For General Release
REPORT TO:
Richard Simpson, Assistant Chief Executive (Corporate
Resources) and Section 151 Of icer
in consultation with Cl r Simon Hal , Cabinet Member for
Finance and Treasury and the Leader
SUBJECT:
Procurement strategy for a managed service provider for
temporary agency resources
LEAD OFFICER:
Sarah Ireland, Director of Strategy Communities and
Commissioning
CABINET MEMBER:
Cl r Hal , Cabinet Member for Finance & Treasury
WARDS:
Al
CORPORATE PRIORITY/POLICY CONTEXT/ AMBITIOUS FOR CROYDON & WHY
ARE WE DOING THIS:
Temporary agency workers are an important part of the Council’s workforce and help
to ensure resilient and flexible service delivery. This enables the Council to ensure
resources are in place where required to cover short term or specialist requirements
and continue to deliver high quality services thereby meeting the needs of service
users.
The proposed procurement strategy wil ensure that the Council continues to deliver
high quality and value for money public services. The new service wil include a
contractual y mandated focus on ensuring local people are provided greater
opportunity to fil temporary roles. The procurement wil ensure that there is sufficient
flexibility to enable the Council to explore possibilities for alternative models of delivery,
including in-house provision, over the course of the contract. Therefore this
recommendation supports the ambition for promoting investment in Croydon’s local
communities; taking a prudent approach to managing the Council’s finances and;
improving value for money for local public services.
FINANCIAL IMPACT
Current annual spend on temporary agency workers is circa £20mil ion per annum.
Therefore spend over the total term of the new contract (4 years) is forecast to be
around £80mil ion. However, over the life of this contract the Council wil be working to
further develop its contract management arrangements and wil through the proposed
service model, develop a partnership approach with the successful provider to manage
demand and the market in order to ensure the new contract delivers best value for
money.
KEY DECISION REFERENCE NO: This is not a key decision
The Leader of the Council in accordance with decision reference 61/15/LR has
delegated to the Assistant Chief Executive Corporate Resources, in consultation with
the Cabinet Member for Finance and Treasury and the Leader, the power to make
the decisions set out in the recommendations below:
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1. RECOMMENDATIONS
The Assistant Chief Executive Corporate Resources is recommended to agree:
The procurement of a master vendor managed service provider for temporary agency
workers for a period of four years at an estimated total contract value of £80mil ion by
way of cal -off from the Eastern Shires Purchasing Organisation’s (ESPO) Managed
Service for Temporary Agency Resource 2 (MSTAR2) Framework Agreement
fol owing the a mini competiton led by Newham Council on behalf of the London
Col aboration of which Croydon Council is a member
2.
EXECUTIVE SUMMARY
2.1 Temporary agency workers are an important part of the Council’s workforce.
The use of temporary resource enables the Council to deliver organisational
objectives without interruption to resourcing levels, ensuring resilience and
service continuity.
2.2 For the past nine years the Council has contracted a neutral vendor managed
service provider. This service has been provided by Comensura Limited
(Comensura). The contract that the council has with Comensura is the result of
a further competition, (cal -off), exercise under the framework agreement for
Managed Services for Temporary Agency Resources (MSTAR1). The MSTAR1
framework was let by Pro5 on behalf of the Local Government Professional
Services Group (LGPSG) and the contract is managed by Eastern Shires
Purchasing Organisation (ESPO).
2.3 The contract commenced on 9 July 2012 and the initial contract term expired
on 8 July 2015. The Director of Strategy, Communities and Commissioning
approved the one year extension which was provided for in the original contract
on recommendation from the Contracts and Commissioning Board on 14
October 2015 (CCB1025/15-16). The extension period expires on 9 July 2016.
2.4 A further extension was approved by Cabinet on 25 April 2016 [decision
reference A49/16] via a variation to the term of the original contract for three
months commencing 10th July 2016 with the option to extend for a further two
months (3 + 2 months). This was agreed in order to enable a ful options
appraisal exploring potential future service models to be completed. This
procurement strategy has been developed as a result of that options appraisal.
2.5 This procurement strategy recommends a cal -off from Lot 2 (Master Vendor)
of the Eastern Shires Purchasing Organisation’s (ESPO) Managed Service for
Temporary Agency Resource 2 (MSTAR2) Agreement fol owing a mini
competion run on behalf of the London Col aboration members.
2.6 The content of this report has been endorsed by the Contracts and
Commissioning Board.
CCB Approval Date
CCB ref. number
29/06/16
CCB1151/16-17
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3.
DETAIL
Agency workers
3.1 Agency workers or temps form an important part of the Council’s workforce and
ensure the organisation is able to remain responsive to change and ef iciently
bring in additional skil s and expertise to address capacity or skil issues. There
is, and always wil be, a corporate requirement to engage temporary workers
for a number of reasons:
to cover for vacancies pending longer term recruitment
to cover for absence when a return date is unknown (e.g. sickness)
to cover for absence when a return date can only be estimated (e.g.
maternity)
to cover for fil ing a post pending a restructure/reorganisation
to deliver fixed-term projects where knowledge or capacity does not exist
internal y
3.2 The use of temporary resources therefore enables the Council to deliver its
organisational objectives without interruption to resourcing levels.
Background
In 2007 the London Borough of Croydon entered into contract with Comensura Limited
for a vendor neutral managed service for the provision of temporary agency staf ing.
The approach in 2007 moved away from a devolved process which was largely
managed by Departmental Managers to a centralised approach that was intended to
provide greater corporate control of spend and drive consistency and efficient
business practice through improved use of information technology.
However, whilst there were clear benefits derived from the new service model,
numerous issues remained. These included concerns regarding the quality of
candidates, lack of support from the provider in managing the supply chain and
significant levels of non-compliance resulting in spend outside of the contract.
As such this was an area of spend that was identified as part of the Council’s then
ef iciency/transformation programme, Step Change, for targeted support to deliver
improved performance and reduce spend. The ef iciency review found that the
service model stil presented opportunity to control spend and drive a consistent and
compliant approach across the Council however further controls were necessary to
drive compliance and change manager behaviours.
In 2012 the Council entered into a mini competition from an existing National
Framework; Managed Services for Temporary Agency Resources (MSTAR) via the
Eastern Shires Purchasing Organisation (ESPO). After evaluating the quality of erings
of the six available suppliers, three were chosen to submit pricing through an E-
Auction. The process identified Comensura as the overal winner and the Council
entered into a new contract for a term of three years, giving the option to extend for
one further year.
The new contract was intended to mark the beginning of a new relationship with
Comensura that focused on driving a more commercial contractual relationship and
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introduced tighter controls around spend on temps including a corporate gatekeeping
function.
In January 2014 the Council opted to further increase focus and resource on the
Agency contract by hiring a dedicated contract manager and contract of icer.
Significant benefits have been delivered by the contracts team including amendments
to the local arrangements of the extension of the MSTAR agreement for the final year.
The additional service arrangements were agreed as fol ows:
Development and implementation of an enhanced Interim/Executive category,
engaging specialist and executive agencies at 10% of pay to chal enge the
more expensive Local Government Recruitment Partnership (LGRP) framework
(operating at 18-20% of pay).
Development and implementation of a Payrol Only function. This is used in
instances when Comensura as the supplier engages known candidates
therefore eliminating the ‘introduction fee’ an agency would normal y charge
Revisions to the Service Level Agreement to drive customer service
improvements such as reduced response times to hiring manager queries and
tightening the authorisation process
A further extension was approved by Cabinet on 25 April 2016 [decision reference
A49/16] via a variation to the term of the original contract for three months
commencing 10th July 2016 with the option to extend for a further two months (3 + 2
months).
Current service provision
The Comensura contract is used throughout the Council by managers engaging
temporary workers. The compliance rate exceeds 99% (the remaining <1% being
delivered by the LGRP framework).
Spend by Department 15/16
3.4 The Council’s current annual
spend on agency workers is
approximately £20mil ion (total spend
in 15/16 was £20,225,630)
.
Information on spend for 2015/16 is
set out below:
The People department accounted
for the largest proportion of spend in
2015/16; this is due to the high level
of spend on social workers. This
refelects national trends however the
Council has been actively working to
reduce reliance on temps and to
work col aboratively with other Local Authroities to bet er manage rates.
The Resources department accounts for 31.45% of spend. A signficant proportion of
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this is comprised of spend on project work (£2.6m). This is fol owing a Council
decision to resource its transformation programme through a variety of non-permanent
roles inlcuding secondment opportunities and interims sourced via the Comensura
contract. This negated the need to source expensive consultancy services and also
helps ensure the Council develops the internal capacity to deliver sustainable change.
Spend in the Place department accounts for just 10.26%, although spend is expected
to increase in Place through 16/17 due to increased demand for project workers.
Though the current contract has delivered efficiencies there have been ongoing
concerns regarding the level of customer focus and the ability to drive continuous
improvement and innovation through the contract. Whilst the current provider’s
of ering has been largely fit-for-purpose, their web-based management/ordering
system is now behind the market technology and is widely viewed as not user friendly.
It has also been noted that the current provider’s commercial model lacks the
customer focus needed to deliver the requirements of the agreed SLA and to develop
a partnership approach to tackling ongoing issues in the market. As a result the
Council has needed to invest resources to develop a dedicated contract management
team and to provide targeted support to ordering managers.
The contract management model, and the launch of new policy guiding the use of
temporary agency workers, has been successful and has delivered tangible benefits.
Overal , the first year of the new contract management arrangements (14/15) saved
£2mil ion. In 15/16 a further £1.8 mil ion was saved in general staf ing, however the
Council made a number of decisions to bring together its spend on non-permanent
resources and to expand the use of the Comensura contract which means the overal
spend on the Comensura contract appears to have remained at the same level as the
previous year. This expanded provision included the use of the agency contract for
interims and senior executives (as previously mentioned) and resourcing the current
transformation programme via this contract rather than engaging a consultancy
service. This decision has led to an overal reduction on non-permanent resources but
also provides greater corporate visibility across al arrangements.
Key areas of savings and/or improvement are highlighted below:
Savings/efficiencies:
£240k saved to date opting Ltd company day raters out of the Agency Workers
Regulations (AWR) and embedding that approach across the organisation
Negotiating and embedding a Payrol only facility has saved £123k to date
(against an average 10% agency fee)
Establishing an Interim Executive Category - savings estimated to be £145k in
financial year 15/16.
Identifying and reclaiming monies from wrongly input ed AWR parity dates
established a saving of £40k (approx.) in fin year 14/15, they have been
monitored since therefore no further inaccuracies have occurred.
£65k recovered through formal complaints process
£130k reclaimed against invoicing/contractual errors
Costs mitigated by managing the market:
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Over £300k saved (FY14/15) from strategic and focussed support in Children’s
Social Care, disrupting the market by bringing Experienced Social Worker role
down from £33 per hour to below the market rate to £29 per hour.
Costs avoided through robust process for market testing rates, negotiating
with individuals who demand an above market rate
Service improvements:
Rol out of the new policy in June 2014 alongside training and a robust
communications and engagement plan, has led to a cultural shift in hiring of
agency workers.
Focussed contract management has led to improvements from the service
provider including helpdesk performance
Learning from the experience over the past nine years, it is important that future
provision not only ensures similar value for money in terms of commercials, but also
ensures the service has increased technological capability and, an enhanced
customer focus.
Future service provision
Through discussion with key stakeholders across the Council, a set of key principles
have been developed which have formed the basis for assessing any future service
models. These principles are set out below:
Ability to source high quality resource across a wide range of council
services – model needs to be able to ensure high quality provision across the
breadth of Council services
Provides flexibility/experience to fill project/specialist/senior roles – the
new model needs to build on the benefits already derived from developing an
integrated approach to resourcing executive and project roles and be able to
respond to changing need
Supports greater transparency – further supports the development of a
robust contract management model based on accurate and timely data that
ensures accountability of supply chain and benchmarks against the wider
market
Provides Value for Money and supports control over spend – al ows for
processes that ensure controls are in place to manage spend and ensure good
governance around decision making
Customer-focussed – provides dedicated support to hiring managers, ensures
adequate quality assurance processes are in place (e.g. CV quality check) and
maintains swift issue resolution
Supports local employment and growth – actively supports local
employment by ensuring local people have the opportunity to be engaged
through the new service model and enables the Council to identify target
groups to promote opportunity and fairness for Croydon’s diverse communities
Partnership approach to managing market and demand – service model
needs to support active market management and act as a market disruptor
where necessary
Continuously innovating/developing – model makes best use of emerging
technologies and industry best practice to ensure continuous improvement.
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Make or Buy assessment:
A make or buy assessment has been undertaken based on the principles set out
above. A summary of the findings is included in the table below:
Advantages
Disadvantages
Make – in-
Outcomes
Outcomes
house service An in-house model would
The Council does not have
model
al ow the Council to define the
the necessary relationships
focus and priorities for the
and networks to source the
service and align operation to
range of roles (in particular
Ambitious for Croydon and
niche and specialist roles) in
the findings of the Opportunity
the required timescales
and Fairness Commission
The necessary market and
Risks and challenges
industry knowledge and
No advantages identified
expertise does not exist
Cost/income direction
within the Council and would
Eliminates management fee
need to be developed over
charged by a MSP
time
Performance
Risks and chal enges
Council can decide the level
The Council’s ability to
of focus on customer service
predict changes in the market
improvements and ensure the
would be limited
service is resourced in order
The Council would not have
to meet this
access to the intel igence
needed in order to
benchmark rates and ensure
the Council remains
competitive and delivers VfM
Cost/income direction
Ability to manage the market
(on a regional/national) level
and leverage buying power
would be extremely limited
Ability to manage overal
costs and continue trend of
reduced spend would be
chal enged
Performance
Limitations identified above
would risk the Council’s
ability to source and engage
the right quality resource at
the appropriate market rate
Reputational risk to Croydon
of poor service delivery
Buy – third
Outcomes
Outcomes
party service Service provider able to bring Provider commercial model
model
learning and experience from
may limit ability to prioritise
other contracts to suggest
local objectives (this would
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innovative ways to drive
need to be addressed
continuous improvement
through any future contract)
Risks and challenges
Risks and chal enges
Ability to leverage buying
No disadvantages identified
power of service provider to
Cost/income direction
engage with and influence the Management fee charged
market
Performance
Service provider able to
Some internal resource
benchmark costs across its
required to ensure ef ective
client base and potential y
contract management (may
bring intel igence from other
be addressed by
industries/sectors
implementation of new
Cost/income direction
corporate model for contract
Ability to work col aboratively
management)
with other service provider
clients to identify opportunities
to col ectively control or drive
down costs
Performance
Specialist expertise of service
provider to work with the
market and ensure high
quality provision
As a result of this assessment it is considered that outsourced service provision would
best deliver the intended outcomes and ensure a quality service in the short to
medium term. It should however be noted that the opportunity exists for the Council to
explore developing internal capacity and capability to deliver al or part of the service
in-house in the future. However in order to develop a commercial y sustainable
internal model, it would be necessary to assess the viability of developing a traded
model. In order to al ow scope for this ongoing assessment, any outsourced provision
should al ow the Council to change the scope of services delivered over its lifetime
and not commit any specific level of spend or volume through the contract.
Service model options appraisal:
Three main service models exist and these have been appraised, based on the
principles set out, to assess which model best fits the Council’s needs. A summary of
the findings is set out in the table below:
Service
Description
Summary of findings
Ranking
models
Vendor Neutral Procurement service
Opportunity for savings 2
Managed
contracting with supply
to be delivered through
Service (VNMS) chain of agencies who
this model
bid CVs against roles
Access to a wide talent
NB - current
with no preferential
pool
service
treatment of any
VNMS model has less
agency
focus on customer
service and ordering
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manager support
Greater investment in
contract management
resource required
Master Vendor The MVMS provides
High levels of customer 1
Managed
candiates itself (either
service/client care
(recommended
Service
directly or via an
Ability to sustain local
option)
(MVMS)
af iliated group of
arrangements in terms
agencies)before a 2nd
of executive/specialist
tier of contracted
hiring
agencies pitch
High level of data and
intel igence available
MVMS focus on
managing supply chain
MVMS have developed
model and innovated
around partnering in
the 2nd tier to ensure
quality and ability to fil
across categories
Ability to work with
MVMS to develop a
local focus and to
support work with
target communities
Hybrid service
A mixture of both
Whilst this could be an 3
neutral and master
option for the future,
vendors into one
the lack of experience
service/organisation
in developing this
model and the cost it
would take to develop
and operate this far
outweighs current
resources and time
limits.
It is therefore recommended that the Council develop a procurement strategy to
source a Master Vendor Managed Service Provider.
Procurement strategy
As this is a procurement for ‘Services’ with an estimated value of over £164k, the
procurement process wil need to comply with EU legislation and the contracts wil be
procured in compliance with the Public Contracts Regulations 2015.
It is proposed to cal off Lot 2 (Master Vendor) of the Eastern Shires Purchasing
Organisation’s (ESPO) Managed Service for Temporary Agency Resource 2
(MSTAR2) Agreement fol owing the London Contracts and Supplies Group’s (LCSG)
mini competition.
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The folowing sourcing options were considered:
Benefits
Risks
Extend / vary
Easy to implement
Not compliant with EU /
existing contract
Continuity of service
PCR
No assurance of
competitive rates
Inability to easily redefine
requirements and scope
Cal of from existing EU and PCR compliant
No risks identified
framework
Shorter time for cal off
(Recommended
procedure
option)
Suitable framework
identified
OJEU compliant
OJEU and PCR compliant Time and ef ort to manage
procedure: open /
Ability to flex length of
process
restricted
initial term and extension Potential loss of continuity
options according to
requirements
Ability to bespoke
financial model and in-
contract ordering
procedure as required
Social value
The Council wil develop a local specification set ing out specific Croydon
requirements for this service. This wil include mandating that al workers engaged
through the contract are paid at a minimum the London Living Wage and that the
provider wil work with the Council to support local people to engage through the
supply chain and therefore access greater opportunities to fil Council roles. The
Council wil use equalities data to identify target groups within the community.
Contract management arrangements
This contract wil be managed in accordance with the Council’s new commercial
contract management model. As such the Category Manager Enabling wil be
responsible for supporting the Head of Service and relevant Director on commercial
contract management.
Operational contract management resource requirements wil be less under the
Master Vendor Model as the provider wil offer greater ordering manager support and
provide more detailed management information as part of their core of er. The
resource requirement wil be finalised as part of the contract mobilisation period. Any
resource requirements wil be met from within existing budgets within the SCC
Resources team.
Market assessment:
10
The VNMS market has always been extremely limited with only a couple of providers
sustaining true neutrality however, the MVMS market is wider as many agencies
innovate into the MSP market. The successful providers in the Local Authority market
are large national agencies, or group networks including a number of brands with it.
To compete effectively with the streamlined/low pricing of VNMS, some MVMS
suppliers have innovated to form partnerships with 2nd tier agencies as opposed to
simply procuring them, this addresses customer service issues of supply with VNMS
providers.
Across the board MVMS have continued to innovate and drive development of the
service model, and in particular, the online ordering / management information
system. Many have also developed a targeted service/technology resource to gather
market intel igence, particularly around social care in order to strategical y support the
constant issues of hiring within this category.
Col aboration, consortia or joint procurement opportunities:
The Council has dedicated time exploring the possibility of entering into a shared
service with another London borough to build upon the One Oracle col aboration. Due
to significant changes happening in the potential partner borough it has not been
possible to move forward with this approach at this time. However the proposed
procurement strategy recommends accessing a col aborative mini competition led by
the London Borough of Newham on behalf of the London Col aboration of which
Croydon is a member. Croydon has been actively involved in this procurement and
participated in due diligence process for al tenders.
Opportunities for involvement of SME’s / local businesses or voluntary sector:
Opportunities exist for SMEs or VCSE to play an active role in the supply chain of any
future service. As part of the tendering exercise the Council wil set out specific local
requirements which wil form a part of the final contract. These requirements wil
include the need to work proactively to ensure local y based recruitment agencies are
a part of the supply chain and able to access Council opportunities.
Finance
There is no specific budget for agency staf . Costs for temporary agency workers are
provided for by vacant posts or using project-related funds. The table below sets out
anticipated spend levels for the next year:
Year
Expenditure
2016/2017
£20,000,000 – estimate
2015/2016
£20,200,000 – actual (rounded)
Procurement timetable
The London Col aboration mini competition for Lot 2 was completed in March 2016
therefore the dates below refer to Croydon’s ‘Cal Off’ and approval process:
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Activity
Date
CCB Strategy Report approval
June 16
Approval of strategy report under delegated authority June 16
Cal Off / Request for Services under the MSTAR2
June 16
London Col aboration mini competition
CCB Award Report
Intra-meeting decision
June 16
Cabinet
11th July 2016
Key decision
19th July 2016 (1pm)
Standstil
12 July – 25 July 2016
Contract Award
29 July 2016
Mobilisation
August - September
Contract start date
01 October or 01
December 16
4.
CONSULTATION
4.1 Key stakeholders across the Council have been consulted in development of
the key principles and discussions regarding potential service models. Key services
have been identified for targeted support to manage the transition to a new provider.
The contracts team wil be actively working with these groups over the Summer to
ensure service is not adversely impacted by the changes.
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FINANCIAL AND RISK ASSESSMENT CONSIDERATIONS
5.1
The current spend on agency workers is circa £20m per annum. This is forecast to be
£80m over the four year life of this contract. It is anticipated that there wil be
the opportunity to achieve efficiencies over the contract life and at current
usage rates this is estimated to be approx. £380k per annum.
2
The effect of the decision
The ef ect of the decision wil be to enter a contract for a managed service provider
for temporary agency resources for a period of four years at a total estimated cost
of £80mil ion.
3
Risks
There is a financial risk that the cost of agency staff wil exceed available budgets
but robust contract and demand management should enable any financial risks to
be mitigated and it is anticipated that spend on agency staf wil decrease
throughout the contract period.
4
Options
Al options considered have been set out in the main body of this report.
5
Future savings/efficiencies
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The Council wil continue to work over the next four years to reduce spend on
temporary workers through effective contract management and by proactively working
to manage market demands. Spend wil continue to be monitored on a quarterly basis
and the Strategic Category Manager (responsible for commercial contract
management) wil work with specific service teams, and HR, to identify interventions to
continue to drive costs down.
Approved by Lisa Taylor, Assistant Director and Section 151 Of icer
6. COMMENTS OF THE BOROUGH SOLICITOR AND MONITORING OFFICER
6.1 The Acting Solicitor to the Council comments that the proposed tender process
described in this report appears to be in accordance with the requirements of
the Council’s Tenders and Contracts Regulations and the Council’s
Constitution, and fulfils the Council’s duty of Best Value, under the provisions of
the Local Government Act 1999
Approved for an on behalf of Gabriel Macgregor Acting Council Solicitor and
Acting Monitoring Officer]
7.
HUMAN RESOURCES IMPACT
7.1 HR needs to continue to be consulted to ensure that people resourcing is a
priority and the use of temporary staf is appropriate. There are no other
immediate Human Resources considerations arising from the award of contract
for Council staff or workers.
Approved by: Michael Pichamuthu, HRBP on behalf of Heather Daley,
Director of Human Resources
8.
EQUALITIES IMPACT
8.1 An initial EIA has been completed and it shows no impact on protected groups
and as such there is no need for any further equalities analysis to be
undertaken.
9.
ENVIRONMENTAL IMPACT
9.1 There are no environmental impacts arising from this report.
10. CRIME AND DISORDER REDUCTION IMPACT
10.1 There are no crime and disorder considerations arising from this report.
11. REASONS FOR RECOMMENDATIONS/PROPOSED DECISION
11.1 A Managed Service Provider wil support the Council to have an agile and
flexible workforce able to meet the needs of Croydon’s communities.
12. OPTIONS CONSIDERED AND REJECTED
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12.1 A number of options have been assessed as set out in the main body of the
report.
CONTACT OFFICER:
Name:
Genine Whitehorne
Post title:
Head of SCC Resources
Telephone number: 60584
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