- Your incumbent contractor won’t give you information about the transferring staff.
- Your incumbent contractor claims TUPE applies to a group of staff who you suspect are not entitled to transfer.
- The service is splitting and TUPE will only apply if the same contractor wins the majority or all of the work.
Bidders require accurate information about staff they may inherit in order to price their bids. If you cannot supply them with accurate information, they will be basing their tender prices on flawed assumptions and risks may arise:
- Your pricing evaluation may be skewed so that the wrong bidder is awarded the contract. In addition to contracting with a more expensive provider, this could expose the authority to claims from unsuccessful bidders.
- The winning bidder may pull out before contract signature if they cannot deliver the service for the price quoted once the true employee liabilities become clear. Conversely they may have priced their bid high on a worst case scenario which results in the authority being liable for an inflated contract price.
- You may have to give the successful bidder an indemnity in respect of unknown employee liabilities. But on a re-tendering, these won’t be your employees so the risk to the authority will be unquantifiable.
Protect your authority
So what should you do to avoid this happening?
- Ensure your contracts entitle the authority to request employee liability information in good time before the contract end date; and
- Ensure your contracts contain a warranty from service providers as to the accuracy of any employee information they provide.
If your contracts are silent on these matters, you may look to TUPE for assistance, try:
- Reminding the service provider of its obligation to provide employee liability information under Regulation 11 of TUPE and the penalties for failing to do so.
- Pointing out that the service provider will need to liaise with the transferee as to the measures the transferee envisages taking with respect to the employees in order to carry out proper consultation under Regulation 13.
- Offering to help discharge these obligations by collecting the employee liability information in an easy format and putting them in touch with the transferee.
At the end of the day however, even TUPE may not be enough, as it merely requires the transferor to supply employee liability information to the transferee – and not to the service commissioner - two weeks prior to the transfer date. This is of no use for a tender process which is likely to take several months. It’s far better to rely on tightly-worded TUPE clauses in your contracts.
Imposters on the list
And what if when you do eventually receive the list, you suspect some of the employees are not actually entitled to transfer? Bidders may well be put off because they fear inheriting onerous employment obligations. You will need to remind incumbent contractors of the risk of unfair dismissal claims from employees forced to transfer when TUPE doesn’t apply to them. Bidders can be reassured that if TUPE doesn’t apply then no liability will transfer either.
Splitting a service - who goes where?
It is increasingly common for authorities to re-configure contracts on a re-tendering and split services, especially in health and social care services. However, if it is unclear whether TUPE will apply to the re-configured services, the authority may struggle to determine which liabilities it should ask bidders to price for; and bidders to scope their response.
Two recent cases have considered this issue in relation to service provision changes under regulation 3(1)(b) of TUPE 2006.
Kimberley Group Housing Ltd v Hambley
In Kimberley Group Housing Ltd v Hambley, an accommodation and support service for asylum seekers was split between two new contractors. Neither contractor accepted that TUPE applied and the employees were dismissed. The EAT stated that where there are several possible transferees it should be possible to identify to which contractor employees will transfer even though it is likely to entail difficult questions of fact. Here, the existence of several possible transferees did not preclude TUPE from applying, and although there may be “some circumstances in which a service which is being provided by one contractor to a client is … so fragmented that nothing which one can properly determine as being a service provision change has taken place”, that was not the case here. While there is no exhaustive list of factors which will conclusively determine to which part of an undertaking an employee is assigned, it is essential for there to be a link between the employee and the work or activities performed. Here, the employees’ principle purpose had been to carry out activities that were then carried on predominantly by Kimberley. They should therefore have all transferred to Kimberley.
Clearsprings Management Ltd v Ankers & Ors
In Clearsprings Management Ltd v Ankers & Ors, the fragmentation of a service did preclude a TUPE transfer. As with Kimberley, the case concerned an accommodation and advice service for asylum seekers. During the transition period from the old contract to the new, the service users transferred gradually to two different service providers. There was no link between the allocation of service users to employees and their subsequent re-allocation to the new providers. It was this fragmentation (as anticipated in Kimberley) which the tribunal determined, as a matter of fact, meant that no transfer took place.
So TUPE applied in Kimberley and not in Clearsprings … how then should procurement officers deal with similar circumstances when re-tendering a split service to ensure fairness to the employees and bidders and to avoid challenges from both, especially where in some cases it may not be possible to say whether TUPE applies until after the transfer date?
Addressing the issue during the procurement
The risk of TUPE applying must be made clear to bidders at the outset of the tendering process. To the extent that it is able, the contracting authority should determine in advance, with assistance from the incumbent contractor, which employees are assigned to which part of the service and produce this information (anonymised) to the bidders. If it remains unclear whether the employees will transfer, for example where a service is fragmented into lots which may be won by a single contractor or by several, any additional costs associated with the TUPE transfer should be calculated by the authority and carved out of the tender. The authority should then inform all bidders of the sums that would be paid to them in addition to the contract price should TUPE be found to apply. While this solution is not perfect, it is transparent and goes some way to removing uncertainty from the bidding process.