Content

RESOLVED:
 
a) 
Approve the variation to the Leisure Management
Contract (“the Contract”) between the Council and
Greenwich Leisure Limited (“GLL”), for GLL to run the
leisure centres as an agent rather than a principal for the
remainder of the Contract term and to extend the Contract’s
term by 5 years to 31 March 2034 (based on Options 2A or 2B
outlined below);
 
b) 
Approve the variation to the Contract between the
Council and Greenwich Leisure Limited, so the operation of
Clissold Park Splash Pad is formally
included in the Contract;
 
c) 
Approve the variation to the Contract between the
Council and Greenwich Leisure Limited, to update the Classification
of Maintenance so it reflects recent changes that have been made to
the facilities; and
 
d) 
Delegate authority to the Group Director - Climate,
Homes & Economy in consultation with the Group Director -
Finance and Resources and the Director - Legal, Democratic &
Electoral Services to agree the terms of and enter into all
necessary legal documentation in relation thereto.
 
Reasons For Decision
 
5.1  
Leisure Management Contract - Contract Variation
 
5.1.1   The Council
commenced the Contract with GLL on 1 April 2009 for a period of 15
years, after being in an interim arrangement with them since 2005.
The Contract was extended in 2016 until 31 March 2029, as part of a
wider renegotiation, which now means under normal circumstances
that the management of the Council’s sports and leisure
facilities is delivered at nil cost to the Council (excluding costs
associated with meeting landlord maintenance responsibilities for
the sports and leisure facilities).
 
5.1.2  Over the
last twenty years, the partnership with GLL has significantly
improved sport and leisure provision in the borough, transformed
the financial performance of the sports and leisure facilities and
has also resulted in a strong and trusted relationship developing
between the two organisations.
 
5.1.3  A change
to HMRC VAT policy in 2023 in relation to leisure services,
provided the Council and GLL with an opportunity to implement an
arrangement, the ‘Agency Model’, with benefits to both
parties by way of reduced costs, whilst protecting the
Council’s risk position.
 
5.1.4 
Following the CPIC decision on 6 January 2025, the Council has
reached agreement with GLL on the terms for the implementation of
the Agency Model / Agreement (as outlined in the attached
Exempt
 
 
 
 
 
Appendix 1 to this report).
 
5.1.5  However,
as part of the negotiations with GLL, four alternative and
potentially attractive options for the Council have also been put
forward for it to consider. The new options presented by GLL offer
the Council more financial certainty for the Contract, at a time of
significant financial uncertainty - presenting a choice between
more certainty (with further financial protection if there is over
performance) for the next 7 or 9 years or the unknown potential of
the surplus share until 2029 and / or a new contract
procurement:
 
· 
Option 1A & 1B: In Option 1A, in return for
extending the Contract under the Agency Model / Agreement by 3
years to 31 March 2032, GLL proposes that from 2025/26 to the end
of the extended contract it will guarantee the annual payments
outlined in the attached Exempt Appendix 1 to this report to the
Council.
 
In Option 1B, in return for
extending the Contract under the Agency Model / Agreement by 3
years to 31 March 2032 and the Council committing to providing
alternative temporary health & fitness provision during the
closure of Kings Hall Leisure Centre, GLL proposes that from
2025/26 to the end of the extended contract it will guarantee the
annual payments outlined in the attached Exempt Appendix 1 to this
report to the Council.
 
In both options, the Kings Hall
Leisure Centre adjustment from 2030/31 assumes the closure of the
facility in September 2025 and the full re-opening of the facility
(following refurbishment by the Council) from October 2028. Should
this change, the adjustments in 2030/31 and 2031/32 will be delayed
and start when Kings Hall Leisure Centre reaches a mature year (the
year following 18 months of operation).
 
Any financial over performance of the
Contract will be shared with the Council as it currently is via the
existing Surplus Share mechanism.
 
The guaranteed payments outlined in
the attached Exempt Appendix 1 to this report and the existing
surplus share thresholds would be subject to inflationary increases
based on the existing Contract clauses. The first inflation
increase would be applied on 1 April 2026.
 
· 
Option 2A & 2B: In Option 2A, in return for
extending the Contract under the Agency Model / Agreement by 5
years to 31 March 2034, GLL proposes that from 2025/26 to the end
of the extended contract it will guarantee the annual payments
outlined in the attached Exempt Appendix 1 to this report to the
Council.
 
In Option 2B, in return for extending
the Contract under the Agency / Model Agreement by 5 years to 31
March 2034 and the Council committing to providing alternative
temporary health & fitness
 
 
 
 
 
provision during the closure of Kings
Hall Leisure Centre, GLL proposes that from 2025/26 to the end of
the extended contract it will guarantee the annual payments
outlined in the attached Exempt Appendix 1 to this report to the
Council.
 
In both options, the Kings Hall
Leisure Centre adjustment from 2030/31 assumes the closure of the
facility in September 2025 and the full re-opening of the facility
(following refurbishment by the Council) from October 2028. Should
this change, the adjustments in 2030/31 and 2031/32 will slip and
start when Kings Hall Leisure Centre reaches a mature year (the
year following 18 months of operation).
 
Any financial over performance of the
Contract will be shared with the Council as per the existing
Surplus Share mechanism.
 
The guaranteed payments outlined
above and the existing surplus share thresholds would be subject to
inflationary increases based on the existing Contract clauses. The
first inflation increase would be applied on 1 April 2026.
 
5.1.6  The
proposed Options transfer most of the financial risk of generating
surpluses to GLL and provide an assurance to the Council that
proposed savings from the Contract will be achieved. The Council
still benefits should significant surpluses be generated via the
existing surplus share mechanism. 
 
5.1.7  The
Council now needs to determine how it wishes to proceed with the
implementation of the Contract Agency Model / Agreement.
 
5.1.8  In
addition to the above, it is proposed to use this opportunity to
address a number of other minor amendments that are required to the
Contract. These include:
 
· 
A variation to the Contract so the operation of Clissold Park Splash Pad is formally included -
with the additional costs being met from the Council’s
surplus share as they are currently; and
 
· 
A variation to the Contract to make minor updates to the existing
Classification of Maintenance, Repair and Replacement
Responsibilities so it reflects recent changes that have been made
to the facilities i.e. the new Britannia Leisure Centre.
 
 
Alternative Options
Considered and Rejected
 
5.6.1  The
following alternative options have been considered and rejected for
the reasons outlined below:
 
a) 
Do nothing: GLL would continue to operate the
Council’s leisure facilities for the remaining 5 years of the
current Contract i.e. up to 31st March 2029, at nil cost to the
Council. However, the Council would not benefit from the
significant financial savings to be achieved from implementing the
‘Agency Model’ or the guaranteed annual payments from
GLL as outlined in the Exempt Appendix 1 to this report.
 
The delivery of the Kings Hall
Leisure Centre refurbishment at the same time as procuring a new
leisure management solution from 2029 would present significant
resourcing challenges for the Council that need to be carefully
considered.
 
In addition, the refurbishment of
Kings Hall Leisure Centre is due to be completed in September 2028,
if everything goes according to the current programme. This would
mean that GLL would be opening the new facility with only six
months of the existing Contract remaining - a less than ideal
situation, particularly if GLL has been informed at this point that
they didn’t win the tender for the new contract (this would
have to be announced at a minimum of six months prior to the end of
the Contract to allow adequate mobilisation time for a new
operator). This challenge would be exacerbated further if the Kings
Hall Leisure Centre refurbishment programme was delayed in any way
beyond September 2028.
 
b) 
Termination of the current contract and procurement of
a new operator: Termination of the current Contract was
considered but rejected as an option for the following reasons:
 
 
I. 
The operational and financial performance of the incumbent operator
(GLL), together with service improvements over the years, would not
support termination on the grounds of deficiencies in quality or
service provision;
 
II. 
The potential risk of legal challenge by GLL due to the early and
potentially unsubstantiated termination of the Contract;
 
III. 
The financial implications of compensation payments to GLL for
early termination of the contract; and
 
IV. 
The risks associated with the appointment of a new and essentially
unknown leisure operator, together with the additional and
unbudgeted procurement costs.
 
c) 
Implementation of Agency Model / Agreement Only: At
its meeting on 6 January 2025, the CPIC approved a variation to the
Contract between the Council and GLL, for GLL to run the leisure
centres as an agent rather than a principal for the remainder of
the current contract term. The Council has reached agreement with
GLL on the terms for the implementation of the Agency Model /
Agreement (as outlined in the attached Exempt Appendix 1 to this
report). However, the financial benefit of implementing the Agency
Model / Agreement isn’t guaranteed.
 
In addition, the factors relating to
the Kings Hall Leisure Centre refurbishment outlined above in a)
would not be addressed.
 
d) 
Implementation of Agency Model / Agreement with
3 year Contract extension:
Implementation of the Agency Model and extending the Contract by 3
years to 31 March 2032 for a guaranteed annual financial payment
from GLL to the Council (as outlined in the attached Exempt
Appendix 1 to this report) was considered. However, given the
financial challenges currently facing the Council and the
refurbishment of Kings Hall Leisure Centre taking place (subject to
planning permission), a longer guaranteed annual payment period is
considered more attractive.
 
5.6.2  As
this is an existing long term contract and the proposed Agency
Model / Agreement implementation with a Contract extension will
secure guaranteed savings for the 2025/26 financial year and
ongoing until 2033/24 (as outlined in the attached Exempt Appendix
1 to this report), without adversely affecting the on-going
delivery or quality of service to local residents, no further
options were explored.