Leisure Operator Partnerships:
Covid-19 Think Tank
16 April 2020
The Sport, Leisure and Culture Consultancy (SLC) facilitated an online Think Tank – Leisure Partnerships – Managing the Crisis and Planning for the Future for Local Authority Officers with Leisure Operating Contracts on 16 April 2020.
Facilitation was provided by Duncan Wood-Allum, Managing Director – SLC, supported by Judith Schrenk (SLC, Research Consultant) who took notes.
The delegates who attended were:
- Tammy Barrass (Sheffield CC, Head of Partnerships)
- James Barnes (Sheffield CC, Parks and Countryside Manager)
- Pauline Lawrence (LB Ealing, Leisure Operations Manager)
- Tony Perks (Stratford-on-Avon DC, Deputy Chief Executive)
- Rob Wilks (Staffordshire Moorlands and High Peak C., Principal Officer – Leisure and Recreation)
- Geoff Caine (Stevenage BC, Culture, Wellbeing and Leisure Services Manager)
- Lisa Pottinger (LB Tower Hamlets, Head of Sport and Physical Activity)
- Liz Slater (Plymouth CC, Leisure Partnership Manager)
- Steve Welch (Sport England, Strategic Lead)
- Martyn Allison (Management Improvement Services)
- Iain Greenshields (Womble Bond Dickinson, Partner)
- Toby Kingsbury (SLC, Director)
- Mark Tweedie (SLC, Associate)
Key themes explored in the session were as follows:
- What is happening with leisure operating contracts whilst facilities are locked down?
- What approaches are being taken by councils and their leisure partners to address the immediate issues?
- How should we revisit future long-term contracts given the inevitable recession, changes in demand and future funding cuts for local government?
- What learning can be shared to support other councils and leisure partners with a contract and management fee in place now and in shaping the future arrangements?
- How can the sector support partners’ through the stages of recovery?
What is happening with leisure management agreements whilst facilities are locked down?
- Councils at the moment are under immense pressure, in a precarious financial situation and have a number of pressing priorities – leisure in many cases has not been seen as a high enough priority given other emergency planning and support issues
- It is proving to be extremely challenging for local authorities to deal with complicated matters such as contracts for leisure provision in the light of the current situation
- Council officers are currently in discussions with their leisure operators about potential arrangements to deal with the current situation and associated financial risks – a range of different approaches are being taken by both leisure operators and councils
- Some Councils are looking to collaborate in groups with single operators to ensure consistency of approach and to establish a clear and transparent financial position
- A number of participants are handling multiple negotiation processes at the same time due to different contractual arrangements being in place
- It can be enormously challenging for local authorities to financially support leisure operators, especially if they normally do not pay a management fee to the leisure operator
- The requests from leisure operators to some local authorities can be to pay 20% to top up salaries of furloughed stuff working on sites, to cover the upkeep payments for sites and waiver the operator’s management fees. For many local authorities the top up request is not being met
- The financial payments supplied to the leisure operator by the local authority needs in most instances to be repaid through the rest of the contract
- The repayment can be extremely difficult if the contract length between Council and operator is short
- Some local authorities are exploring extending the contract due to this issue
- If local authorities financially support the leisure operators, there is a question of what additional benefits that the local authority and its community will receive
- Helping the leisure operators in the current crisis is not only a financial challenge for local authorities, but is proving in many cases to be extremely difficult to manage due to the current crisis and capacity issues – with many senior staff being redeployed
- In some partnerships there is a sense of transparency due to the leisure operators adopting an open book policy – however, there may be a need for this to also be applied in relation to central management charges and reserves.
- There is a question of where the customer sits in contractual relationship between operator and local authority and what steps the operator is taking in keeping them engaged
- The option of frozen membership for those who keep their memberships throughout the crisis as a popular measure
- Sports clubs that may go out of business will have an effect on visitor numbers, bookings, etc. of facilities in the near future post lock down
- The conversations between local authorities and their leisure operators across the country are interdependent as regards protecting the wider leisure operator market. With limited players in the market, the sector cannot afford to lose that many operators as there would not be sufficient capacity to step in and this would reduce competition.
- If a leisure operator does cease trading due to insolvency, because they cannot reach a financial settlement collectively across the majority of their portfolio in the very near future (weeks not months), this could be not only catastrophic for the organisation and its local authority partners, but for physical activity levels and services delivered through the contract. It will have significant impacts on the supply chain supporting this market and, in many cases will result in facilities staying closed with an uncertain future and significant loss of opportunity for the community to be active.
How should we revisit future long-term contracts given the inevitable recession, changes in demand and future funding cuts for local government?
- The real opportunity for the sector lies in looking beyond crisis and the period of recovery to the future
- There is a question of should there be a shift in focus from leisure contracts generating surplus to supporting the communities in being physically active and healthy?
- There is an opportunity to become better at balancing the outcomes with financial sustainability in contracts as a sector
- This emerging vision needs to be socialised in local authorities at a political level – there is a question whether they can prioritise this now and who champions this vision
- Local authorities are still trying to understand what the short- and long-term impacts of this crisis will be – they are reluctant to commit to a medium-term funding package at this stage – this then has the knock on effect of making the leisure operator even more vulnerable
- That makes long-term planning and promises of support very difficult
- Local authorities do have stronger influence in negotiations with leisure operators. This could enable them to explore improvements in specifications and contract terms if the local authorities financially supported leisure operators through this crisis (which in most cases will be required) For old contracts that are not strategically aligned, this presents an opportunity for the partnership.
- There was a view from some delegates that the position that the sector finds itself in is due to the history of the sector
- It was suggested by delegates that modern contracts tend to focus on efficiency but in some instances without a strong specification they do not serve those members of the community who need it most
- The online debate around contractual situations in the light of this crisis has taken centre stage in the last couple of days and blame has been shifted around – there is a danger that relationships could be irreparably damaged
- It would be important for the sector to aim at getting out of this together under a unified vision and purpose that can be adapted locally
- If we solely focus on the current situation and not on future consequences, we may create problems in the future, e.g. re-payments in the future and a focus on financial performance at the expense of social value and impact
- It is important to incorporate long-term strategic thinking and vision into the planning now, this will also help buy in support and enable political leaders to see a positive opportunity
- One delegate said, if we just repair what we had, we may realise that the market has changed and the repair is not working.
What learning can be shared to support other councils and leisure partners with a contract and management fee in place now and in shaping the future arrangements?
- It is key for local authorities to have an open conversation with attention to detail and gather a realistic estimate of the costs to maintain the sites managed by the leisure operator
- This can help reduce the costs caused by this crisis and make it more achievable and palatable for the local authorities to be able to fund the difference
- There is a risk of leisure operators being very focused on income, specifically in these times, and that could increase inequalities in the medium term
- There is a cost to reaching out to the communities in terms of targeted outreach and interventions that contribute to positive longer term outcomes – this vitral service will be needed more than ever but at the same time is at risk of being lost
- There often is support for revenue invested into leisure in Councils, but elected Members need to be convinced that the investment is going to the right places in future
- There is a need for an open and realistic analysis of the existing contract between the local authority and leisure operator to find out how to mitigate the impact this crisis has on both sides and move forward together
- There is a question of how do local authorities get a better understanding of the level of financial support required by leisure operators when historically in some instances, there has been mistrust and at times ‘smoke and mirrors’ particularly relating to central management costs
- It would be extremely helpful for local authorities to gather a shared understanding of the level of leisure operators’ head office costs across the country
- Looking ahead on re-procurements, there is uncertainties for local authorities regarding market conditions and as such many of these exercises are being postponed often with the resulting need for a contract extension and a new financial arrangement which could be significantly less attractive to the Council (SLC is of the view in some cases, where there is sufficient market interest, procurements should continue but be adapted in the short term)
- Upcoming re-tendering and procurement of contracts have significantly more risk for leisure operators and for local authorities, as the market will change in the aftermath of this crisis.
How can the sector support partners’ through the stages of recovery?
- There was a real interest from local authority delegates in the national picture and they were keen to understand what is Sport England is doing to support the sector at this time.
- Sport England are working on three levels to support public sector leisure:
1) They are undertaking ministerial engagement to show the scale of impact public sector leisure has on the nation’s health and wellbeing.
2) They are leading on strategic partnership engagement with key stakeholders (UKA, CLOA, CLUK, LGA, APSE etc) by providing support and a bridge to government.
3) Importantly they are offering practical help by proactively approaching local authorities offering an opportunity to get in touch and receive specialist support for their leisure services and partnerships
- The support Sport England is providing is looking to be flexible to the needs of local authorities and not prescriptive – specialist consultants like SLC will be available to provide help along with Sport England officers
Should there be a code of conduct / commonly agreed principles for all partners entering into partnership negotiations linked to change of law?
- There was a general consensus that principles would be helpful – e.g. clarifying specifically what open book actually requires the leisure operator to share
- There is a danger of inequality in approaches to this issue taken by local authorities and leisure operators that can lead to different outcomes with some local authorities not achieving a best value outcome / a leisure operator not having a viable settlement that enables them to operate in the future
- A collective approach to these issues would therefore be key in creating an even playing field and consistency of approach where appropriate
- There is a need to see an overview of the approaches taken by local authorities and steer in the right direction. It was understood APSE are undertaking a questionnaire to ascertain what approaches are being taken in respective leisure contracts
- Local authorities and leisure operators all have agreements that are unique in some way despite the standard documentation used from the Sport England Procurement Toolkit, as they are tailored to individual circumstances
- While it might be hard to have the exact same approach in all local authorities, as their contracts differ greatly, an agreement on potential solutions would be helpful for the sector if shared nationally or regionally
- It is key for the local authorities to understand their contractual position as a starting point for negotiations, for instance understanding the change of law clause in their contractual arrangements
- Sport England is advocating a responsible, shared approach to partner negotiations
- There is a broad agreement amongst attendees that an even playing field is key to managing the crisis and Charter for a) current situation and b) post Covid-19 market would benefit local authorities and their leisure operator partners
What has been the role and the effect of the open book policy on the operator’s side?
- The open book approach taken by leisure operators does not automatically mean full disclosure – the degree of transparency greatly differs throughout open book arrangements – there is an opportunity to standardise this nationally
- Accounts presented by the leisure operators should not just cover certain standard income and expenditure, but present local authorities with a detailed snapshot of their accounts and historical performance to highlight if previous years has been profitable and to what level
- In many cases, some aspects of the leisure operators’ accounts are less transparent, local authorities often need to push back to get the full picture – it was agreed this should not be necessary from this point forward as it would not be in the leisure operators’ interests
- If there is no consistency in the recording of a leisure operator’s accounting it is extremely difficult for a local authority to make sense of the shared information – this is an issue that has evolved over time and presents an opportunity through guidance such as the upcoming Leisure Services Delivery Guidance (replacement for the Procurement Toolkit) to address this
- It was suggested this could be an opportunity to apply an open-book policy to data provision by the leisure operator (more than just attendance numbers) to support developing greater insight in behaviour and addressing inequalities etc.
We would like to thank all the delegates who invested their time to support each other and share their thinking.
The next Local Authority Client / NDPO Trust Virtual Think Tank exploring Leisure Partnerships – Managing the Crisis and Planning for the Future is on 23 April.
For further information on upcoming themes for exploration in our weekly virtual Think Tanks, please visit SLC’s website www.slc.uk.com
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