ESS, who operate the SIMS management information system (MIS) used by many schools, announced last term that they will only offer 3-year contracts from April this year. Although the details of the contractual arrangements vary considerably, many of the SIMS agreements previously operated on the basis that there was a rolling contract which renewed on an annual basis.
The decision to move to a 3-year contract has prompted a reaction within the sector and we are aware that there are many mixed messages and rumours doing the rounds. Following the concerns raised by schools, we understand that ESS informed many schools that they didn’t need to serve notice by 31 December 2021 and they could instead renew at any point up to and after 31 March 2022 (although it is important that you check the position with ESS so that you are clear about when you are required to serve notice if you wish to end your contract).
In addition, in January 2022 it was reported that ESS were giving maintained schools an option to request a break clause in the 3-year contract but they apparently needed to exercise this option by 20 February 2022. However, we have not seen the terms relating to this break clause and again would invite schools to check the position with ESS and seek specific advice from us on this if required.
This briefing note has been drafted to provide practical guidance to schools and academy trusts on the risks and the options relating to MIS contracts to help you to make an informed decision. There are no easy answers and this is a fast-evolving situation so although this guidance note is accurate at the time of writing, you will need to stay alert to any further communications regarding this issue. In addition, if you are currently a SIMS customer, you will need to check your own contractual or licensing arrangements to understand your specific rights and obligations.
What do we need to consider before signing up to a 3-year contract?
Schools are subject to various regulatory and legal requirements to ensure that they obtain best value.
If the value of the 3-year contract equals or exceeds the procurement threshold of £213,477 (including VAT), the Public Contracts Regulations 2015 (PCR 2015)[1] will apply.
However, even if the value is below the procurement threshold, maintained schools are still subject to requirements set out in their local authority’s finance regulations and academy trusts are subject to the Academy Trust Handbook which expect schools to ensure they obtain best value. In addition, many schools will find that they will not be complying with their own procurement policies if they sign up to a contract without first checking if it represents best value. This raises issues about governance and regulatory compliance.
What are our options now given the timescales?
If you appoint another supplier following a procurement process, you will need to allow time for an implementation period in order to migrate your data to your successful bidder before your existing contract expires. We understand that this can take 4-6 weeks which means a new supplier would need to be appointed by mid-February at the latest. We recommend that you ask about implementation periods before you decide whether you can change suppliers at this stage (though be aware that any such commitment will not be contractually binding unless it is incorporated into any contract with the supplier).
In light of the above timescales, schools do not have much time to test the market and carry out due diligence in order to assess whether an ESS contract offers best value. It will be important to try to compare like with like. For stand-alone schools or small trusts, there may be time to run a simple benchmarking process which might be all that is required by your procurement policy.
For larger academy trusts where the value of the ESS contract is more significant (but still below the procurement threshold), it will be very difficult to run and complete a more rigorous procurement process for an MIS contract to start in April, given that you will need to allow time for implementation. Where the value of the contract exceeds the procurement threshold, our view is that academy trusts do not realistically have enough time to run a compliant procurement process in accordance with the PCR 2015 (at least not without a significant level of procurement and operational risk).
One option open to schools and academy trusts is to find a stopgap service provider who will offer a one-year (or other sub-threshold) contract and then undertake a procurement process later on. However, you will still need to think about whether a one year arrangement offers best value, mobilisation periods and the operational challenges that come with changing suppliers.
An alternative option for academy trusts where there is not enough time to run your own procurement process is to use a framework. The process is simpler than designing your own procurement process as there is no need to draft your own procurement documentation. It is also quicker than running a procurement exercise. However, there is less flexibility when you use a framework and there are likely to be limitations to the parts of the contract that you can change. You would also need to consider if the options on framework are close enough to your technical, operational and commercial requirements.
Even if you use a framework, the process of changing suppliers is still a significant decision and given the timescales, the process could feel very rushed especially as the strategic planning that would usually take place for such a significant change may have not taken place.
What could happen if we enter a 3 year contract without running a tender process or using a framework?
It depends on the value of your contract. If the value is sub-threshold then then the school or academy trust could be in breach of its own procurement policy or finance manual, depending on what the policy says. There is a risk of regulatory action but as this is an issue which is affecting many schools in the sector, we would hope that the current context would be taken into account if the issue is picked up by the regulators. There is also a risk of a public law challenge (a judicial review) if an academy trust enters into a contract with ESS in breach of its procurement policy. A claim of this nature could be brought by another supplier, for example, but it’s a very expensive process to pursue with no guarantee of success.
If the contract is above the procurement threshold, then in addition to the issues with governance and compliance highlighted above, an academy trust may be in breach of the PCR 2015 if they sign up to a contract without conducting a compliant procurement process. A third party could issue legal proceedings against the academy trust to ask for the contract to be ruled as ‘ineffective’.
Alternatively, there are provisions in the PCR 2015 which allow schools and academy trusts to enter into contracts without competing or advertising the requirement in circumstances where there is “extreme urgency” but we recommend that you take advice before you go down this route as this will be a fact specific assessment (we can help with that).
Conclusion
We understand that many schools and academy trusts will feel as though they are ‘stuck between a rock and a hard place’ given the various risks outlined above. As well as procurement risks, it is also important to factor in your data protection obligations, including the need to maintain data availability given the nature of the information stored on a school’s MIS. We recommend that you carry out a data protection impact assessment before you transfer any data.
It is very important that records are kept of the approach you decide to take and the reasons why. We also recommend that an internal business case is prepared to justify any decisions and that this is submitted to the audit committee or the board for approval as appropriate.
If your school or trust decides to sign up to a 3 year contract with ESS, it would be good practice to carry out due diligence on the other suppliers in the market over the next couple of years so that you are well placed to make an informed decision before the contract next comes up for renewal.
All contracts need to be managed effectively so you should ensure that there are clear deliverables so that you can hold the supplier to account for the service you are paying for (and consider early termination for breach if appropriate).
For further information or advice, please contact our School Support Service team on 0345 070 7437 or schoolsupport@wslaw.uk
[1] When you are estimating the value, you should include the value of any extensions if there is the possibility of extending the contract. If you know that more schools are joining your academy trust, you would need to assume that those schools will be added to the contract too when you are calculating the estimated value of the contract.