| TERMS OF THE SALE
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| Qs 1 and 2
| 3. Our predecessors asked the Authority whether they considered that the sale proceeds of £12 million were sufficient, given that the new owners would receive assets valued at £5 million and guaranteed income of £111 million over six years. The Authority said that they sought a number of bids from potential buyers and that the bid they had accepted was the highest by quite a margin compared with the other bids received. They also said that the bid they had accepted was close to the highest of a number of benchmark valuations that had been prepared which anticipated proceeds of £13 million.
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C&AG's Report para 4
Qs 228-231
| 4. As part of the guaranteed income arrangements the Authority gave the new owners sixty three separate guarantees in relation to areas of facilities management work at different sites. The Authority told our predecessors that the decision reflected general advice from Coopers and Lybrand that, the greater the volume of assured work, the greater the likely sales consideration.
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| Evidence, Appendix pp 22-23
| 5. The Authority said that most employees had contracts which were site specific and it was unlikely that staff could be redeployed to other activities. The Authority therefore considered that the separate guarantees made it less likely that prospective purchasers would factor into their bids the possibility of redundancies in the event of any reduction in work.
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C&AG's Report para 2.20(a)
Qs 86 and 87
Q 27
| 6. Since the sale, the Authority have been required to pay Procord compensation of £342, 000 because at the Dounreay site in 1995-96 the level of work commissioned was less than the value of work that had been guaranteed to Procord. The Authority told our predecessors that they had also been required to pay Procord £1.2 million compensation because certain areas of work had reduced following service reviews and that the sale proceeds would be reduced by a further £0.6 million because of adjustments to the value of assets transferred to Procord.
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| Q 7
| 7. These amounts which had reduced the benefits of the sale to the tax- payer had, however, been more than offset by savings of £5.1 million which the Authority had received from Procord, partly for meeting guaranteed levels of business, partly for placing other levels of business with Procord which had not been guaranteed, and also because of price reductions in real terms which were built into the service agreements between the Authority and Procord.
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| C&AG's Report para 2.20
| 8. The compensation of £342,000 to Procord arising from the shortfall of work at Dounreay was payable despite the fact that in aggregate the Authority placed work with Procord in 1995-96 with a value of £51.8 million which substantially exceeded the £37 million which had been guaranteed. The Authority was liable to pay this compensation because of the guarantees they had given in relation to the sixty three separate areas of facilities management work.
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| Q 4
| 9. Our predecessors therefore asked the Authority whether they could have considered netting off the shortfall at Dounreay against the substantial aggregate surplus in work compared with the total guaranteed payment levels. The Authority told our predecessors that this would have been possible but that the individual guarantees recognised that it would not have been easy for Procord to move staff from one activity to another when shortfalls in particular areas arose.
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C&AG's Report para 6
Evidence, p 1
| 10. One of the sale objectives was to take account of the interests of employees. The Institution of Professionals, Managers and Specialists told our predecessors that more staff had been made redundant than had been expected at the time of the sale.
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| Qs 49-54
| 11. Our predecessors asked the Authority how, in the light of the reduction in employment, employees' interests had been looked after. The Authority said that their concern had been to make sure that as many jobs as possible could be provided after the sale and that, if people were asked to leave or were asked to volunteer to leave, they would receive appropriate redundancy terms. The Authority said that, while they did not expect all the staff who had been previously engaged in facilities management to be retained, they believed that by placing staff with a purchaser who was very aggressively expanding in the facilities management area, they would maximise the staff's prospects.
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C&AG's Report para 1.20
Q 57
Evidence, Appendix 3, pp 23-24
| 12. We asked whether Procord had retained 90 per cent of the former employees of the Authority. Johnson Controls (formerly Procord) told The National Audit Office that at 31 October 1997 the number of former Facilities Services Division staff employed was 608. This is equivalent to 65 per cent of the workforce of 934 at the time of the sale. They said that the reductions had been on account of resignation, ill health, retirement and voluntary redundancies, and that there had been no compulsory redundancies.
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C&AG's Report para 2.25
Q 43
Q 83
Qs 219 and 220
| 13. The Institution of Professionals, Managers and Specialists also told our predecessors that they would have liked the opportunity to speak with each of the shortlisted bidders and also to have had a longer period of discussion with the preferred bidder. The Authority said that they had consulted all the unions concerned about what would be required of the purchasers of the Facilities Services Division. They had, however, been trying to sell the Facilities Services Division as quickly as possible in preparation for the subsequent sale of AEA Technology. They believed that the bid from Procord was substantially better than other bids they had received, and it had been strongly supported by both the vendor unit and customers.
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| Qs 219 and 220
| 14. The Authority said that also they had not wanted to extend the sale timetable to allow for further consultation with the unions because, given the level of support for Procord's bid, they would not have felt able to accept an alternative bid, and extending the sale timetable would have created a risk that Procord might withdraw.
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| Conclusions |
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| 15. We note that, at £12 million, the proceeds of the sale of the Facilities hideflags Services Division were higher than other bids received and were close to the highest of a number of benchmark valuations which had been prepared.
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| 16. We note however that, as part of the sale, the Authority guaranteed Procord a level of income of £111 million over six years; and that, as part of this arrangement, the Authority gave Procord sixty three separate guarantees relating to particular areas of facilities management work. We are concerned that, as a result, the Authority were required to pay compensation of £342,000 to Procord because the value of work required at Dounreay in 1995-96 was less than the amount that had been guaranteed even though in aggregate they had placed work with Procord with a value some £14.8 million higher than the total amount guaranteed.
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| 17. We note that, by 31 October 1997, one third of the workforce who had transferred at the date of sale were no longer employed by the new owners.
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