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Local authorities are demanding support service firms offer more from contracts, to help save cash as the recession takes hold. Quarterly results published to the City revealed providers able to offer ‘bundle' contracts are achieving record growth while single-service contractors are feeling the pinch. Smaller providers are also suffering from ‘slash and burn', as councils cut more vulnerable individual contracts to free up cash. Larger ‘bundle' contracts are often seen to offer better value for money in the long term, but are also harder to terminate. Financial results from major firms in the sector revealed cash-strapped councils were making them work harder for more prescriptive contracts. One of the big players benefiting from this was support services contractor, Mitie, which had seen the number of multi-service contracts rise from just above 20% to 33%, and posted an operating profit of £80.5m. Mitie chief executive, Ruby McGregor-Smith, said: ‘The model where a big client used to have hundreds of suppliers is radically changing. ‘We are making strong progress as clients increase outsourcing in their drive for efficiency at this stage in the economic cycle. ‘We are benefiting from a sustained level of outsourcing and asset management opportunities as contracts become more sophisticated, larger and longer-term and client strategies respond to the challenges of the global low carbon economy.' She added: ‘Our people, balance sheet strength, long-term order book, attractive bid pipeline, committed banking facilities and lack of debt put us in a good position to continue our track record of sustainable profitable growth.' PwC estimates one in five UK businesses which went into insolvency in the first three months of the year were support services. But not all councils are turning their backs on their smaller contractors. Kent CC is planning to send more tendering opportunities to local providers.

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BUSINESS

'Bundle' contracts boom in recession

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