From India to Guernsey: Museum’s Outsourcing Journey Goes On

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Naval Guns outside Imperial War Museum, London

Following the winding up of museum contractor, Shield Guarding, the livelihoods of the Imperial War Museum’ Visitor Services and Security staff lies in the hands of a private equity firm. Alchemy Partners, which owns the new contractor, Noonan Services, specialises in investing in “distressed and underperforming businesses” to achieve “superior risk-adjusted returns” for its investor clients.

In 2011, the Imperial War Museum conducted a Visitor Services & Security review to compare the in-house service with the market. The review focused on “effectiveness, efficiencies and also opportunities for staff development.” A decision was reached to outsource the department and, in 2013, IWM had a successful bidder – “Shield Group,” a collection of security firms owned by Indian conglomerate, Topsgrup, was awarded the £10–11 million contract.

In April, this year, two years into a three year contract, Shield Guarding, went into administration. It has since been reported that the company made a £3.5 million loss in 2014 and, for some time, stopped paying staff pensions contributions, resulting in the Public and Commercial Services Union (PCSU) reporting them to the Pensions Regulator.

After months of rumour, IWM staff discovered that, following administration proceedings, they now worked for an Irish cleaning, facilities management and security firm, Noonan Services Group, who had bought the assets and business of the defunct Shield Guarding.

Noonan and Alchemy Partners

Noonan was set up in 1977 as a family business by Noel Noonan, a Limerick-born Irish businessman. In those days, it had a handful of staff and specialised in cleaning services. It grew dramatically but was still primarily a cleaning and maintenance firm until 2002 when it purchased an Irish security firm. In 2006, Noonan made a pretax profit of €4.3 million from a turnover of €103 million.

In 2008, Noonan was sold for €90 million in a management buy-out backed by a private equity firm, Alchemy Partners, described by Bloomberg as a “vulture firm.”

Alchemy Partners’ fund management company, Alchemy Partners (Guernsey) Ltd, is based in Guernsey and has businesses based in London. Between formation in 1997 and 2004, Alchemy was reported to have made a return of £1bn for investors, including Goldman Sachs Asset Management and British Aerospace investment fund.

The Deal

Alchemy’s acquisition of the defunct Shield Guarding, for an undisclosed sum, bears similarities to their purchase of another distressed business, Belfast-based outsourcing firm, Resource.

In 2014, Resource went into administration after an order requested by a Guernsey-based company, known as R3768723 Ltd, which is thought to be owned by Alchemy Partners.

John Hansen and Stuart Irwin, of KPMG in Ireland, were appointed as administrators of the defunct company and Noonan Services Group came in to purchase the business and assets.

Likewise, after Shield Guarding went into administration in April 2016, KPMG’s John Hansen and Stuart Irwin were appointed as administrators (by which time, Shield Guarding were known as Jameson and Harrison Security Limited). Noonan Services Group took over the business of Shield Guarding.

The Future

From finding themselves working for a firm owned by an Indian conglomerate, Imperial War Museum Visitor Services and Security are now employed by a company headquartered in Dublin, whose registered office is in Surrey and whose parent company is a vulture capital firm registered in Guernsey.

More significantly, the contractual rights of IWM staff, from all five branches, are in jeopardy and the policy of hiring staff on zero hour contracts at the Museum is likely to continue.

 

Museum Contractor Goes Bust

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Shield Guarding, the private security firm that was given a £10-11 million contract by the Imperial War Museums  to provide Visitor Services and Security, has gone bust two years into the contract. The business and assets of the defunct company have been acquired by Noonan, a facilities management company owned by private equity firm, Alchemy.

The privatisation, in December 2013, was controversial for turning over Museum front-of-house employees to a security firm with no visitor services experience. IWM made the decision for “effectiveness, efficiencies and and also opportunities for staff development.” Aside from quality of service,  concerns were raised that Shield Group profited by placing their staff on zero-hour contracts.

The contract with Shield, owned by Indian firm Topsgrup, was beset by payroll and administrative errors and failure to pay staff pensions on time resulted in the Public and Commercial Services Union (PCSU) reporting the company to the Pensions Regulator.

In June 2016, security staff from Shield Group working at the University of Portsmouth threatened a walk out if delays over their pay continued.

A winding up order was published, in February 2016, only to be retracted a few days later. On 8th April, administrators were officially appointed.

The PCSU, which represents some of the staff whose contracts were privatised, has urged that the Museum consider bringing the service back in-house. Moreover, question marks have been raised, again, about the contracting out process.

IWM Outsourcing Visitor Services: Revisited

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On 11th December 2013, Visitor Security and Services Assistants (VSSA) staff at the Imperial War Museums had confirmed to them what they had expected, their department was being contracted out to a private security firm, Shield Group. From 1st April 2014, some 160 front-of-house and security staff would no longer be employees of the Museums.

The IWM Board identified major risks to the decision, including the threat of “losing significant numbers of staff who may decide not to TUPE across (Transfer of Undertakings Protection of Employment)” to Shield, despite most of their benefits theoretically being protected for a year and “a potential dip in quality of service during transfer because of low staff morale.”

The decision was a controversial one, especially as it would come into effect months before the major £35 million re-launch of IWM London and its new WW1 galleries in the commemorative centenary year.

IWM’s VSSA review commenced from September 2011, focussing on “effectiveness, efficiencies and also opportunities for staff development,” comparing in-house with those offered on the market. In the summer of 2013, they decided to “test” commercial options by opening the service to public tender.

From the outset, it was clear that the tender process was not a genuine comparison because security firm bidders, such as Shield Group, had no experience in providing visitor services.

The department was put out for public tender in June 2013 to find the most “economic” and a shortlist of four companies, including Shield Group submitted final proposals in October 2013.

With the decision to select Shield Group being announced in December, this means that IWM likely spent under two month evaluating the four final proposals before awarding the £10-11 million contract to Shield Group for three years with the option of a two year extension.

The table below is from documents obtained from IWM through a FOI request. It appears to show that the four shortlisted bidding companies only had to provide a projected breakdown of costs for the first year of the contract. This is despite the fact that the claimed “main efficiency benefits” were to be borne from year 2.

table 1

Shield’s projected costs for the first year of the contract were redacted by IWM from the documents. However, within IWM’s tender evaluation document is a table (included below) which compares IWM’s Year 1 projected costs with Shield’s, taking into account parts of the department not included in the contract and, therefore, retained by IWM ( certain facilities management costs (FM) and new  IWM staff posts created from the outsourcing). An 0.8% figure is provided in an unlabelled column which is likely to mean that Shield’s projected costs plus IWM retained/created costs amount to 0.8% more than IWM’s, at £4,761,559. (IWM: £4,723,769).

table 2

Based on this table, IWM were expecting the first year of the contract to offer no savings and, in fact, cost 0.8% more. This ‘loss’ could actually be even greater because not included in the table are “equipment costs” which Shield expressly state in the documentation that they will not absorb. It is not known if Shield was the one bidder who proposed a contingency fund.

Moreover, the tender proposal and further clarification documents suggest that Shield did not cost for staffing at certain corporate events or summer events at Duxford. Shield’s proposal also assumes no staff to be working on Christmas Day and Boxing Day, which was not addressed in IWM’s clarification questions.

Most significantly, in terms of excluded costs, Shield expressly state in their tender proposal that costs for pensions and VAT had not been included. It is not clear if the figures provided by IWM in their tender evaluation include these or not.

Due to the IWM having redacted the figures projected by Shield, it is not possible to reach a definite conclusion about loss/savings in year 1. But, it seems likely, if the 0.8% figure has been interpreted correctly, that IWM was expecting to lose money rather than make savings. It is possible that the actual loss could be very significant if Shield did not include VAT or pensions costs in their costs projection during the tender process.

The possible first year loss on the contract makes IWM’s claim of an annual savings figure of £250,000 even more dubious. IWM claims that this will be achieved through ”reduction in staff numbers; the benefits of providing additional staff from their (Shield) reserve and support teams; and the natural turnover in staff will enable them to employ on their terms and not IWM terms (estimated that this could save £6-8,000 per post).”

IWM concluded that over 6 years cost savings could amount to £1.5m. No evidence seems to have been provided for these figures. Expected efficiency benefits borne from year 2 were “based on information provided by all tenderers, and the experiences of the [redacted].”

TUPE regulations prevented Shield from amending the benefits of staff transferred to them from IWM for at least a year, except for certain pension benefits. Staff turnover and cheap labour was relied upon by Shield and IWM to make cuts. But, with no meaningful projections by Shield beyond Year 1, IWM seem to have gone into this contract blind about costs.

Further information is needed from IWM as to whether the procurement of Shield, partially having been funded by the public, has achieved any meaningful benefits. More questions also need to be asked about the procurement process which seems to have been insufficient for such a significant contract affecting so many staff.