Tendering for a new contract is crucial to the growth of many businesses. No matter how organised or sophisticated the tender team is, we find it a pressured and sometimes stressful time. Pricing is always key. Our clients often ask us whether or not TUPE will apply if they are successful in bidding for new work. It is an understandable question which is often central to the pricing process. The applicability of TUPE is extremely fact sensitive, however. Case law is littered with examples of situations in which TUPE has been held to apply, or not to apply, to outsourcing situations. It is often difficult to reconcile the decisions. Here are some tips which may help in identifying whether or not your particular situation is likely to involve you in receiving employees transferred from an outgoing contractor if you are successful in bidding for new work.
First, what is the precise nature of the services that are to change hands? In “TUPE-speak” it is necessary to define the “activities” that are ceasing to be carried out by one party, either on its own behalf, or on behalf of another, and which are subsequently to be carried out by someone else – you hope you. Often, this will be clear from the tender document itself. However, it is wise not to wait until you are in the throes of the pitch to consider whether or not yours will be a TUPE situation.
Secondly, consider and gather information about how the current provider of the services carries out the work. Is there a dedicated client team? Where are the people who do the work and how are they organised? Do they work for other clients? What systems and processes do they use to deliver the services? These are all important questions which a wise business will begin to investigate well before the invitation to tender is received. The wording of TUPE will be familiar to many readers i.e. is there an “organised grouping” of employees currently carrying out the work? Remember that a single employee can be an “organised grouping”.
Thirdly, how are you going to provide the services if your bid is successful? Carefully planned, TUPE can be circumvented quite legitimately, by an innovative approach to the planned service provision post-tender. To this extent, the contractual and pitch documentation is key. In the excitement of the pitch, it is often tempting to offer a dedicated client team working for the proposed client but this may not be the most effective way to pitch for the work at a competitive price. Remember, all your pitch documents will be disclosable evidence if the issue of TUPE rears its head later.
Fourthly, beware the situation in which contracts are divided up, having previously been operated by one master provider. This may result in TUPE avoidance but it will not necessarily be so. Once again, the facts will be all important and it will depend very much on how the services were being provided prior to the tender. There is also no requirement for the whole of the service to transfer in order for the service change provisions of TUPE to apply.
It should by now be clear that information is everything and the business intelligence you gather about the current arrangements long before you put your hat in the ring to take over the service will be crucial. Equally, even in public sector circles, it is wise to keep your powder dry if at all possible about the applicability of TUPE until the post award period when genuine due diligence can take place. Commercially, it is recognised that this may not always be possible, but in our experience, in the excitement of the pitch it is easy to be persuaded to agree that TUPE will apply even if legally there may be an entirely legitimate argument that it does not.
Last but not least, don’t forget the value of warranties and indemnities in the contract documentation. It may be possible to protect your business or minimise risk by inserting sensible arrangements for allocating liability in the event that employees decide to argue that their employment has been transferred. Plan ahead and think about the “economic, technical or organisational reasons” as to why it might be necessary to terminate the employment of transferring staff, if all else fails.
If you are thinking of pitching for a new contract we’d love to support you to make it commercially viable from a staffing perspective. Feel free to call us for an early chat to think through how TUPE might impact upon your sales pipeline.