Mitie has missed out on an £170 million facilities management contract with Edinburgh City Council, despite claims that the deal would have saved the council £115m.
Councillors rejected an auditor’s report and an officer’s recommendation to use preferred bidder Mitie for its integrated facilities management and corporate and transactional services.
The council also terminated the procurement of its seven-year environment and waste programme in November, which Enterprise was expecting to take on after it was made preferred bidder.
The Mitie decision came after an amendment referencing the Alternative Business Models Reviews programme.
The joint Labour/SNP amendment highlighted the loss of public sector jobs and an adverse impact on the local economy. It said the risk to local services, and local accountability, was “too great” and the estimated level of savings are “unlikely to outweigh the dis-benefits.”
Councillors at Edinburgh, run by a Liberal Democrat/SNP coalition, voted 31 to 23 to terminate the procurement process.
According to the original officer’s report, outsourcing to Mitie would have created £51.5m of savings over seven years - £13.5m more than the internal improvement plan, which would save £38m. It would have meant an extra £39m of revenue savings in the council’s 2011/12 revenue budget process.
That report also said there would have been a pipeline of business cases to develop the service and support property rationalisation, potentially making another £63.3m of efficiency savings.
The report added that outsourcing would have brought 200 jobs to the city and £6m investment in schools, and was supported by an Ernst and Young report concluding there was “moderately low confidence” in the internal improvement plan.
Labour councillor Ricky Henderson said it also put 100 jobs at risk and said any projected savings would be out of the council’s control. He said the contracts would commit the council to up to 12 years with an external provider just before election time.
Mitie had been named preferred bidder for the works ahead of Capita/Carillion. It intended to set up subsidiary Vital Edinburgh to manage the contract, supported by Lambert Smith Hampton and Atkins.
The firm said its outsourcing pipeline remains strong across the UK.
The council said officers will now focus on a “programme of improvement” based on the internal improvement plan.