Agenda item

Qualis Business Plan

Report to follow.


The Strategic Director and  Section 151 Officer (A Small) introduced the Qualis 1-Year Business Plan. Currently, in the rapidly changing economic climate, considerable economic pressures were not limited to the Council’s finances and residents, but also to the Council’s partners, e.g., in the construction industry. Although Qualis should produce a 4-Year business plan under the Shareholder Agreement, in this time of great uncertainty, the decision had been taken that a 4-Year Business Plan would be too challenging and be out of date sooner than forecast. The appendix to the report detailed the financial conditions and how Qualis would address them. Qualis had assessed its opportunities. It had reviewed the Council’s commercial assets / portfolio with some success and therefore, the transfer of assets seemed the right time, as Qualis had more opportunities to maximise return. The Conder Building had been demolished. Development of the Epping Sports Centre site had started. The Council was confident good governance was robust at Qualis. The Qualis Group Managing Director (S Jevans) continued that Qualis was building strong skills. There were challenges but the report set out the savings made, and had identified the key risks, strategic priorities and was optimistic on growth.


Members raised many questions which were answered by the Finance Portfolio Holder (Councillor J Philip).


What level was the decision taken to not produce a 4-Year Business Plan? The agreement was reached in discussions between the Finance Portfolio Holder, Qualis Group Managing Director, and the Strategic Director / 151 Officer. Qualis presented a thorough 4-Year Business Plan to Overview and Scrutiny Committee last year. However, Russia had invaded Ukraine in February when this was worked out and with many economic uncertainties arising, the 1-Year Business Plan achieved a different option.


As there were allegedly several residents’ concerns with Qualis’ performance on housing maintenance, how could this be scrutinised? The correct approach was with Housing Maintenance. The Housing and Community Portfolio Holder (Councillor H Whitbread) advised that Qualis was an improvement, as there was a direct line of conversation and problems were resolved quicker. In reply to a further question on scrutiny, the Finance Portfolio Holder continued that replacing the software system had allowed better scheduling of people with more jobs being completed in a day by staff.


Would there be an opportunity to scrutinise the business case on the transfer of Grounds Maintenance to Qualis and would staff terms and conditions be assured? The business case would be scrutinised ahead of any Cabinet decision, which was why it was in the 1-Year Business Plan but the date for this had not been agreed yet. If there was not good reason for a transfer of service, then it would not go ahead. Any major change to terms and conditions of staff would be done properly.


Replying to a query on the inter-company recharge of £844,000 for each Qualis company, the Finance Portfolio advised that on company charges the group overhead was split evenly between them.


The transfer of Asset Management to Qualis that had taken place and the welcome renegotiation of leases was viewed as helping to improve the Council’s productivity. The Finance Portfolio advised that Asset Management had been seconded for a year but, as it was working well, the Council was looking to make this transfer permanent. The transfer of Grounds Maintenance would be good value for EFDC in addition to the recharge from Qualis back to the Council.


What was happening in the transfer period to make the expertise at Qualis better and more efficient? If more Council properties were refurbished quicker, this was an improvement. It was also to do with competency and came down to the management structure and therefore, focus and increased capability was achieved. When well led by experts, leadership and learning were also accomplished, as well as passing on knowledge. The Strategic Director observed that the commercial asset team had a detailed knowledge of the EFDC estate, but duplication of the teams would have resulted in more expense for Qualis.


It was noted that Qualis expenditure of £1.75 million on staff costs was small but not unreasonable, as staff costs were a substantial part of the budget, and it was worth paying for people with the right skills in place.


In view of risks on loans, what about loans to Qualis and was the interest rate variable? It was a fixed interest rate and a margin had been added on. It also depended on Qualis. Interest rates would change when the Council borrowed from the Public Works Loans Board. But loans were well ringfenced. Qualis needed to be successful for the Council to be better. Qualis was taking a sensible business approach and factoring this in.


Why were there no detailed proposals coming forward for Qualis Community? The Qualis Group Managing Director replied that the purpose was to generate benefits for residents out of profits. Qualis Commercial had been created as a community interest company but needed to get to that stage, so shareholders could decide how best to share profits. A significant amount of money would be generated through the section 106 process for the developments, and it was possible that some of those benefits could be delivered though Qualis Community.


Had Qualis borrowed from elsewhere? No, however, once profits were in, Qualis could invest in property or land and it would then be in a position to go into the market to borrow against assets, outside EFDC.


Could Qualis default or renegotiate interest rates and had this scenario been budgeted for? There would be no speculation on what might happen. Developers might land bank if this situation arose. Qualis had this option therefore, the 1-Year Business Plan had been produced.




            That the Committee pre-scrutinised the Qualis 1-Year Business Plan ahead of the Cabinet decision on 10 October 2022.

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