Research Data Scotland: outline business case

Commercial Case

Introduction

The Commercial Case sets out the implications for procurement as developed from the initial work on RDS. It considers the requirements, proposed sourcing options, commercial considerations and identified risks at this early stage.

The Commercial Case also summarises the preferred delivery option for RDS. The objective is to consider options for the participation in RDS of public sector bodies and other partners and service providers and to establish which vehicle/strategy should be pursued in order to achieve organisational objectives. As part of this, contractual and legal considerations are set out.

A brief summary of existing procurement and governance arrangements is presented. Further detail on this will be sought from existing service partners as the OBC develops to inform a collective picture of the current legal and contracting landscape.

A Legal Working Group convened in 2019 comprising representation from service partner organisations, along with solicitors contracted by Scottish Government. The remit of the Group is to provide information and advice to support the process of identifying options for legal models for establishing RDS as a legal entity, including any contractual and regulatory requirements. It will also reach agreement on the form of founding partners in RDS, to align with strategic objectives for RDS and for the participating organisations.

Further legal advice is being sought and the OBC will be shared with the group for input and consideration. This work will develop through the FBC.

RDS Commercial Structure: Company Limited by Guarantee (CLG)

Based on the work conducted through the SOC, the Strategic Case and the Socio-Economic Case, the preferred approach to be delivered is a Joint Venture company – to be limited by guarantee in order to seek charitable status. A CLG is a legal form of organisation, which is regularly established to conduct business for the benefit of the community.

RDS as a company limited by guarantee will be a “not for profit” entity on the basis that any profits arising will be reinvested in its public mission. The organisation may "trade" but only in accordance with its objects. A CLG may be charitable, in which case if approved by HMRC certain sources of income may be exempt from corporation tax.

Governance Arrangements and Legal Status of founding RDS partners

The Socio-Economic Case presented options for delivering RDS via alternative legal structures, along with examining the status quo. Various success criteria were used to score and rank options for the preferred legal structure for RDS in light of its public mission and longer-term objectives. This identified the JV as the preferred vehicle for delivering RDS.

Potential founding partners in RDS are still under consideration. In light of the Founding principles of RDS and its public mission, founding partners are likely to constitute other public bodies, (including SG) and/or academic institutions. Users of the services provided by RDS may also choose to participate and the network of Regional Safe Havens based in academic institutions may also have the option of joining. Public sector data controllers might also wish to hold a stake in RDS. Depending on the founding partnership a set of contracting arrangements will be drafted with service providers. The LWG are taking forward these considerations to agree a workable and effective set of articles for the setting up of RDS as a JV.

Roles and Responsibilities

• National Records of Scotland (NRS)
• NHS National Services Scotland (NSS)
• Public Health Scotland (PHS)
• Scottish Government (SG)
• Data Controllers
• Scottish Universities
• Users

Contracting Arrangements under Existing Service Model

The existing commissioning arrangements comprise a set of bilateral agreements between the various partners, depending on their role and involvement.

The arrangements do not lend themselves to a ready appraisal of the effectiveness of the individual services, either within each of the contract terms, or at a more strategic level across the system. Various funders contribute to different services and risks are not borne or aligned in a way that promotes efficiency, stability and sustainability.

An improved commissioning framework will be developed as the FBC is worked up, in collaboration with partners and the support of the Legal Working Group.

• The National Safe Haven was commissioned by NHS NSS to be delivered by EPCC, University of Edinburgh, and this remains the case; this contract has now transferred from NSS to PHS. A set of service agreements and legal contracts underpin this relationship.
• The Chief Scientist’s Office holds an existing SLA with PHS/eDRIS for delivery of the National Safe Haven and it is envisaged that this funding be channeled via RDS. This will facilitate a single structure.
• SILC was defined through a Memorandum of Agreement (MoA), which outlined a governance structure for the collaboration.
• A number of Service Level Agreements (SLA’s) were developed between the groups operating within SILC, with each individual organisation reporting to the SILC-SMB.
• A set of collaboration agreements, lease agreements and licenses to occupy the space at Nine BioQuarter were also developed for FARR and ADR-S.
• FARR IT infrastructure – shared infrastructure resource.

Proposed RDS Operating/Commissioning Model: Required Services

This section describes briefly the legal structure and core components of RDS.

Recognising that health data and health informatics generally are core to the aims and ambitions of RDS, PHS, a key NHS organisation, will be one of the founding members of RDS. PHS has wide functions under NHS legislation to, for example, provide research and development services, collect, disseminate and analyse epidemiological data, participate in epidemiological investigations and provide information services, in the NHS context plus facilitate health research generally. RDS will be set-up under NHS legislation as a joint venture company limited by guarantee (with SG, PHS and the University of Edinburgh as the three founding members) and whilst its core purpose will be to perform these functions, such services and activities will also be provided outwith the NHS arena.

This is based on a commissioning model with a small core RDS staff. Various assumptions on the future operating model have been made and will be tested with service partners and key stakeholders. It is assumed that:

• RDS will focus on a range of data sources and types – recognising its core purpose, it will have a strong focus on health and social care data, but will also operate with other data sources.
• It will act as a ‘shop-front’ for data access by researchers, with most data continuing to be held by relevant public sector bodies.
• Data sharing agreements or data processing agreements as appropriate will be put in place with each of the organisations whose data RDS makes available to others will be put in place between the partners.
• RDS will have its own governance structure (members/directors/trustees – as appropriate to the choice of legal structure).
• It will commission all services and staff needed to operate, principally:
  • eDRIS (from PHS) – customer support
  • EPCC computing infrastructure and support (from University of Edinburgh, via PHS)
  • NRS – data indexing and matching
• The exact details of commissioning arrangements, priorities and structures are yet to be agreed.

Discussions have opened with the regional safe havens in Scotland to explore their current offering and potential collaboration with RDS in the future. This work will also set out a short-term plan for ensuring the regional safe havens are appropriately joined up with RDS in the short term when the RDS service is launched in FY 2021/2022.

Contract Structures

The following key contractual arrangements will need to be put in place to implement the preferred commercial solution. They are not considered to be a complete list of considerations and are subject to full and thorough legal review by appointed legal advisors.

• Stakeholders/Members’ Agreement – between public sector stakeholders who wish to take a stake in RDS. This will set out the respective roles in funding and governance of the Project.
• Service Agreements – with commissioned service partners.
• Lease – if required as identified, provided from an office provider to RDS to provide a space for RDS staff to operate from.
• Finance agreements – entered into by RDS with stakeholders, setting out the funding and equity/debt arrangements (if required).

Indicative Terms and Conditions will require to be drafted, setting out the key contractual clauses between RDS and its service providers; it is anticipated that these will be developed in detail throughout the procurement phase of the project.

The Scottish Government will also need to obtain specific legal advice to ensure compliance with relevant regulation, including:

• Vires (legal capacity)
• State aid
• Procurement regulations
• Employment law
• Regulatory law
• Financial treatment
• Office for National Statistics (ONS) treatment.

The proposed commercial structure should be subjected to a Legal Compliance Check to ensure compliance with relevant legal requirements.

Procurement Strategy

The procurement strategy will be developed on the basis of a number of assumptions.

• It has been assumed that the necessary inputs and functions required to be commissioned by RDS from each of NRS, University of Edinburgh and PHS can be contracted for directly. Depending on the out-turn structure of RDS, the basis for compliance with procurement requirements includes:
  • reliance on Regulation 13 of the Public Contracts (Scotland) Regulations 2015 either (i) where the partner has a joint controlling membership of RDS and/or (ii) on the basis of a collaborative arrangement in furtherance of public duties and objectives.
  • that certain contracts will be capable of direct award in compliance with Regulation 33 of the Regulations for technical reasons.
• It is considered that the proposed remit, scope and funding arrangements for RDS will be structured such that no state aid issues arise.
• RDS will have its own core staff who will be responsible for fronting RDS, undertaking an initial ‘triage role’ following enquiries, and managing the commercial relationships that RDS will have with its delivery partners.
• Staff resources and assets of the current operating model would not “transfer in” to RDS but remain where they are with RDS, in effect, paying for their use.
• RDS will have in place appropriate service agreements with each of the bodies from whom it obtains commissioned inputs.
• Underpinning legislative basis for PHS’s current operation of eDRIS in the current model would apply equally to eDRIS being available to RDS going forward.
• It is yet to be determined whether RDS would lease particular premises. A Location Review is underway to scope criteria and potential options for siting RDS. Conclusions of this will inform the FBC.
• RDS is to be put in place without supporting / additional legislative measures.

RDS will require a procurement strategy that sets out what components it requires and how it will go about procuring them. It is assumed that RDS will be a contracting authority and, for general items, will have to adhere to the appropriate procurement legislation. This will mean there is likely to be a time lag between a requirement being identified and its procurement. This should be included in any planning assumptions.

A key assumption of the operating model is that RDS will commission services such as indexing, safe haven, and computer infrastructure from partners. Given the importance of data security and public trust it is assumed that these services will only be able to be sourced from established and trusted public sector partners. These arrangements will require contractual terms to be put in place with partners. A more detailed procurement strategy will be developed for the FBC and further details of the RDS operating model will be provided in the FBC.

The Management Case provides detail on the procurement strategy. Throughout the process, it is recommended that SG has externally appointed technical, financial and legal advisers in place to act in the best interest of the public sector and ensure that the procurement specifications are sufficiently detailed to achieve the desired outcomes. In order to maximise the recoverability of project expenditure, it is anticipated that RDS will be incorporated and VAT registered in advance of the incurrence of costs relating to the establishment of the operation.

Based on the assumed operating model, for RDS to function as a service for data controllers and users, the following components will require to be sourced.

Table 10: RDS components

Staff

Hiring a small number of new technical, operational and managerial staff.

Office space

Includes rent, rates, and related utility costs. This could be a shared office space with a suitable partner organisation or a stand-alone facility rented from private or public sector.

ICT equipment

Staff computers, telephones, printers and related infrastructure will have to be procured through the relevant procurement frameworks including shared services solutions

Office equipment

Office fixtures and fittings, consumables and amenities will have to be procured through the relevant procurement including shared services solutions

Professional services

RDS is likely to require legal, insurance, consulting, financial and tax advice during planning, transition and RDS business as usual. These can be procured through the relevant procurement frameworks including shared services solutions.

RDS operational

RDS specific activities such as indexing, parallel computing capability, website build/maintenance. Most likely to be commissioned from other public sector organisations through service level agreements (SLAs) and/or Memoranda of Understanding (MoU). It is expected that due to the specialist nature of these services, these activities will fall under specific exemption from procurement rules.

Key Contractual Terms and Risk Allocation

The commissioning model will require contractual terms to be agreed between RDS and the partners who are supplying it with services. RDS will require legal support to achieve signed contracts. The key contractual terms will set out the requirements of the service, availability, response rates, and payment terms. The relative risk allocation between the parties will be included in the contractual arrangements but, given the principles of partnership, the risk allocation should be equitable whilst agreeing who is better placed to manage/bear the risk.

Procurement route and timescales

Procurement is likely to be through four main strands as follows.

• Procurement of private sector goods and services: this could take up to three months from development of the specification to the goods/services being delivered to RDS.
• Staff recruitment: this could be undertaken using or could be supported by a private sector recruitment firm. Timescales from job specification to start could be as much as five months (including successful candidates’ notice periods). RDS could consider transfer and/or offer secondment opportunities to accelerate this process.
• Office space: the choice of office space will depend on what is available on the market. A specification of requirements has been developed.
• RDS operational capabilities: these will need to be commissioned from partner organisations and it would be sensible to identify which organisations could meet RDS’s requirements. If there were several potential partners, then some form of appraisal would have to be undertaken to determine who would be best placed to meet RDS’s needs. RDS’s legal support would have to agree some form of SLA and draft the necessary agreement. This whole process could take three-to-four months. Because of the specificity of these services and the importance of using public data correctly, it is assumed that these services will not require to follow EU or Scottish procurement rules.

Efficiencies and Commercial Issues

The following commercial issues will need to be considered in arriving at a preferred commissioning model:

• The market in Scotland and supply of required specialist skills is limited and requires investment.
• Requirements of specialist data holdings.
• Statutory functions which mean there is a limited set of potential suppliers.
• Tax treatment of alternative partnership and contracting options.
• Regional - versus national-level demand and how to configure supply.

Conclusion

The Commercial Case lays out the initial procurement requirements and commissioning considerations for RDS. Discussions with the LWG and stakeholders will progress toward a preferred set of arrangements for participation in RDS and for optimal commissioning arrangements consistent with those preferences. The FBC will cover the requirements in further details based on these decisions.