AIRSPRUNG BEDS - THE GREAT TRANSPORT COSTINGS MYSTERY

 

As of the 30th July 2008 Airsprung Beds no longer have a contract with Scottish Prison Service Industries for the manufacture of bed frames at HMP Shotts. The last ever load of bed frames had left Shotts 2 days before to make their way to the Fauldhouse depot. On top of this news, the long running saga of a Freedom Of Information application to SPS Industries from CAPS on the subject of their contract with Airsprung Beds is drawing to a close, so we thought that now would be a good time to reveal the full story of "The Great Transport Costings Mystery" as we know it.

THE BACKSTORY

The whole Airsprung story came to our attention back at the beginning of 2005, when we started receiving letters from people working within the Scottish Prison Service (SPS) complaining about the way that their prisoners were being exploited by the private companies that had contracts with SPS Industries. "I am sick and tired of companies like Wickes and Airsprung Beds (who supply Argos with beds made by SPS) sniffing around looking for cheap labour. I feel sorry for some of these prisoners as they are offered false hope and are worked like dogs & for what????" one said.

'Naming and shaming' these companies on our website, we also started to receive a number of allegations about the internal workings of SPS Industries itself. The most startling of which was that their 'flagship' contract with Airsprung Beds had been 'misnegotiated' and, as a consequence, SPS were losing money on it. On top of that, it was alleged that sections of the management knew this was the case and were trying to cover it up. We decided to pursue a number of Freedom Of Information (FOI) Act enquiries to try and ascertain the true cost of transport and just how much that loss was.

THE CONTRACT

Airsprung Beds are a company based in Trowbridge, Wiltshire who supply beds to Argos, Bensons & The Bed Shed amongst others. SPS Industries have a contract with them for the manufacture 90, 135 & 150cm platform and divan bed frames in the industrial workshops at HMP Shotts. Airsprung supply and transport the raw materials (and the tools used), freighting them up to Shotts at their own cost, where the wood is machined and assembled into unfinished bed frames. These are then transported, at SPS Industries' own cost, the 9.5km from HMP Shotts to the SPS depot at Fauldhouse. There they are held in storage until Airsprung lorries transport them to their Wiltshire factory.

The contract prices for the different sizes and types of bed frame are shown in Table 1. These prices have to cover Direct Costs such as prisoners’ wages, plant maintenance, utilities and, most importantly, the transport costs from Shotts to Fauldhouse; together with Indirect Costs such as staff wages, capital depreciation, rent and rates.

One story that we heard was that when the initial contract was negotiated, it was decided that staff at Fauldhouse would use the works' Luton van to ship the bed frames between Shotts and Fauldhouse. Transport costs would therefore only be 30p per frame. It very soon dawned on Fauldhouse that it was actually a full-time job, that they would need to employ an outside transport contractor and that a very large blunder had indeed been made.

SPS Industries though have told us that originally Airsprung were meant to collect the bed frames directly from Shotts. However, HMP Shotts did not have sufficient space to store the finished frames and so it was decided to store the beds at the Fauldhouse Central Stores. This of course means that the whole of the transport cost would now effectively be a surcharge on the original contract price and eat into that revenue stream

Whichever version is true, this was a contract that SPS Industries could not afford to lose given that slump in income from sales from 2003 onwards. [1]

THE CONTRACT REVIEW

Like all competent commercial firms, it is SPS Industries' policy to carry out quarterly Contract Completion Reviews on all their Contract Services contracts. [2] This type of review is designed to establish whether the original estimated costs for any contract in terms of overheads such as materials and transport correlate to the actual costs of these items, and therefore whether the contract is providing the revenue the contract, as originally negotiated, was meant to provide.

In all of our investigations, one of the more startling things that we discovered was that the one SPS Industries contract that does not undergo these Contract Completion Reviews is the largest in their Contract Services portfolio, the Airsprung Beds contract. Inevitably the suspicion of some form of cover-up was raised. It subsequently turned out that SPS do not in fact carry out Reviews on so-called "free issue" contracts, those where the materials and tools are supplied directly from the customer.

THE FOI REQUESTS

The answers from SPS Industries to our initial FOI questions failed to provide any useful information. In response we formulated what was to be our core question, "What is the direct costs attributed per contract unit price of each half drawer base and each platform base for transport between HMP Shotts and the Faulhouse depot?" We hoped that this was a succinct enough, together with various variations on questions of size and cost of the maximum and minimum load dispatched, to elucidate some form of useful answer.

SPS Industries' response was to invoke the £600 threshold (if the total costs of an enquiry exceeds this figure, a public authority can refuse to answer it) and also invited the "commercial interests" exemption. We appealed too through SPS's internal system and received the same answer. We therefore decided to appeal to the Scottish Information Commissioner in March 2008.

At the same time, having had access to a copy of the Transport Matrix that is used by SPS to calculate transport costs for various loads and mileages for the 3 separate transport firms that they use, we were able to estimate that the cost of transport from Shotts to Fauldhouse was somewhere in the region of £1.60 per bed frame (based on 100 beds per load). This would mean that on 90cm platform bed frames they were only making 55p per bed. We press-released this and posted details on our website, together with a follow up article "The Crisis In Scottish Prison Service Industries" which placed the story in it's wider context within SPS Industries troubled financial situation

 

THE INFORMATION COMMISSION

In response to our appeal to the Scottish Information Commissioner, SPS Industries put forward a compromise offer where they would use a months' dispatches from Fauldhouse and calculate the number of 'units' per load, the cost per load and per 'unit' for the 960 'units'/480 beds (8 loads of 60 beds each) dispatched in January 2008. The average cost of transport per bed came out at £2.312. This went part of the way to answering our questions, but failed to provide any breakdown as to the type and number of the various models or even a breakdown between platform and divan beds that would be essential to establishing what we need to know. Breaking the figures down further "would involve an excessive amount of additional work" and exceed the £600 threshold. It should be noted that this is calculated at £25 per hour i.e. a maximum of 24 hours of administrative work for the answer.

Having a partial list of dispatches from Fauldhouse to Wiltshire, we made our own rough calculations of how long it might take and the sort of results that might result. For a list of 70 beds, it took one person 5 minutes to calculate a breakdown of bed size and type (6 categories) by number, percentage, transport cost using the January 2008 figures and the amount of profit/loss after transport costs were deducted. At that rate it would be possible to count and calculate for the 480 beds from January 2008 in just over an hour. Even allowing for a generous collating rate that is four times slower than the rate achieved and a good few fag and tea breaks, that amounts to a lot less than 24 hours.

What these calculations also revealed was that on all models of platform beds SPS Industries made a loss [see Table 2] and taking all the costs into account, the average value of a bed after transport costs were removed for that lot of 70 frames was 68p. [3]

THE DISINFORMATION ‘UNIT’?

Through out this process it became clear that at best some of the answer provided failed to answer the question asked, some answers were basically incorrect and some appeared to be designed to confuse the issue. At one point the Head of Sales, standing in for the acting Head of SPS Industries, told us that they only made 90cm platform and 135 & 150cm divan beds. However, the worst example of obfuscation is the saga of the 'unit'.

Our original core question sought the contract unit price [4] of the different bed types and, as we all know, divan beds often come in 2 half-bed units. What we didn't realise however, was that when SPS Industries SPS Industries chose to address all answers on the basis of what they called 'units' rather than our 'contract unit', it was because their internal auditing system is apparently based on the notional half bed 'unit'. So that when Airsprung Beds send in an orders for beds, this is translated by SPS Industries into a certain number of half beds, although it is actually impossible to make a half platform bed frame - it's either a platform bed frame or it's an unassembled platform bed frame. This is apparently one of the major reasons why they are unable to provide us with any more complete answers. We'll leave it to you to draw your own conclusions.

To add insult to injury, they told us that not only were our calculations wrong (we have to admit that there were a couple of errors but the essence of our argument was correct) but they then proceeded to try and persuade us that the prices listed in Table 1 were in fact per ’unit’ not per bed, in total contradiction not only of all the Airsprung Orders and Airsprung Dispatch documents we had seen but of their own previous answer to a FOI question.

THE CONCLUSION

We still hope that a compromise position on some form of fuller disclosure is possible and that SPS Industries will in fact end up answering the questions we actually asked rather than the ones they themselves have set. Probably we will end up having to rely on an adjudication from the Information Commission. We are not holding our collective breath either way.

However, one outcome of all this is that we have learned that SPS Industries are undergoing a major review that already appears to be bearing positive fruit. Rather than a core of Industrial Workshops providing cheap goods to outside firms through Contract Services and often little transferable skill for the prisoners that man them, together with a rump of so-called training workshops, news is filtering out of an alliance with the National Grid for Learning in Scotland. Early information suggests an integrated system, possibly along the lines of the Corporate Alliance for Reducing Re-offending, of in-prison training by firms that would then offer jobs to prisoners upon release.

On the Airsprung Beds front, it is still unclear whether they pulled out of the contract because of the potential bad publicity threatened with our FOI enquiries or whether it was due to the contract having to be renegotiated and it suddenly becoming a less lucrative prospect using HMP Shotts. One company in this did find the publicity associated with our 'naming and shaming' policy uncomfortable and that was The Bed Shed. Apparently, when they found out that the beds they had ordered from Airsprung were actually made by prisoners they didn't want them after all. So Airsprung themselves said that they didn't want them, refused to pay SPS for them and 800 bed frames stayed hidden away for months in the Fauldhouse depot whilst SPS Industries sales department kept trying to persuade them otherwise.

FOOTNOTES:

[1] See: The Crisis In Scottish Prison Service Industries article.
[2] Contracts with private sector firms to supply goods made in Prison Industries workshops.
[3] Calculations link.
[4] A commonly used and universally understood commercial term, in this case denoting a single bed frame.

UPDATE:

Not surprisingly a compromise position between CAPS and the Scottish Government could not be found, even when we offered to limit the information supplied simply to the orders covered by the beds made and transported during the January 2008 period already covered in the SPS compromise offer. This would have allowed us to form a more accurate picture of the type of bed frames made during that period and make a more accurate calculation of the monies involved. It would also have taken very little time, effort and cost on SPS industries' part to comply.

It was never our position to find out the cost of the contract over this period down to the last penny but this appeared to be the starting position for SPS Industries. Therefore the Information Commissioner had to make his decision in the end and he found in favour of SPS Industries refusal on the ground of exceeding the financial limit of £600. [see Decision 106/2008 ]

In the end the types of losses incurred by SPS Industries from the Airsprung Beds contract were revealed by our enquiries, despite the convoluted path it had to follow and the obvious lack of candour shall we say on SPS Industries' behalf. The one thing we don't know however is whether the contract ended because Airsprung did not appreciate all the bad publicity involved in this case [which is what some insiders are telling us], whether the contract was up for renegotiation and Airsprung did not like the new prices they would be charged or if it was down to other factors involved in the reorganisation of SPS Industries that we hear is currently on the go.