Decision details

Theatres Operating Contract, Deed of Assignment

Decision Maker: Chief Executive

Decision status: Recommendations Approved

Is Key decision?: No

Is subject to call in?: No

Purpose:

North Devon Council’s (NDC’s) Theatres Operating Contract is with Selladoor Worldwide. Selladoor Worldwide sub-contracts to Selladoor Venues (North Devon) who have operated both our theatres under the terms of the contract and accompanying leases since January 2019.
The theatre industry has been hit extremely hard by the COVID 19 lockdown and Selladoor is now struggling to keep the North Devon Theatres contract viable. They were successful in an application to the Arts Council England (ACE) administered “Arts Recovery Fund” at the end of 2020, with £553,000 awarded to Selladoor Venues (North Devon) for the North Devon Theatres contract. This has gone some way to keeping the contract viable.

Selladoor Venues North Devon has now applied for a further £276,000 from the Arts Recovery Fund Stage 2, but the Department for Culture Media and Sport (DCMS) which is responsible for the funds, has stated that Selladoor Venues North Devon is ineligible for the funding as it is part of the wider Selladoor Group, which is a commercial organisation. There has been much discussion with ACE as to why the “goalposts” appear to have moved for stage 2 of the funding, but their decision is final and they are not willing to change their position.
In order for the Stage 2 application to be considered and hopefully approved, Selladoor is internally re-structuring some of its groups and companies. They have settled on a proposal that will remove Selladoor Venues (North Devon) from the Selladoor Group, which ACE has confirmed will enable its eligibility for Arts Recovery Stage 2 Funding. The re-structure requires Selladoor Worldwide to assign all its rights under the North Devon Theatres Operational Contract to a newly created company known as North Devon Theatres Ltd. The sole member of this company will be Selladoor Director, David Hutchinson. North Devon Theatres Ltd will then sub-contract to Selladoor Venues (North Devon) which is the same company that has operated our theatres since January 2019.
NDC can approve the re-assignment of the contract through a Deed of Assignment which has been drafted and is attached (Appendix 1).
An urgent decision is required to approve the deed of assignment, because Selladoor Venues (North Devon) has already submitted its bid to ACE. This had to be done in order to meet the application deadline. The Arts Recovery Fund Stage 2 is oversubscribed and bids are now being assessed. ACE could ask NDC at any point now for confirmation the deed of assignment has been approved and will not award funding if it has not. Without the funding it will be difficult for Selladoor Worldwide to keep our theatres operational.
Procurement Implications
Altering a contractor during the life of the contract amounts to a material change under Public Contract Regulations 2015 and NDC’s own contract procedure rules. It is permitted if, “corporate changes have occurred in the supplier linked to merger, takeover or insolvency provided:
(a) the new supplier complies with any pre-qualification criteria assessed during the procurement; and
(b) the change in supplier does not require any other substantial amendments to the contract/Framework Agreement;”
There is obviously no takeover, merger or insolvency in this instance and we are altering the contractor to allow a funding application to proceed and assist the operator in recovering from the impact of COVID 19. Neither the Public Contract Regulations 2015 nor NDC’s Contract Procedure Rules allow for this provision, so NDC could be exposed to challenge from a competing theatre operator. The risk of challenge is low as the contract is unlikely to be attractive to a rival operator in the current climate, but the risk is there and NDC will need to publish what it is doing on its contracts register.
No other substantial amendments are being made to the contract, so point b) above is not an issue. Point a) might be an issue though as North Devon Theatres Ltd will be a completely new company and it will not be possible to credit check it for financial stability. To mitigate any risks/concerns NDC could pay future management fees direct to the sub-contractor (Selladoor Venues (North Devon)), but this may require some re-drafting of the main contract.
Financial Implications
Approving the deed of assignment will not affect the level of management fee payments made to the operator. The budget will be unaffected, but future payments will be made directly to Selladoor Venues (North Devon) or North Devon Theatres Ltd rather than Selladoor Worldwide.

Decision:

That the Theatres Operating Contract is re-assigned to North Devon Theatres Limited

Alternative options considered:

A direct application by NDC to the Arts Recovery Fund Stage 2 was considered, but then rejected due to complexities with the application process and potential confusion with NDC’s bid to the same funding pot for the Museum of Barnstaple & North Devon. Local Authorities were only permitted to make a single application to the Stage 2 Fund and a combined Theatre and Museum bid would have been very difficult. There was also no guarantee that ACE would give approval for NDC to forward funds to an organisation that was still part of the Selladoor main group.
If the ACE Stage 2 Recovery Fund application is unsuccessful, Selladoor have asked if the 2021/22 management fee could be paid to them in one payment, rather than quarterly (as per the current contract arrangements). They would still like us to consider this request even if the ACE funding is successful, as it will enable them to budget with more confidence as the theatres come out of lockdown and hopefully recover from the effects of the COVID crisis.

Publication date: 01/03/2021

Date of decision: 01/03/2021