APPENDIX A
Sandown TOA – Procurement Process Options Paper
Revision No. 7
D Newton, Corporate Impact, 25/04/18

EXECUTIVE SUMMARY
This document is written as a part of the Sandown Tourism Opportunity Area (TOA) Project
which was established to consider the future use of IWC land centred around Dinosaur Isle,
Sandown. It recognises the challenges facing The Bay Area, the town of Sandown, and the
fact that Dinosaur Isle (a key attraction) is aging rapidly and in need of £0.85M of investment
for repairs and maintenance, and £1-2M in total if it is to be improved and modernise.
As IWC is unlikely to have the resources available to address these issues on its own. This
project is seeking to identify a potential investment/development partner to modernise and
expand Dinosaur Isle and advance the regeneration of The Bay Area.
This project was initiated in June 2016 and has to date:
•
•
•
•
•
•
•
•
•

Undertaken desk research and initial interviews with key stakeholders
Identified issues affecting the Town & Museum
Agreed aims and objectives
Quantified physical & financial risks facing the Museum
Freed the site from conditions of grant funding
Run a Soft Market Test Exercise
Held a follow-up Stakeholder Engagement day
Refined and agreed revised criteria for success
Produced this paper along with a range of underpinning documents

The steering group would now like authority from elected members to proceed with a
procurement process based on an approach known as ‘Competitive Procedure with
Negotiation’ to identify a partner/s. They are also seeking authority to undertake further
feasibility work on the use of other IWC land and the potential for IWC to invest in the future
success of Dinosaur Isle. The issue and options surrounding these recommendations are
outlined below.
In considering the future of Dinosaur Isle and its impact on The Bay Area it has been
important to recognise that the accredited museum plays three roles:
•
•
•

A visitor attraction,
An educational centre, and
A world renowned scientific resource.

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 It also comprises of the land, building, staff and volunteers, and the collection. Each needs
specific attention and careful consideration of issues arising from potential partnerships e.g.
who would employ which staff and could stewardship of the collection be appropriately
managed under new arrangements. Considerable research and engagement with key
stakeholders has been undertaken to better understand these issues. This has resulted in
the development of success criteria that reflect both the original broad aims of the project
and important ingredients in securing the museums ongoing success. These criteria will be
used as the basis for assessing proposals in the future so as to ensure an appropriate
balance of qualitative elements (e.g. maintaining the museums accreditation), quantitative
performance (e.g. an increase in visitor numbers) and wider public benefit.
This work also recognises there are other significant limitations such as planning constraints,
the environmental sensitivity of the surrounding land, legal issues such as the lack of clarity
around ‘ownership’ of all the different items in the collection, and the financial standing of the
authority which means that any financial losses on a non-statutory service such as a
museum have a direct impact on statutory front-line services such as social care.
Delivering the proposed criteria is likely to require significant capital investment; and may
require another party to take responsibility for the site and bring further expertise to
maximise financial returns and/or reduce risk. There are numerous ways in which these
needs could be met such as selling or leasing associated property, seeking loans or grants,
or entering into a Joint Venture (JV). Again, each requires careful consideration when being
applied to the operation of something as complex as a museum.
The council is interested in exploring the potential of a Joint Venture but is yet to decide what
degree of financial support (if any) it will bring to such an arrangement. The idea of a JV
was tentatively explored through a Soft Market Testing exercise which elicited a meaningful
response from a small but impressive selection of potential partners from the Island,
mainland, Europe and as far afield as Australia.
Through engagement with potential bidders it has become clear that land nearby the
museum (including additional parking) is seen as important to the success of a new visitor
attraction. Particularly, as there is interest in creating a further outdoor element to the
museum such as a dinosaur park, but this will require significant space. As such, further
work is required on the feasibility of including other IWC land such as that which does not
directly abut the site but sits to the north beyond Browns Golf Course.
Market engagement has shown that there is likely to be competing ‘commercial’ interests
seeking a role in Dinosaur Isle and/or use of nearby land. As such any process used to
select a preferred partner (including consortia) for IWC needs to be open and competitive so
as to ensure best value and demonstrate public accountability. However, there is concern
that traditional ‘formal’ processes can be inflexible and slow, and so a newer hybrid
approach is required.
There are also a number of key variables and still a wide range of potential operating models
that seem viable, and so it would seem wise to explore these further before limiting IWC’s
options. However, delaying the process further is unlikely to generate much more useful
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 further information as it has been interaction with others that has recently been of most
value. As such, a process that enables this on-going dialogue while progressing the actual
procurement would be beneficial. A “competitive procedure with negotiation” is process that
exists for exactly this purpose. It is relatively new but sufficiently tested for the project
steering group to recommend it as the way forward. In addition, a museum service falls
under the Light Touch Regime (Regulations 74-77 of the Public Contracts Regulations 2015)
which offers far greater flexibility of process. This will allow the Council to design its own
project specific procurement process which will be based on the Competitive Procedure with
Negotiation but not stringently tied to a prescribed detailed process and timeline.

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 1. Introduction
This document is written as a part of the Sandown Tourism Opportunity Area (TOA) Project.
It is written by Corporate Impact for the project steering group to enable them to agree the
appropriate procurement process to pursue should a partner or partners be required to
secure the necessary resources to deliver the project. It outlines issues and options and
states Corporate Impact’s preferred options as the recommendations for their approval.

Works
Zoo

Holiday
Park
Grand

Development Site

Figure 1: Sandown TOA and land ownership within the area.

While the project considers the whole TOA above it has been primarily focussed on the
Dinosaur Isle Museum and associated land (Site no. 2). This document reflects that focus.

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 2. Background
For some years, it has been recognised that The Bay Area on the Isle of Wight is critical to
the economic stability of the Island and has the potential to stimulate significant
regeneration. Unfortunately, there is still limited investment and some key developments
have not moved forward leaving significant eyesore sites in important locations. As such,
IWC is now seeking to use its assets in the area to attract investment and help trigger the
area’s wider regeneration. Key to this is Dinosaur Isle.

Figure 2: Dinosaur Isle with the derelict Grand Hotel site in the background.

Dinosaur Isle was funded with the aid of a Millennium Commission (now Big Lottery Fund, or
“BIG”) grant in 1998, to provide a visitor attraction which would house the Sandown
geological collection in an iconic building, as a way of marking the Millennium on the Island.
While it has been a successful project it now faces challenges largely due to its aging
infrastructure and rapidly deteriorating superstructure. It is also recognised that there is
further significant untapped commercial potential. It is estimated that an investment of £1-2M
would be required to repair the museums and address its major commercial deficiencies
such as the lack of a café.
As IWC is unlikely to have the resources available to address these issues, this project is
seeking to identify a potential investment/development partner to modernise and expand
Dinosaur Isle and advance the regeneration of The Bay Area. This work is set against a
backdrop of restricting public finance and two previous attempts to address the future of
Dinosaur Isle in 2010 and 2012.
This project has been recognised by the Cabinet as a significant ongoing project and as
such is intended to add value to the IWC regeneration strategy. Following initial stakeholder
engagement, extensive background research, and resolution of legal issues; a Soft Market
Testing Exercise and further stakeholder engagement were undertaken to inform this paper.

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 3. Issues

3.1 Overview
The rejuvenation of Dinosaur Isle is a complex matter with interrelated issues historically
causing a lack of certainty as to the way forward. The project team have spent many months
exploring these issues so as to create clear aims, parameters and next steps.
Key issues include:
•
•
•
•
•

Consensus around required outcomes
Operational restrictions
Clarifying nature of offer
Agreeing an appropriate process
Sustaining the facility and its purpose

3.2 Required Outcomes
Critical to the success of the project is the success of the museum. But it’s important to note
that the museum itself consists of four elements:
•
•
•
•

The site,
The building,
The service, and
The collection.

To ad further complexity the service is delivered by a mix of staff and volunteers and
involves a wide range of stakeholders.
The museum also plays three roles:
•
•
•

A visitor attraction,
An educational centre, and
A world renowned scientific resource.

It is easy to become quickly drawn into ‘fixing’ Dinosaur Isle as the museum is the focus of
the work but it must be remembered that supporting the regeneration of Sandown is the
desired outcome. As such, the views of external stakeholders also need to be considered
before deciding the future of the museum.
The project team have been in discussion with key stakeholders since the project began and
towards the end of last year undertook a Soft Market Testing Exercise (SMTE) and a wider
stakeholder engagement day to better understand the issues and aspirations surrounding
Dinosaur Isle. This work has created refined criteria to guide the development of proposals.

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 The proposed criteria are:

A: Dinosaur Isle (50% weighting)
1. Maintain museum accreditation with a commitment to continuous improvement
2. Grow and improve the quality of the collection and maintain it locally to maximise
public benefit
3. Improve community involvement and relationships with local collectors and
volunteers
4. Improve Dinosaur Isle’s value and use as a regional educational resource
5. Make the new Dinosaur Isle museum an engaging high-quality sustainable facility

B: Wider Impact (35% weighting)
1. Increase visitor numbers to the Island
2. Support a more diverse and less seasonal tourist economy for Sandown Bay
3. Build links with universities to promote and provide Island-based higher education
opportunities
4. Improving the Island’s educational offer around STEM subjects
5. Support global branding and awareness of the Isle of Wight

C: IWC Duties (15% weighting)
1. No negative financial impact on IWC and its services
2. Compliance with existing IWC strategy and policy
3. Support the Island’s overall economic, social and environmental wellbeing
The weightings that have been included will help the formation and evaluation of proposals
aimed at meeting the required outcomes. However, the steering group has also considered
the use of absolute minimum criteria that a proposal would have to meet.
Existing implicit minimum criteria are:
•
•

Lawfulness
Financial viability for IWC

The proposed new minimum criteria are:
•
•
•

Collection kept for Public Benefit
Museum remains accredited
Operation is financially sustainable for IWC and key partners

If this recommendation is adopted it is likely some criteria above such as A1, A2 & C1 would
be slightly redrafted to be more aspirational so that proposals that exceed the minimum are
better recognised.

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 The use of minimum standards as an absolute does have potential drawbacks and still
leaves room for misinterpretation. For example, it might be possible to fulfil the minimum
criteria above by closing the existing building and radically diminishing the service and
display material so that it can operate affordably within another Island-based accredited
museum’s building. This does not resonate with the feedback we have received from all
stakeholder groups. Therefore we are recommending that the minimum standards are used
for long-listing only with weighted criteria as above suggested for short-listing as they enable
some flexibility. However, a proactive approach to accreditation is so important to most
primary stakeholders and hugely important to the operational model of a rejuvenated
Dinosaur Isle, so it must receive one of the highest priorities during short-listing. The
appropriate use and stewardship of the collection may be marginally more important as it
secures the greatest asset for future generations but doesn’t seem to be as emotive a issues
as accreditation or have such far reaching implications for the whole model. As such this
area should be scored a little below accreditation during short-listing. A financially
sustainable solution is a de facto requirement but hard to evidence so a degree of judgement
will be needed in assessing bidders evidence that their proposals are feasible for the next 35 years. Further flexibility may also be required during shortlisting in assessing the longerterm financial pros and cons of different financial proposals.

Performance indicators
In due course IWC will also need to agree performance indicators so as to assess
proposals against short-listing criteria i.e. A high-quality sustainable accredited
museum attraction may be expected to perform at the following minimum levels:
●
●
●
●
●
●

100,000 visitors a year
90% positive visitor feedback
75% of visitors spending 2+ hours at the museum
50% of visitors of all ages engaging in an interactive display or activity
20% profit-margin
Clear use of an ‘edutainment’ strategy

It is anticipated that meeting the indicators listed above will require the addition of a
cafe, improved education facilities, approximately double the current exhibition
space, and on-site collection storage. This will all need to be enhanced with a
modernised technological offer.

While ambition need not be limited to the above, there has been a strong emphasis on
deliverability throughout the work so far. This requires that any proposal could attract an
investor within a year and create a return on that investment with five years. This will require
a significant level of ‘commercial’ activity to generate a return on any investment in the site.
So, a financially sustainable museum will have to be generating sufficient income to cover
running costs, finance cost, long-term maintenance costs, and an appropriate margin for
risks and ongoing development.

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 3.3 Operational restrictions
Significant operational restrictions include:
●
●
●
●
●
●

Planning
Available assets
IWC Finance
Employment relations
Accreditation
Use of the collection

Planning
The site is within a flood zone and close to areas of ecological value. This limits what
can built there particularly in terms of on-site enabling development. Even an
extension of the existing facility would have to prove it was appropriate for that
location which increases planning and design costs. However, the principal planning
advice has been supportive and there seem to be opportunities to expand both the
footprint of the current structure and enhance the use of some elements of the site.
Available Assets
Existing lease arrangements on neighbouring sites seem to limit the IWC offer to
Dinosaur Isle although further legal analysis may reveal other options. As such, it is
probable that any discussion around expanding the development onto nearby sites
will be at the discretion of existing leaseholders. However, IWC may find itself
involved in such discussions as its lessees may wish to vary an existing lease to
accommodate a proposal. Such discussions have recently been undertaken with
Sandown Town Council.
IWC Finance
Our research has indicated some approximate development costs that give a sense
of scale to the proposed project.
Approximate capital cost estimates are:
• £1-2M to repair and update the existing museum
• £5M to turn Dinosaur Isle into a regionally significant visitor attraction
• £10M to turn Dinosaur Isle into a nationally significant visitor attraction
It has generally been assumed there will be no funding available from IWC to assist
any partner with a proposed development or to reduce risk by undertaking enabling
studies or works. However, there is a general willingness to maintain the museum
during this process to ensure it doesn’t become further dilapidated while the process
is underway. It is also recognised that IWC has a property investment fund which
could be applied to this project if it met appropriate risk/return criteria. A formal
decision has not been made and clarity on this point will be critical to how this project
progresses through to negotiation with potential partners.

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 Employment Relations
As with any change proposal, the ongoing legal and operational relationship with
employees needs to be carefully considered. At Dinosaur Isle, there are curatorial
staff, front of house staff, support staff (e.g. maintenance workers), and volunteers.
As some of these could be contracted from other areas of the council, the impact on
wider staffing structures needs to be considered. It may also be necessary to
consider how such staff could be managed in a partnership with a third-party e.g.
IWC maintaining appropriately qualified curatorial staff to manage the collection while
a more commercially orientated operator provides front of house staff.
Accreditation
A considerable concern throughout the time of the work to date has been ensuring
that the museum remains accredited. As highlighted above this is a core aim of the
project as it as seen as integral to the ongoing success of the museum, and
important in bringing wider benefits to the town and Island. This aim does further
complicate the operating environment as there are restrictions and standards which
must be adhered to. The is particularly challenging in relation to private sector
involvement in the project as the governance of the museum (i.e. how the service &
collection are owned and managed) must be maintained on a not-for-profit basis.
There can of course be private sector involvement as suppliers, operators or owners
of related aspects such as the shop or an attraction but there needs to be clear
delineation and careful management of such arrangements.
Use of the Collection
The collection is distinct from the museum although the museum houses significant
elements of the collection. A form of licence may be required to regulate access to
and appropriate use and preservation of the collection. As many items were donated
by local collectors or may be on semi-permanent loan, legal issues around ownership
and use may also need to be clarified. This area will become a significant risk if the
local collector community are not happy with the outcomes of this project. A loss of
confidence from the collector community would also lead to the collection stagnating
as most donations would almost certainly cease.

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 3.4 Nature of Offer
Financial Arrangement
Delivering the proposed criteria is likely to require significant capital investment; and may
require another party to take responsibility for parts of the site and bring further expertise to
maximise financial returns and/or reduce risk. These needs could be met in various ways.
Potential capital income sources include:
●
●
●

Grants & Awards
Investments (inc. Public Works Loans & Commercial Finance)
Premiums (Lease Premium or similar)

Mechanisms for devolving responsibility for costs include:
●
●
●
●

Entire site or parts sold
Entire site or parts leased (full Repairing Lease)
Existing building is leased (full Repairing Lease) with Service Charge
A ‘standalone’ bespoke legal agreement relating to services delivered

Mechanisms for introducing new ‘commercial’ expertise include:
●
●
●
●
●

Commercial elements leased with service charge
Franchise commercial elements
Procuring specific commercial services
Recruit key individuals with the specific skills base
Partner with a suitably experienced organisation around specific initiatives e.g. ecommerce or education

As already mentioned, the leases and funding arrangements concerning the sites abutting
Dinosaur Isle site seem to prevent IWC making any direct offer around their use. As such,
only the Dinosaur Isle site was previously considered as a part of the offer.
The Dinosaur Isle existing site and associated assets include:
●
●
●
●
●
●
●
●
●
●

Car park
Museum building
Additional land on site (with restrictions)
Access to the collection
Goodwill of the volunteers & local collecting community
Brand value and existing marketing
Website
Staff
Current exhibition
Current stock

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 Figure 3: Site boundary with main restrictions listed.

Through both stakeholder engagement and soft market testing it has become apparent that
the surrounding land (including additional parking) is seen as important to the success of a
new visitor attraction. There is considerable interest in creating a further outdoor element to
the museum such as a dinosaur park but this is likely to require significant space. As such,
further work is required on the feasibility of including other IWC land including that which
does not directly abut the site but sits to the north beyond Browns Golf Course. This land is
indicated in yellow and brown on the original lease map (overleaf). An additional area has
been cross-hatched orange on the map overleaf to highlight land also owned by IWC under
separate lease. The limited access points to these sites are shown with arrows which
highlights the need for further land use negotiation with tenants at some point in the process.
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 Shaded
Brown

Shaded
Yellow

IWC could formally offer an option on additional plots or indicate their willingness to discuss
such matters. Negotiation with tenants could then be left to potential partners to agree
amongst themselves or negotiated via IWC either prior to the process or through the
process. It is advisable to continue brief leaseholders and neighbours on the likely approach.

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 3.5 Nature of the Process

Key issues in relation to the ‘procurement’ process include:
Is formal procurement appropriate?
This is still a fundamental question that is yet to be answered. Options include:
•
•
•
•

Maintain in-house
Land transaction
A formal procurement process
Close the museum in its current form

If some responsibility is transferred to another party, the more involved IWC is in the
way that party uses of the land or operates the museum the more likely it is that a
procurement process will be required. As such, a hybrid land transaction may also
require a procurement process.
It may also be desirable or necessary for the museum to be the subject of a
Community Asset Transfer (CATs). Such transfers do tend to operate under a more
relaxed regime than commercial transactions but are still subject to legal restraint
and public scrutiny. It is of particular note that on occasion CATs have been
challenged if they are seen as a sham property transaction concealing a change of
service provider. This is important as procurement regulations concerning services
are more complex than those concerning simple property transactions. As this project
may require something of asset-based service hybrid-bid, the simplicity of an asset
transfer may not be appropriate. It is also good practice to use a form of open and
competitive tender process in Community Asset Transfer to ensure Best Value and
public accountability. Often such competition is only between not-for-profit entities
because the nature of the asset in question prohibits private sector involvement.
However, this project may yet uncover a useful a role for a private sector entity in a
land transaction (although not the museum’s governance). As such, it seems
appropriate to run a process that is open to all sectors but which appropriately values
the differing contributions that each sector might bring to the table.

It is important to stress that whether or not an approach might require a certain type
of procurement process should not be a major consideration in finding a way forward.
The process needs to enable the desired outcome and so clear prioritised outcomes
are critical.

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 Duration versus Quality
Firstly, it is important to stress that a longer process will not automatically generate a
higher quality outcome. However, any process does need to be sufficiently long to
enable new potential partners to assess the opportunity, develop new relationships,
and draft meaningful proposals. This will also create significant costs for those
bidding and as such it is usual to have stages in such a process to enable bidders to
invest more significant resource once they have a better understanding of the
likelihood of success. By already beginning market engagement, we have shortened
the maximum time one might spend on a formal process but we do still need to allow
those who were not involved in the market engagement sufficient time to respond.
Somewhat counter to this need to give interested parties sufficient time, we also
recognise the urgent need to show progress. We are mindful of the delays already
encountered and mounting financial pressures on the museum. As such, we will
enable IWC to conclude this process within the financial year ending March 2019.

Competition, accountability and compliance
As this project was developing it became clear that there was commercial interest in
the site and the museum. This interest was further tested via a Soft Market Testing
Exercise to see if there were enough interested parties to warrant a formal tendering
process if it were needed. It was also seen as an opportunity to test materials
already under development.
The Soft Market Test Exercise revealed:
•
•
•
•
•
•
•
•

Sufficient interest from credible parties from public, private & voluntary
sectors
Strong public interest
Criteria ‘fit for purpose’ in expressing parameters without deterring interest
Some untapped or underutilised resources/assets yet to be considered – e.g.
Digital Platforms & Education
Collection will need to stay under IWC’s stewardship
Related activities already underway – e.g. Discovery Bay
Range of operational models to consider
Quality (particularly educational quality) and the academic legitimacy of the
museum are seen as essential by its supporters

There is likely to competing ‘commercial’ interests in opportunities relating to
Dinosaur Isle and so any process needs to open and competitive so as to ensure
best value and demonstrate public accountability. However, this does not
automatically mean adopting a prescribed OJEU compliant process (which can be
very time consuming). In essence, the more akin to a property transaction the activity
becomes the less likely it is that a Europe-wide process will be needed to satisfy
regulation.

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 If there is a service element to any proposals then European procurement thresholds
will have to be considered. Regardless of such thresholds, a procurement process of
any sort will have to be compliant with the Public Contracts Regulations (PCR) 2015.
However, as museum services falls under the Light Touch Regime (Regulations 7477 of the Public Contracts Regulations 2015) this allows far greater flexibility of
process allowing the Council to design its own procurement process if it adheres to
some basic principles and general good practice.

Flexibility & Staging of the process
Based on the results of the Soft Market Testing Exercise, it would be possible to
operate a single stage process by announcing the agreed opportunity on the South
East Portal with all associated documentation. However, with so many possible
operating models and some uncertainty around the offer, it would be beneficial to
have some flexibility and room for negotiation within the process.
A single stage process also may not give a genuine indication of levels of interest
from the market and would also ultimately only provide information on those prepared
to submit a full tender. As such this approach limits the ability to engage potentially
interested parties in the process latterly if any aspect of the process changes
materially.
On the positive side a single stage process has the ability to be swift if there is
certainty around the required outcome; strength of market; nature of the risks; and
sufficient information available to make the process meaningful.
IWC will also need to be clear on whether it will be primarily assessing proposals on
the teams and their potential to deliver, or the specifics of the proposals. However, it
could be argued that to assess the full specifics of the proposals would require the
successful completion of a planning application. Plans may also change as a result
of information released by IWC following discussion and clarification via the process.
As such, there is great merit in using a multi-stage process that enables suitably
qualified bidders to progressively invest in building more detailed proposals as more
certainty develops.

Openness and Impartiality
Stakeholder Engagement has identified a level of mistrust and suspicion about the
aims of the process. Against such a backdrop it would be wise to invest in the
process to prove its integrity. As such, IWC should consider using a panel to make
the decision to eliminate proposals and that this panel includes someone from the
museum development network or similar, to independently verify that proposals are
compliant with good practice, accreditation and in the public interest.

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 3.6

Sustaining the facility and the purpose

The underlying assumption in considering a new approach to managing Dinosaur Isle is that
the development can be significant enough to have an impact as a visitor destination and
educational resource while generating sufficient return to justify such an investment.
Financial return on investment
To illustrate the potential for Dinosaur Isle we have used some very broad
assumptions across two scenarios based on historic figures:
•
•

Scenario 1: Steady-build from current performance level
Scenario 2: Step-change from current performance with little growth

The scenarios are illustrated below, both assume the equivalent of a loan of £2M with
related payments approximately equivalent to a mortgage with a 10% interest rate on
an interest and repayment basis over 10 years. Year 11 has been included to show
potential thereafter. A cost (sinking fund) has also been included to allow for another
major refurbishment after 20 years although it is hoped that the refurbished building
will perform better in this regard than the existing building.
It must be stressed that very broad and approximate figures have been used here
simply to indicate the scale of the opportunity/risk. A feasibility study is beyond the
scope of our contract and so we have not been able to interrogate financial
information sufficiently for the forecasts below to be relied upon. However, we do feel
they show sufficient potential for the client to consider undertaken a small piece of
work to further explore the viability of investing in Dinosaur Isle.
Although considerable uncertainties remain, the conservative forecasts below
suggest there is sufficient opportunity for an investor to make an acceptable financial
return on the proposition. However, it may be a slower rate of return than a
commercial investor would hope for. Addressing this issue by increasing the income
from the museum may create tension between its financial performance and public
benefit.

Historic Performance

2011-12

Visitor Numbers
Income
Expenditure
Profit
Av. Income / Visitor
Growth rate

£

2012-13

2013-14

2014-15

2015-16

Total

68,276

64,000

71,450

77,033

72,861

353,620

345,048
339,207

297,206
309,128

437,157
454,997

438,168
426,193

465,043
455,961

1,982,622
1,985,486

5,841

(11,922)

(17,840)

11,975

9,082

(2,864)

5.05 £

4.64 £
0.92

6.12 £
1.32

5.69 £
0.93

IWC Sandown TOA Options Paper – Corporate Impact – May 02, 2018

Av.
6.38 £
1.12

5.58
1.07

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 Scenario 1
YEAR:

1

PERFORMANCE/ASSUMPTIONS
Visitors
Income per Visitor
Rate of increase
Cost inflation
Variable cost per visitor

£

75,000
6.50
1.07
2.0%
1

2

£

80,000
6.96
1.07
2.0%
1.02

3

£

85,000
7.44
1.07
2.0%
1.04

4

£

90,000
7.96
1.07
2.5%
1.07

5

£

100,000
8.52
1.07
2.5%
1.09

6

£

7

107,000
9.12
1.07
2.5%
1.12

£

110,000
9.75
1.07
3.0%
1.15

8

£

115,000
10.44
1.07
3.0%
1.19

9

£

120,000
11.17
1.07
3.0%
1.22

10

£

11

125,000
130,000
11.95 £
12.79
1.07
1.07
3.5%
3.5%
1.27
1.31

TOTAL

1,137,000

INCOME
Combined Income
TOTAL

487,500

556,400

632,557

716,650

852,017

975,475

1,073,022

1,200,322

1,340,185

1,493,748

1,662,243

10,990,120

EXPENDITURE
Repayment
Cost of Finance
Sinking fund (Dilapidations)
Fixed costs
Variable costs
TOTAL

125,491
200,000
100,000
350,000
75,000
850,491

138,040
187,451
100,000
357,000
81,600
864,091

151,844
173,647
100,001
364,140
88,434
878,066

167,028
158,463
100,002
373,244
95,977
894,713

183,731
141,760
100,003
382,575
109,307
917,376

202,104
123,387
100,004
392,139
119,882
937,516

222,315
103,176
100,005
403,903
126,941
956,340

244,546
80,945
100,006
416,020
136,692
978,210

269,001
56,490
100,007
428,501
146,915
1,000,913

266,311
29,590
100,008
443,498
158,392
997,800

100,009
459,021
170,493
729,523

1,970,411
1,254,909
1,100,045
4,370,040
1,309,634
10,005,039

362,991 -

307,691 -

245,509 -

178,063 -

65,358

37,958

116,682

222,112

339,272

495,948

932,720

985,080

BALANCE

-

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 Scenario 2
YEAR:
PERFORMANCE/ASSUMPTIONS
Visitors
Income per Visitor
Rate of increase
Cost inflation
Variable cost per visitor

1

£

100,000
10.00
1.025
2.0%
1

2

£

101,000
10.25
1.025
2.0%
1.02

3

£

102,000
10.51
1.025
2.0%
1.04

4

£

103,000
10.77
1.025
2.5%
1.07

5

£

6

104,000
11.04
1.025
2.5%
1.09

£

105,000
11.31
1.025
2.5%
1.12

7

£

106,000
11.60
1.025
3.0%
1.15

8

£

107,000
11.89
1.025
3.0%
1.19

9

£

108,000
12.18
1.025
3.0%
1.22

10

£

11

109,000
110,000
12.49 £
12.80
1.025
1.025
3.5%
3.5%
1.27
1.31

TOTAL

1,155,000

INCOME
Combined Income
TOTAL

1,000,000

1,035,250

1,071,638

1,109,197

1,147,965

1,187,979

1,229,275

1,271,894

1,315,875

1,361,261

1,408,093

13,138,426

EXPENDITURE
Repayment
Interest
Sinking fund (Dilapidations)
Fixed costs
Variable costs
TOTAL

125,491
200,000
100,000
350,000
100,000
875,491

138,040
187,451
100,000
357,000
103,020
885,511

151,844
173,647
100,001
364,140
106,121
895,753

167,028
158,463
100,002
373,244
109,840
908,577

183,731
141,760
100,003
382,575
113,679
921,748

202,104
123,387
100,004
392,139
117,642
935,276

222,315
103,176
100,005
403,903
122,325
951,724

244,546
80,945
100,006
416,020
127,183
968,701

269,001
56,490
100,007
428,501
132,223
986,222

266,311
29,590
100,008
443,498
138,118
977,525

100,009
459,021
144,264
703,293

1,970,411
1,254,909
1,100,045
4,370,040
1,314,415
10,009,820

BALANCE

124,509

149,739

175,885

200,621

226,218

252,703

277,551

303,193

329,653

383,735

704,800

3,128,606

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 Social Return on Investment
Increasing the financial return, without further investment to drive up visitor numbers,
is likely to require an increase in either the entrance fee or average spend per visitor.
However, increasing such costs will begin to undermine the affordability of the
museum and therefore its social purpose and public benefit. If it could be argued that
its purpose is to benefit local people and the scientific community then a premium
commercial service/experience could be offered to non-resident non-scientific
visitors. However, this adds further complexity to the operating model. An alternative
would be to address the issue of accessibility through targeted workshops and open
days and/or outreach work. This would make the day to day operation of the museum
more straight forward but create another service to be managed.
In accordance with the Social Value Act, an assessment of Social Return on
Investment will need to be undertaken prior to any formal procurement exercise. This
need not be onerous and may well generate a fresh perspective on the emergent
options. This document and its underpinning research have considered most of the
issues which need to be addressed to fulfil this requirement.

Further potential
It is worth noting, that there could be other income streams derived from dinosaur
related trading that would not impact the core public benefit of access to the
collection. These are likely to relate to a development in the museum’s Business-toConsumer on-line trading capacity. It may also be possible to develop a Business-toBusiness service or product through operating the museum e.g. preparation of
artefacts. Such ventures would require sufficient time (probably 3-5 years) to develop
before any income could be relied upon and they would also require further
investment during start-up.

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 4. Options
4.1 Overview
As indicated above, the key questions to answer at this stage are:
•
•
•
•

Should the council continue to operate the museum in-house?
If not, should it sell or lease the land and/or building, or procure a partner?
If it is to procure a partner, what is their role and what process should be adopted?
How are these decisions to be made?

These create options to be assessed in sequence while considering the issues above.

4.2 Operating model
4.2.1 Introduction
Operating Models highlighted by Soft Market Test Exercise were:
1. Local start-up not-for-profit (e.g. ‘Friends’ forming a Trust) takes control by asset
transfer following IWC repairs;
2. Established regional not-for-profit (e.g. an existing Museum in Hampshire) takes
control by asset transfer;
3. Business acquires land or building to operate attraction and related commercial
activity and then provides space (e.g. sub-lets building) for not-for-profit to run
accredited museum;
4. Business invests in museum so as to operate attraction associated with museum in
building and/or in its surroundings (e.g. lease or licence for sufficient space for a
themed ride);
5. Retail (digital & physical) &/or catering contracts let to generate new income streams;
6. IWC commissions management services to improve performance;
7. Investment secured as loan or grant and repaid normally or via profit share in JV.
Investment offers ranged from specific sums of £0.2M-0.5M to some seeking up to a £10M
grant to secure the future of the museum, and some broader offers of Gifts In Kind or similar.
Through this exercise it was also pointed out that revenue (rather than capital) models of
rejuvenation were available through incremental improvements. This theme was stressed
further in later stakeholder engagement that highlighted the potential in the continuing
development of the nascent Discovery Bay partnership. This is a partnership between
attractions, businesses and other local organisations who already have an interest in the
wider site. It is built on the premise that by pooling their investments and promotional activity
they can create the impression of a single attraction so that the whole becomes greater than
the sum of the parts. This suggests a useful minimum bar of investment of circa £1M (inc.
committed IWC budget) to modernise the museum without the need of creating a greater

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 attraction with the museum itself. However, this approach may not generate sufficient impact
in the time-scale desired to support the aims of the regeneration strategy.
The Stakeholder Engagement exercise also highlight considerable interest in the formation
of an Island-based Trust to take the museum forward. This was seen by many as a way to
ensure the ongoing not-for-profit status (and therefore accreditation) of the museum while
insulating the Isle of Wight Council from operational risk and freeing the museum from the
political uncertainties of democratic control. It was felt that is the overall not-for-profit
governance arrangement were addressed first then the detail of the role of commercial
partners (if any) in the day-to-day operation of the museum could be addressed later.
Although there would always be uncertainty around the sustainability of newly formed
organisation there are examples of this working well on the Island in recent times e.g.
Shanklin Theatre. However, as this project is also concerned with the wider regeneration of
The Bay, there is a risk that a new governing body may not concern itself with this wider
agenda without being tied into such an obligation in some way.

This diverse range of potential models makes it difficult to identify the most appropriate
solution, so first it is necessary to clarify the role the IWC might play in any such solution:

4.2.2 Investor and Operator
In the current financial situation, it is first necessary to consider what is possible before one
considers what is preferable.
The financial analyse above suggests it would be possible to run the museum on a cash flow
neutral basis after investment, particularly if borrowing at rates that are more normal within
the public sector (e.g. 3-4%). It may then be possible as to generate a surplus from the
museum, once it has stabilised.
While IWC can borrow more money for an appropriate financial return, careful consideration
will have to be given to servicing such debt during the construction period. Although, there
seems scope to appropriately phase draw-downs to make such finance manageable.
If it is possible, is it preferable? It is an approach with considerable risks such as, the limited
initial budget of £2M, potential overspend on the build, and the possibility of eventual poor
commercial performance. Maintaining the service in-house also means that the museum will
not benefit from new commercial perspectives and systems from an external organisation. It
may also be politically unpalatable to invest so much money in a non-statutory service when
areas such as social services are having to be cut-back significantly.
As an investment, it seems to have the potential to generate significant income for the
council once the debt has been repaid. Over the 20-year period, prior to the next scheduled
investment, this could amount to £5-10M. As such, even considering the risks, the
investment could result in a good mid-term return on investment with the entire asset
retained and a £2M sinking fund banked.

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 4.2.3 Vendor or Landlord in a Land Transaction
A simple low-risk alternative would be to sell or lease land and/or the building through a
property transaction. It would be in-keeping with the IWC regeneration strategy to retain
some aspect of the freehold, so a ground rent can be recovered as a minimum.
The site is approximately 125,000 sq ft so to match the annual income above the site would
need to generate an income of 80p per sq ft. As this is the entire site including a sloping
woodland and a severely restricted car park, it may be wise to consider the income from the
museum and its curtilage (approx. 45,000 sq ft). This would need to generate a return closer
to £2.25 per sq ft. If internal floor space was used (approx. 15,000 sq ft) then a rate of £6-£7
per sq ft is required. Shops in the Bay Area have been recently advertised at £10-£15 per sq
ft so these rates are very competitive. It is also worth remembering that the requirement to
house an accredited museum on the site will deflate the rate which can be reasonably
expected.
While IWC would have surrendered a significant amount of control of the total asset and
would have little or no sinking fund, it would still hold the land and should have secured the
asset at its current value through appropriate dilapidations clauses.
This is a very low-risk financial strategy with the main risk being the operator might fail and a
new operator would have to be found. A further potential benefit of this approach is that a
property lease/sale process is less complicated and costly than a procurement process. This
approach does however increased complexities in the management of the collection,
influence over the design and build process, and the securing of public benefit in the longterm.
This approach would also reduce the influence that IWC could have over the wider
development of the TOA.

4.2.4 Partner in a Joint Venture
As the staffing costs associated with the museum are not a major consideration it is unlikely
that there will be any significant advantage in sub-contracting the operation on the museum.
If the primary objective is to invest in Dinosaur Isle and the surrounding area but IWC will not
or cannot borrow sufficient money to make that investment, then IWC must attract an
investor on a profit and risk share basis or some similar arrangement.
Depending on how closely the operator and IWC are working together, profit share
arrangements can be difficult to manage particularly in relation to cost base and agreed
actual profit. As such, a hybrid land transaction may be more appropriate with a mix of
agreed fixed costs and risk share. This may even include a pre-agreed tapered rent or other
income that increases over-time once certain basic thresholds have been met. This creates
some certainty for IWC while creating the potential for enhanced profit for the operator.
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 This is undoubtedly the most complicated operational model and is also very likely to require
a procurement exercise to identify a potential partner. Operationally it is also likely to result
in a separation between curatorial staff and commercial staff which may cause tensions and
management issues in a small facility such as this. Understandable delineation may ease
this e.g. commercial staff operating an external park with curatorial staff in the museum.
As would be expected, income levels should be guaranteed to be more than if the land were
simply leased but should have the potential for even greater income to justify the greater
organisational involvement in the venture. There is a risk that the IWC overheads committed
to the venture may go unrewarded if commercial performance falls below expected levels.

4.2.5 Franchiser
The Council could license the use of the collection and other materials (including branding,
training resources and some intellectual property); and parts of the building or site to an
operator for a fee. Fees can vary significantly in size and type and can include an initial
premium with annual fees and some form of profit share.
This approach would have to be navigated with considerable care so as not to contravene
the standards and spirit of operating an accredited museum and as such may simply
become more akin to a merchandising option.
Buying into an unproven franchise model may be viewed as being on a higher-risk shorterterm basis than leasing or buying a building and so may not attract significant investment
early-on. It can also be difficult to maintain a property licence for any significant period
without it being regarded as a sham-lease. As such, it may require the Council to play an
active role in facilities management and may require that it funds the renovation and offers
the fully functioning museum as a facility for use by the franchisee.
There is no reason why the property and franchise concepts could not be decoupled so that
each element is undertaken separately. This may lead to a separate licence for the use of
merchandise and brand along with a more traditional lease on the property. Ultimately, it
would also be possible to offer the franchise to any suitable operator/s with an appropriate
venue or venues, allowing the existing building to be used for a different purpose.

4.2.6 No Change
This is essential the do-nothing option. It assumes that IWC will be able to run the museum
without further significant investment. There is a risk that at some point IWC will have to
close the museum as the building may become not be fit for purpose. If this were to happen,
the site may then have to be sold as a derelict site for redevelopment. This does create an
opportunity to use receipts from such a sale to invest in another museum to host a scaled
down selection from the collection. However, such a scenario is likely to have a negative
impact on the local economy, and the Island’s reputation; and would not achieve many of
this project’s regenerative objectives. It has also been the case in recent years on the Island
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33

 that such facilities do manage to sustain themselves (even if in a dilapidated state) for a long
time before emergency action is required.
As such, this option could be adopted for the time-being while grant funding or similar is
sought. This could be successful, but it is high-risk as the building is aging rapidly. This
would be particularly problematic if the operational window is shorter than anticipated and
funding takes longer to secure than anticipated.

In each of the models above we have assumed comparable public benefit but this would
require active management in the Land Transaction and Joint Venture options and may lead
to disputes and associated costs.
Refining the options above would be subject to discussion with interested parties but
procurement documents should make it clear that the council will be seeking to explore a
continuing interest.

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 4.3 Procurement Process

The options available are characterised by the following:
●
●
●

Reach into ‘markets’ i.e. how many potential bidders might be notified
Compliance i.e. compliance with varying procurement regimes, existing covenants
and funding arrangements
Staging of the process to assess initial interest and then progressively test levels of
commitment and appropriateness. This must be balanced against process duration
and complexity.

Reach & compliance options
At this point in time we could adopt the following approaches:
●
●
●
●

Adopt a European-wide OJEU compliant process to cover all potential possibilities
Adopt a nationwide competitive process to address most possible outcomes
Adopt a local process to minimise complexity and reach most interested parties
Delay the process to develop a more specific process to address specific needs of
this situation (as we still lack clarity)

It is of note that the Soft Market Testing Exercise, despite limited promotion, had two
international responses which suggests international reach is appropriate. However, this
won’t necessarily require a full prescribed OJEU process. As mentioned earlier, a
museum service falls under the Light Touch Regime (Regulations 74-77 of the Public
Contracts Regulations 2015) which allows far greater flexibility of process allowing the
Council to design its own procurement process. This can be based on an existing model
but doesn’t have to follow a prescribed detailed process. However, it does require
appropriate notice is given which would create the opportunity for at-least European
promotion without any additional complexity in-terms of process.
As indicated earlier in this document, there is still a wide range of potential operating
models that seem viable and so it would seem wise to explore these further before
limiting IWC’s options. However, delaying the process further is unlikely to generate
much more useful further information as it has been interaction with others that has
recently been of most value. As such, a process that enables this while progressing the
actual procurement would be beneficial. ‘Competitive Procedure with Negotiation’ and
‘Competitive Dialogue’ are processes that exists for this purpose as can be seen from
the Procurement Decision Tree overleaf. ‘Competitive Procedure with Negotiation’ the
simpler of the two as it is written into the Public Contracts Regulations (PCR) 2015 and is
likely to make a good basis for a project specific process under the Light Touch Regime.

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 Staging options
Key staging options include:
●
●
●

Single-stage to minimise complexity
Two-stage to better gauge interest and create more significant lead-in time for
bidders without significant complexity e.g. PQQ then tender
Multi-stage Formal Process to drip-feed information as available and progressively
reduce the number of bidders who can then invest more effort in progressive rounds

A multi-stage process would support the needs of this project to allow for ideas, and possibly
partnerships between bidders, to develop. This approach could work using a “competitive
procedure with negotiation” style process. However, this process need not be excessive
and should be built on a basic long-list to short-list to selection model with an opportunity for
clarifying in each stage.

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 Procurement Decision Tree

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 5. Recommendations
Due to the range of potential routes and scope for innovation in the nature of the opportunity
and potential for partnerships;
IT IS RECOMMENDED that:
1. IWC brief the appropriate portfolio holders and make preparations to present an
options paper for authority to proceed;
2. IWC commits to a programme of running repairs to enable the facility to run and
prevent further dilapidations during the ‘procurement’ process;
3. IWC further explore the viability of IWC investing in the property;
4. Further work is undertaken to examine use of nearby IWC land-holdings including car
parks;
5. If IWC decide to seek an external investor or other partner/s, they initiate a
Competitive Process with Negotiation style process under the Light Touch Regime as
detailed under Regulations 74-77 of the Public Contracts Regulations 2015 as
outlined in this paper once appropriate authority to proceed is granted;
6. In support of the above, further work is undertaken with the steering group, overseen
by the Regeneration Board, to develop the documentation for this process. This will
include the development of Key Performance Indicators to assist in the assessment
of all criteria and especially those concerning ‘Quality’.

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