Mark Sheldon on ERP, procurement and “growing the business”

Mark Sheldon is director of resources for Cheltenham District Council. Last month the council went live with its shared services structure GO Shared Services, a collaboration with Cotswold, Forest of Dean and West Oxfordshire District Councils.

Room 151: How did you first start with sharing services?

Mark Sheldon: Within Gloucestershire the chief finance officers had a good working relationship and we were all in the place where we needed to save money and save it fairly quickly. So we thought what can we save by working together? Can we look at systems, back office?

It was fortuitous that a number of systems were coming to the end of their lives so we started to look at sharing those. Out of that came a project team of the councils and we talked about procuring an Enterprise Resource Planning (ERP) system, which is a combined finance, HR, payment and procurement system.

We pulled together a business case, mulled it over and as time went on some authorities found that the timing wasn’t right. We were originally seven authorities, the Gloucester ones plus West Oxforshire who were working very closely with Cotswold and already sharing chief executives. So we ended up with four authorities.

It was fairly pioneering and when it was seven of us it was fairly big. When it came down to it there were different reasons for the others dropping out so we revised the business case and ended up with a preferred supplier.

Then we got a really good, state of the art system which individually, as small councils, we wouldn’t have been able to afford, but sharing the cost meant we could.

We needed external help as there was procurement, change management, massive stuff in terms of where some authorities were and where they were going to end up with the new system.

Room 151: So four local authorities are sharing the system that you went live with last month?

MS: There were the four authorities plus the arms length company for Cheltenham’s housing stock, and more recently we created a local authority company to deliver joint waste services for Cheltenham and Cotswold District Council.

That organisation will be using the ERP as well, so not only were we trying to work collaboratively and create one system that suited us all but we had the added complexity of another company being set up at the same time, timescales were incredibly challenging.

Forest of Dean went live in November of last year, we’ve gone live in April, so we’re using the system now for payroll, procuring etc. We’ve pulled together finance, HR and procurement teams from each authority and created one central team which we have TUPE’d across to Cotswolds for the time being, then we will create a shared service team that serves all the four authorities.

Room 151: How much should you save?

MS: We have done a projection of the savings and for Cheltenham the savings are going to be £270,000 per year, across the four bodies it should save just under £700,000 per year.

Room 151: And how much did you have to invest over what time frame?

MS: Purchase and implementation and project management cost £1.5m over the four authorities and our arm’s length management company. 2012-13 is where we pull everyone together and start working it and then 13-14 onwards is when we start to see the savings.

Room 151: How does the finance department work?

MS: We’ve built a system for finance which we all have, but some of us have some slightly different cost centres, so we’ve agreed a standard approach to how we construct our finance ledgers and approach accounting for things, then we modify it locally so that you have different cost centres for different services.

We don’t know at the moment what the central finance team we will create is going to look like, but for example payment of invoices will all be in one place. The county goes from Witney in West Oxfordshire right to the Forest of Dean, so there’s 50-60 miles of distance between the two and we’ll be putting different teams in different sites. So instead of four different VAT officers we’ll have one who specialises in VAT for all four. You look at the current issues around retention of business rates, council tax, discount schemes, traditionally we would have done that four times and now we’ll have one person to do that on behalf of four councils. You can see where the economies come from.

Room 151: I imagine that works well for procurement?

MS: Yes, we are all using the same methodology and approach and we can see across the four councils, so from a procurement perspective we can see what we are all spending on gas or electricity across the four sites so looking at spend is easier and we can then simply say, collectively these four councils plus two organisations have this buying power, and we can drive procurement savings down the line.

Room 151: Do you have targets for savings on contracts?

MS: We do have an amount per authority. For Cheltenham it’s £30,000 as a starting point for 2013-14. We recognise down the line that there should be significant procurement savings but it is difficult to see what they might be at the moment. This is a reasonable starting point.

Room 151: Are you sharing senior level posts?

MS: Yes, I previously had a deputy chief finance officer who I am now sharing with Forest of Dean District Council and Cotswold and West Oxford are sharing theirs, so we are already sharing posts. The head of HR that was at Cheltenham is already shared across all four councils.

We were doing sharing of senior management posts outside of our shared services project. An audit manager works across the four authorities and the MD of the waste company I mentioned is shared between two authorities, We’re looking generally to share and reduce costs.

Room 151: There’s a limitation somewhere to how much sharing you can do I guess?

MS: Yes, it gets complicated and one thing to think about is governance, we’re doing work on that: where does decision making lie, where do members get involved?

Room 151: Could you ever amalgamate funds?

MS: Well with pensions you start off with your individual deficits. Then we have our waste company and if that grows it’ll have its own pension fund and liabilities and why would you want to share someone elses’ liability?

Room 151: What have been the main difficulties in setting all of this up?

MS: Well it is a huge project. In terms of project planning it is complicated and challenging. You have different members in different authorities to deal with, communications are vital between authorities, staff within authorities, members across authorities, you have to communicate with them all. Logistically it’s tough but we have had a strong team doing hard, hard work to overcome that.

Room 151: As the years go on all of the councils will be making redundancies. How do you handle that?

MS: Yes, it is inevitable, we have already tried to manage that as much as possible. There’s always turnover so when people are going we have tried not to replace them, or use a temporary replacement so that there will be less people to make redundant.

Conversely, we might well grow the business if we’ve got a product and a concept that works although the other district councils haven’t joined now, that’s not to say they won’t join at some point, it might be we sell the service to other councils in the future. We’ll concentrate on using the system and having it fully working before we think about selling it though.

Room 151: So that’s what you would hope for looking forward?

MS: Yes, it’s an aspiration. If we can prove the concept there is nothing to stop us increasing the number of clients both in Gloucestershire and outside. We have to feel that we’re ready to do that though, it has been a huge project and we want to get through a couple of years’ worth of accounts before we can offer it out. We have had the conversation as a group of authorities and with our elected members about expanding it and they are up for doing that in the future.