How far can the commissioning council go?

Steve Bishop is Strategic Director for South Oxfordshire and Vale of White Horse District Councils

As I may have dazzled you with before, our major claim to fame at South Oxfordshire and Vale of White Horse is the work that we have been doing on shared services and joint procurement. Our single contracts help with economies of scale and contract management but also push us down the route of merging our back office departments. There’s no point having two client teams managing the same contract.

Now we’ve shared all the services we can. One of the very first bits of joint work we did was our financial services contract and that ten-year contract comes to an end in July 2016. Our chief exec has made it clear for when we retender that we can throw every single council service possible in there: we won’t just be re-tendering for financial services, potentially it’ll be all the white collar council services that we haven’t already contracted.

We’re using the upcoming six months to look at what to contract out and have already sat down informally with five major suppliers and had conversations saying: “Potentially you can have every council service that we don’t currently outsource. What do you think?”

It’s been a real eye-opener because we thought they would say “we want everything in a 50 year contract” and they haven’t at all.

That was pretty much the market’s approach 11 years ago when we last went out to the market. Suppliers were brash and had a “we can do everything” attitude. Now Capita and the other outsourcing companies are much more mature. They’re taking a measured stance and not one of them has said they can do everything. If they’ve got no experience of an area they’ll admit it, some areas they tell us are their forte and with others they’re telling us they have some experience of now and will perhaps have some successful case studies to show us by the time we hit the market.

When we’ve talked about contract periods they’ve told us that they think local government is changing so quickly that councils would be mad to give anything more than five years out. As suppliers they don’t want to be tied into too long a deal because they know things are rapidly changing and they might end up with contract disputes and negotiations as councils have no choice but to change service delivery requirements.

So now we’re analysing the intelligence we’ve gleaned from suppliers and trying to make a plan for the services we can’t outsource. Some will be services that no company can do, and some will be services that councillors don’t want to outsource – planning development for example, and local democratic services (councillors like their interface with the committee clerks). So those two are probably no-go areas for us, purely in terms of local politics.

We’re also thinking of having an A list and a B list of what can be outsourced. The A list will contain the core services that we’re fairly sure the market can deliver from day one of the contract. The B list will be for those that the market has got some experience of, but depending on which supplier ends up winning the contract, they might not have enough pedigree and experience for us to feel safe that they can deliver from day one. Particularly if we change supplier, if we move from Capita, we’d much rather give the company lower risk services from the beginning than start a new contract relationship with high risks and big problems. After a year or two of the contract running, once our partner’s proven themselves and can demonstrate successful delivery of the B services elsewhere in the country then we might go live with those too.

The suppliers have even suggested we could keep our options open by putting a C list of every single council service in the Official Journal of the EU advert, just to give us a legal hook in case down the line for whatever reason suddenly the council does want to outsource planning or another service (because unless you specify upfront in your OJEU advert you can’t stick things in later as contract extensions). So you could list everything and keep your options open for the future. This is fairly radical and I don’t think any council has tried it, so it’s an untested strategy.

We’re not sure whether we’ll put everything in the advert. Not just because of the legal risks but because you also have to bear in mind the impact it has on staff. If staff see an advert that says everything but the management team is going to potentially be outsourced and TUPE- transferred then all hell could break loose. You also have a problem if you put one group of staff on an outsource list but not another as that will upset those on the list more than if you put everything down and then everyone is in it together. So we’re considering that staffing side as well as the business cases of what needs to go out.

We’re not doing this to become a ‘commissioning authority’ but in effect that is what we would be doing. I don’t know if there is a definition of what constitutes a ‘commissioning council’? Is it that 80% of the council is outsourced? Or simply over 50%? Or does it have to be 100%? If there’s a larger part of the council outsourced as a result of this contract – especially given all the other contracts we have got outsourced – does that make us a commissioning council? It’s only a label, but rather a topical one. Currently we’re a ‘mixed economy’ model with what we think is a healthy mix of outsourced and in-house services. We’re not sure how far we will go in 2016 as politics are sure to come into play – officers and members. Over the next six months I’m expecting we’ll see service heads lobbying decision-makers to have their area taken off the list, arguing that in-house delivery is best.

Just to look a little at the political side of all of this, we had management consultants in a while ago and they asked what our two councils would look like in five years time. Of course there were different views expressed by senior councillors (who each saw separate sovereign councils delivering even more excellent services) and management team (who saw co-location and merged councils as one of the few survival tactics in a much reduced local government landscape). Unsurprisingly there is no single agreed vision of what my two councils should look like in ten years time.

But having said that one of our Leaders did say – in part to be provocative – that he could imagine it being “himself and a couple of others in a shed in ten years time”. He wouldn’t have a problem with himself and the absolute minimum management being the last ones (and I guess probably also the planning department given current political appetite), having outsourced, or ‘commissioned’ the rest.

No doubt when we put our lists of what could be outsourced to the Leaders saying essentially, do you want to become a commissioning council or do you want to be an ‘outsourcing plus’ council, that particular Leader will strike off far less in terms of what on the list he thinks should stay in house than the Leader of my other council.

In general terms councillors join councils because they care for their community, want to add value and get to love their council brand.  They become part of that council, and have often ‘been here forever’. It is then a bit naïve of officers like me to say “guys, lets abandon the brand to merge into one council and it’ll be great because we’ll save loads of money for the taxpayer.” That’s not what the councillors got into it all for. Commissioning councils outsourcing more and more services will leave less and less behind that is that brand, meaning that the council these councillors joined will become a shadow of its former self, and they become shadows of their former selves, so you can understand that human, emotional reaction to it.

Emotions aside though, this kind of thing has got to be the way forward because the Capitas of this world can do high volume transactional work way cheaper than we could do internally.  We need to minimise the amount of local government central fixed overheads by reducing the number of councils and outsourcing as much as possible that other suppliers can provide more cost-effectively. The questions to consider are: how much can and will councils let go of; and, will there come a day when the outsourcing companies can do it all?