23rd June 2011


Developing a learning partnership for school improvement services in Hertfordshire

Outline strategic business case and options appraisal for Hertfordshire County Council

Executive Summary

23rd June 2011

Client / Hertfordshire County Council
Document title / Developing a learning partnership for school improvement services in Hertfordshire
Date modified / 23 Jun 2011
Status / Final
OPM project number / 8542
Author / Tim Whitworth
Quality assurance by / Hilary Thompson
Contact details
Main point of contact / Tim Whitworth
Telephone / 020 7239 7857
Email /

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OPM 2 of 8

A learning partnership for school improvement in Hertfordshire – Strategic Business Case

Executive Summary

This options appraisal and strategic business case for school improvement services in Hertfordshire seeks to provide independent and objective thinking and analysis of the realistic benefits and disadvantages of a partnership model established as a mutual or social enterprise organisation for school improvement in Hertfordshire formally owned by schools and an assessment of two comparative models.

Whilst a great deal of thinking and work has been carried out already, including the establishment of a project group with seconded representative heads, this has been at a time of considerable uncertainty and national policy change and SSE have been engaged in substantial transformation and reduction in resources.

Vision and Purpose

The desire that has been set out so far is to co-produce a model which is fit for purpose in the context of national policy; achieves better learning and well being outcomes for children and young people; enables a family of self-improving schools; inspires and motivates staff and responds to financial pressures and wider markets.

·  The social enterprise option clearly fits well with the desired strong moral purpose and a mutualised option would enable the partnership between schools and SSE staff.

Strategic and Policy Context

These are times of unprecedented change in education and schools policy - the legislative environment, including the Education Bill currently before Parliament, emphasise much greater autonomy for schools which are either incentivised to leave or set up outside local authority control. Even if not apparent to most schools as yet, reductions in the funding available for education will impact on how schools and LAs invest in standards and government is known to favour a self improving school system, which capitalises on the benefits of clusters of schools, adopts local solutions, stimulates co-construction between schools and expands the concept of system leadership. The Council has strategic policy objectives that seek to maintain a democratic mandate, catch problems early, be based around citizens and communities, and allow the Council to maintain a strategic perspective and generate income.

·  This research confirms, as Council papers have already noted, that a social enterprise is suitable for the policy climate, including more autonomous schools. This option should enhance a business focus, and the motivation and freedom to respond quickly to a changing climate, and can retain a strong Hertfordshire policy flavour and mutual support among schools.

The current model

The current model provides a successful model in maintaining and improving standards service to the LA, schools and other settings based on accurate collection and use of data that anticipates issues in individual schools; clear criteria established for monitoring and evaluation; well established and mature working relationships with schools; enabling and skilling up school leadership to self evaluate and provision of robust early intervention. This approach has shown consistent improvement in standards, placing Hertfordshire amongst the very top performing authorities in schools in the country – however, the costs of investing are higher than some equivalent authorities. A new ‘lean’ operating structure comes into operation w.e.f. 1st September 2011 – based on increased income targets and charges for some traded services, staffing reduced by 94 posts and related reduced office premises and overheads.

Market analysis

SSE appears to command a high degree of service and brand loyalty amongst the 550 maintained Hertfordshire schools. However this market is fast becoming less certain because of schools converting to Academies – a further 35 in 2011 – and a significant range of competitor suppliers – represented by large, medium and small schools effectiveness service providers. To achieve the targeted increase in traded income will require new clients outside Hertfordshire.

·  Given a priority to retain a high performing school system in Hertfordshire there are pressing needs to retain very high penetration in the Hertfordshire schools market and to grow new clients in other areas, There are opportunities to work within a new partnership to develop innovative cross phase products for development locally and ‘selling’ externally. The mutualised model provides a good platform for both and potentially provides some incentives to grow the business for the future. There are risks, in particular in the short term, because of uncertainties in school and council funding and new entrants into the supplier market. Trading conditions will be complex for the next year or two and the Council will need to consider maintaining investment in school improvement, over which period it can be expected that there will be some consolidation amongst providers.

Financial analysis

We understand that current budgets assume an increase in traded income, continued corporate contributions in line with statutory and certain strategic objectives in certain services, and prices set relative to the current market (although a highly competitive market may put pressure on these rates). The budgets also assume that cuts in costs will contribute over £1m a year and increases in trading income amounting to at least £1.5m a year will be achieved over the next few years. It is however likely that further savings will be expected of the SSE services as a result of increasing pressure on the Council’s overall budgets. There has been some analysis of target income by types of services, but the complex picture remains very fluid.

It is difficult, in the current uncertain market, to forecast the level of likely trading income but conservative budgeting suggests that a target of at least £2m should be sought in new income streams by 2013/14 in order to justify the cost base. Although the financial modelling provides for a gradual build up to this level, this is a substantial target based on average levels of existing spend by schools on consultancy & training and the costs of intervention where a school has dropped below floor standards.

In terms of potential future work on developing a detailed business case, it will be important to:

1.  have set a realistic additional external trading income target

2.  recognise that, although the financial modelling provides for a gradual build up to the level, this is a substantial target based on average levels of existing spend by schools on consultancy & training and the costs of intervention where a school has dropped below floor standards.

3.  decide the most effective way to bring in new external market traded income and what sort of market research, development and marketing strategy will be required.

4.  decide if the new operating model should seek to bring in additional traded income from individual schools outside of County or by bidding for whole authority contracts or both.

5.  continue work already begun on:

·  projections of three year income by future client – council, schools collectively through a new HLP, and schools individually (traded services)

·  analysis of traded services by subscription and pay as you go services (to feed into cash flow considerations)

·  sensitivity analyses of surplus/loss against different assumptions for future income from outside the county

·  further assessment of the profitability of different services.

Legal, VAT & Tax and Implications and TUPE

A fit for purpose legal form should be chosen when details of the model are clearer. The ambition of an enterprise with a clear social purpose and, we believe, some element of mutuality should be achievable through standard forms.

Procurement law is relevant and competition can be expected in the medium term at a minimum.

The VAT position is determined by reference to the entity providing the supplies, the recipient’s eligible status and the nature of the supplies. If the supplier is not an eligible body then exemption may not apply in respect of the provision of education services. The VAT treatment of each supply will therefore need to be confirmed.

Whereas at present, the council is able to recover VAT on inputs used to provide certain supplies of education and vocational training that are exempt from VAT, a social enterprise would not be able to recover VAT on these inputs and this may impact on pricing and profitability.

We expect that, for the options under consideration here, TUPE would apply to the social enterprise and outsourcing options, and that staff terms and conditions would be protected.

Risks

Main risk factors
All options / The time and effort needed to engage all schools with a new partnership model does not match the pace of policy changes and this leads to tensions in the partnership relationship.
Failure to achieve sufficient traded income to make the service sustainable, in a tight financial climate and a competitive market, leads to cuts in services offered/available
Secondary schools may see less benefit for them in participating than primary and SEN schools.
Can schools afford the services they would like?
Growth in competition from sole traders, neighbouring transitioned local authority services and larger established providers challenges resilience of model and uncertainty leads to loss of the most talented staff.
Social enterprise / Complex business case and transition processes, including tax, procurement/competition and TUPE issues, saps energy and enthusiasm for model.
A greater degree of local schools ownership of the entity could provide a pressure on SSE staff not to be trading extensively outside of County
The bureaucracy of partnership may not match the benefits for partners.
Developing and maintaining an offer which is appealing to schools (in the case of Hertfordshire market research is suggesting this means breadth of offer) without generating too big a cost base and overheads.
In-house / Developing and maintaining an offer which is appealing to schools (in the case of Hertfordshire market research is suggesting this means breadth of offer) without generating too big a cost base and overheads.
Schools do not have the ownership they seek and look elsewhere for services
Services are subsequently challenged under a Localism Act and fragmented
Out-sourced / Hertfordshire ‘family’ loses sense of ownership and vision dissipates
Less confidence in sustaining highest standards with impact on public perception.

Proposed operating model and our conclusions

The preferred option needs to meet the needs of four client and stakeholder groups:

  1. Hertfordshire schools as individual purchasers and as a collective, under a new partnership and self improving school system arrangements – the main clients
  2. Hertfordshire County Council - Council for the Future – and its policies and strategies
  3. Staff working in SSE, whose expertise is essential for services
  4. New customers and schools elsewhere – as potential sources of significant new income.

But while the details of partnership working and a self-improving school system are being worked up, key details of the proposed operating model remain very unclear.

·  The social enterprise has the potential to build on the established range of services and to market itself independently to councils and schools outside Hertfordshire. Services will need to be offered with an increasingly wide/flexible choice and with more visible quality assurance. There are recognised issues about need for improved marketing and entrepreneurial skills.

·  This model clearly reflects the concept of schools ownership, promoting shared responsibility for business sustainability to schools and offering an opportunity to build on existing relationships and achievements. This is a confident baseline position – schools might be encouraged to share a commitment to build on this, sharing expertise through organised approaches towards continuous improvement and innovation, becoming increasingly outward facing and aiming to position the partnership to gain from national endowments available.

·  This option enables the co-produced partnership approach to school improvement to be taken forward. The main question is about how ownership (rights and responsibilities in relation to services) are balanced across schools, SSE and its staff, and the council and how it works for different types of services. Significant further work remains to be done with heads and governors on the details of how such a new partnership will work and on the balance between ‘free’ peer support, brokering of a range of support, and traded support.

·  The ambition for a family of schools to work together suggests a mutualised approach, with schools being members of a new model.

·  Membership for staff would offer benefits of commitment and retaining talent, and enable them to use their experience to influence the development of services.

·  The Council’s statutory role would be provided by a supplier with a strong existing track record; for schools at risk of failure, relationships with a self improving school system need to be worked out further.

·  To take into account potential tensions between Hertfordshire schools working together and desire for increased external income, a mutual with a trading subsidiary might be worth further exploration. The essential core characteristics should be to operate in a business like way but to have the opportunity to plough back profit/ surpluses for the benefit of Hertfordshire children and families

We suggest that it is too risky to envisage that a new partnership model can be up and running by April 2012.

We suggest a phased plan as follows:

Vision and plan
Agree way forward with roles and timetables / July
Circulate and gain broad consensus for a vision for partnership / By end July
Building the model
Establish redefined project arrangements / September
Establish leadership groups for the new partnership / September
Initiate new trial cross phase and LSDP activities / From September
Test out arrangements for different membership packages / By end December
Shadow operation
Start operating shadow governance and new services (e.g. brokerage) / From January2012
Continue to develop business outside Hertfordshire / From January
Review shadow arrangements and emergent model and move to planning full operations / By April
New model
Full business case, subject to review of shadow operation / Apr 2012
Formal processes (legal, TUPE, procurement) / Apr 2012
Potential start date / September 2012

This timescale calls for a rapid pace of change and requires careful listening to stakeholders within the shadow operation period to establish whether the new model is fit for purpose and capable of implementation by September 2012