TO : CABINET : 5th March, 2003

JOINT REPORT OF THE DIRECTORS OF CORPORATE SERVICES AND PERSONNEL AND PERFORMANCE

STRATEGIC PARTNERSHIP PROJECT -

THE NEXT STEPS

1.PURPOSE OF REPORT

The purpose of this report is to:

a)Provide a summary of the work done on the Strategic Partnership Project since the last meeting of the Project Board held on 13th November

b)Raise with Cabinet some of the issues which have been considered by the Senior Management Groups for the relevant services and the Project Team/Board during this period; and

c)Make recommendations as to the next steps to be taken with this Project.

  1. RECOMMENDATIONS (requiring decision today)

Cabinet is asked to provide strategic direction by approving (as appropriate) the following recommendations:-

(i)Agree in principle with the concept of further exploring appropriate partnering approaches for some or all of the services provided by Corporate Services and Personnel and Performance, and to critically analyse responses to ascertain if they would add real value.

(ii) That our primary goals and objectives in pursuing this

initiative, are as follows:-

a.To improve quality and add value to services

b.To speed up the pace of improvement by providing additional investment

c.To achieve better value for money by reducing transaction costs

d.To exploit our existing skills and expertise

  1. To preserve and enhance staff employment security
  2. To provide regeneration/inward investment and better local job opportunities
  3. To safeguard and enhance democratic accountability in the delivery of our services
  4. To strengthen strategic capacity to enable achievement in the priority areas

(iii)Consideration be given to ascribing particular weightings to the agreed objectives, e.g., if regeneration is the primary goal then this would impact onto the type of preferred contract model.

(iv)That this initiative run separately to that being undertaken by colleagues in Development Services (who are at a more advanced stage and which will ensure that good practice lessons can be shared without unduly hindering progress).

(v)Agree that any advertisement should emphasise that we are seeking genuinely innovative solutions and that we would expect any potential partner to ensure that staff be employed on no less favourable terms and conditions than those which they currently enjoy, in line with our previously agreed “Statement of Intent”.

(vi)That the form of any advertisement makes clear that this is initial soft market testing rather than a formal invitation to submit tenders.

3.PROGRESS MADE TO DATE

Gathering Intelligence

Work has been continuing to gather intelligence regarding the experiences of other local authorities, which have gone down the strategic partnership route for the provision of some of their services. Visits have been made by small groups of staff representing the majority of the services being considered for partnership to a number of sites as follows:

  • Blackburn with Darwen
  • Westminster
  • Liverpool
  • Middlesborough
  • Durham
  • Cumbria

These visits have been useful in both gathering some technical information about the nature of the contracts entered into, which has fed into the work done by Manchester Business School (more of which later), and to enable staff representatives to ask their own questions about employment/ development/pension matters. Whilst all authorities had entered into partnership arrangements, there was no consistency as to the model adopted. In addition, contact has been made with ODPM’s (Office of the Deputy Prime Minister) Strategic Partnering Taskforce, which is producing guidance on the subject through its work with strategic partnering pathfinder authorities.

The Manchester Business School (MBS) Report

Peter Kawalek, author of the MBS report attended the last meeting of the Project Board to present his findings. Cabinet had access to a summarized version of the report or could have requested a full copy according to their own choice. For ease of access, a copy of the summary is attached at Appendix A.

Whilst this report could not do full justice to Peter’s findings, there follows a brief guide to some of the issues he has raised, and will no doubt further explore at the meeting.

  • Terminology – what do we mean by the words “partnership” and “outsourcing”? Partnership is often used to describe outsourced arrangements because it has a “kinder/softer” ring to it.
  • Which decision making strategy does Salford wish to pursue? Cost based decisions are termed “tactical”. Raising the capabilities or standards of the organization leads to a “strategic” model, whereas the next dimension, where the decisions are based upon levering additional value added outcomes for the area rather than just service specific gains for the organization, is known as the “comprehensive” model. How do these definitions fit with Salford’s desired outcomes?
  • Which models are out there? They can be put into four categories:

Fee for service contract

Buy – in contract

Strategic collaboration

Preferred supplier

These models can be implemented in a variety of ways, e.g.,

Joint ventures

Public/private partnerships

Public/public partnerships

Externalizations

  • Change control mechanisms in contracts – how would we ensure the correct degree of flexibility to negotiate and agree service developments in the future?
  • Salford’s Viewpoint – is there a case for an external relationship and if so, what kind of relationship? Results of this initial analysis suggest that all but one service sub units might potentially benefit from some sort of external relationship, and the most common model is suggested to be the strategic collaboration.
  • The Way Forward –

Clarify the big strategic goals of any potential partnership

Develop an initial set of targets to be delivered by such a partnership

Further review and development of the analysis of suitability of services for partnership

Development of a communication plan

Taking a view on long term issues such as staff/Trades Union views and TUPE, handling negotiations, understanding the contractor, capacity to manage external relationships, exit and termination strategies, etc.

4. DELIBERATIONS OF SENIOR MANAGEMENT GROUPS

The Senior Management Groups for Corporate Services and Personnel and Performance have both met to consider the findings of the MBS report and to think about the next steps for the Project. After revisiting the objectives of the Project and considering their linkages to the six pledges and the Council’s overall vision for the City of Salford, the Groups then discussed the initial findings of the MBS evaluation of the suitability of services for partnership. The MBS results were accepted by Service Heads as being a firm enough basis upon which to proceed with further work on the Project.

However, it was felt to be too early in the process to assess the relative merits of particular contract vehicles, and that to do so may unduly fetter innovative approaches from the market. Service Heads did give some thought though to the areas of service improvement/development which they would wish to see delivered as a result of entering into a partnership with another service provider, and these would form part of an evaluation framework which could be developed should expressions of interest be sought from the market. It was felt that the main operational drivers are:

(a)Improving delivery of services

(b) Levering in additional investment

(c)Responding to the e-government agenda

(d)Addressing skills gaps in certain areas

(e)Recruitment and retention difficulties in certain areas

(f) Responding to external criticisms of the Council as a whole

(g)Improving best value and management performance indicators and the improvement in performance associated with this

(h)Exploiting our own skills and expertise within a wider market

It was accepted that there was sufficient evidence to proceed to place an advertisement seeking expressions of interest from the market to ascertain whether a partner(s) could “add value” to current service delivery, and to the achievement of our corporate pledges. Further, it was agreed that all of the services, which fall under the umbrella of Corporate Services and Personnel and Performance, ought to be included within such an advertisement.

These conclusions were then considered by the Project Team at its meetings held on 29th January and 4th February. During the course of these discussions a number of issues were raised which were referred to the Project Board on the 13th February.

Issues requiring decisions of Cabinet

The Advertisement

Earlier in this report mention has been made of the possibility of placing an advertisement seeking expressions of interest from the market. A draft is attached at Appendix B for the Cabinet’s consideration. This includes all services within Corporate Services and Personnel and Performance and is intended to test what the market has to offer. No preferred contract models have been identified at this stage.

It is interesting to note that Tameside Borough Council have recently placed an advertisement in the Municipal Journal seeking “Innovative Proposals for Joint Partnerships”, a copy of which is attached at Appendix C. The main differences between the two are as follows:

  • Tameside have included a greater number of services i.e., those which are currently grouped under Development Services in Salford as well as Trading Standards and Facilities Management.
  • Tameside are “seeking ideas for new partnership structures” which implies that they may consider a number of smaller contract packages.

Similarities include:

  • Exploitation of good services by doing work for others.
  • Additional investment and/or expertise is sought to improve and grow the business.
  • Building a secure and growing employment base.
  • Improving the quality of services.

At the time of writing it is not yet clear whether Tameside have placed a PIN in OJEC as well as the advertisement in the local government press.

Should Cabinet decide to proceed it will also need to consider whether the advertisement should become a PIN (Prior Indicative Notice) and therefore be placed in OJEC (The Official European Journal) as well as other publications such as Municipal Journal and Local Government Chronicle. The pros and cons of such a course of action are illustrated below.

  • PIN – Placing a PIN notice would give notice to potential partners that the City Council intends to place a formal invitation to tender/negotiate during the course of the next 12 months. In doing so, the City Council can still protect its position by stipulating that in the event of tenders being unsuitable; it will not be obliged to enter into any contract. The advantage of placing a PIN notice is that it reassures potential partners that we are serious about seeking an appropriate strategic partnership. If we were not fully committed to this course of action in principle, then placing a PIN would be inappropriate.
  • Soft market testing – This is a process of talking to the market in order to ascertain whether potential partners may be able to help us to achieve our objectives. The advantage of this approach is that it can be undertaken without any firm commitment and provides an opportunity to further explore the business case. The disadvantage, is that it may indicate to the market that we are not convinced about pursuing this strategy and it could be perceived as paying “lip service” to the concept of partnership working.

The feeling of the Project Board was that we should soft market test rather than place a PIN notice.

Cabinet will also be aware of the parallel soft market testing work, currently being undertaken by Development Services seeking a partner for the future delivery of those built environment, planning, design, road safety, management and maintenance services within Salford.

Development Services is at a more advanced stage than this project, having already undergone the model consultation and evaluation process. They are currently carrying out a detailed investigation of a preferred model.

Development Services have expressed a preference to continue to progress on a directorate basis for the following reasons:

  1. They are seeking to progress as quickly as possible in order to obtain access to new markets which would secure the employment of their staff as a result of the increasingly volatile markets and budgets they are now experiencing.
  1. Very few of the companies who have expressed an interest have experience or expertise of the services covered by the Directorates of Corporate Services and Personnel and Performance. It is therefore considered that there are a very limited number of companies who are able to deliver the combined objectives of the Directors of Development Services, Corporate Services and Personnel and Performance
  1. To take advantage of the excellent level of market interest which has been obtained from companies who specialise in Development Services’ range of integrated services and who are likely to be most able to achieve their objectives.
  1. Market research shows that at least 4 companies would be prepared to submit bids using Development Services preferred model. Five further companies have requested further discussion
  1. Staff and Unison are fully supportive of the approach being adopted by Development Services (and the preferred model being explored), and are showing strong commitment to the appointment of a partner.
  1. To maintain the momentum which has been achieved to date

Once research and an assessment of the level of market interest into the preferred model has been completed by Development Services it is anticipated that the Cabinet will be approached for approval to place a formal contract notice inviting tenders in OJEC.

Implications for other Directorates

In considering the next steps for this project, Cabinet must be fully aware that any decisions to pursue a partner(s) for the delivery of Corporate Services and Personnel and Performance services will have implications for the other Directorates of the Council. For example: other Directorates employ their own support staff who interface with the staff affected by a partnership. How far does a potential partnership extend within the Council’s support staff? Service Level Agreements would need to be drawn up between the partnership and Directorates. Any deviation from those agreements will require a negotiated variation to the contract and may increase Directorates’ costs if demand substantially exceeds agreed service levels. A substantial number of staff are currently outstationed within Directorates and a decision will be required as to how this arrangement would be treated under a partnership. For these reasons, if directors are projecting significant changes in demand for services (from Corporate Services and Personnel and Performance) this information needs to be shared with the Project Team as soon as possible. The introduction of a contractual dimension to these relationships will also demand a focused approach to the application of corporate processes and procedures across the Authority, for example: the Customer Services strategy and the full utilization of the SAP system. Such questions, and many more which have yet to surface will need to be discussed with our customers in Directorates.

Staff and Trades Union views

All staff have been kept fully in touch with progress via staff newsletters and team leader forum meetings. Understandably the staff and trades unions are cautious of these developments and concerned about job security, pay and conditions as well as intellectual/philosophical arguments about compromising the public sector ethos of service delivery at the expense of private sector profits. Equally, however, there is an understanding of the difficulties local authorities are faced with and recognition of the need to explore these opportunities.

At the Project Team and Board meetings, the Unison Branch view opposed any outsourcing of services that are currently provided in-house. The recommendation to Cabinet however is to proceed to undertake soft market testing on the basis of compliance with our agreed “Statement of Intent” and that staff be employed on no less favourable terms and conditions of employment.

What kind of partnering arrangements should be considered?

A clear definition must be drawn between the types of partner Salford might choose. Many of the latest partnerships have been tagged as being “strategic” in nature. Does Salford seek a partner(s) with whom it will determine its future strategic direction, or is it merely seeking partner(s) with whom to explore operational/technical benefits and developments? The answer to this question is a crucial step at this stage of the Project. It will determine the way in which contract(s) are drawn up and services are packaged. For example: the “big bang” approach where all services are placed together in one package has the advantage of possibly attracting the type of investment which could meet the regeneration agenda and will require smaller scale contract administration, whereas bespoke contracts may deliver improved operational effectiveness but not the economies of scale required to meet the Council’s regeneration needs. Of course, all these questions are unanswered, as we have not yet asked the market to demonstrate how innovative it can be. However, it serves to demonstrate just how important it is to have complete clarity of objectives from very early on in the Project.