Joint Metrology Service Restructure Proposals

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JOINT METROLOGY SERVICE RESTRUCTURE PROPOSALS

COUNCILLOR BARRY COPPINGER - EXECUTIVE MEMBER FOR TRANSPORT (temporarily for Community Safety And Leisure)

IAN PARKER – DIRECTOR OF ENVIRONMENT

6 June 2007

PURPOSE OF THE REPORT

To consider a proposed reconfiguration of the Metrology service.

BACKGROUND AND EXTERNAL CONSULTATION

The Service

The Metrology service, known as Tees Valley Measurement, has existed as a Middlesbrough-led joint arrangement since Local Government Reorganisation in 1996. Before this it had operated on broadly similar lines as the Technical Services unit of the County Council Trading Standards Department. The primary function of the unit is to carry out the majority of the statutory Weights and Measures duties for the four participating Authorities. It achieves economies of scale in having only one set of highly specialised equipment and three qualified Trading Standards Officers (including the site manager) between the four Authorities.

No charges may be made for inspection of plant or equipment. It is possible to charge (with fees set nationally) for initial verification as, for example, upon installation. The fees for this type of work are in decline due to a reduction in sites liable to verification (eg petrol retail) and a change in legislation allowing self certification.

To reduce the contributions due from the four partners the formal agreement states that, as time permits, the unit’s expertise should be used to generate income through commercial calibration work. The mainstay of this work is the Mass Lab that has become increasingly sophisticated and gained higher and higher levels of accreditation to make it commercially attractive. The customer base of approximately 600 local, national and international businesses is developed and maintained by a Business Support Officer working 18.5 hrs per week. Other commercial income is derived from Road Tanker calibration both from direct service provision and by running training courses on the subject.

The Centre also houses an extensive food and non-food testing laboratory accepting samples from the partner Authorities. The lab is capable of carrying out complex chemical analyses as well as physical tests on anything from domestic electrical goods to fireworks. The submission of such samples for test is a core public protection function but is extremely expensive if external testing facilities are used.

Funding

Under the 1996 agreement the Authorities make contributions in line with their respective populations (Hartlepool 16%, Middlesbrough and Redcar and Cleveland both 26% and Stockton 32%). The gross initial budget amounted to £310k with £100k income assumed. Although the agreement stated that each budget would be based on the previous year “with an amount for inflation based upon current price indices” pressures invariably meant that one or more partner caused the overall settlement to be sub-inflationary. Despite repeated efforts to live within these constraints, including the freezing of posts and the waiving of the agreed management fee by Middlesbrough, by 2004 an emergency review was necessary. This resulted in the 2004/05 budget being set at 119% of the previous year, 2005/06 dropping back slightly to 114% and from thereon wages being annually increased by inflation and 1% added for other running costs. A five year capital plan was also agreed to cover replacement of technical equipment.

Although 04/05 allowed a £19k carry-over this was all needed to balance the 2005/06 budget despite the added benefit of the capital contributions. 2005/06 income amounted to £101k against a target of £108k.

Income for 2006/07 was agreed at £110k on the Head of Metrology’s expectation of increased business following investment in further accreditations and profile-raising at trade exhibitions. Unfortunately as the year progressed income levels remained low, failing to reach £40k in the first six months. Although the year end figure rose to £98K, this shortfall and unavoidable overspends on the tight running costs budget resulted in a £29k deficit at outturn as shown in the table below.

Budget 2006/07 / Projected Outturn
2006/07
Staffing Costs / 321,995 / 328,397
Building & Operating costs / 74,651 / 85,177
Total Expenditure / 396,646 / 413,574
LA Contributions / 269,938 / 269,938
Other Income / 110,000 / 98,127
Petrol Licensing / 16,708 / 16,790
Total Income / 396,646 / 384,855
(Surplus)deficit / 0 / 28,719

Whilst an inter-Authority agreement was reached to cover this loss in isolation, the partners agree that the service must operate within the set budget from now on.

Earned income for 2006/07 is shown below, illustrating the amount of business in each category derived from inside and outside of the contributing Authorities’ area.

Income Category / Teesside Business / Non-Teesside Business / Total
Commercial Calibrn. / £20,096 / £24,894 / £44,990
Tanker Testing / £8,082 / £11,418 / £19,500
Seminars / £3,805 / £3,805
Other / £4,745 / £4,745
Verifications / £18,290 / £6,797 / £25,087
Total / £46,468 / £51,659 / £98,127

The review process

Since November 2006 there have been regular meetings involving representatives from the four Authorities, assisted by the Head of Metrology. This process has been enhanced by the participation of Centre staff in a full day session where views were sought on the key issues. As a result, a discussion document was produced for the Tees Valley Directors of Environment Group. Further consultation was then undertaken with Metrology staff and the Unions. The responses received were considered by a subsequent meeting of the Environment Directors’ Group at the beginning of March.

With a goal of securing a sustainable future for the service within the current funding arrangements, each function provided by the centre has been examined in turn to arrive at a configuration that best balances partner needs with costs.

OPTION APPRAISAL/RISK ASSESSMENT

Statutory Inspections. All Authority representatives agree that provision of statutory services for the maintenance of standards and the centralisation of metrology inspections represent the most efficient way of carrying out these duties. This view was reinforced by a recent regional best value review of Metrology services in the North East. There are advantages in terms of both specialist knowledge and economies of scale compared with alternative methods of delivery. This work would require a staff of two Trading Standards Officers and two Technical Officers and would still allow for the continuation of Petroleum Licensing inspections for Redcar and Cleveland and Middlesbrough.

Samples Testing. All four Authorities have expressed a wish that the screening laboratory service should continue as it provides greatly enhanced capacity to sample and test both food and consumer goods. In 2006/07 the lab processed 956 samples representing a saving of £151k against comparable work undertaken elsewhere.

Commercial Calibration. This is the main means through which the Centre aims to meet its income targets. Considerable efforts have been made to maximise customer take-up: the work of the Business Support Officer, the attainment of increasingly rigorous accreditations and latterly participation at national conferences and exhibitions. All of these elements won praise in the previously mentioned regional best value review. Despite this however, figures show that since 1996 (with one exception) annual income from this source has always fallen within a £7k band between £38k and £45k. From this it appears that merely maintaining market share, let alone increasing it, is a considerable feat. It is recommended that this service is discontinued.

The current commercial calibration operation involves three specialist officers (2.5fte). Therefore, on staffing costs alone, this element of the service costs over £70k against an income in 2006/07 of £45k. In addition there are also fees and charges for accreditation, additional equipment and promotion of the service. A further operational commitment that did not arise until this level of activity was introduced is the continued maintenance of the centre’s sophisticated IT system. This has been developed and continually refined over many years by the current Head of Metrology.

The 2005 collapse of the country’s major commercial calibration provider in South Yorkshire has provided some opportunities for new income, but even so, 2006/07 income has not risen above £100k. Based on a combination of past figures, the current deficit between expenditure and income and continual battle to maintain existing customers, this is unlikely to change significantly for the better.

Tanker Testing. This is undertaken in a purpose-built bay within the Centre. Pre-1996 it provided a major income stream for the County. The Centre continues to be a well-respected provider of these services and is nationally renowned for its training courses on the subject. It is recognised by staff that the location of the site puts it at a profound disadvantage to a rival facility in West Yorkshire that is situated within easy reach of most major customers. It is recommended that this service is discontinued.

Income generated directly from tanker and meter calibration work (£19.5k in 2006/07) generally covers staffing costs however this does not take into account equipment, materials and maintenance charges. (At present a new calibration meter is needed at a cost of £7k)

Additional income is derived from the training courses, again however, this was heavily dependent on the Head of Metrology whose application for early retirement was approved and took place at the end of April.

Commercial calibration and tanker work may assist in regeneration and enterprise. Neither of the functions however is seen as a direct benefit to the funding Authorities’ Trading Standards and Environmental Health teams. In addition, in the past five years, 55% of Commercial Calibration income and 58% of Tanker income has come from businesses based outside of Teesside. These issues further undermine the logic of providing subsidised services to selective elements of the business community.

Were the Metrology Service to be maintained in its current form for a further year, the overall income requirement to achieve a balanced budget would be £121,643. This would represent an increase in excess of 24% over achieved income in 2006/07 and a 22% increase over the Centre’s best ever year. The market for this type of service is price sensitive and so significant price increases would not provide a viable solution to the problem.

The changes proposed to the service are summarised below:

FUNCTION / Current / Proposed
Maintenance of standards and working equipment / Y / Y
Statutory field inspections and verifications / Y / Y
Petroleum Licensing Inspections (R&C and M’bro) / Y / Y
Training for partners / Y / Y
Food and non-food screening laboratory / Y / Y
Road Tanker /Bulk Calibration / Y / N
Accredited Commercial Calibration / Y / N
Commercial Bulk Fuel Training Courses / Y / N

FINANCIAL, LEGAL AND WARD IMPLICATIONS

Financial Implications

A staff of seven as listed below would be capable of providing the Statutory Inspection and Samples Testing services required by the four partners. This would however effectively end the Commercial Calibration and Tanker Testing services currently offered.

N.I. & Superannuation

(On-costs included)

1x Principal Trading Standards Officer£44,647

1x Trading Standards Officer£40,408

1x Screening Lab Manager£31,297

1x Screening Lab Assistant£23,381

2x Generic Technical Assistants £46,762

1x Administrative Officer£21,315

Total £207,810

As a consequence, the following posts would become superfluous:

1x Technical Manager£35,247

1x Officer from – Senior Technical Assistant/

Technical Assistant /

Calibration Officer£23,500(mid point)

0.5x Business Suppt Officer£14,082

0.5x Clerk Typist£ 8,470

Total£81,299

In addition, if the now vacant post of Head of Metrology is not filled, and the remaining responsibilities of the role appropriately assigned elsewhere, this would represent a further saving of £44,907.

There is a commitment from colleagues in the other Authorities that any staff affected will be placed in their respective redeployment schemes at the earliest opportunity.

In the short term, building and operating cost reductions would be small, coming from savings in the tanker bay: consumables (including water), calibration of the equipment used and heating/lighting. There are also likely to be modest savings associated with the reduction in calibration capability as there will be no expenditure on additional accreditations as has been the pattern in previous years. These first instance savings are estimated at £5k. By virtue of its Custodian status, sale of the site would result in a division of capital receipts, a proportion of which could be used to build a new, more energy efficient base for the service. It is the opinion of all partner Authorities that this should be looked at as a major priority otherwise there are major concerns about the state of the current building, which will warrant significant expenditure in the near future. For the time being however, building and running costs for a revised service are estimated at £80k.

Although there may be an opportunity to win more income, particularly from other Authorities, every effort is to be made to reduce reliance on this. As a result a realistic estimate would be £15k from verification and £17,210 from the retained Petroleum Licensing function.

It has been agreed by the partners that as direct services will be unaltered, current funding levels will be maintained and increased in line with the formula established in 2004. With the proposed structure, this will result in the following position:

Proposed revised budget 2007/08
expenditure
Staffing Costs / £207,810
Early Retirement (one-off) / £6,500
Building and Operating Costs / £80,000
Total Expenditure / £294,310
Income
L A Contributions / £280,169
Other income / £15,000
Petrol Licensing / £17,210
Total Income / £312,397
Net / (£18,069)
L A Capital Contributions / £40,000

The resulting difference of approximately £15k in 2007/08 and approximately £21.5k in future years would provide some protection against the threat of reducing income and the 1% cap on the non-wage budget. It may also afford the opportunity for Middlesbrough to reinstate a mutually agreed lead Authority Management fee.

Ward Implications

Proposed changes to the service concern the commercial side of the operation therefore impact will be confined to business customers. This would not affect statutory inspections of weighing and measuring equipment in the town or advice offered on these issues. Food and non-food samples taken by Trading Standards and Environmental Health Officers would also continue to be dealt with in the same way.

Legal Implications

All of the funding Authorities agree that the service should continue to provide the full range of statutory services currently offered. There is no legal obligation to provide the commercial services under discussion.

RECOMMENDATIONS

It is recommended that the Executive Member endorses the proposal to maintain the statutory and sample testing elements of the Metrology Service whilst ceasing to provide commercial calibration and tanker testing. It is also recommended that support be given for the relocation of the service to maximise savings and further secure its future.

REASONS

The recommendations are supported by the following reasons:

The service satisfies the statutory responsibilities of contributing Authorities.

It is the shared view of the partner Authorities that the recommendation represents the only method of securing the future of the service in the medium to long term.

The costs associated with providing the combined Calibration and Tanker testing facilities outweigh the income derived. The subsidy of the service is brought further into question by the fact that the majority of the income generated is from businesses based outside of Teesside.

Should the service be down-sized it would be much easier to relocate as it would not require a site capable of accommodating articulated road tankers.

BACKGROUND PAPERS

The following background papers were used in the preparation of this report:

Discussion document for the Tees Valley Directors of Environment Group 1 Feb 2007

Alternative Proposal –The Future of the Joint Metrology Service (Tees Valley Measurement)

The Future of the Metrology Service (Consultation reply) - February 2007

Consultation Response and Alternative Proposals for the Restructure and Future of the Joint Metrology Service - February 2007

Tees Valley Measurement 2007/08 Income Projection Report. March 2007

AUTHOR: John Wells

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