Tuesday 17 November 2009
Speech from the Guardian's 'Capital Ambition' conference in London.
On to the question then, ‘if getting organisations working together is an obvious and simple solution, what has prevented it happening?’
Some of my experience in this area probably dates back to the period 2002 - 04 when I sat on the Office of the Deputy Prime Ministers Strategic Partnership Taskforce and I seen at first hand the difficulties of getting the cultural, political and structural ducks in a row. We oversaw the 24 pathfinder projects identified as having the best chance of success and which in the end either experienced huge delays or disappeared into oblivion. So my starting premise would be to say an obvious solution, yes, a simple solution, no as it can become too elaborate and be over complicated by consultants and experts who make a living by generating fees.
Implementation time can be significant and shouldn’t be underestimated, the longer it takes the more likelihood there is of political, organisational or environmental change in one or more of the organisations. Large projects are also resource intensive and must be planned for properly. Consultancy and legal costs must also be built into the equation or the project could end up costing more than it saves.
However, APSE has also seen successful approaches to shared services, in the East Midlands 17 authorities undertaking joint legal services work saving £2.5m over 5 years, in Essex 15 authorities procuring energy supply together and reducing the cost by £1.7m per annum on a £12.5m turnover, the Greater Manchester authorities procuring transport fleets jointly and in Worcestershire the County and its 6 Districts combining to deliver the revenue and benefits service producing savings of £1m per annum.
A number of authorities in South Yorkshire also got together to procure necessary supplies for their decent homes programmes and advertised in OJEU their intention to hold an e-auction for £100m of heating systems, bathroom suites and vinyl flooring.
In Scotland Highways and FM services are delivered by Tayside Contracts to 3 local authorities, Dundee, Angus and Perth and Kinross who have worked successfully together for 13 years despite the fact that political control between the authorities has never been aligned and has changed many times.
Again however, I have also seen numerous examples of protracted discussions taking place over a number of years with a lot of time, resources and energy being expended prior to reaching an impasse and the project being abandoned.
With any partnership arrangement trust is always key and this is particularly relevant when operating in the goldfish bowl of local government where everyone appears to know everyone else and the baggage they carry. Co-operation is also one of the attributes required and managing egos in terms of who gets the credit will involve the greatest of diplomacy tests. Grasping the opportunity, however difficult discussions become, could be the critical factor for success and surely the potential efficiency rewards make it worth the pain.
The best advice available on governance structures for shared services is not to over complicate them. The more complex they become the more they are likely to invoke the European procurement directives or run up huge consultancy fees, which then erode the potential savings. Joint working arrangements, joint committees or consortia are often adequate to do the job. Limited Liability Partnerships or Joint Venture Companies, however fashionable they may appear, are only necessary in specific circumstances or when third parties from the private sector are involved, which changes the procurement dynamics significantly.
Potentially the largest savings can be made in I.T. based services where new technology can improve delivery across authorities and where geographic distances between the lead authority becomes less relevant than with more front line based services. Clearly savings can also be achieved from specialist service units or assets which are currently underutilised that can provide good opportunities for both shared services and service co-locations. With regard to labour intensive services the savings will mainly come from a reduction in senior and middle management and although this is politically sexy it will produce limited results. The use of buying consortia can also contribute significantly to achieving efficiencies through economies of scale particularly where heavy capital investment is required for large projects such as incinerators.
So in summary, keep it simple! Ensure there are adequate arrangements for scrutiny, transparency and democratic accountability. Remember if you go down the company route any elected member appointed to the company board will be required to act in the best interests of the company under U.K. law rather than the Council they represent. It is important to have senior officer involvement in the arrangements and to ensure that any conflicts of interest are identified by those involved. Consideration must also be given to asset transfer and ownership as well as anything jointly created by the shared approach such as intellectual property rights. One final point on governance is that exit arrangements should be agreed at the outset with financial penalties in place for those who voluntarily leave.
In the current financial climate local authorities cannot ignore this agenda, they need to examine their portfolio of services and assess which ones are most suitable for sharing. The shared services approach creates an opportunity to reinvent public services; the key to achieving this sits within the issues of trust, co-operation and grasping the opportunity. Don’t over complicate it!