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** Import Warning ** A shared vision
10:00 01 Jan 2002
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What outsourcing model do local authorities most commonly follow?
It's a question that may
leave the contracting community scratching their heads. Indeed, cynics might say the UK's 400 or so local authorities are hell bent on employing a different model each time, rather than trying to share best practice around.
One contract hailed as a trail blazer was Morrison's all singing, all dancing arrangement with Norwich City Council, which encompassed all the council's blue collar services, and was heavy on performance incentives.
But five years since it was signed, few councils have followed that route.
Earlier this year, Morrison signed up to another local authority outsourcing deal, which is again being talked up as a best practice model for others to copy.
The contract, in jv with Capita, is a 12-year arrangement with Salford City Council worth £250m. The core of the contract is highways maintenance - it's actually Capita's first venture into highways - but unusually, Salford has bolted on other services as diverse as planning, property management, and architectural design.
Some 400 city council employees have been seconded to the jv, called Urban Vision, with the two private sector partners also seconding a number of staff.
Paul Mallinder is associate director of Urban Vision, and was assistant director of business development with Salford City Council when the externalisation idea was conceived. He explains the thinking: "We reviewed all our services as part of Best Value, and concluded different parts of the organisation would benefit in different ways from a strategic partnership.
"Some sectors were subject to very volatile workloads, such as architecture and planning. At such times, we'd have to go to external consultants, which can be expensive and unreliable. We felt that by going to someone like Capita or Morrison, then any peaks in workload could be absorbed by those organisations.
"But there was also a regeneration agenda. We felt by externalising these services, and allowing a new jv to sell the services to other clients, we could create new jobs in Salford."
Hit the road
In the short-term though, Salford's biggest priority is its highways. The poor condition of the council's roads has clearly come to the attention of 'ambulance chasers', with claims relating to trips and falls reaching epidemic levels.
Last year, 620 claims were made against Salford, running to "several million pounds", according to Mallinder. "The average claim is around £4,500, but if an old lady falls and breaks her hip it can be considerably more."
Not surprisingly, Salford wants to boost investment in its roads network, and is aiming for an increase from £1.5m to £7.5m a year over the next five years. But this is not set in stone. Like all council highways departments, Salford's faces a real-terms budget freeze in the next three years, plus pressure from the council to spend its allocated money elsewhere as it is not ringfenced.
Urban Vision believes it has an answer to this potential shortfall: short-term borrowing. Normally, any kind of debt finance proposed by local authorities has the auditers scrambling for their red pens, but Mallinder insists this approach is different.
"It's called 'invest to save'," he explains. "It's based on the premise that by having roads in better condition, we will save considerably on claims payouts, and that saving will effectively pay for the borrowing.
"It's a model never before tried on highways maintenance."
To test the idea out, Urban Vision has already completed a footway improvement pilot project. "We've repaired that stretch of footway, so we now know what the asset condition is, and how often it should be maintained," says Mallinder. "But also, we can measure claims levels for that stretch to see if they are less than before the pilot. Assuming they are, that's where we'll make the saving.
"Salford's internal auditors have already approved the 'invest to save' model," he adds.
Mallinder expects Urban Vision to make other savings through "better management" and "greater commercial awareness", which is where the private sector partners come in.
Ken Harland is business development director at Morrison Highway Maintenance and highway services director for Urban Vision, and has already started identifying savings in that area of the business.
"It so happened that the lease on the old fleet of vehicles expired when our contract began," he says. "So we were able to bring in a new fleet. They are better equipped, with compressors installed on board, rather than towed behind, and they have far more fault-repairing facilities, allowing gangs to repair different types of blacktop and concrete, rather than having to call out another vehicle.
"And we have a new concrete mixing wagon, which saves gangs from going back to the concrete plant just for 0.5m3 of concrete.
"We're also picking up the faults more quickly, because the inspectors are being deployed better," says Mallinder. "The gangs have hand-held devices, and report back according to the severity of the faults (they're graded). And because all the vehicles are now GPS-linked, we can work out which one is nearest and best suited to the job."
Relationships with suppliers have changed too, says Harland: "The 12-year contract gives us a very strong bargaining position; it means we can effectively bring suppliers in as partners."
Surprise, surprise
Harland admits Morrison was surprised by the range of services Salford wanted to bundle together in the outsourcing venture.
"Particularly planning, as it's a regulatory function," he points out. "But we are just doing the donkey work; all decisions will rest with Salford."
By the same token, Harland has been surprised at some of the services Salford has chosen to keep in-house. "For example, it has retained environmental services, which includes grass cutting, street cleaning and winter maintenance. The thinking was that if there was a harsh winter, it could utilise refuse collectors for winter maintenance.
"Obviously though, there is synergy there with highways maintenance. And there's scope to switch those functions into Urban Vision; it all depends on making the Best Value case. That's a task for us over the next three to six months."
Separate ways
Harland says the other parts of Urban Vision, such as architectural and planning services, are likely to remain fairly separate areas of the business, with little interface with highways. But he feels that having those functions in the jv does give it extra critical mass.
"It demonstrates a sizeable commitment from Salford, allied to the 12-year contract," he says. "It also gives us more scope to diversify. Our architects are very closely linked to schools, for example, where we could do work resurfacing car parks or playgrounds, as Morrison already does on an outsourcing contract in Dudley."
Urban Vision is already bidding for - and winning - work with external clients.
"Our architectural services department, which probably has the biggest potential for growth of all areas of the business, is doing work for the police," says Mallinder. "Our landscaping division is working for Capita in Liverpool. We even assisted Capita in preparing London's Olympic bid - it helped with the planning issues - and that was great for staff morale."
But the main priority in the short-term is keeping the core client happy. "Salford has put the emphasis on getting a sound structure in place for a service delivery organisation that will grow as a business," says Mallinder. "They want Urban Vision to create jobs that can help regenerate the Salford."
For that reason, the council has not offered Urban Vision huge financial incentives in the contract. "The jv will get a £100,000 bonus if it achieves a number of performance indicators, which falls away on a sliding scale, and they get nothing for only hitting three-quarters of them," explains Mallinder. "But £100,000 is not a huge amount for a company with Urban Vision's turnover."
It's likely the jv will make most of its margin in efficiency savings. Urban Vision has to deliver the service on the existing budget, though once any profits it makes reach a certain level, they're shared 50/50 with the council. "But Salford will reinvest its share back into the service, so Urban Vision effectively gains from that," says Mallinder.
Leading the way
It's quite a different contract from the performance-driven deal signed by CityCare, the company set up by Morrison and Cleanaway to manage Norwich's services. Of course, that may indicate most councils simply require bespoke arrangements to deal with their own local issues, or it could be that the outsourcing model is continuing to evolve as legislation and directives from central government change.
Harland, though, believes Salford could become a model of best practice.
"Norwich looked like being the template three years ago," he says, "but now, I think the likelihood is that other authorities will follow Salford.
"Hartlepool and Bradford have already been here to look at what we're doing, and there will probably be others."
leave the contracting community scratching their heads. Indeed, cynics might say the UK's 400 or so local authorities are hell bent on employing a different model each time, rather than trying to share best practice around.
One contract hailed as a trail blazer was Morrison's all singing, all dancing arrangement with Norwich City Council, which encompassed all the council's blue collar services, and was heavy on performance incentives.
But five years since it was signed, few councils have followed that route.
Earlier this year, Morrison signed up to another local authority outsourcing deal, which is again being talked up as a best practice model for others to copy.
The contract, in jv with Capita, is a 12-year arrangement with Salford City Council worth £250m. The core of the contract is highways maintenance - it's actually Capita's first venture into highways - but unusually, Salford has bolted on other services as diverse as planning, property management, and architectural design.
Some 400 city council employees have been seconded to the jv, called Urban Vision, with the two private sector partners also seconding a number of staff.
Paul Mallinder is associate director of Urban Vision, and was assistant director of business development with Salford City Council when the externalisation idea was conceived. He explains the thinking: "We reviewed all our services as part of Best Value, and concluded different parts of the organisation would benefit in different ways from a strategic partnership.
"Some sectors were subject to very volatile workloads, such as architecture and planning. At such times, we'd have to go to external consultants, which can be expensive and unreliable. We felt that by going to someone like Capita or Morrison, then any peaks in workload could be absorbed by those organisations.
"But there was also a regeneration agenda. We felt by externalising these services, and allowing a new jv to sell the services to other clients, we could create new jobs in Salford."
Hit the road
In the short-term though, Salford's biggest priority is its highways. The poor condition of the council's roads has clearly come to the attention of 'ambulance chasers', with claims relating to trips and falls reaching epidemic levels.
Last year, 620 claims were made against Salford, running to "several million pounds", according to Mallinder. "The average claim is around £4,500, but if an old lady falls and breaks her hip it can be considerably more."
Not surprisingly, Salford wants to boost investment in its roads network, and is aiming for an increase from £1.5m to £7.5m a year over the next five years. But this is not set in stone. Like all council highways departments, Salford's faces a real-terms budget freeze in the next three years, plus pressure from the council to spend its allocated money elsewhere as it is not ringfenced.
Urban Vision believes it has an answer to this potential shortfall: short-term borrowing. Normally, any kind of debt finance proposed by local authorities has the auditers scrambling for their red pens, but Mallinder insists this approach is different.
"It's called 'invest to save'," he explains. "It's based on the premise that by having roads in better condition, we will save considerably on claims payouts, and that saving will effectively pay for the borrowing.
"It's a model never before tried on highways maintenance."
To test the idea out, Urban Vision has already completed a footway improvement pilot project. "We've repaired that stretch of footway, so we now know what the asset condition is, and how often it should be maintained," says Mallinder. "But also, we can measure claims levels for that stretch to see if they are less than before the pilot. Assuming they are, that's where we'll make the saving.
"Salford's internal auditors have already approved the 'invest to save' model," he adds.
Mallinder expects Urban Vision to make other savings through "better management" and "greater commercial awareness", which is where the private sector partners come in.
Ken Harland is business development director at Morrison Highway Maintenance and highway services director for Urban Vision, and has already started identifying savings in that area of the business.
"It so happened that the lease on the old fleet of vehicles expired when our contract began," he says. "So we were able to bring in a new fleet. They are better equipped, with compressors installed on board, rather than towed behind, and they have far more fault-repairing facilities, allowing gangs to repair different types of blacktop and concrete, rather than having to call out another vehicle.
"And we have a new concrete mixing wagon, which saves gangs from going back to the concrete plant just for 0.5m3 of concrete.
"We're also picking up the faults more quickly, because the inspectors are being deployed better," says Mallinder. "The gangs have hand-held devices, and report back according to the severity of the faults (they're graded). And because all the vehicles are now GPS-linked, we can work out which one is nearest and best suited to the job."
Relationships with suppliers have changed too, says Harland: "The 12-year contract gives us a very strong bargaining position; it means we can effectively bring suppliers in as partners."
Surprise, surprise
Harland admits Morrison was surprised by the range of services Salford wanted to bundle together in the outsourcing venture.
"Particularly planning, as it's a regulatory function," he points out. "But we are just doing the donkey work; all decisions will rest with Salford."
By the same token, Harland has been surprised at some of the services Salford has chosen to keep in-house. "For example, it has retained environmental services, which includes grass cutting, street cleaning and winter maintenance. The thinking was that if there was a harsh winter, it could utilise refuse collectors for winter maintenance.
"Obviously though, there is synergy there with highways maintenance. And there's scope to switch those functions into Urban Vision; it all depends on making the Best Value case. That's a task for us over the next three to six months."
Separate ways
Harland says the other parts of Urban Vision, such as architectural and planning services, are likely to remain fairly separate areas of the business, with little interface with highways. But he feels that having those functions in the jv does give it extra critical mass.
"It demonstrates a sizeable commitment from Salford, allied to the 12-year contract," he says. "It also gives us more scope to diversify. Our architects are very closely linked to schools, for example, where we could do work resurfacing car parks or playgrounds, as Morrison already does on an outsourcing contract in Dudley."
Urban Vision is already bidding for - and winning - work with external clients.
"Our architectural services department, which probably has the biggest potential for growth of all areas of the business, is doing work for the police," says Mallinder. "Our landscaping division is working for Capita in Liverpool. We even assisted Capita in preparing London's Olympic bid - it helped with the planning issues - and that was great for staff morale."
But the main priority in the short-term is keeping the core client happy. "Salford has put the emphasis on getting a sound structure in place for a service delivery organisation that will grow as a business," says Mallinder. "They want Urban Vision to create jobs that can help regenerate the Salford."
For that reason, the council has not offered Urban Vision huge financial incentives in the contract. "The jv will get a £100,000 bonus if it achieves a number of performance indicators, which falls away on a sliding scale, and they get nothing for only hitting three-quarters of them," explains Mallinder. "But £100,000 is not a huge amount for a company with Urban Vision's turnover."
It's likely the jv will make most of its margin in efficiency savings. Urban Vision has to deliver the service on the existing budget, though once any profits it makes reach a certain level, they're shared 50/50 with the council. "But Salford will reinvest its share back into the service, so Urban Vision effectively gains from that," says Mallinder.
Leading the way
It's quite a different contract from the performance-driven deal signed by CityCare, the company set up by Morrison and Cleanaway to manage Norwich's services. Of course, that may indicate most councils simply require bespoke arrangements to deal with their own local issues, or it could be that the outsourcing model is continuing to evolve as legislation and directives from central government change.
Harland, though, believes Salford could become a model of best practice.
"Norwich looked like being the template three years ago," he says, "but now, I think the likelihood is that other authorities will follow Salford.
"Hartlepool and Bradford have already been here to look at what we're doing, and there will probably be others."