EAST KENT SHARED SUPPORT SERVICES
To: Extraordinary Council – 18 February 2010
Main Portfolio Area: Customer Services and Business Transformation
By: Donna Reed – Director of Customer Services and Business Transformation
Summary: This report and the attached strategic case outline the approach for sharing services between the District Councils of East Kent. It makes recommendations on the first tranche of services to be considered and the process by which each council will determine whether or not it will participate in each proposed shared service.
1.0 Introduction and Background
1.1 In January 2006 East Kent Councils (Thanet, Dover, Canterbury and Shepway) agreed to a protocol that governed joint working arrangements. In early 2007 this commitment was formalised and subsequently the East Kent Joint Arrangements Committee (EKJAC) was created to facilitate decision-making around creating joint East Kent Services based on an agreed programme.
1.2 Given the tough economic situation local government faces and the pressing need to find savings this commitment has developed apace and options have been developed based on what is happening elsewhere in the country. An appointed project group drawn from senior managers from each of the four districts was established in May 2009 to flesh out these different options. Four models were identified; joint management team, privatisation, hosting and shared services vehicle.
1.3 Following a staff workshop and East Kent joint cabinet meetings, two models were identified as the preferred options: “hosting” and a “shared services vehicle” (referred to as Joint Services Group – JSG). A “twin track” approach was agreed until the issue of the legality of a shared services vehicle is finally resolved, as there is approximately 80% commonality between the two.
2.0 The Strategic Case
2.1 The strategic case is the overarching report that describes the framework within which the projects would be delivered. It sets out an approach which is intended to allow reasonably quick and efficient decision making, whilst enabling wider consultations to be held by individual councils where necessary. Its aim is to define the methodology by which the detailed service business cases will be developed and allows for individual authorities to make their own decisions.
2.2 Detailed business cases for each service will be written, and must identify a minimum of 10% savings against the existing combined budgets (through service transformation an expectation of further savings can be achieved) and an acceptable level of service to each council. If these targets are not met, the business case will be referred back to each Council’s Executive.
2.3 The first tranche of services that will be merged are identified as: Revenues and Benefits, Customer Services (face to face and Contact Centre), IT Services, Building Control and the residual Housing Services. It is anticipated that the first tranche of joint services will go live in April 2011, with work commencing soon after Council decisions in February 2010.
2.5 The strategic case also identifies the need to: manage vacancies across all four authorities in order to keep redundancy costs to a minimum; resist undertaking any further shared working until May 2011; and appoint one of the East Kent authorities as the host authority by whom all such officers will be employed.
3.1 The strategic case is presented to all four authorities’ Cabinets and Councils during February and March 2010. The following is an indicative set of milestones;
· February – Canterbury Council (18th), Thanet Council (18th)
· March – Dover Council (3rd), Shepway Council (17th)
· April – appointment of Shared Services Director
· May – appointment of Service Transformation Managers
· June – identify service level and budget parameters
4.0 Corporate Implications
4.1.1 As identified within the strategic case the project is in its infancy, so detailed financial figures will not be available until each service business case is written.
4.1.2 Indicative calculations have been carried out by Finance and an approximate figure of £3m savings has been included within the Medium Term Financial Strategy (MTFS). This figure is based on economies of scale, following best practice and undertaking a business process and systems thinking approach within each service.
4.1.3 The minimum criteria for each service business case is that a minimum of 10% savings against the existing combined budgets must be achieved in the first two years and that an acceptable level of service can be delivered.
4.2.1 Of the two models preferred to facilitate a structured programme of joint working, the first or ‘hosted’ model operates through the agency of a joint committee; that is to say a committee consisting of elected councillors appointed by two or more local authorities. Local authorities have a general power under sections 101 and 102 of the Local Government Act 1972 and subordinate regulations to delegate the discharge of both executive (Cabinet) and non-executive functions to a joint committee and having done so it will then be the responsibility of the joint committee to arrange for the effective delivery of the services that discharge the delegated functions, usually through a joint officer team led by a director level officer reporting to the joint committee. However, the initial configuration of the joint officer team will reflect both the pre-delegation arrangements of the participating Councils and the staff transfer requirements of the TUPE regulations. In addition, joint committees do not have separate legal personality, meaning they cannot enter into contracts for goods and services or contracts of employment i.e. they can neither employ staff nor procure contractors to discharge the functions delegated to them. Consequently, the joint committee approach requires the nomination of a ‘host’ authority who will assume responsibility for the employment of the staff transferred into the shared service as well as for the procurement of goods and services required to deliver the shared services programme. As a result, if this model is adopted by the East Kent Councils there will be a phased delegation of functions to EKJAC who will then arrange on behalf of the East Kent Councils the delivery of the services that discharge those functions by the merger of the relevant officer teams and the transfer of their contracts of employment to one of the East Kent Councils as the ‘host’ authority.
4.2.2 As to the second preferred model - the creation of a Joint Services Group - here the East Kent Councils would establish a wholly owned and controlled company and then contract (individually or jointly) with the company for the delivery of the services comprised in the shared services programme. As the company has separate legal personality it would employ the staff transferred to it under the TUPE regulations, apply for admission to the Local Government Pension Scheme in order to meet its pension obligations and be able to enter into contracts for the goods and services needed to deliver the programme. The East Kent Councils would exercise effective strategic and political control over the company through the exercise of shareholder democracy including the power to appoint the directors of the company and a shareholder agreement would regulate relations between the Councils to address issues such as cost sharing, service development, service equity, dispute resolution and exit strategies. This model has two further perceived benefits. Firstly, in addition to the efficiency savings gained from service merger, the company could further reduce its costs by trading its services to other local authorities, the third sector and the private sector. Secondly, if at a later stage the East Kent Councils wanted to procure private sector investment and know how or indeed, in order to facilitate trading, a selected private sector partner could be offered a stake in the company.
4.2.3 As to the legality of a JSG arrangement, until recently it was generally held by lawyers supported by the advice of leading counsel that local authorities could rely on a combination of the ‘incidental’ powers in section 111 of the Local Government Act 1972 and the ‘well-being’ power in section 2 of the Local Government Act 2000 to establish JSG companies to deliver shared services programmes. Unfortunately, in the recent case of R -v- Risk Management Partners Limited ex parte Brent LBC and London Authorities Mutual Limited (2009) the Court of Appeal decided that local authorities could not rely on well-being powers to establish a company that had as its principle objective the making of saving, this of course being a key driver for shared services. In a subsequent judgement the Court of Appeal also clarified the extent to which a shared service could be operated via a JSG without contravening the requirements of the EU Procurement Regime. In summary the East Kent Councils would have to exercise the same degree of control over the company as they exercised over their in-house services and the company would have to carry out the greater part of its work for the East Kent Councils.
4.2.4 Although officers are satisfied that an East Kent JSG would be procurement compliant, it is considered that primary legislation may be required to remove the doubts cast by the Court of Appeal over the ability of local authorities to establish and participate in JSG’s as a shared service delivery vehicle. It is for this reason that the hosted model is the one recommended to TDC and its partner Councils.
4.3.1 Risks - The strategic case identifies high level risks at the early stage of the project (page 20), but each service business case will have its own risk log.
4.3.2 Corporate Plan - The project links to Theme 6 – Modern Council, ensuring that we are managing staff and assets to ensure that we deliver the best possible value for money for our residents.
5.1 Due to the significance of the project in financial and service terms, the report has been referred to Council for final consideration.
5.2 The East Kent District Councils: Canterbury City Council, Dover District Council, The District Council of Shepway and Thanet District Council (“the East Kent Authorities") are minded to merge the delivery of each of the services generally described as ICT, face to face and Contact Centre Customer Services, Revenues and Benefits, residual Housing Services and Building Control ("the services") between two or more of them subject to the following process:-
a) A business case or business cases shall be prepared in respect of each of the services which shall amongst other things describe the proposed merged service, the arrangements between the parties, the savings to be achieved both generally and for each Council and the level of service it is proposed to provide, such business cases to be presented in an agreed format to each of the East Kent Authorities.
b) Each of the East Kent Authorities shall delegate to its Chief Executive in consultation with the Leader the power to approve a business case on its behalf mindful that the business case shows to his satisfaction that savings of 10% against the existing combined budgets must be achieved in the first two years and that an acceptable level of service to his council can be delivered.
c) If the Chief Executive is not so satisfied for those or any other reasons he shall expeditiously refer the business case for consideration to the Council's executive if it concerns an executive function or to the appropriate committee if it is a council function
d) If The Chief Executive or the executive or the committee as the case may be is so satisfied then a delegation to the East Kent Joint Arrangements Committee shall thereupon occur of the powers and duties of the Council as defined in the business case such delegation to take effect on 1st April 2011 or such other date or dates as the Chief Executives of the East Kent Authorities who have made similar delegations shall mutually agree in respect of that service.
e) The East Kent Joint Arrangements Committee will delegate such powers to officers as it thinks fit in relation to the services and is requested to appoint one of the East Kent Authorities as the host authority by whom all such officers will be employed.
f) Vacancy management arrangements shall be developed by the Chief Executives of the East Kent Authorities in relation to each of the services proposed to be merged pending such merger
g) Any decision regarding the delivery of the services by other methods by each of the East Kent Authorities be deferred and be reconsidered no earlier than May 2011.
h) To authorise the Chief Executives of each of the East Kent Authorities to take any steps necessary on behalf of their authorities to explore or facilitate the joint delivery of the services.
i) To appoint the Director of Shared Services with the intent he or she will take up their post as quickly as possible after the East Kent Authorities have adopted these proposals.
6.0 Decision Making Process
6.1 East Kent Joint Arrangements Committee (EKJAC) received the Strategic Case on 18th December 2010, and agreed that; The East Kent District Councils of Canterbury City Council, Dover District Council, The District Council of Shepway and Thanet District Council ("the East Kent Authorities") are minded to merge the delivery of each of the services generally described as ICT, face to face and contact centre customer services, revenues and benefits, residual housing services and building control ("the services") between two or more of them subject to the recommendations stated within the strategic case.
6.2 The recommendations of the extraordinary meeting of the Overview and Scrutiny Panel held on 4 February will be considered by Cabinet on 11 February.
6.3 The recommendations from the meeting of Cabinet to be held on 11 February 2010 will be supplied separately.
Donna Reed, Director of Customer Services and Business Transformation, Extn 7112
Richard Samuel, Chief Executive
Strategic Case attached
Frequently Asked Questions
Corporate Consultation Undertaken
Sue McGonigal - Director
Harvey Patterson – Head of Legal and Democratic Services