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Commercial Models and the Commissioning CouncilClaire Taylor and Amardeep Gill
8 September 2015
Overview
1. A little bit of context2. CDC SNC SDC – our experiences (and challenges)3. Our model – confederation 4. How does commercialisation fit in?5. What does this mean for us (commissioning) 6. Practical examples, lessons and considerations
Devolution & regional collaboration
Economic climate and austerity
Changing citizen demand
A generational shift in the role and operating landscape of the public sector?
Context and focus
LAs as active investors and enablers not just
passive purchasers or default providers
Commissioning (in collaboration)
Alternative models of service delivery
Organisational change: typical scenarios
● Sharing service with another LA (various forms)● Establishment of arms’ length trading arm● Setting up, employee-led mutual for leisure/cultural/
care services● Developing property for private rent● Regenerating activities to shape place● Investing in enterprise● Renegotiating outsourcing / PPP contracts to achieve
savings and update specification
The CDC SNC SDC challenge
● Two way shared services – savings of circa 20% (management, efficiencies etc.) but…
● Traditional democratic decision making processes are slow and if/as we move to include other partners (DCs or other public bodies) they will become unwieldy
● Current delivery arrangements limit trading, and are especially complex across more than one partner
● Developing a new form of collaborative partnership (we called it a confederation) that will enable us to get the maximum benefit from the array of alternative delivery vehicles available to us without losing control or handing value out of the districts
A permanent union of public authorities, united in an alliance for a common purpose.
To deliver effective services to communities, as near to the community as possible whilst maintaining sovereignty of its members.
Maximising the economic and transformational opportunities provided through operating on a multi local authority area basis and returning trading surpluses and efficiency benefits to the controlling partners.
Why a ‘confederation’?
Confederation model: South Northamptonshire & Cherwell
mixed economy of service delivery
Board with responsibility for commissioning services, performance management, client
side, commercial direction, member leadership. The parent body for delivery
vehicles drawn from the mixed economy. Local Authority Trading
Company Delivery of
support services, e.g.
HR, ICT, Finance,
democratic
With ‘golden shares’ these founder LA partners set strategic direction for
confederation and reserve right to admit additional partners.
Network of service delivery vehicles using the most appropriate commercial/business/ corporate form for trading, freedom to
innovate and drive efficiencies.
LLP
Legal Services
Partnership
Social Enterprise
Economic dev inward
investment and district promotion
Trusts
Leisure Trusts
Co-ordinating Entity
Founding Partners
How do we envisage it working?
● A parent body owned by the founding local authorities, but where other public sector bodies could own a stake
● Shareholder Agreement – including an exit strategy ● A number of delivery entities, part of the confederation family
that are not restricted like councils● Benefits to local communities generated as opposed to
private sector profit● Wholly owned by the public sector, but still can have JVC
This requires a commercial ‘strategy’
● Commercial development programme ● Guiding principles ● Commercial opportunities in three areas:
• Trading services• Developing new services (which are income
generators)• Assets / major projects
Alignment● Strategic priorities ● Savings model
What does this mean for the founding partners?
● Small retained core – focused on commissioning services from the ‘mixed economy’
● Strategic leadership focused on outcomes for place● New skill sets: collaborative leadership, commercial development,
managing complexity ● Mix of public and private financial skills and perspectives● Different requirements for democratic, legal and HR advice
Beginning with new management structure and OD strategy
Organisational Challenge: issues to consider
● Where are we as an organisation?● Political and citizen views● What works well and what needs to change?● What are our peers doing – scope for collaboration?
● What is the primary purpose of change● What are the most important benefits we hope to achieve – and are these
realistic?● What are the economic and legal constraints? ● What business environment will we operate in?
Organisational change: overview
Strategic Issues:
• Objectives
• Business model – market norms and conditions
• Business plan and viability assessment vital pre-requisite
Structural Issues:
• Ownership and governance
• Legal form (contractual, joint venture)
• Appetite and experience of personnel to participate
Typical Legal Issues
● Legal powers/challenge proofing● Corporate and funding structures● Governance/conflict of interest prevention● New Public Contracts Regulations 2015
• New procedures, timescales, exemptions and rules● State Aid● TUPE/secondment/preventing equal pay claims● Pensions
Incorporating a Company
● Required for commercial trading (s4 Localism Act 2011)● Type of company:
• Limited by shares• Limited by guarantee• Co-operative/Community Benefit Society• Community Interest Company
● Pros and cons:• Mutual• Charitable/tax exempt• Teckal status• Profit distributing
● Governance issues• Director appointments• Conflicts of interest
Examples of alternative models
One Barnet: Commissioning Council Wellingborough: New ways of workingCroydon Education: Charitable Mutual
Commissioning Council: One Barnet
Customer Services:● Revs & Ben, Finance, IT,
C. tax, HR, Procurement● 10 + 5 years● £320m Value● £125m Savings
Regulatory Services:• Building Control • Planning• Regeneration• Environmental Health• £39m Savings and
guaranteed profit share
LB Harrow
Barnet Cares Adult Care LATC
Barnet Homes ALMO
Barnet Hold Co
Ltd
HB Law ABS
LB Barnet “Commissioning
Council”
Capita Services
Ltd
Capita Group PLC
RE LtdCapita
Property Ltd
Joint Venture
Agreement (IPPP)
PCG PCG
Shared service procurement exemption
Competitive dialogue
Interface Provisions
Teckal
Teckal
Teckal
100% S/H
100% S/H100%
S/H
Competitive dialogue
51% S/H
49% S/H
IAA
Wellingborough – New Ways of Working
Service Delivery Company (crematorium services) Property Management Company
Waste Services (outsourced to Norse) Residential Management Company
Revenues and Benefits (potential shared service)Car Park Development (either by way of establishing
of a separate company or via contractual arrangement)
Services Assets
Council Commissioning Hub
Property Joint Venture
Investment Partner
Town Centre SPV
Retail & ResidentialScheme SPV
JVCO
Access to 142 other sites on completion
of 3 projectsResidential SPV
Council
+
Profit ProfitProf
it
Procured
Land
Land
Land
Land
Working capital
Equity investment, repression, returns
Equity investment, (land) repression, returns
JVCo provides Master planning, Development Management, Investment Advice and Administrative Services to JVCo for a set fee under separate agreement
Charitable Mutual: Croydon Education Services
Summary: Issues when considering organisational change
● Does the business proposition work● Are there ingredients to create a sustainable business● Ensuring the contractual matrix works● Understanding risk and how to manage it● Be aware of legal reforms/changes● Manage political aspirations● Be aware of governance change● Understanding the commercial view point● Understanding citizen need● Cater for changes on the horizon
5 Lessons Learnt and 3 Takeaways
1. Local Vision 2. Build in flexibility3. A coherent business model 4. All partners share the same aspirations 5. Engage widely
6. Design for what works – what are you trying to achieve? 7. Communicate, communicate and communicate8. Training and development
Contacts
© Trowers & Hamlins LLP 2015
Trowers & Hamlins LLP is a limited liability partnership registered in England and Wales with registered number OC 337852 whose registered office is at 3 Bunhill Row, London EC1Y 8YZ. Trowers & Hamlins LLP is authorised and regulated by the Solicitors Regulation Authority. The word “partner” is used to refer to a member of Trowers & Hamlins LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Trowers & Hamlins LLP’s affiliated undertakings. A list of the members of Trowers & Hamlins LLP together with those non-members who are designated as partners is open to inspection at the registered office.
Trowers & Hamlins LLP has taken all reasonable precautions to ensure that information contained in this document is accurate, but stresses that the content is not intended to be legally comprehensive. Trowers & Hamlins LLP recommends that no action be taken on matters covered in this document without taking full legal advice.
(c) Copyright Trowers & Hamlins – September 2015 – All Rights Reserved. This document remains the property of Trowers & Hamlins LLP. No part of this document may be reproduced in any format without the express written consent of Trowers & Hamlins LLP.
Amardeep Gill, Partner Public Sector Commercial
d +44 (0)121 214 8838e [email protected] www.trowers.com
Claire Taylor, Business Transformation Manager, Cherwell, South Northants and Stratford Councils
d +44 (0)300 0030113e [email protected]