The Shared Service Market

26/11/2013

Duncan Whitehead (Graduate Management Trainee) October 2012 1
1 The Shared Service Market
1.1
Overview
Since the Gershon Review identified the expedience of local authorities sharing services to reduce costs, a multiplicity of sharing paradigms have been born, each endeavouring to cut a swath as best practise in a developing field. These paradigms have disseminated around the United Kingdom, providing models to aspiring authoritieslooking to opt into the efficiencies offered by sharing services. When CE and CWAC launched their shared service arrangements, and presently started debating the distillation of these arrangements into an SLE, collaborative ventures were undeveloped: time had yet to tell which paradigms and sharing combinations would prove fruitful.

CE and CWAC were frontrunners in their adoption of shared services, but whilst the SLE concept has been refined, the market has had time to percolate. We now have a greater pool of evidence on which to draw when assessing collaborative companies, as early attempts at partnership have played out with variegated success and failure. The repercussions of these ventures have in-turn shaped the market contours; there are new preconceptions and optimal paradigms. For instance, the earlier optimism that bore a glut of Joint Ventures into being has been tarnished; the aftermath of the likes of South West One has left a more guarded legacy, sensitised to the fact that private sector partnership is not a silver-bullet to economic pressure.

As such, the proposed SLE between CE and CWAC has a unique opportunity to build upon the established sharing base between the two authorities as well as learning from the recent vacillations of the shared service market. Crucially, this means understanding and embracing the changes in the market, whilst also recognising that conditions are not the same as they were three years ago when the SLE was first proposed. Different ideas exist and new opportunities, though often with old targets, abound. This analysis delineates the current market culture and makes some recommendations on that basis. There are two loci of discussion:
•A cross-section of sharing arrangements, providing commentary on compositions, successes, and failures. This is not an exhaustive list but aims to be representational of the range of sharing models.
• Furthermore, this analysis seeks to identify prospective market opportunities and the viability of partners to augment CE and CWAC sharing arrangements. This entails a reassessment of previously entreated agencies in light of recent market developments, as well as a survey of existing UK collaborations to illuminate service trends and future opportunities.
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Duncan Whitehead (Graduate Management Trainee) October 2012 2
1.2
Existing Shared Services
This initial section concerns itself with the first of our aims: the evaluation of shared service models through indicative examples of their implementation. These arrangements are categorised into a number of broad paradigms for easy assessment and comparison. The section concludes with some summarising thoughts on the motors that inform success or failure in collaborative enterprises.
1.2.1
Constitutional Shared Services
Name/Partners Description Lessons Learnt
Adur DC/Worthing
BC
In 2007, two West Sussex district councils - Adur District Council
and Worthing Borough Council - formally agreed to enter into a
joint working partnership for the delivery of their local services
using a single workforce and senior officer structure – the first
plan of its ilk in England and Wales. The overall initiative was
driven by the need of two small councils to preserve essential
local services in the face of reduced central government funding
and the efficiency demands of the 2007 comprehensive
spending review.

In terms of services, Adur and Worthing began by sharing refuse
and recycling services alongside their management structure.
They have gone on to unify their Local Land and Property
Gazateer, Geographic Information System, Street Naming and
Numbering and the Public Sector Mapping Agreement systems
and policies, and web-based services.
Since then high level business cases have been developed for
each of the new service blocks setting out how teams could be
brought together over the next two years: how shared services
could be delivered in the future and clear indications of where
further savings can be made.
It is anticipated that the sharing arrangement will generate a total
net revenue saving of £4.4m in the period to 2012/13.
•
This early collaborative arrangement helps establish the benefits of jettisoning
services into a dedicated shared service arrangement with specialised staff, as
council officers in Adur and Worthing were stretched to perform shared service
duties alongside their day jobs, as The Audit Commission reported.
•
Adur and Worthing profited from a thorough review of all services to determine
which could be usefully shared, rather than committing uncomplimentary elements.
•
The degree of success achieved was enabled by the ability to unify systems and
policies, which was in turn abetted by the relatively small scope of the integration
initiative between two district councils.
LGSS This arrangement was formed by Cambridgeshire and
Northamptonshire County Councils in 2011, and is focused upon
the sharing of core systems, namely Oracle and services
including:
•
Similarly to that between CE and CWAC, LGSS was born when both councils felt
they had trimmed as much as possible from their budgets without sharing services.
Likewise, LGSS is one of the only other sharing arrangements governed by a joint
committee.
•
This arrangement was originally intended to include a private sector partner;
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Duncan Whitehead (Graduate Management Trainee) October 2012 3
Name/Partners Description Lessons Learnt
•
HR, including Organisation Development
•
Finance (Planning and Operations)
•
Internal Audit, Risk, and Insurance
•
Legal Services
•
Pension Services
•
Procurement Services
•
Property and Asset Management
•
Business Transformation and Change Management
Other services, from Slough Borough Council which was
supposed to join the partnership, introducing services included
Revenues & Benefits and Contact Centre.
In November 2008 Slough Borough Council (whom also used
the same Oracle system) joined the partnership and a Business
Case was put together to form the LGSS in December 2009, but
Slough left the arrangement, believing that benefits would take
too long to filter through and being unprepared to front capital
costs. Negotiations also reached an impasse between LGSS
and Lambeth Council.
There were concerns surrounding the legal footing of the LGSS
venture, following the ruling concerning London Authorities
Mutual Ltd in June 2009 (see below) and current practice
restrictions that prevent the councils’ lawyers being employed by
a separate entity. The reversal of this decision has in theory
helped pave the way for the LGSS SLE; the meantime they are
taking preparatory steps and have formally setup a constitutional
shared service in the interim.
Subsequently, LGSS has entered into partnerships with Norwich
City Council (to whom LGSS provides ICT, finance, and
Revenues & Benefits services) and Huntingdon District Council
(to whom LGSS supplies HR and payroll services). Moreover,
LGSS is in negotiations with Northampton Borough Council and
however, as the 2 councils were only willing to offer a minority shareholding in the
venture, no private sector partner was willing to join. As a result, this remains a
public sector only arrangement.
•
Breadth of sharing, harmonised systems: The success of LGSS can be largely
attributed to the extent of services that the two councils share, ensuring a broad
swath of savings. This in-turn was facilitated by the fact that they shared the Oracle
platform, ensuring that transition and harmonisation were not blighted by complex
systems conversion.
•
Unique commercial offer: LGSS’ commercial offering focuses on public sector
bodies – particularly those wary of entering into a partnership with the private sector
– defined by LGSS as ‘by public sector for public sector.’ LGSS thus promotes a
distinct and specifically public sector character to its services and ethos. LGSS
operates a ‘no detriment’ policy, only taking on partners who will not detract from the
service quality delivered to the founding authorities. This is combined with a pledge
to produce an upper quartile quality offering for a lower quartile price. LGSS are
targeting up to three other partners to join the joint committee, preferably from
distant locales to prove the viability of a geographically transcendent sharing model.
•
Transitional model: LGSS considered an SLE from the start, but it was decided that
to quickly deliver some of the savings associated with sharing services, and create a
strong base for a later transition into an SLE, that the constitutional model under a
joint committee was a useful interim option. However, the lack of progress from what
was intended to be a transitional stage creates fears that it has become a holding
pattern.
•
Politically balanced governance: The joint committee has three members from each
council, with each appointing two from the leading party and one from the main
opposition party.
•
Non-financial benefits: the inter-council sharing has allowed the development of inhouse
skills and dissemination of intellectual property; this process is exemplified by
the number of services - and thus skills - shared, negating the need to utilise
expensive private partners. LGSS has also struck the difficult balance of ensuring
staff remain motivated and feel secure (by retaining their employment with their
parent council) whilst also identifying with the LGSS, seeing it as an opportunity for
growth. The LGSS branding was developed quickly, and workers were given vision
and values workshops from senior executives early in their tenure. However there
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Duncan Whitehead (Graduate Management Trainee) October 2012 4
Name/Partners Description Lessons Learnt
provides legal services to the NHS in Cambridgeshire. These
collaborations make LGSS one of the few constitutional shared
service arrangements in the country to have attracted external,
and geographically distant, partners.
LGSS has so far been able to deliver its shared services, and
the savings complicit in this, with no reduction in customer
satisfaction, with a March 2012 survey showing a slight increase
to 90% satisfactory responses.
are no LGSS email addresses yet.
•
Opportunity for expansion: so far savings have been a product of the number of
services shared rather than genuinely innovative process refinement. This is one
perceived benefit of garnering more partners and converting the arrangement into
an SLE, allowing the commercial honing of processes and improved marketability to
partners and customers. For LGSS, the question is at what point do they become an
SLE. At the minute LGSS has been successful in delivering a concerted market
identity, but if it achieves it targets for partners, the dynamic could become too
strained to manage outside an independent company. Furthermore, as long as
LGSS makes the shift with a strong brand capable of drawing work, it can negate
the loss of procurement advantages that come from being a public body.
London Authorities
Mutual Ltd (LAML)
This was an attempt by a group of London boroughs to club
together to set up a mutual insurance company.
The concept of LAML had been financed and encouraged by the
Department for Communities & Local Governments London
Centre of Excellence – now Capital Ambition.
•
This arrangement was ended after the Court of Appeal ruled that the participation of
local authorities in an insurance mutual in this manner was beyond their statutory
powers despite assurances from central government that the well-being powers
were sufficient for their purposes.
•
However, ministers tabled an amendment to the Local Democracy, Economic
Development and Construction legislation allowing councils to form mutual
insurance companies. This amendment will allow any principal local authority to
“become a member of a body corporate… to do anything that is required by, or is
conducive or incidental to, membership of any such body… to provide insurance…
or to enter into arrangements under which such insurance is provided”. The revision
was passed in Supreme Court, representing a major coup for SLE and sanctifying
the benefits they offer participant councils in terms of procurement.
•
Careful scrutiny of legal issues is therefore imperative to ensure any separate entity
can engage with public sector organisations within the procurement rules.
Mid-Kent
Improvement
Partnership
The Mid Kent Improvement Partnership involves Ashford
Borough Council, Maidstone Borough Council, Swale Borough
Council and Tunbridge Wells Borough Council.
It was setup so that these authorities work together as a formal
‘cluster’ of local authorities to deliver the following services:
•
HR
•
Legal
•
Internal Audit
•
A wider partnership of authorities was considered with other boroughs. However,
one of the perceived barriers to progressing shared services in the past has been
the larger number of authorities that are involved in an initiative and in particular the
inability to reach a consensus decision. As such, this arrangement has not grown
significantly to date and only modest savings have been achieved in HR and Legal
(around £80,000).
•
The Mid-Kent partnership has thus moved slowly, and aspires to have a dedicated
shared services arrangement in 2013.
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Duncan Whitehead (Graduate Management Trainee) October 2012 5
Name/Partners Description Lessons Learnt
•
Revenues and Benefits (Swale does not partake).
•
ICT sharing is being developed.
London Tri-
Borough Shared
Services
In 2011, the chief executives of the Westminster City Council,
Hammersmith and Fulham Borough Council, and Kensington
and Chelsea Borough Council laid out a plan to share services,
back-office functions, and management costs for a combined
saving of £33.4 million.
Since June 2011 the councils have combined:
•
Children’s services
•
Adult social care
•
Library services
•
ICT
•
HR
Hammersmith and Fulham, and Kensington and Chelsea now
have a joint chief executive, a single treasury and pensions
team, and a shared environment and leisure team.
•
The Tri-borough arrangement is one of the few shared services to collaborate on
frontline services, but the model has been wholly successful for them: the local,
small scope of the shared service arrangement allowed these frontline functions to
survive in the face of reduced budgets, and customer satisfaction has actually
increased in that time, rising from 77% to 79%.
•
The sharing arrangements also allowed the condensation of certain back-office
functions and the reduction of middle management across the frontline services,
which meant costs were reduced but service provision was not changed. For
instance, in children’s services, risk assessments were still conducted on a borough
basis but specialist functions and management were combined.
•
The Tri-boroughs thus provide an exemplary instance of shared services enabling
the unrestrained continuation of frontline services, and has aptly been named
‘Project Overhead’, reflecting its aim of primarily reducing things like management
costs.
•
The arrangement has now developed, as the tri-boroughs have put out to tender for
the provision of HR, payroll, e-sourcing, property asset, business intelligence,
helpdesk, and disaster recovery systems in a contract worth £800,000. This has
been done using the pan-London Athena programme framework for systems
integration, meaning that up to 17 councils could share in the new service systems.
The Athena programme has been a major landmark in ensuring London councils
coalesce around a single ICT framework; it serves as a simplified mechanism
through which other councils can easily partner.
•
The tri-boroughs are now on track to save up to £3 million in ICT through sharing
things such as data centres and implementing cloud-based technology.
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Duncan Whitehead (Graduate Management Trainee) October 2012 6
1.2.2
Disaggregated Shared Services
Name/Partners Description Lessons Learnt
Buckinghamshire Buckinghamshire created a two-tier pathfinder project with all
districts, establishing shared service contracts which could then
be absorbed into a possible cross-county deal including a private
partner, covering a range of back-office functions including:
•
HR
•
Finance
•
Payroll
•
Facilities management
•
ICT
The estimated a cross-county and cross-district deal could save
up to 20% of the costs of back-office functions, equating to£40m
per annum across the two counties.
However, despite starting in partnership with Aylesbury Vale,
South Bucks, Wycombe, Buckinghamshire, and Milton Keynes
Fire and Rescue, only the county and South Bucks remain.
•
Buckinghamshire’s shared-services pathfinder project has recently been
dissolved after partner councils pulled out of the scheme to outsource the
services, stating that continuing with the project was not in the best interests of
taxpayers and that the potential risks outweighed the potential savings.
•
The prospective inclusion of a private sector partner (most probably either
Mouchel or IBM) deterred many of the authorities, who baulked at the prospect
of an estimated 450 job losses in the local economy.
•
The fact that savings were projected to take six years to be realised was also
unpopular within Buckinghamshire County Council. This highlights one quandary
associated with joint ventures with private companies, namely that savings are
slow to percolate down to the local authority. However, an SLE, for instance,
enables savings to be achieved from day one.
•
A potential problem was the lack of proposition clarity, as the services shared
were not clearly defined and the benefits obscure.
•
Approach was largely reactive, asking partners (both public and private) how
they would want to involve themselves, rather than presenting a menu of
services to researched targets and crafting any contracts on the authorities’
terms.
Worcestershire
Enhanced Two-Tier
Programme
(WETT)
The WETT programme was not a shared service company but
more an awareness initiative, designed to promote the benefits
of sharing services wherever possible within Worcestershire and
creating a culture conducive to proactive partnership creation.
The programme was terminated in early 2011, after
Worcestershire’s Chief Executive Panel agreed that WETT had
achieved its goals: a collaborative ethic has pervaded
throughout the county, making the sharing of services an
established practise in stymieing the exacting economic climate.
WETT’s influence is manifest in the creation of a host of sharing
companies under its tenure, including:
•
The WETT programme provides a unique approach to sharing services:
whereas elsewhere sharing arrangements are agreed first and cultural issues
addressed within the new containers, WETT sought to incubate a county-wide
sharing culture as a priority before channelling this culture into new structures.
•
Such an approach has helped lay the foundations for shared institutions, easing
their inception and identifying future areas of possible growth, including planning,
housing, waste, and community services.
•
However, it could be argued that whilst culture is an important issue in the
success of sharing ventures, well-designed structures, contracts, and operating
models for the individual sharing arrangements are more critical: these things
provide the infrastructure for success, represent the tangible creation of sharing
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Duncan Whitehead (Graduate Management Trainee) October 2012 7
•
Worcestershire Regulatory Services
•
Worcestershire Property Services
•
Worcestershire Internal Audit Services
entities, and will create a propitious culture on their own if managed properly.
•
In sum, WETT is an interesting illustration of a unique mechanism designed to
address one of the core obstacles to shared ventures. It represents a holistic
approach and illuminates the importance of unifying working culture to achieve
success.
1.2.3
In-House Trading Companies
Name/Partners Description Lessons Learnt
Essex Cares In-house company that was the first to commercialise the
delivery of adult social care services. Generates income from
non-discretionary services which is reinvested in the company to
improve services.
Council transferred 850 staff at its inception in 2009; it met its
efficiency savings in the first year before making 3.5 million in
2010-2011.
It has been able to improve outcomes, such as admitting less
people to hospital, and has achieved a 99% satisfaction rating.
•
Difficulties inherent in such an approach are that trading companies are not
teckal exempt, there can be staffing problems regarding transfers, and
councils need to be primarily accountable to the public rather than a profitmargin,
which is an issue if services are wholly jettisoned. Commercial acumen
will have to be injected through commercially-minded appointments, a privatesector
partner, or the close association of councillors with business
experience.
•
However, Essex Cares succeeded in negotiating these potential potholes and
extracting top performance from the trading company model. Essex Cares
combines public sector ethos with private commerciality, standing as a new
model to deal with cuts whilst preserving frontline services. ECC remains the
sole shareholder and any profits made are used to improve the service quality.
•
The service benefits from a flattened hierarchy, responsive decision-making
and greater employee accountability – all of which are part and parcel of the
commercial model.
•
The trading company model allows councils to compete with private firms, in
this case health care providers, where people are increasingly spending their
individual budgets. In the age of personalisation, social care services offered
by a council have to be competitive, and a commercial model enables this
whilst safeguarding services from cut-backs or the loss of control complicit in
outsourcing.
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Duncan Whitehead (Graduate Management Trainee) October 2012 8
1.2.4
Joint Venture (with Private Partner)
Name/Partners Description Lessons Learnt
Liverpool Direct This is a partnership between Liverpool City Council and BT
(who own approx 60% of the shared in the venture; LCC hold
40%) that offers support for customer contact, consultancy,
change management, and day-to-day operational management
of core services including:
•
ICT solutions and ICT platform management
•
Web and Geodata Services
•
Contact centre development and management
•
Consultancy
•
Business support services (finance and commercial)
•
Employee and organisational development
•
Human Resources
•
Payroll
•
Revenues & Benefits Services
•
Learning and development services
Liverpool Direct employs over 1,100 people and has a net
turnover of over £80m p.a. – it is the largest public-private joint
venture in the United Kingdom.
In 2011-12 Liverpool Direct exceeded its targets to deliver £26.2
million total order values.
A refresh agreement has recently been agreed, continuing the
partnership until 2017.
Liverpool Direct started in 2001, and despite initial problems has
succeeded in attracting new partners and customers, who
include:
•
Northumbria Police
•
Reigate & Banstead Borough council
•
Liverpool Direct started with a plethora of problems: few initial contract targets
were met, systems were slow to be updated or refreshed, and BT were perhaps
guilty of taking too much profit early in the venture. However, the enterprise began
obtaining desirable results, particularly in turning Liverpool Direct into a
regeneration flagship for the city, with many jobs generated. This success has
been compounded by more assured systems and contracts, effective
incorporation of partners, and an assured marketing offer.
•
Fluid partnership: Alongside the refresh agreement, a Partnership Framework
Agreement is being calcified to compound the nature of the sharing arrangement
and the values against which it operates. SLAs were consolidated and reviewed
after it was determined that there were too many for a company in which a
performance-driven culture was already embedded. These measures highlight the
impetus to constantly recalibrate the partnership to ensure continued, adaptive
efficacy. The refresh agreement includes a reorganisation of the board to include
more representatives from Liverpool City Council.
•
High-quality marketing offer and visibility: Clear business plans and service
reviews exist which quantify the improvements made in every area. This helps
acknowledge success and raise profile.
•
Liverpool Direct was the solution devised to rejuvenate poor or failing council
services, as well as rebuilding the image of Liverpool City Council. Its success has
been sweetened – and no doubt facilitated – by the defining impulse to better the
council service provision and revivify the city of Liverpool.
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Duncan Whitehead (Graduate Management Trainee) October 2012 9
Name/Partners Description Lessons Learnt
•
Vale of White Horse District Council
•
Knowsley Metropolitan Borough Council
•
The Security Industry Authority (Home Office)
•
Building Schools for the Future
•
London and Quadrant Housing Trust
•
Liverpool Mutual Homes
•
Helena Partnership
•
Gloucestershire County Council
South West One Southwest One (SWO) is a joint venture set up by Somerset
County Council, Taunton Deane Borough Council, Avon and
Somerset Police, and IBM. Comprising 660 staff seconded from
Somerset County Council, 150 from Taunton Deane and 600
from the police force.
The service provides:
•
HR
•
IT
•
Procurement
•
Property and HM
•
Customer services,
•
Revenues and Benefits,
•
Print and design,
•
Finance.
One year into the decade-long deal, the savings are projected as
£1.7 million a year, and Somerset was able to levy belowaverage
council tax increases as a result.
However, it made losses of a reported £31.5 million and
Somerset council brought many things in house. There are now
fresh allegations that South West One tried to hide its losses and
the extent of IBM’s bail-out. IBM remains the dominant partner
•
Lack of consideration of commercial offering: SWO failed to attract any other
partners as hoped, with prospective partners Devon and Cornwall reneging. They
feared the exportation of jobs from their local economies, the high up-front costs,
and IBM’s controlling stake in the partnership.
•
Rigidity of contract: Leader of SCC, Ken Maddock, said that the failings of SWO
were down to the lack of flexibility in the contract to react to the company’s
fortunes. SCC expressed a wish to renegotiate the arrangement, as certain
functionality no longer sat comfortably under the SWO umbrella and SCC wanted
the prominence of certain partners (Mouchel Parkman and HBS) to be reevaluated.
SCC has thus become embroiled in a contractual dispute as it has tried
to bring its functions back in-house and appease tax-payers who have seen the
massive losses.
•
Lack of prior organisational planning: there was no initial management and training
plans, which left transferred staff unsure of lines of authority.
•
Failure of systems planning: Once the company was established, an attempt was
made to transfer everything on to the SAP system. However, there were massive
complications with the wholesale adoption of the new system. Fixed costs may
have been lowered for SCC but they were stung with unexpected costs arising
from the failure of the technology.
•
In the long-term, the weight of these set-backs and performance issues debarred
SWO from becoming competitive enough to find work.
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Duncan Whitehead (Graduate Management Trainee) October 2012 10
Name/Partners Description Lessons Learnt
following its cash injections, which amount to some £20 million.
ERYC East Riding of Yorkshire joined forces in 2005 with Arvato
Government (part of Arvato Bertlesmann). An 8 year contract
was signed t deliver services such as:
•
Revenues services;
•
Financial assessments;
•
Payroll services;
•
Creditor payments;
•
ICT services;
•
Customer service centres;
•
Print and design;
•
Training; and
•
Occupational health.
The main objective of this venture, into which 500 council staff
were transferred was to create a regional economic centre,
improve services and sell services to other public and private
sector partners.
Through a competitive bidding process, the Joint Venture
company, of which the Council is a 20% shareholder, has
secured contracts with:
•
Sefton Council, for 10 years from 2008, to deliver payroll
services;
•
Norwich City Council, for 4 years from 2008 to deliver payroll
services.
•
They subsequently have begun targeting some London
authorities who are in the market for the services the Joint
Venture provides.
•
Between October 2005 and March 2009, a net total of 154 full time equivalent jobs
had been created from the contract. It was estimated that these jobs generated a
further £6m per annum into the local economy. The focus was never just savings
from the collapsing of services, but was designed to be rooted in the local
economy and create jobs in Yorkshire. There were no redundancies or
redeployment outside of the East Riding, as Arvato accepted all of ERYC’s service
specifications.
•
500 staff were transferred on their existing T’s & C’s to limit contractual confusion.
•
In sum, the strategic partnership has been a success thus far, meeting 99% of
performance targets in 2010-11.
•
ERYC gained political credence as a means to counter potentially inimical local
forces, as the council looked to address the threat of a regional employment
centre being established outside of the East Riding’s boundaries.
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Duncan Whitehead (Graduate Management Trainee) October 2012 11
Name/Partners Description Lessons Learnt
Salford Urban
Vision
Regeneration and development partnership between Salford
City Council, Galliford Try and Capita. The private sector led the
commercialisation and developmental facets, but the council
retained control. Employees were mostly seconded in from the
council, though Capita has the controlling share (50.1%). Went
on to sell services to 230 other public-private clients and 130
councils.
Services include:
•
Planning advice
•
Design
•
Project management
•
Landscape design
•
Architecture
•
Highway services
•
Scheme delivery.
The overarching benefit behind Urban Vision is that it makes a
highly-skilled, specialist group available to SCC. 420 people
have been seconded from the council to UV. The Audit
Commission recognised UV as the only joint venture in the
country to provide a comprehensive development control
function through the private sector.
•
Sophisticated commercial offering: UV occupies a unique market niche, being one
of the only Joint Ventures to specialise in building services and regeneration. UV
provides a menu of building services for clients to pick and choose from.
Exemplified in the Services4Schools initiative.
•
Specialist expertise, targeted successes: UV able to meet national targets for
planning processing times within 13 weeks (64% in 13 weeks as opposed to 61%
annually everywhere else).
•
Structural planning and maintenance: A lot of focus was placed on having
management structure there at the start and then bolstering managers with team
development training.
•
Success in qualifying/quantifying success: For instance, UV appeal to reduced
KSI’s as a result of better roads. The council sets targets for UV which are
refracted through 44 KPIs and measured on a monthly basis in the Partnership
forum.
•
Enduring council control: Despite Capita’s controlling stake, it is SCC that sets
strategic objectives, stringently monitored through the monthly partnership forum.
The board consists of 7 representatives from the three partners, including a nonexecutive
chairman and managing director.
•
Local utility, commercial clout: UV was born in direct response to a major
misgiving of the Salford electorate: the condition of the built environment, which
had received a plethora of complaints. UV thus made an expedient move to
develop what was a visible and popular initiative into a commercial venture. This
helps lubricate the political gears for UV’s existence.
•
Respect for change compatibility: During the vetting process, SCC demanded to
see the various applicants’ systems and staff in order to base the final decision on
how well these elements would complement those of the council.
Cornwall Strategic
Partnership
Proposed telecare, telehealth and support services joint venture
between Cornwall County Council and one of CSC and BT.
Initial plan is to incorporate libraries, payroll, IT, and benefits,
and transfer 1000 staff over.
Contract was planned for ten years, with the option of a five year
•
This case study exhibits a slightly different issue: the potential political
divisiveness of Joint Ventures.
•
The CCC cabinet and CEO Ken Lavery (who used to work for BT and is a
published advocate of Shared Services) are keen on the venture, but the
members at large feel that such a fundamental decision should go to council vote
– so much so that 41 have signed a petition to remove leader Alec Robinson.
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Duncan Whitehead (Graduate Management Trainee) October 2012 12
Name/Partners Description Lessons Learnt
extension.
Was pledged that 500 net jobs would be created as part of the
venture.
However, the initiative never flowered; it was shrouded in
acrimony and became the catalyst for schism throughout the
council.
•
The members’ fears fell roughly into two categories. Firstly, the diminution of
member accountability: the proposed board included five of the private firm, the
CEO of the council, and one representative from the NHS. Secondly, that the new
company would be moved away from Cornwall and deprive its economy of jobs;
scepticism that the 500 new jobs promised would materialise under this
arrangement.
•
CCC has been firefighting with a useful FAQS page on their website, explaining
the progress and details of the proposed Joint Venture.
Birmingham City
Council/Service
Birmingham
Service Birmingham is a joint venture between Birmingham City
Council and Capita to provide:
•
ICT
•
Customer centre
•
Learning and Knowledge Services
•
Project Services
Despite initial controversies regarding the failure of a new SAPbased
e-procurement portal, the strength of the venture’s
transformation programmes rectified the issue, turning service
Birmingham into one the most successful and stable joint
ventures in the UK.
The success of the partnership has led to the recent extension of
the contract with Capita to 2021, upping its total worth to around
£1 billion.
Atop the joint venture, BCC are keen to extend their shared
service portfolio, announcing last year that it intends to expand
HR and payroll sharing, the latter of which is already done to a
lesser degree with other authorities.
Service Birmingham benefitted from a number of factors:
•
BCC put infrastructural elements into the joint venture but few frontline services.
Infrastructure can flex to broader demands more easily than frontline service
provision, which has to be more bespoke given the variegated local contours.
•
BCC ensured that specialists with commercial acumen from the city council were
in the vanguard of those transferred to Service Birmingham, meaning the culture
gap between city council and joint venture never became too wide, and service
provision in Service Birmingham did not falter at inception.
•
BCC remained highly open-minded in the planning stage and was happy to
embrace change and innovate to turn generated capacity into new functionality.
•
The systems, assets, and operating models of Birmingham City Council, as the
UK’s largest authority, were already robust and reasonably unified, providing a
stable operating base.
•
The danger for BCC is the high exit cost (estimated at around £90 million) given
the extent of Capita’s involvement.
•
BCC’s ability to realise its new shared service expansionism hinges on the
flexibility of the contract with Capita, with the council having aspirations to reduce
its core supplier costs and bank the savings itself through sharing services with
other authorities. This exposes that a joint venture contract can delay or preclude
the savings possible through alternative sharing models (such as an SLE);
however, this must be balanced with the commercial stimulus a private partner
can furnish.
Edinburgh City
Council
Recently renewed contract with BT until 2016 after the telecoms
company achieved 88% of the its improvement targets. The city
stands to profit from 22 million in savings from the deal. The City
Edinburgh prospered by only putting in infrastructural elements into the venture, being
careful not to commit too much and retain control. This followed a clear operating model
where they approached BT on their own terms and stated what they were willing to
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Duncan Whitehead (Graduate Management Trainee) October 2012 13
Name/Partners Description Lessons Learnt
had recently standardized most of its IT to windows through
Microsoft’s Infrastructure Organisation Model. The joint venture
with BT had previously been renegotiated by Edinburgh, which
freed up some 23.3 million in savings over ten years. This
money was reinvested in the standardization project with
Microsoft.
contribute, rather than being beguiling to hand over more functionality, which would have
made contract management, renegotiation, and exit harder.
Rotherham
Metropolitan
Borough Council
Rotherham combined with BT in 2003, but has pulled out the
deal four years early in 2011 after the council expected to
generate more than £50 million of savings. The result has left
the chief executive, Martin Kimber, to conclude that ‘The world
has moved on’ from private joint ventures, and that Rotherham
want to share services with other councils.
BT had helped supply:
•
IT
•
HR
•
Customer services
•
Procurement
•
Revenues and Benefits
The enterprise was dogged with issues of customer service quality, beset by susurrations
of poor delivery and wastage from the shop-floor.
Rotherham has come to be regarded as a case of putting too much into a joint venture,
resulting in the public partner losing control. The contract proved nonnegotiable and
unsuitably managed, leaving Rotherham to ponder a non-existent exit strategy that could
cost upwards of £20 million.
1.2.5
Outsourcing
Name/Partners Description Lessons Learnt
Suffolk County
Council/Customer
Service Direct
Suffolk county council established a joint venture in 2004 with
BT lasting ten years. The arrangement saw BT provide £53
million of up-front costs, whilst obliging SCC to pay BT £301
million over ten years. However, this figure has risen to
£417 million.
The venture has left a legacy of acrimony, as former employees
have lambasted SCC for not negotiating contracts that
•
The massive rise in the contract costs have reportedly come from mark-ups on
services outside of the original contract. Liverpool Direct had a similar criticism to
make of BT in their contract (worth £70 million per year).
•
The joint venture was to be a cornerstone of Suffolk’s radical outsourcing policy,
which they believe will propel them to becoming the ultimate commissioning
council. However, the cost of CSD has cast a long-shadow on the model, and
leaves the council needing to save around £125 million over the next four years.
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Duncan Whitehead (Graduate Management Trainee) October 2012 14
represented value-for-money for the Suffolk tax payers.
The outsourcing policy has caused public outcry, as constituents
have assembled petitions protesting the ‘Virtual Council’
model in which all services will be floated to private firms.
They seem intent to follow an outsourcing model to make these savings.
•
Public fears largely revolve around perceived job losses that a comprehensive
outsourcing programme would entail.
•
The idea has now been put on hold and the leader who proposed it, Jeremy
Pembroke, has stepped down. However, there are signs that the ‘Virtual Council’
spectre has yet to be fully exorcised, as Serco was commissioned for £130
million to provide healthcare in Suffolk, despite the SCC’s previous exhortations
that outsourcing had failed, quoting the failures of Suffolk, SWO, and the
transient issues of BCC.
There are several outsourcing deals in existence in local government and indeed this market continues to grow; the key players include:
•
Accenture, who provide consulting, IT and business process outsourcing, though are not too involved with local government.
•
Avarto/Bertlesman, who provide IT, Revs & Bens and front office support for East Riding and Sefton Councils.
•
BT, who provide IT, consulting, business process, outsourcing services to the likes of Liverpool Direct, Rotherham, South Tyneside, Suffolk, Sandwell Councils, and,
most recently, Lancashire County Council.
•
Cap Gemini, who focus on IT and Outsourcing for the most part.
•
Capita, who specialise in public sector outsourcing, consulting and IT.
•
Fujitsu, who provide business process and IT services.
•
IBM, who provide IT, consulting, and business process outsourcing services; they have arrangements with South West One and Essex County Council.
•
Mouchel, who provide outsourcing, consultancy and facilities management to Oldham, Lincolnshire, Middlesbrough, and Milton Keynes Councils. However, they have
recently gone into administration, meaning the scaling back of many services they provided to local authorities; notably, Middlesbrough and Milton Keynes responded
by returning some services in-house whilst still using Mouchel for ICT, whilst Rochdale nullified their contract with Mouchel.
•
Serco, who provide outsourcing, consultancy and facilities management, with ventures including that at Glasgow Council. Deal with Glasgow is quite innovative, being
one of the first in which the public and private partners have an equal stake.
•
Steria, who provide IT and outsourcing services, including that to the NHS.
•
Vertex, who offer predominantly front office services.
Nearly all of the above would be capable of partnering to provide the services in the scope of this analysis and, as the above shows, have the relevant expertise. Also, for the
services in the scope of this document, ICT providers are increasingly entering the market. This additional competition is continuing to drive down costs.
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Duncan Whitehead (Graduate Management Trainee) October 2012 15
1.2.6
SLEs
Name/Partners Description Lessons Learnt
Compass Point
Business Services
East Lindsey and South Holland District Councils created this
company to provide back office services to both Councils from 1
August 2010.
Services in scope include:
•
Customer Services
•
Revenues and Benefits
•
ICT
•
Human Resources
•
Finance.
The anticipated savings are approximately £30m between the
Councils, with savings starting in 2011/12.
The company has proved successful in consolidating shared
service arrangements between the two controlling district
councils and completing work within their constituencies, but as
yet have not introduced any further partners or delivered services
to external clients.
Alongside CPBS, South Holland shares a management team
with Breckland, and almost secured a deal to share management
with Great Yarmouth Borough council, but this fell through earlier
this year.
•
These Councils have created the new company at the start of the process and
intend to drive through fundamental review of the services through the
company rather than prior to their transition to the company.
•
Prior to formation, a comprehensive review of all five participant services was
conducted to illuminate weaknesses and areas where commerciality could be
transplanted and bureaucracy trimmed.
•
Private sector partners (Hitachi, Capita, Microsoft) were utilised to provide
specific, one-off systems, but were not involved as parent companies or as
board members. This ensured that savings belonged entirely to the councils:
Capita was employed for £1 million, but only to deliver Revenues and Benefits
computer programmes and document management, netting CPBS a 20%
saving in their Revenues and Benefits department. CPBS provide an ecalculator
for customers to calculate their benefits. The board consists of
councillors and the chief executives of the two councils, ensuring council
control and a strong public ethos.
•
Similarly, no private company was contracted to embed themselves in the
change management; rather, individuals with commercial expertise were
employed to manage or consult the specialist staff.
•
The creation of the company cost £4.65million, but this was spent largely on
up-front costs rather than on-going payments: things such as redundancies,
new computer systems, legal advice, and change advice.
•
In terms of systems, customer specification workshops were held to define the
80% of functions deemed core by CPBS. This means that, whilst offering a
small (20%) scope for systems specification, there is a standardised core of
systems that is universally shared between partners and offered to customers,
rather than a medley of customised applications that might not be relevant to
prospective clients.
•
Lastly, CPBS are the first company to implement the Microsoft Dynamics AX
system, which is specifically designed for a shared services environment.
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Duncan Whitehead (Graduate Management Trainee) October 2012 16
Name/Partners Description Lessons Learnt
Forth Valley GIS Forth Valley GIS Ltd. is a company limited by shares, wholly and
equally owned by the three founding shareholders,
Clackmannanshire, Falkirk and Stirling unitary councils.
The Board of the company currently comprises two Directors
from each of the founding shareholders. The shareholding
agreement between the members contains specific provisions to
increase membership of the company, providing potential
opportunities for other local authority, public sector or business
shareholders in the future as well as the potential for employee
shareholding.
Forth Valley GIS Ltd. is a local authority company that provides
Geographical information services, consulting, training, and
systems support to the public and commercial sector.
•
Building on a highly successful local government partnership over the last 11
years, the new local authority company was incorporated in July 2007 and the
transfer of existing staff, business and assets was undertaken. The new
company promotes delivery of the benefits of shared Geographic Information
Services to a rapidly increasing network of public sector customers, its
partners and businesses across Scotland and wider afield.
•
Recently, Forth Valley GIS was awarded the contract to deliver an innovative
Enterprise Web GIS platform and applications to two councils in Tayside. Perth
and Kinross Council and Angus Council have worked together to define an
approach that balances the delivery of new solutions with the ability to
maximise benefits from previous separate investments in GIS. The
procurement process was rigorously managed by Tayside Procurement
Consortium, the shared service procurement organisation for Tayside. This
case shows that companies limited by shares can win contracts, though must
go through a robust procurement processes for contract provision.
•
Forth Valley GIS prides itself on delivering a public-service ethic, striving for
the best and most accountable service to its parent authorities, girded with a
commercial realism as it aspires to win contracts and get maximum value for
the investment placed in it.
•
Forth Valley GIS partly succeeded because it quickly developed a suite of 12
business applications that met the needs of the three constituent authorities
and standardised practise. They also created a one-stop access to over 17
property-based systems, achieving operating efficiencies.
Norfolk Property
Services (NPS)
Group
NPS is a limited company wholly owned by Norfolk County
Council, which was operated as an internal business unit until
2002, when the NPS Group was set up as a limited company.
The companies within NPS Group are wholly owned by the
public sector, with partner authorities enjoying a share in the
companies’ success.
NPS is a national organisation, delivering a comprehensive and
flexible range of property services to both public and private
sector clients across the UK, using a base in Norwich and
providing client services from a network of local offices setup for
NPS has grown significantly after its inception through the creation of a number of joint
venture companies with public and private sector organisations. NPS wields a
venerated joint venture business model, in which new partners stipulate which services
they want to transfer to NPS; any employees working in these services in the partner
authority are TUPE transferred into a new NPS company, which, whilst centralised in
the new partner’s proximity, draws upon the pre-existing NPS management structure
and central resource pool. NPS provide the capital for the creation of this new
subsidiary. This model ensures that:
•
Local Authorities retain a direct influence on the strategic direction of the company
through representation on the Board of Directors. This, along with, Norfolk County
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Duncan Whitehead (Graduate Management Trainee) October 2012 17
Name/Partners Description Lessons Learnt
each Joint Venture. Council’s total ownership of the parent company, means that NPS appeals as a
public-sector specialist, evidenced in that the majority of its partnerships are with
other councils.
•
The profits of the company (including those from external clients) are shared
between NPS and the partner authorities.
•
NPS is an attractive prospect to partners, who receive largely bespoke services,
and can readily enter partnerships along well-established and repeatable
contractual mechanisms; there are currently ten NPS subsidiary companies around
the UK generating a turnover of above £40 million for NPS.
•
NPS manages to foster a commercial ethic.
•
OJEU procurement rules do not apply, provided that best value can be
demonstrated.
•
All of the commercial risk in establishing the joint venture company is taken by NPS
who also provide the capital for investment in service improvements.
•
Financial independence allows the company to borrow for investment, and enables
more effective cash management. A programme of continuous improvement seeks
to strip out inefficiencies and unnecessary overheads and provides economies of
scale.
Some of the key challenges found by NPS include:
•
Cashflow, as this is a separate company, it must ensure it is solvent;
•
Capital for investment was difficult at the start and required a significant cash
injection from Norfolk County Council; and
•
Risk management and culture, where a more commercial attitude had to be adopted
in order to grow the business.
Acivico A company constructed by Birmingham City Council to provide
and sell property management and planning services.
However, on the day of its recent launch the company had to be
pulled because of incomplete VAT submissions.
An attempt by Birmingham City Council, who are one of the most innovative local
authorities in the shared service market, to create an SLE to tap the planning and
property market – so far relatively underrepresented by public sector companies aside
from NPS and Salford Urban Vision. The company represented a venture away from
BCC’s long-term private sector running-mate Capita.
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Duncan Whitehead (Graduate Management Trainee) October 2012 18
Name/Partners Description Lessons Learnt
The stalled enterprise evinces the importance of commercial competence and
assiduous planning, as well as making the case for private sector involvement, whose
commercial acumen and investment shoulders the risk burden and largely eliminates
administrative transgressions. In short, SLEs must be based on strictly-regulated
operating models to succeed – especially when detached from private aegis.
1.2.7
Other Organisations
Name/Partners Description Lessons Learnt
DVLA
The DVLA, previously DVLC, assumed vehicular administrative
functions from local government forty years ago. It has since
converted from paper systems to become a governmental
pioneer in electronic service provision. They are responsible for
44 million driver records and collect £6 billion in Vehicle Excise
Duty each year. The DVLA has its headquarters in Swansea.
The DVLA represent a good template of the sophistication of a jettisoned governmental
function. The agency has succeeded through its adoption of a more commercial model, as
well as its willingness to employ increased capacity, born of effective streamlining and
modernizing processes, in the development of new services and revenue-generating
expedients.
For instance, rather than just becoming leaner through the computerisation of its records and
services, the DVLA experimented in enhanced functionality; this saw the birth of license-plate
customisation.
All public bodies can learn lessons from the DVLA in how to firstly achieve efficiency savings,
before redirecting the freed capacity into improved service offerings.
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1.3
General Conclusions
Our analysis lends itself to a tri-partite grouping of findings. Efficacious management of these three themes will breed success in any paradigm of collaborative venture.
People/Culture Infrastructure Operating Model
Dedicated structure: shared service arrangements
benefit from having dedicated staff, where officers
are not performing shared service responsibilities
atop their day jobs. This is achievable through the
creation of a separate company.
Local utility: shared service enterprises can be
major boons to a local area, addressing popular
concerns and delivering jobs. However, if they are
seen to be removing employment or curtailing service
quality, they can become politically unviable. Tying
the successes of a shared service to local
improvement is thus an important consideration.
Right people, right places: the likes of Salford
Urban Vision and Service Birmingham prevailed
because they moved skilled staff into the new
companies first. Furthermore, employees chosen for
the vanguard were those with commercial or private
experience, easing transition.
Cultural awareness: shared services tend to be
different beasts to those employees are used to.
Identification with the shared brand is important, as is
an appreciation of sharing values. Successful
enterprises have focused prominently on cultural
realignment, through workshops etc., in their infancy
– or even in the build-up, in the case of the WETT.
Effectively integrating systems: some of the most highprofile
collaborative failures have been due to
complications arising from systems unification. Small
changes are manageable, but large infrastructural changes
frequently hinge on partners already sharing certain
systems.
Systems packages: as above, systems pluralism is
dangerous to shared services. When considering the offer
made to new partners or customers, a concerted and welldefined
systems package is needed. This entails a robust,
core suite of services that remains unchanged (usually
around 70-80% of the functionality offered) with a small
scope for customisation based on the partners’ needs. A
multiplicity of overly-specific applications is a difficult sell.
Streamlined frameworks: the mechanisms by which new
partners join can be lubricated and simplified. The Athena
project and NPS’ contract framework allow for repeatable
and standardised expansion; such accessibility is
appealing to prospective partners.
Business Propositions: it is important for shared service
ventures to enter the marketplace with a set of well-defined
business propositions to sell to selected targets, rather
than just behaving reactively.
Asset appraisal: some prospective partners may simply
benefit from space to host services. Physical location and
property holdings are all potential capacity waiting to be
tapped, and can act as delimiters to the scope of a shared
service initiative.
Service planning: Successful ventures have performed comprehensive reviews of
services to gauge their suitability for inclusion; unsuccessful ones have rushed in with no
clear picture of which services are fit for incorporation or marketing to
customers/partners.
Representative Governance: Ensuring all interests are represented in balanced
governance between all partners is critical, rather than having one partner preponderant.
Contract negotiation: the rigidity of contracts, particularly in joint ventures, have blighted
many shared services. An understanding of potential hidden costs, and in-built
agreements for redefinition, can allow market adaptability and ensure continued value for
money.
Visible success: the savings and achievements of shared services have often proved
difficult to qualify or quantify, leading to confusion regarding efficacy. Robust
communication of successes, both for external sales and internal morale, enables shared
services to flourish.
What goes in: it is possible to put too much into a shared service venture. Putting in
frontline services can be risky, but is highly effective if the scale is reasonably small. For
larger collaborations, infrastructural functionality can flex more easily to meet broad
demands and accommodate more partners. Moreover, the services selected should
complement the strengths and capabilities of the local authority in question. All this
predicates a thorough definition of scope to achieve success.
Exit strategy: often an afterthought but crucial - especially in light of a number of highprofile
collapses, such as Rotherham, where extrication from the venture has been
tortuous.
Capacity growth: a shared service does not just have to be about cost-cutting. Capacity
freed up from leaner processes can be reinvested to drive profit or growth, rather than
just being severed as cost reductions. The smart shared service companies plan how
they can utilise this added capacity in advance to enrich the shareholders and the local
area.
Appeal of commercial offering: It is one thing having shared services founded on lean
principles, but this collaboration may struggle to win partners/business unless it can
exude cachet. Shared services may not be able to compete with large, private sector
outsourcers in terms of delivery capacity, but can concentrate on the quality or
uniqueness of their market offering. This could entail an uncommon menu of services,
strong branding and marketing, the ambient sale of services in addition to the search for
wholesale partners, or a specific ethos - such as ‘by public sector for public sector.’
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2 Opportunity A