PLC Public Sector reports:
Local government has seen some impressive innovation over the last few years, with the aim of delivering more for less, or better for the same. The latest manifestation of this drive is the plethora of shared services arrangements either already established or in the pipeline.
What does “shared services” actually mean?
The standard approach is for local authorities in a particular region to pool back office functions, such as HR, finance and IT services or other business process work, such as the administration of revenues and benefits. The purpose is cost saving but an additional benefit is a possible service redesign in which the best of each authority can be brought into the mix.
Recent projects have however extended to front line services and include the proposed merger of the London Boroughs of Hammersmith & Fulham and Westminster’s education departments.
So what about shared legal services?
The in-house legal team lends itself to a shared services model – the local authority is highly unlikely to make any savings by outsourcing it. But savings can be made from a shared services model by:
- Pooling expertise and resources. A shared document management system and training budget can reduce duplication of spend.
- Eliminating duplication in work. Local authority lawyers advise on a myriad of legal issues. Sharing know-how and documents reduces the risk of reinventing the wheel.
- Allowing lawyers to become more specialised. A highly-skilled workforce should mean a reduced need to source external legal advisers, and a more targeted use of external advisers when they are appointed, at lower rates due to increased purchasing power.
Less obvious benefits may include:
- A culture change with an increased focus on customer service, which will be underpinned by the partners’ agreed performance standards.
- Providing staff with more of a career path as a larger or more specialist team allows them to develop skills and access opportunities which may not have been available in their original authority.
You’ve got the power
Local authorities have a good selection of powers to call on when considering sharing services, such as:
- The power to arrange for the discharge of their functions by another local authority (section 101, Local Government Act 1972).
- The power to make staff available, and provide administrative, professional and technical services to another authority (section 113, Local Government Act 1972 & section 1, Local Authorities (Goods & Services) Act 1970).
- The power to incur expenditure, provide staff, goods and services, and exercise the functions of another person (section 2, Local Government Act 2000).
- The power to make arrangements with other authorities to defray expenditure incurred by one of them in respect of any functions exercisable by both or all (section 136, Local Government Act 1972).
In addition, a power of general competence has been promised by the coalition government.
Against that backdrop, the tricky issue of procurement arises – are you letting a services contract that must be procured, or does your arrangement consist of permitted inter-authority cooperation that falls outside the procurement rules? A consideration of the specific proposals against the relevant case law will be required.
The key to success?
Planning! No arrangement will work unless it has been adequately scoped and the parties know what they are getting themselves into. See our memorandum of understanding for examples of the type of issues that will need to be considered in the planning process.
But aside from the issues that concern lawyers, the keys to making a shared services arrangement a success are the people.
Unless the members and senior managers can align their strategic objectives such arrangements will not get off the ground. Smaller partners may worry their voices will go unheeded by the larger partners or lead authority, or more specifically, that they will bear the brunt of any job losses for the benefit of the wider partnership. The use of a joint committee model, or even a joint venture vehicle, for a shared services partnership goes some way to addressing these concerns as it can mean no one authority is too dominant. Whatever model is used, strong leadership is fundamental.
The recent forecasts of public sector job cuts are staggering. Asking staff to buy into a plan which will see teams merge to reduce costs is a hard sell, whether or not redundancies are a likely consequence. Public sector employees are already under pressure, the speed and scale of recent upheavals risks inducing “change fatigue”. When the officers tasked with driving the project are themselves at risk of redundancy, the authority will need to manage its communications carefully.
Brave new world – Total Place to Big Society
Local authorities and the NHS have a long history of collaborating in the delivery of front-line services. The big tests come when local authorities and their NHS partners look beyond the confines of the section 75 agreement and align to re-shape service delivery. To achieve this, and make savings, some partner organisations are extending their collaboration up the tree to the management teams by sharing a chief executive and other senior managers, as Blackburn with Darwen Borough Council is doing with Blackburn with Darwen Primary Care Trust, and Herefordshire Council is doing with NHS Herefordshire.
Such arrangements can only increase, particularly if the proposals set out in the government’s white paper on NHS reform to make local authorities responsible for ensuring the joined up delivery of health and social care at a local level are implemented.
The end result will be that the role of local authority lawyers will become even more interesting and challenging. We will be publishing a series of new materials in the coming months to assist those facing these new challenges.