Ros Ashcroft, Associate at DAC Beachcroft LLP:
A recent news story again reported the government’s view that local authorities should aim to cease being direct service providers, instead commissioning services from a wide range of specialist providers. It was suggested that this is the route to more effective and efficient public services in a time of austerity. In-house provision, therefore, is generally presented as not representing best value (whether this is in fact the case or not).
Many people will have spotted that this ‘news’ is not really new. The vision of local authorities as hubs at the heart of a network of service contracts with providers in the public, private and third sectors was clearly set out in the Open Public Services White Paper back in 2011 and has run through most discussions about local government commissioning and outsourcing since then.
But from a lawyer’s perspective it is interesting to see this aspiration re-stated again now. There have always been a number of reasons why the contractor hub vision is much less simple than it might seem. How does it look when viewed through the filter of recent legal developments for local authorities?
Ros Ashcroft, Associate at DAC Beachcroft LLP, considers the role of the local authority as a contracting hub and the challenges it will have to overcome to effectively source public services.
The local authority as a contracting hub
Talk of contracting hubs tends to lead people to think of future local authorities as comprising a handful of procurement specialists and contract managers.
For a start, this demonstrates a lack of understanding of the complexity of current local authority commissioning. Recent experience of working with clients on the commissioning of residential social care has reminded me of the range of skills and knowledge required, even leaving aside the current litigious context for this area of provision: commissioners need an understanding of the varying types of service required, different business models for providing services, the nature of the local market, and regulatory and quality issues. Commissioning with a view to reducing expenditure only tends to increase the resource needed for the commissioning process, particularly where the market is immature or the service is to be provided in a different way.
But in any event the government’s own idea of the shape of future local government cannot be regarded as limited to a basic contract management function. As the Open Public Services paper was being published the government was also working on the White Paper which then became the Health and Social Care Act 2012. Through the creation of Health & Wellbeing Boards and the transfer of public health functions, these reforms put local authorities at the heart of ongoing strategic thinking about the needs of their populations for services in the essential areas of health and social care. The required membership of the Boards includes local authorities’ directors of public health, children’s services and adult social care: suggesting that those roles, with their responsibility for the substance and quality of service provision, are expected to form part of the future local authority as they do now.
The House of Commons Health Committee: Public expenditure on health and social care, Seventh Report of Session 2013–14, published on 12 February 2014, has called for Health and Wellbeing Boards to be given a greater role in spearheading integration between health and social care to help drive the change that should result in savings. It notes that “Health and Wellbeing Boards were established by Parliament to enable commissioners to take a view across the whole of a local health and care economy. In the light of the urgent need to increase the pace and scale of service reconfiguration in the health and care system, the Committee repeats the recommendation it has made in earlier reports that the role of HWBs needs to develop to allow them to become effective commissioners of joined-up health and care services”.
Authorities have also become subject to the Public Services (Social Value) Act 2012, with its duties to ensure that procurements take into account the broader needs and wellbeing of their communities, and the Care Bill 2013-14 will add further to their duties to understand and engage with their local market for service provision.
So these hubs will have to be pretty sophisticated in their understanding of their locality, their populations and the way in which services are delivered to meet needs in practice. The need for an intelligent client probably sounds obvious. But there may be a challenge for authorities in maintaining this level of knowledge if they move away from direct service provision, which maintains a direct link with the population and generates insight into the practicalities of structuring and delivering care provision.
Challenges for contract drafters
The task of creating contractual arrangements which will effectively and cost-effectively fulfil local authority duties and intentions has never been simple (something which central government itself should know from its outsourcing experiences). There are no indications that this is getting easier. Contracts are becoming more complex and the variety of delivery models is expanding, as many social care and health services are delivered through collaborative arrangements and new structures, such as staff owned enterprises, Norfolk County Council recently announced that it is bringing its services supporting vulnerable adults with mental health problems back in-house, because an outsourced arrangement with an NHS body has not been successful. Other attempts to contract with third parties to provide core statutory services have foundered at the stage of contractual discussions, because authorities could not find an effective, efficient way to deal with the risk of unlawful delegation of statutory functions. And there is always the $65 million dollar question as to whether outsourcing really will save costs in the long term on any particular project, particularly in light of increased debate about quality standards.
There is more that central government could and should do to support authorities in limiting and managing the legal risks of innovative commissioning. It cannot will its vision into reality just by re-stating it. It is also important to recognise what lawyers can contribute, by providing clear advice which accurately bottoms out the nature of legal risks and by creative approaches to contract structure and drafting based on a proper understanding of both the local authority legal framework and practical considerations, such as the nature of the market and the specific nature of the services. More could also be done to assist in achieving outcomes based frameworks that invest in prevention and early action, such as adult social care “social investment bonds”.
Impact of funding constraints on effective commissioning
However, creative commissioning and contracting (including understanding of cost profiles) requires a reasonable time frame and appropriate resource. Investment and a longer-term view are required to achieve any long term efficiency gains that may be available. But of course finances are desperately tight. The immediate time and cost pressures on authorities can push towards a short-term approach and consequently higher costs. And if authorities decide that they cannot afford to fulfil statutory duties, then a debate about who should provide those services and how they should be commissioned will be frighteningly redundant.
Meanwhile the other facet to this picture is that the government is continuing to add to the duties on local authorities – the complexity of the commissioning task is increasing. As already mentioned, the Care Bill 2013-14 creates new duties on authorities to manage and develop a diverse market for care services – but they must do this without creating conflicts of interest or falling foul of procurement law (including Monitor’s regulatory regime for health commissioning if there is joint procurement with the NHS). Yet more resources will be required if the whole of health and social care commissioning is channelled through Health and Wellbeing boards (as well as changes to their powers to enable the exercise of executive functions).
The Care Bill 2013-14 also creates a new requirement on authorities to make arrangements for provision of care even to individuals who are not eligible for funding for care. Alongside the new level of transparency about care costs created by personal budgets and care accounts, this will have major implications for the scope of services to be commissioned and the nature of the markets for services. The game is changing and the goal posts are moving are moving at the same time.
In this context local authority commissioning is not a task for a skeleton staff or a skeleton budget. The hub has to be robust enough to take the strain.