Outsourcing: Overcoming the challenges and delivering more for less.
What a delight it must have been for the delegates who attended the above CIPFA conference on 29 March 2011 to find that amongst the seven speakers was our very own Andrew Traversty CPFA; undoubtedly worth the attendance fee to listen to him alone.
So let's have a look at his sensational PowerPoint presentation which was entitled "The New Localism" whatever that means ( a Markey-esque phrase ) and only 12 pages of it thank goodness. Mr Mustard has also copied any slide notes.
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Rising population ( Mr Mustard wondered what the red arrow was all about )
Falling resources
Falling satisfaction
Still talking about 2009. Ignoble history.
Oh dear, wheelie & recycling bins on the pavement. That's not right now is it? Which unobservant public servant failed to spot that continuity error.
The notes
The principles underpinning One Barnet remain those that we recognised through the development of the Future Shape programme.
At the heart of the programme is one clear aim – to become a truly citizen-centric council ensuring that our residents can lead successful and independent lives whatever their background.
We can best do this through ensuring that we test everything we do against three key principles:
A new relationship with citizens
A relentless drive for efficiency
A one-Barnet approach.
Easy Council - pass the sick bag - That will be £5 please.
The notes - complete with spelling errors and incomplete
One Barnet is a transformation programme to deliver the changes needed to ensure that those principles are met in everything we do. It means looking at all our services in turn and asking whether they are really focussed on their customers. Too often we deliver services in silos reflecting professional groupings, or organisational boundaries within the council. We expect customers to join things up. So customers don’t get a good service and we waste a lot of their time, and taxpayers money, in the process.
One Barnet is about our services, our internal organisation and role and our partnerships. Its an evolving programme comprised of a number of projects, and these ill change over time as some project move to delivery phase and others come on stream.
It aims to ensure that:
Services are delivered in ways which are focussed on customers’ needs, bundled in ways which suit their needs, not the council’s. This means looking at how services should be brought together, as well as the best model for delivering them. In some cases this will be through an organisation separate from the council. But this is not a presumption and all service bundles will be tested to ensure that the eventual solution is in the best interests of
There will only be One Option in One Barnet - One External Provider.
Pledgebank is an expensive disaster with virtually no take-up ( the Royal Wedding and The Big Lunch are red herrings as they would have happened anyway ).
The Big Society Innovation Fund ( not calling it a bank any longer as it isn't a bank ) is not designed to provide services but to bring out novel extras so it will cost money and not save it.
Mr Mustard would welcome comments about Community Coaches as he knows a fortune was spent on prototyping ( a prototype is usually thrown away when a better one is developed ) and he needs to know if it was money well spent.
A map with pretty colours.
Department for Regulatory Services - the first department for the chop. Not just the nice man with the pencil behind his ear though is it ? In Mr Mustard's experience the building inspectors have been some of the hardest working, most organised and sensible employees in the whole council. Don't mess their department up please.
A picture of 5 people who don't know where Barnet is.
Too many rectangles.
In case he bored himself rigid and forgot who he was by the end of the presentation.
Now Mr Mustard hopes that Mr Travers stayed for the whole day and listened to the other speakers' valuable contributions. The organisers helpfully provided a briefing paper of the key points and here they come along with some useful extra remarks from Mr Mustard in red.
The event featured a range of high-quality speakers, who set out a range of important issues that were drawn from their own research and practical experiences of outsourcing. This briefing paper pulls together these key lessons into a checklist for any managers who may be considering undertaking similar initiatives: Please don't.
1. Take a strategic commissioning approach – think about what you are trying to achieve, and how you can get there. This means considering outsourcing alongside other options, for example a management buy-out, shared service or partnership with voluntary groups. Only outsource if you feel an external provider is likely to be more efficient and effective at delivering desirable outcomes that your organisation – don’t do it for purely ideological reasons. Or invest some effort in getting the in-house system to work properly - known in 2011 as Good Management.
2. Clarify why you might want to outsource in the first place – and consider what the ideal bid might realistically look like. You may have a lack of capacity or resources, a desire to transform the organisation, a wish to drive down costs, or a combination of the above. The reasons should shape your invitation to tender, your choice of partner, the performance indicators and service level agreements in the contract, and how the relationship is managed. Ideology is not a good answer to this question. A £900m p.a. organisation does not lack resources although it clearly lacks management capacity. There is no history of managing any business relationship properly e.g. MetPro.
3. Ask whether you should stop delivering some services altogether – and allow the market to fill the gap by itself, thus avoiding a tendering process. LB Barnet no longer provides skips, for example. Was that the best example that could be found? taken straight out of the ideas bank as submitted by a resident - Mr Mustard put so many ideas in that he can't remember if this might have been one he started - credit should have been given, with permission, to whichever resident came up with the idea. You don't stop something in order to avoid a tendering process but because it is the correct thing to do !
4. Understand the value and strength of your own organisation – its assets, resources connections, customer base, income streams and borrowing powers – and compare it to those of potential suppliers. You may be better placed to deliver the service than you might think. Alternatively, if you do decide to outsource, it will help you to market the service as a good opportunity for suppliers and thus get a better deal. You can't expect any of the consultants brought in to understand Barnet Council as many of them don't live in the borough and the council is too large to get to grips with in just a few months and so they are likely to undervalue the in-house capacity.
5. Never outsource a problem – it is much better to address perceived incompetence or failure and reap the benefits of improvement yourself before going to market, rather than allowing a supplier to pick all of the ‘low-hanging fruit’. Also, it is worth bearing in mind that if you are unable to operate a service effectively at the outset, you are unlikely to be able to manage its outsourcing properly. This is exactly what is about to happen in Barnet. Customer services has been reorganised several times and never left to settle and it is a flawed concept in any event to centralise calls about benefits, penalty charge notices, adoption & 20 other specialities. ( bold emphasis by Mr Mustard )
6. Consult with potential suppliers and other organisations that have outsourced before making a decision – this will help you to understand the market better. If the right conditions are not set for the outsourcing arrangements, there is a risk that the authority will not get genuine competition in the tender exercise. You also have to ask the right questions - the really hard ones that get to the heart of the subject - afterwards is to late.
7. Remember that outsourcing procurements can be extremely complex and lengthy due to OJEU and other requirements – so they will not deliver quick financial savings. Procurements staring now are unlikely to achieve real savings until 2013/14. The notes should have said "starting now". So the speaker aid allow 2 to 3 years before you see any benefit. The DRS timeline is to be outsourced between Jan 11 and October 12 and the budget figures shows savings in 2011/12 - why are Barnet Council so hopelessly optimistic ? when expert advice is based on experience?
8. Factor in the opportunity costs of going through an outsourcing process into the options appraisal – these may be significant and will include cost of setting up the arrangement and diverting senior staff to lead the project from normal activities. Senior staff have had their eyes off the ball since Future Shape started in May 2008 so that is 3 years of not paying 100% attention to normal activities, is it any wonder that some of them are less than perfect?
9. Avoid bundling too many services together into a single contract – especially if they have little in common with each other. This will reduce the pool and type of potential suppliers and is likely to exclude smaller organisations/ social enterprises that could provide innovative solutions. Like the following DRS bundle perhaps?
Strategic Services:
Regeneration
Strategic Planning and Housing Strategy
Highways Transport and Regeneration
Highways Strategy
Operational Services:
Building Control and Structures
Planning Development Management
Land Charges
Highways Network Management
Highways Traffic and Development
Public Health, Consumer and Regulatory Services
Environmental Health
Trading Standards & Licensing
Cemetery & Crematorium
Registration and Nationality Service
The Big Society which Barnet Council are so fond of won't be realised in Barnet if parcels of 13 services are sold off to the highest/lowest bidder.
10. Clarify the employment status of staff – are they being seconded or transferred, and what are their terms and conditions? The Government has recently confirmed that the ‘two-tier code’ will be abolished for both central and local government, so suppliers will be able to employ new staff at reduced terms and conditions than those that have been transferred from the client. Mr Mustard understands business. The pursuit of profit is not a bad thing ( how else would Mr Mustard earn an honest crust himself ) but there will inevitably be pressure on staff terms & conditions. The only way is down, baby!
11. Consider the supplier’s situation – for example, do they have enough resources to survive in the medium-term if you try to negotiate a payment-by-results arrangement? If the contract does not deliver a profit for them, service delivery is likely to suffer. Or like 2e2 they will refuse to support the contract but are doubtless still taking the money.12. Remember that public sector supply chains and relationships have changed out of all recognition in recent years – this makes it extremely difficult to assess all of the potential risks associated with outsourcing contracts. It is recommended that authorities consider more flexible contract terms in the future to protect the organisation from vulnerabilities and uncertainties. Given the number of contracts which One Barnet are trying to outsource at the same time some will go wrong. It's just a question of how many and how badly and whether the losses on one badly specified contract will wipe out all of the gains on the others.
13. Ensure that experts are involved in negotiating tenders and drawing up contracts – neither task should not be left to service managers. Suppliers will allocate their best people to these tasks in order to get the best deal available, and it may be worthwhile paying for outside support to ensure that you negotiate effectively. Strikethrough by Mr Mustard. Why does Mr Mustard think that the suppliers' experts who play this game all the time will be better than the expensive temporary help that One Barnet have retained?
14. Allocate sufficient resources to managing the contract – avoid the ‘let and forget’ syndrome, ensure there are regular governance meetings at both strategic and operational levels, and include contract management costs into the business case. One speaker argued that poor contract management reduces the potential benefits of a contract by 40-70%. Which, in the worst case, also known as One Barnet?, would reduce the 9 year savings from £102m to £31m and probably less once the rose-tinted optimism is also removed.
15. Clarify exactly what is expected of the supplier – include your desired outcomes in the contract and specification. Also, consider issues such as branding, data protection, intellectual property, complaints handling and any special requirements (such as whether you might need to recall transferred staff in an emergency). Search the internet, or look in Private Eye, and you will find oodles of examples of contracts being taken away from large private providers and returned to councils. The common themes are failure to deliver and huge costs to exit.
16. Ensure that you have a ‘Plan B’ – include formal break clauses and exit triggers in the contract, and test the market from time to time ahead of its renewal. Begin planning to transfer to an alternative supplier around 18 months before the contract ends. We need a plan B because plan A "One Barnet" is going to be, in time, exposed as an empty promise.
17. Remember that your reputation will be at stake – if service quality suffers, customers are more likely to blame the public body than the contractor. Mr Mustard can see the day when many councillors, who foolishly think the electorate have short memories, will be saying that they weren't really in favour of One Barnet, that it was all the fault of consultants, the Chief Executive, basically anyone but them.
18. Consult and communicate with staff from the outset – in order to keep them updated with progress. It is highly likely that the trades unions will oppose any outsourcing initiative, and any uncertainty will have damaging effect on morale and productivity – so you should try to nip this in the bud and prevent conflict. It would seem that the process has not been managed very well as Revenues & Benefits and Parking staff are working to rule. Also, you don't have just to consult, you have to listen and act on the concerns of staff.
19. Agree exit terms at the outset – including the length of the contract, grounds for early termination or renegotiation, compensation, and who assumes ownership of intellectual property, data, assets and staff. Barnet Council seem already to be slavishly accepting the minimum of 10 years that the market is demanding. Better negotiators are need at Barnet Council.
20. Remember that outsourcing is not a panacea – it can help you achieve your objectives, but requires a lot of hard work on both the client and supply side. Not a panacea, a lot of hard work - so One Barnet outsourcing is not a magic pill and management are still going to have to manage. It makes you wonder why they are carrying on with One Barnet - I've started so I'll finish?
Let us hope that the emperor realises he isn't wearing any clothes before the cost of embarrassment is too high.
Yours frugally
Mr Mustard
