22 January 2012

Headline 2023 - DRS outsourcing a success

Actually Mr Mustard doesn't think that the headline will be that as either the outsourcing won't get off the ground because too many staff are affected and seem to be putting spokes into wheels or because after 5 years the councillors will realise it is an expensive disaster, or maybe even just not value for money ( Vfm for short ) and like the current long term leisure contract which Barnet Council wish to buy negotiate their way out of they will try to do the same for DRS. Bizarrely the argument for quiting outsourcing will be the same as for entering into it, in order to save money.

Let us firstly attend the official contract signing ceremony:

Anyway let us for the sake of this post pretend that the DRS outsourcing runs for the full 10 year term ( ask yourselves why it is a 10 year term - it's because that is what the providers want it to be - is the tail wagging the dog? ). Why will it appear to be a success? because each year Barnet Council applies inflationary increases to its charges ( except parking which it mines like a rich seam of gold with hyper-inflationary increases ) and the reports presented on this topic have ignored the question of inflation. Firstly you need to see the report. It is on the council website so it does not present a problem if it is replicated on Scribd - the good thing about which is that it makes it easy to put the report into a pretty box below.

Click on the below title to be transported to Scribd if you want to download the report to your compuer.
DRS Business Case - Barnet Council

Now have a look at that report and then tell Mr Mustard why he cannot find the word "inflation" anywhere in the report.

You can download the whole thing and print it out if you wish, including from the council website here. I am going to keep the maths as simple as possible as that way lies understanding and it is possibly why councillors get given 160 pages reports full of numbers and tables - so they don't bother to enquire closely.

Firstly take a look at para 6.2 on page 8 so you get an idea of the affected services as DRS is an artificial group of services lumped together into a big fat tasty bundle for outsourcing.

Para 6.5 says that extra income over 10 years will be £10,303,005 ( a stupid figure. It should have been rounded to £10m - this is part of the strategy to bamboozle and appear precise when the figure is just a guesstimate - an aspiration ) This table is repeated for no good reason other than confusion in para 9.7.

Para 9.8 is very interesting. Most of the benefits are expected to accrue by Year 4 so why not stop the contract there as extra benefits will be needed in years 5 to 10 and there are none to be had. A different solution will be needed.

Now jump to page 30. Actual income in the year ended 31 March 2011 ( assuming that is the year from the heading of the expenditure column ). The meat of the breakdown is in the secret appendix E but no matter. We know that total income is £10,286,706.

Now let us apply annual inflation increases to that income. Here is the table that Mr Mustard has knocked up for you.

Effect of inflation increases on DRS income
Inflation 4.477% 104.48%
Year Income £ Extra

Income £
0 10,286,706
1 10,747,242 460,536
2 11,228,396 941,690
3 11,731,091 1,444,385
4 12,256,292 1,969,586
5 12,805,006 2,518,300
6 13,378,286 3,091,580
7 13,977,232 3,690,526
8 14,602,993 4,316,287
9 15,256,769 4,970,063
10 15,939,815 5,653,109
Total extra income 29,056,062

So with inflation at the average rate for 2011 of 4.477% , you can see that inflation alone, if it stayed at this sort of level, would generate nearly 3 times the extra income than is being "guaranteed" ( if it really is, I am sure that the guarantees will be stuffed full of clever city lawyers' get-out clauses ) 

In case you are interested an inflation rate of just 1.75% would generate the required extra income of £10m.

In future reports by officers to the committee once the outsourcing is under way ( if it ever gets there ) there will be a lot of crowing about how fantastic the provider has been in generating extra income when in fact it was inflation price increases that will have done all the hard work. 

Are you reading this Mr Craig Cooper, Commercial Director, whose name is on this report. Are you going to revisit the basis of this contract and start to earn your £132,480 p.a. based on the free advice of a blogger. Please do email me to tell me what is going on as this contract progresses along its bumpy road. I think that in the future, all reports need to separate out the extra income due to inflation from the extra income due to improved sales and new lines of business, don't you?

Does anyone at the council ( don't lower your heads consultants ) feel the tiniest bit embarrassed that a part-time blogger has pointed out such a huge issue ( "issue" is a weasel word used by the council to describe a blunder or a problem ).

Do you remember Councillor Coleman when you were presenting your proposed inflationary increases to EPR charges about a month ago that you said "there is plenty of government detail for bloggers to comb through at midnight" ( or at least that was the gist of it ). This blog demonstrates what good value that is for the council. A pity that more councillors and officers aren't doing this sort of thing in their normal hours or it wouldn't be necessary. Fortunately super-bloggers need less sleep than ordinary mortals.

Yours frugally

Mr Mustard

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