BEST PRACTICE - BEST VALUE NETWORK

BEST PRACTICE - BEST VALUE NETWORK

More and more councils are looking to shared services to create efficiencies. Mark Smulian looks at different ways of making it work

Shared services did not start with Sir Peter Gershon's 2004 review of efficiency, but councils were given a substantial shove in their direction by his strictures on how sharing could deliver savings through economies of scale.

This led to the government setting councils targets for efficiency savings, and shared services offer a comparatively painless way of meeting these targets. Councils that tackled shared services some years ago are looking for ways to extend it, while those new to the concept are still feeling their way.

1 Use a private partner

South Oxfordshire DC and Vale of White Horse DC decided to share financial services last year and appointed contractor Capita to work with them, an operation which has gone well save where the transition is still incomplete.

'We have learned the lesson not to try to change too much too soon and that when you have three partners involved just getting them to all think in the same way and make it financially and operationally viable takes time,' says the shared service's head William Jacobs.

South Oxfordshire had already outsourced its service and its neighbour wished to market test its operation. Vale of White Horse revenue and benefit staff transferred to Capita, as did South Oxfordshire staff who had worked for its previous contractor Liberata. Both councils decided all other staff should be employed by one or other of them in roughly equal numbers to prevent allegations of a takeover.

The contract covers revenues and benefits, accountancy, internal audit and benefit fraud prevention and should save Vale of White Horse £100,000 a year and South Oxfordshire £300,000.

Mr Jacobs explains: 'Revenues and benefits integration has progressed well, and benefit fraud and internal audit integration proved relatively easy. There is an issue with accountancy since the budget build processes were very different.'

Mr Jacobs thinks the service could expand, but not yet. 'If we had tried to do it at the outset with more than three partners I think we would all have lost our marbles,' he says.

2 Keep it public

Darlington and Stockton-on-Tees BCs have agreed to collaborate in human resources, finance, design and print services and information and communication technology, from which they hope to see a net gain of £7m over 10 years through greater efficiencies.

They will not involve private contractors, though that market has been active in offering management of back office services to councils. Paul Wildsmith, Darlington's director of corporate services, says the councils decided against using a private sector partner because 'there is a lack of track record, in our view, of real partnerships with the private sector'.

He adds: 'Evidence suggests that following the honeymoon period, a hard contractual

arrangement emerges. We believe the two councils can be more flexible in delivering

together and can return savings to the taxpayer, and not the shareholder.'

The councils' confidence is boosted by both holding four-star ratings from the Audit Commission and they see shared services as 'the next stage on the improving efficiency journey', he says.

3 Then there were three

South Hams and Teignbridge DCs decided to share services. 'We were looking to improve the robustness of our service delivery across two small councils,' says the former's strategic

director of resources Mark Seymour.

'If you join together you get something more coherent and you can deal with staff gaps better. You are no longer talking about what happens if two staff out of three are away - which is a disaster - but two out of eight or nine, which is manageable.'

There are economy of scale advantages for the councils, which expect to save £1m a year between them, and better career opportunities for staff as part of a larger unit, he says.

The councils expect to share property - including estates, construction, repairs and maintenance - finance, procurement, audit, legal services, revenues and benefits, information technology, personnel and payroll, customer services, waste and recycling.

South Hams and Teignbridge are still thrashing out governance arrangements and

protocols for sharing costs and savings, because 'it is very important to agree before going too far', Mr Seymour says.

As a first step the two have jointly appointed a procurement officer, something neither could have afforded alone. Logistically the sharing is reasonably easy as the two headquarters are just eight miles apart.

Neighbouring West Devon BC is also expected to join in for some services, a prospect boosted by its chief executive David Incoll having temporarily taken the helm at South Hams.

Mr Incoll describes his appointment as 'an imaginative step which will help drive forward the shared services agenda'.

4 Clever buying

Procurement makes an obvious place to start with shared services because it provides a rapid gain in economies of scale. Two councils have twice the buying power of one, and simply bringing that spend together gives them more clout in the market for goods and services.

But it can be taken further. A larger procurement operation enables them not just to aggregate spending but to invest in better

performance so long-term savings increase.

Aberdeen City Council and Aberdeenshire Council formed a board of councillors in April to identify further opportunities for sharing services. But for the moment it is shared procurement that is delivering savings, says the service's acting head Craig Innes.

His unit now carries out all procurement for both councils, with category managers who have detailed knowledge of their markets in different types of goods and services. This work was formerly dispersed around different departments of both councils.

Mr Innes explains: 'Having category managers is new. They know their market and can look for the best deals. Public sector organisations generally have a problem when procurement is devolved to departments because there is a lack of understanding both of procurement and of the need to ensure transparency.'

Geography creates some problems, since Aberdeenshire's dispersed sites make them relatively more expensive to service than those in the city, but Mr Innes says the savings are sufficient that 'it is very much two-way and both get a good deal, the city is not subsidising the rural area'. Back office services and vehicle fleet management are the next most likely categories for sharing.

5 Don't accept limits

Fylde and Wyre BCs are two small councils in northern Lancashire that have long co-operated at both officer and political levels, says Wyre's managing director Jim Corry.

They ventured into shared services with recycling and waste management, which has yielded savings of £400,000 a year between them and 'we used that as a platform to drive it further,' he says.

'Our current priority is to extend it to our streetscene operations, which we are working hard to merge by spring next year.'

Some services have already gravitated to one or other council - for example Wyre provides Fylde's coastal defence and property management. Both also work with neighbouring Blackpool BC on the joint health and safety at work service.

Leisure and recreation is the most likely next area for sharing, says Mr Corry, as 'we have complementary strengths and weaknesses and a lot of duplication. For example, we have a strong countryside service and Fylde do not'.

The sky is the limit for other sharing. 'The main driver is the Gershon process, but as far as I can see the only game in town when you look at local government's budgetary difficulties is to seek more efficiencies,' Mr Corry says. 'I can't think of any service that we would blankly refuse to consider going into sharing, but we need strong business cases to show where that is the right way ahead.'