Lord Justice Stanley Burton ruled last Friday that Brent LBC had violated procurement laws when it awarded its insurance work to Local Authorities’ Mutual Limited (LAML) last April, without a lawful tender process.
By rejecting the council’s claim it fulfilled the criteria for a so-called ‘Teckal’ exemption that a council can ignore procurement rules when awarding work to a shared services company of which it is a member Brent claimed the judge had set a precedent that could dissuade councils from setting up shared services companies.
“The council is disappointed with today’s outcome the result has wider implications for the government’s plans for shared services,” a spokesman for Brent said.
The Department for Communities & Local Government, anxious to press on with shared services, has kept a close watching brief on the LAML case.
Brent, which now faces a damages claim from the plaintiff, private insurer Risk Management Partners (RMP), was one of the founding members of the pioneering venture set up to generate efficiencies of up to 15% (LGC, 5 April 2007). It is now handling insurance for seven boroughs.
Martin Fone, chief executive at Charles Taylor Consulting, which manages LAML, said the ruling did not sound the death knell for the controversial venture, but was very disappointing.
“The current contracts that authorities have with LAML will stand, but when these expire they will have to go through the public procurement process.”
Rob Hann, legal director of 4ps, said: “The result of this case is obviously disappointing. Sensible arrangements proposed for efficient joint working are likely to be obstructed by this judgment.”