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Making the Right Choice Anja Beriro, Browne Jacobson LLP 10 July 2013 Making the Right Choice Anja Beriro, Browne Jacobson LLP 10 July 2013

Content • • • Strategic Context Strategic commissioning Different delivery models Undertaking an options Content • • • Strategic Context Strategic commissioning Different delivery models Undertaking an options appraisal Your role and who to involve

Spending Spending

Austerity Austerity

Politics Politics

Public sector reform Public sector reform

Risk v capacity Risk v capacity

Strategic commissioning Strategic commissioning

Main delivery models • • • In House provider Shared services Private Sector Operator Main delivery models • • • In House provider Shared services Private Sector Operator – not today Joint Venture Social Enterprise Trading company

Options appraisal Provides a framework for: • Identifying the different ways outcomes might be Options appraisal Provides a framework for: • Identifying the different ways outcomes might be achieved • Systematic process • Evidence informed case for change • Transparency : sharing the decision making process and outcomes with others

Key issues to consider • Establishing the strategic need. • Establish the range of Key issues to consider • Establishing the strategic need. • Establish the range of resources available. • Establishing the key outcomes and objectives you want to achieve in terms of meeting the strategic need. • Establish your ‘do minimum’ or “baseline” position. • Establish your organisation’s position on risk transfer. • Develop your evaluation criteria for the long-and short-listing process. • Identify the full range of options, which may be available to deliver your desired outcomes and objectives. • Create a short-list from a high level option appraisal. • Evaluate fully the short-listed options against the evaluation criteria. • Progressing the preferred option

High level appraisal criteria • • • Improved quality of service Improved efficiency Quality High level appraisal criteria • • • Improved quality of service Improved efficiency Quality of employment Corporate impact on the authority Sustainability and growth Added value Speed of implementation Flexibility/scope for collaboration Governance (LA ‘control’)

Who should be involved? • • Politicians Overview and Scrutiny Senior Managers Commissioning staff Who should be involved? • • Politicians Overview and Scrutiny Senior Managers Commissioning staff Service staff Other staff within the organisation Service users Members of the public

Joint committee • S 101(5) and s 102 Local Government Act 1972 - full Joint committee • S 101(5) and s 102 Local Government Act 1972 - full Council functions • s 9 EB Local Government Act 2000 and subsequent regulations – executive functions • Discharge of functions or advice on discharge of functions • Members of JC are elected members of the delegating authorities – tasks carried out by officers • Purely administrative arrangements – no contract, therefore outside public procurement regime • No corporate status so need “lead authority” for any contracts with third parties – these may need to be procured • Documented in a governance agreement • Examples include regional procurement bodies such as ESPO and YPO • Much simpler than a corporate structure but without protection of limited liability

Delegation • • S 101(1) Local Government Act 1972 – full council functions s Delegation • • S 101(1) Local Government Act 1972 – full council functions s 9 EA Local Government Act 2000 – executive functions From one authority to another which has same functions Again an administrative arrangement keeping it outside public procurement regime BUT – recent ECJ case Piepenbrock C-386/11 setting out clear reminder of what a true delegation means – It is not the same as control over a Teckal company – It is not the same as Hamburg Waste judgement (next slide) – Cannot have a supervisory role True delegations must give over all responsibility for delivering service to the delegatee Delegator can withdraw delegation at any time Difficult balance politically

Hamburg Waste judgement • Different type of public-public co-operative working • Very little case Hamburg Waste judgement • Different type of public-public co-operative working • Very little case law but being set out in new Procurement Directive • Between two or more public bodies: – – To facilitate genuine cooperation to perform a public task Not to advantage any particular private entity To reimburse the costs of carrying out the tasks With a distribution of tasks (not necessarily equally) between the authorities – With no private sector involvement in the agreement

Issues to consider - corporate • Governance arrangements: staff ownership; user representation; local authority Issues to consider - corporate • Governance arrangements: staff ownership; user representation; local authority involvement; • Income/funding: trading; grants; contracts; • Distribution of profit / surplus; • Asset Lock; • Market maturity: sufficient choice of suppliers; • Risks; • Procurement strategy; • Regulation requirements; • Power to trade?

Choice of structure • Incorporation required? (see later) • Companies – Limited by shares Choice of structure • Incorporation required? (see later) • Companies – Limited by shares – Limited by guarantee – Community interest companies • Industrial and provident societies • Limited liability partnerships

Other issues • • • The role of members (“owners” not elected) The role Other issues • • • The role of members (“owners” not elected) The role of Directors Conflicts of interest Governance and decision making Dispute resolution and deadlock Appointment of new members Resignation and termination Funding Role of executives Confidentiality and FOIA Impact of procurement law on the above

Public procurement • Local Authorities are as a matter or principle subject to EU Public procurement • Local Authorities are as a matter or principle subject to EU procurement regime. • The EU procurement regime applies to the award of certain types of services contract when their value exceeds £ 173, 000 • Accordingly, when considering the establishment of a shared service the implications of the procurement regime must be considered. • There is no automatic exemption purely because the contract is between public bodies and a procurement exercise may still be required.

Teckal exemption • • • Where services are provided by an organisation which, although Teckal exemption • • • Where services are provided by an organisation which, although legally separate, is "economically dependent" on the buying authority to such an extent that it would be inappropriate to make their dealings subject to the EU procurement rules. This is known as the "in-house" or “Teckal" exception, established by the case Srl v Comune de Viano and Azienda Gas-Acqua Consorziale (AGAC) di Reggio Emilia (C 107/98) [1999] ECR I-8121. The case establishes the principle that, to benefit from the in-house exception, the buying authority must be satisfied that the authority selling the services is a captive entity, that is, the selling entity: – Carries out the principal part of its activities with the relevant authority. – Is controlled in a similar way to that which the relevant authority exercises control over its own internal departments. – Is funded wholly or mainly by the controlling authority. – Has no private sector participation or financing (although private sector directors are permitted if their role is to provide expertise to fulfil public interest objectives).

Multiple controlling authorities • Possible for more than one local authority to be a Multiple controlling authorities • Possible for more than one local authority to be a member of a Teckal company • Although no individual authority needs to have sole control of the company, the participating authorities must have ‘decisive influence’ over strategic objectives and significant decisions • Decisive influence can be present even where it can only be exercised jointly alongside other public authorities

Anja Beriro, Associate T: 0115 976 6589 / 07796 343136 E: anja. beriro@brownejacobson. com Anja Beriro, Associate T: 0115 976 6589 / 07796 343136 E: anja. [email protected] com We are a national firm with a track record of delivering solutions to our national and international client base. We have experience across a wide variety of sectors and a client portfolio to be proud of including blue chip corporates, major insurers and public sector organisations including over 150 local authorities We have a national reach from our offices in Birmingham, Exeter, London, Manchester and Nottingham. This Seminar and supporting materials are prepared solely for training purposes and are not a substitute for legal advice.