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Alternative Delivery Models – Legal issues Kim Howell, Partner Geldards LLP
Why alternative delivery models? • Savings – Pressures on budgets • Efficiency savings already made • • Emergence of private sector provision Reassess the role of the local authority Community engagement How will your chosen model help you achieve these objectives? • What are the opportunities and risks
Legal Issues • • • Powers Democratic Control Procurement State Aid Employment
Service Delivery Models • • In-house Outsourced contract Strategic Partnership Shared Services Corporate Entity Mutual Trading Company Combination
Powers • Identify a power • s. 2 Local Government Act 2000 • s. 111 Government Act 1972 • s. 120 Local Government Act 1972 • S. 123 Local Government Act 1972 • s. 1 Local Authorities (Goods and Services) Act 1970 • Exercise of powers • Constraints
Democratic Control • Outsourced contract – Limited to control through contract • New delivery vehicle • May minimise local authority involvement to ensure • Charitable status • Eligibility for non-domestic rate relief • Company not subject to constraints on local authority controlled and influenced companies • Is this acceptable to members and public?
Procurement • Is there a contract for services where Council buying from provider? • If so, competitive procurement required in principle • BUT • Some potential to avoid competition process through concession contract, provided no realistic prospect of interest from other EU states. Take advice! • Concessions Directive to be implemented
Procurement • Public Contracts Regulations 2015 • “Light touch” regime for some services • Removal of distinction between Part A and Part B services • “Teckal” exemption for in-house companies • Exemption developed from case law included in 2015 Regulations
Procurement • Public Contracts Regulations 2015 • Reserved right for “mutuals” to participate in award of public contracts for some services • Restricts competition to types of organisation that meet set criteria • “Criteria includes employee ownership or participatory principles or active participation of employees, users or stakeholders and maximum 3 year term
State Aid – the ingredients • • • Economic advantage out of State resources Provided to an economic undertaking Giving rise to a selective advantage Potential to distort competition Potential to affect trade between Member States
State Aid in outsourcing • In the terms of transfer • Business and assets transfer • Pension arrangements • Other deal terms • In the ongoing relationship • Service contract • Back office support • Property use
State aid solutions • Market terms deal • De minimis aid • Possible exemptions include: • Sports and recreation infrastructure • Culture and heritage (including libraries) • Services of general economic interest (SGEI) • Carry out a State aid analysis when planning the structure
Employment • Staff costs account may be a large part of service delivery budget – Is this your motivation for change? • If reducing staff costs, how will you ensure the service can be run effectively? • How will redundancies be funded? What impact will this have on the savings you are aiming to achieve?
Employment • Employment opportunities and obligations • Provided Council relinquishes “ control ", should minimise equal pay comparison risks if different terms and conditions emerge • Cross employer comparisons where employers are “associated” • Glasgow City Council CPG and Coria v Unison and Fox Cross Claimants 2014 • Associated where one employer is a company of which the other directly or indirectly has control
Employment • TUPE applies but opportunity to restructure provided rely on “ETO reason entailing changes in workforce” • Code of Practice on Workforce Matters 2014 have regard to it rather than automatically apply it
Example – ML Community Enterprise Limited • Spin out from Lambeth – Youth services • Company with a representative Partnership Board • Members comprise of subscribers and employees of the company • One member, one vote
ML Community Enterprise Limited Why this structure? • Council required: • An employee led asset locked body with no ability to distribute profits to members • Body capable of registration as a charity • Democratic member voting structure
Example – People 2 People CIC • Spin out from Shropshire CC – Social Services • Company limited by shares • Only founder members and employees can hold voting shares • Dividends payable to shareholders • One member one vote regardless of shareholding • Board composition – Service user, employee, independent directors, managing director
People 2 People Why this structure? • Council required: • A social enterprise: • Employee led • Employees have financial dividend and controlling interest subject to statutory cap • Democratic voting structure
Leeds Learning Disability Services • Spin out from Leeds City Council • Community benefit society • Why this structure? • Employee led • Employees able to take a nominal shareholding
In Summary • The same model will not suit all circumstances • Structures do not deliver transformation • Choice of suitable structure • Effective implementation • Range of factors influence choice of alternative model • Financial implications • Staffing implications • Political acceptability of level of control
In Summary • Develop proposals for transformation • Identify and analyse the benefits/risks/costs of each model • Map out process and implementation programme • Implement plans • Review • Share your experiences with others on the journey!
Kim Howell DD : 029 2039 1473 Mobile: 07918 673746 kim. [email protected] com www. geldards. com