Hammersmith & Fulham provides strategic rationale and thinking behind the creation of a mutual

By David Bicknell

In yesterday’s article on the London Borough of Hammersmith & Fulham’s plans to create a mutual Pathfinder, I referred to the  recent report on the mutual plan published by the Council.

In that report are some useful thoughts on the rationale for developing a mutual as well as an insight to what needs to be discussed around procurement.

The strategic rationale for launching the mutual includes: 

• Confidence of the services that they could deliver more effectively as a private company

• Commitment at a political level to explore new ways of working

• As an alternative approach to deliver the challenging financial targets required and maintain/ further commercialise existing services

Hammersmith & Fulham insists that it “will not simply be outsourcing the services currently delivered, but will be piloting an innovative way of the future delivery of in scope services, at a costreduction (and possible profit making) to the Council in headcount and overheads. The delivery of these services via the pilot scheme will have no negative impacton the service as they  will continue to be undertaken by the existing staff who have extensive knowledge and expertise in these areas. All clients will benefit from a reduced cost of service, whilst maintaining continuity of staff and services.”

Benefits to the Council

• A significant reduction in costs through the development and extension of the business

• Reduction in headcount for the Council

• Piloting a new unique approach on the delivery of existing council services

• Front Line services to schools being developed

• Staff commitment to the venture and commercialisation seen as an opportunity

• Seen by the school community as an opportunity, not a threat (as identified in the informal consultation).

• Demonstrates LBHF commitment to the schools

• 50% of net profits shared by the local authorities to allow more freedom to the Councils to target new priorities

The Council admits there are many challenges to overcome for the final business case of the potential pilot scheme, including:

Finalisation of the scope

Capacity issues of staff members in the transition

TUPE issues

Pension issues

Independent Legal advice

Independent Financial advice

Procurement

Legalities on novation of contracts and risk of OJEU

Venue for the additional staff from RBKC and Westminster

Corporate recharges

Support, marketing, sales and communications

On procurement, Hammerwmith & Fulham says it was initially envisaged that the Council would have the option of entering into a time limited relationship with the Mutual as part of the National Pathfinder. However, current Pilots have all been either NHS related(different legal framework) or where the services involved are classified under OJEU as “Part B” and as such the risks to the Council’s involved are minimal. It adds:

“The proposal in this report contains some “Part A” services and as such a full OJEU procurement exercise is likely to be required by law. In order to comply with the regulations and mitigate potential risks, it is proposed that the Council carries out an EU compliant procurement exercise to secure an external partnering organisation. Such an exercise should remove potential risks for future challenges based upon the relationship between the Council and the mutual.

“The first stage would be to place a compliant OJEU Contract Notice seeking expressions of interest from the market to assist in the establishment of a mutualised company. The controlling shares in the company would be on a ratio to be determined as part of the tendering process.

“Depending upon the nature of the mutualised company, the trading arrangement may not only be about service delivery, but consideration may e given to the supply of goods that would otherwise need to procured in accordance with the Public Contracts Regulations. In this case the mutualised company becomes both a supplier and service provider.”

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One response to “Hammersmith & Fulham provides strategic rationale and thinking behind the creation of a mutual

  1. Pingback: Mutuals: asking the right questions to pick mutual winners in local government | Campaign4Change

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