Difficulties in alignment between local authorities make outsourcing together rare, says expert

Local government projects expert Alan Aisbett of Pinsent Masons, the law firm behind Out-Law.com, said that problems in alignment between councils can make it difficult for authorities to combine services through sourcing providers.

"There needs to be political will within local authorities to agree to joining up services with other councils," Aisbett said. "In addition, the combining of services has got to overcome functional and technical barriers – councils may be delivering the same or similar services, but it does not necessarily mean that they are capable of being provided jointly. There needs to be an alignment between councils over the way they see services being delivered too. These barriers apply to the sharing of services, whether internally or through sourcing providers."

Aisbett was commenting after the Royal Borough of Kensington and Chelsea (RBKC) announced that it had partnered with two other local authorities in London to sign a 10 year contract with Amey to combine the facilities management services currently provided individually by the three councils.

Under the contract, which is valued at over £150 million, Amey will combine services currently undertaken at nearly 2,000 buildings with the RBKC, Westminster City Council and London Borough of Hammersmith & Fulham (LBHF) areas. The services to be combined include building security and maintenance, catering, landscaping, environmental management, cleaning and reception services.

RBKC said that the contract will enable the councils to make savings of more than 34% on current costs "through operational efficiency". The terms of the Amey contract enable each of the three local authorities to retain individual responsibility for "service specification" within their own areas.

"Increasing financial restraints in recent years have prompted local authorities to identify new ways in which they can save money," Aisbett said. "Although there has been some outsourcing the more surprising general trend has been towards bringing services that may have been outsourced back in-house. The area where more significant savings could be made is through sharing of services. There have been cases where councils have pooled their resources in order to provide certain services in order to save costs but this has been very piecemeal and quite small scale. One significant exception is the Tri Borough arrangement involving RBKC, Westminster and LBHF where they have announced savings in management costs as a result of sharing the task of providing child, adult social care and library services."

"Combining back-office services and making it work, whether internally or through outsourcing providers, requires there to be political commitment and service alignment between local authorities. In an outsourcing context the authorities often need to speak with a single voice to suppliers and this can be difficult if each authority is looking for different things. Competing needs can inherently arise as a result of fundamental differences in the political mindset or economic conditions within the contracting authorities. These differences can present functional barriers in determining how services can be best organised and how they can be brought together in a cost-effective manner," he added.

Aisbett said that it is easier for authorities to align with one another on issues relating to facilities management services delivery than on issues involving the outsourcing of IT services.

IT contracts expert Simon Colvin of Pinsent Masons said: "One the key challenges for local authorities entering into share service arrangements such as these is to ensure that the transition and any transformation processes manage the alignment of the disparate legacy IT arrangements. This will involve close co-operation between legacy suppliers and any new supplier."

"A strong set of governance arrangements will also be required firstly between the local authorities and secondly with the supplier. This will be key to ensure the parties achieve a successful implementation and to ensure dovetailed business processes can be secured in the required timelines," Colvin added.