Traditionally, the use of alternative delivery models has been thought of as something local authorities consider to save costs. In fact, there are a variety of reasons why a local authority might consider this. It is important to be clear about your purpose from the start, as that will affect the type of model that is most suitable and the arrangements that you make. Possible reasons are:
There are various models to use for alternative delivery of local authority services. Your motivation should influence your choice of model rather than the structure directing how you approach the arrangement, which could result in failing to achieve your objectives. Typical models for service delivery can be categorised as:
Whichever model you decide to use, you must comply with all legal requirements in implementing the arrangements. This will require you to address various important aspects. The first is powers.
A local authority will need to have a power for every action it takes to introduce an alternative delivery model and will need to act reasonably in using this power. It is vital for a local authority to consider this at the outset of planning alternative service delivery, as failure in this could leave the validity of the whole arrangement vulnerable to challenge. On the face of it, there are plenty of powers available to local authorities to develop alternative delivery models. In addition, there is a range of requirements that may need to be addressed in particular arrangements. Examples include discharge of functions, contracts, employment of staff, participation in companies, and disposal of land. The local authority needs to know that appropriate powers are available for all of these.
As well as taking time to identify relevant powers, you will need to ensure that there is evidence that your local authority has acted reasonably in exercising them. Minutes and records of decisions should show that the authority has taken account of relevant information, has observed any specific requirements associated with the exercise of a particular power and has taken decisions for proper purposes. Any shortcomings in the decision-making process will expose the authority to potential challenges.
It is important to recognise the impact of alternative delivery models on the control a local authority has over the service delivery arrangements. If services are outsourced through a contract, that contract will set out the terms on which services are provided, and control by the local authority would need to be exercised through the provisions in the contract. A local authority will therefore need to ensure that contracts provide sufficient rights for it to meet its statutory duties and ensure the delivery of quality services. If a local authority decides to participate in an outside entity, such as a company, there may be practical reasons why it would make sense for the local authority involvement to be minimal. For example, if it is important to achieve charitable status, local authority involvement would need to be minimal, so as not to compromise the independence of the charitable body. By contrast, if you are expecting to rely on the Teckal exemption from public procurement, see below, the authority will need the same control as it has over its own departments. If your local authority is considering an arrangement where its input must be limited, you should make sure that the local authority’s members are aware of this.
Alternative service delivery arrangements made by local authorities must be compliant with public procurement law. It is beneficial to note this early on, as some arrangements will be affected by the relevant legislation more than others. For instance, social and other services specified in the Public Contracts Regulations 2015 are subject to a light touch procurement regime. Companies within the scope of the Teckal exemption are able to provide services to the bodies which set them up. Contracts for social and other services specified in the Public Contracts Regulations 2015 can be restricted to organisations meeting specified criteria, such as mutuals. Considering the procurement implications at the outset of planning alternative delivery arrangements will help to identify the most appropriate model and ensure you do not fall foul of public procurement law.
State aid is an important issue. There are various ways in which state aid might arise in transferring assets to a new provider and in the ongoing provision of services by the new provider. There are also ways of minimising the potential for state aid to arise. Appropriate steps to take include ensuring that transactions are at market value, keeping amounts of aid sufficiently small to be within the de minimis exemption and identifying whether any other relevant exemptions would apply. However, compliance with state aid rules in any arrangements for alternative delivery models would need to be analysed on an individual basis.
Employment issues may be important factors in a local authority’s reasons for considering alternative delivery models. They also have the potential to make a significant impact on alternative delivery models adopted by local authorities. Local authorities should consider the potential employment implications when considering which arrangements are most likely to meet their objectives. Your local authority might want to consider an alternative delivery model because this is seen as a way of reducing staff costs. However, a reduction in local authority staff numbers may result in other costs, such as redundancy and associated costs. There may also be service delivery implications if reducing staff leads to a reduction in the adequacy or quality of services. The overall staffing implications need to be clear before a final decision is made on an appropriate model.
Using alternative delivery models can help local authorities to achieve savings and high quality in service delivery. There is a range of important issues to consider when deciding on and implementing alternative delivery models. It is essential for any local authority considering alternative delivery to assess the advantages, disadvantages, risks and costs associated with each model. Having decided on a suitable model, a local authority needs to put it in place thorough arrangements to plan and implement arrangements, including provision for a periodic review.