New partnerships aim to balance efficiency with public service ethos

Local authorities are currently working through the options for reforming service delivery. Chris Wilson, LeighFisher’s Vice President UK and Europe, tells James Dark about the challenges involved and the considerations that need to be taken into account

In June, Jacobs Engineering restructured its UK and European consultancy arm. Transport planning and traffic engineering services were moved into the parent business, while Jacobs Consultancy was rebranded as an independent company, LeighFisher, designed to focus on strategic management services. The aim is to provide a broader range of services than previously delivered by Jacobs Consultancy, building on specialisms including transport policy, economic regulation, business strategy and planning, and PPP support. Surface transport is one of the main business areas along with strategic government services and enterprise practice.

At present, LeighFisher is heavily involved in assisting local authority clients in responding to financial pressures by finding new models of providing services which deliver high quality outcomes at reduced cost.

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Discuss this and more at LTT's Aligning Partners in Transport event on 13 Oct 2011

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“A lot of clients in the UK are looking at efficiencies and that often involves new service delivery models and rethinking their service delivery strategy,” says LeighFisher Vice President UK and Europe, Chris Wilson. “They are moving to a more integrated approach.” Breaking down silos between council departments and the way councils work with contractors, so that stronger and more effective partnerships are created, is among the key considerations.

Often, the approaches being devised cut across a range of services, assets and departments rather than applying specifically to one policy area and can involve recasting the way councils function.  “A lot of local authorities have been looking at rationalising their property,” he says, “but they can’t do that effectively without looking at how they provide services. There is often an opportunity to bring services into one location within a council or through councils working together. Then you have to integrate services at the same point. You can’t make the efficiencies on property unless you make efficiencies on services at the same time.”

While operating more efficiently without detracting from service quality is one aspect of the framework that is emerging, increasingly councils are considering how to capitalise on their skills commercially as well.

At present three alternatives to the traditional client-contractor approach have emerged which are all being considered or implemented in relation to highways services. These range from councils working in ‘virtual teams’ with contractors, to forming trading entities, either alone or with a joint venture partner, in order to market their services to other local authorities and private sector clients. A third model is a collaborative approach between councils who co-operate to provide services in alliances. All provide a variety of different management challenges. For example forming virtual teams requires contractors and councils to build new relationships which enable costly ‘man marking’ of contractors’ staff by local authority officers to be abandoned in favour of a more mature co-operative approach to service provision. Councils considering setting up a trading arm need to ensure that appropriate governance arrangements are in place to prevent conflicts of interest. Councils forming alliances need to ensure they have the correct legal frameworks in place which enable contractors to supply services under a single contract.

“So there are a number of options open to councils in developing efficiencies and adapting to the new tougher climate,” says Wilson.  “People like ourselves can help them think them through carefully in terms of service delivery, and from  a legal and commercial point of view.”

The move towards outsourcing will also present challenges in requiring councils to develop new skills bases, appropriate internal resources  and management structures. “There is a strong move towards commissioning and the key thing there is to have the right skills to become an intelligent client to manage that and the right governance as well,” says Wilson. “It involves dealing with  a supply chain of different providers that may be private sector, third sector or others. You have to have the governance structure in place to deal with that.”

Incentives are a further key issue in forming effective partnerships and delivering efficiencies under the new models being developed and Wilson believes that local authorities could learn from arrangements employed by other industries in this respect. “There are certainly good examples of incentivised management in other sectors such as water and utilities that could be developed in local government,” he says. “Sometimes that involves the partner taking more commercial risk in delivering an efficient programme or managing an efficient programme.”

The new styles of service delivery that are emerging involve a range of new types of partnerships – between councils and their contractors, between council departments and between local authorities. New ways of relating to the public are also on the agenda in some areas, making  use of technology to improve public satisfaction with services.  “So, for example, someone could report a pothole using a picture taken on their iphone and GPS mapping. That is then logged on a council website, set up as a job and tracked through so that the person who reported it can see how the job is progressing,” says Wilson. “At the same time they can see through the website what other jobs the council has to deal with, so expectations can be managed. If the public can see their concerns are being addressed and how they are being prioritised, it means that councils will have a better relationship with their customers.”

Providing this style of service typifies Wilson’s point on the importance of integration and close relationships between customer services, highways contractors and IT departments. 

While tangible changes are beginning to emerge in the ways local authorities procure and deliver services, reforms are also set to be  made in the way central government works with the private sector in delivering major PPP funded  infrastructure projects. One change that  Wilson believes could secure better value would be for the public sector to play a greater role in financing projects during the initial construction phase, in order to minimise the need for investors to charge a risk premium. The possibility of forming a National Infrastructure Bank that would facilitate this model is currently being examined by the Government.

“That could put government in a position where it could provide finance to get projects moving through the high risk construction phase,” he says. “If an Infrastructure Bank could provide lower cost finance in that early stage in the form of a loan to the project, as with HS1, an investor  could be brought in later to buy into the project. That could potentially make sense.”

That is not to say that the private sector would not be expected to bear risks, and consultants are among those who  new types of incentives could apply to. “We are very much at the front end in terms of working through the options with central government and local authorities,” Wilson says. “What they want is a partner to develop upfront strategy, but who will also be there as a partner to take some risk in terms of downstream delivery.  So we wouldn’t rule out an arrangement with clients with success related arrangement because that is the market condition.” 

Discuss this and more at LTT's Aligning Partners in Transport event on 13 Oct 2011