Bloom, IR35 and Good Practice Questions

We featured here the name change and the launch of Bloom the business that operates the NEPRO consulting framework. NEPRO is a creation of NEPO, the North-east Procurement Organisation, a consortium set up and owned by 11 public sector councils (local authorities) in that part of England. We explained in that previous article that NEPRO started as a “vendor neutral” vehicle through which public organisations could engage consultants in a regulatory compliant manner, but has grown into something much more interesting, and pretty unique in public or private sectors.

After that first article, we had a comment from a reader who questioned whether the NEPRO model was good practice – did it just allow budget holders to engage consultants in effect without real competition but stay “legal”? It is a fair point and one that occurred to me.

The Bloom response is that around half of the assignments they handle are competed – which we suspect may be more than in many public bodies where there is “conventional” procurement. Bloom say they always encourage clients to compete, and in many cases, the local authority (or other customer) still wants its internal regulations about competition to be used (3 bids for contracts over £x and so on).

Where the user does not want a competitive process, Bloom will use benchmarking, negotiation and other tools to try and ensure a good deal is obtained. So while we all agree that competition should always be used in an ideal world, we do feel that a. Bloom are trying to get people to do the right thing and b. Bloom users may be acting in a more value-focused way than many who aren’t users – although we should say that is a feeling rather than based on hard evidence.

Coming back to our chat with Rob Levene of the firm, he had some interesting thoughts on the current IR35 furore in the UK public sector. As of last week, public sector bodies have to assume independent contractors are caught by IR35 legislation, and the employer has to deduct tax and national insurance at source for the contractor’s fees. This has led to contractors walking off projects, demanding higher fees, and according to reports, the potential closure of A&E  hospital services as locum doctors refuse to work.

Levene acknowledges the issues, but suggests that this is a chance for buyers to look at their models for  engagement of contractors and wherever possible, turn the work into “real” projects with clear outcomes. Define a statement of work, agree a fixed price, and it is clear that this will not be caught by IR35 and the new rules. Now this won’t work in some cases (the locum doctor in A&E probably for one, although there might be a creative answer even there …) but for many cases such as much of the IT contracting work that goes on, the approach is quite feasible.

Another approach is to re-cast what is provided as a service, with a defined price for that service – the whole “xxx as a service” approach we have seen grow in recent years, led by the “software as a service” boom. The payment is then based on the deliverables provided and again IR35 should not come into play.

“There are real opportunities to drive innovation”, Levene says, and (we would add) probably get better results too. How may government contractors have sat in offices for literally years, with no real focus on outcomes and deliverables, happy to have steady secure work – at £600 a day (£150K a year plus tax benefits)  rather than the £50K a year the job was really “worth?

Anyway, we will no doubt have more on IR35 to come, and more on Bloom too, we suspect.

First Voice

  1. The Lady Doth Protest:

    “public sector bodies have to assume independent contractors are caught by IR35 legislation” – this is incorrect. Public sector bodies now have to assess independent contractors as to whether they are inside IR35 or outside IR35.

    HMRC is looking at the reality of the engagement, not the contract – so if a worker is being supervised, directed and controlled they may be in scope. This makes it hard for consultancy contract users to distinguish where the line is between providing contingent labour and providing a service. So it’s entirely possible that limited company contractors provided via consultancies could be caught. See the examples for “outsourced with a labour provision” here: https://www.gov.uk/guidance/off-payroll-working-in-the-public-sector-scope-of-the-reform-and-preparing-for-6-april-2017

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