Tony Collins weighs into the Cornwall outsource / partnership debate

Tony Collins, the brilliant ex-Editor of Computer Weekly, who now writes at the Campaign for Change website, has posted a couple of recent articles about the Cornwall Council proposed outsource / partnership. We wrote about it  most recently here, following an extraordinary situation whereby the majority of the council voted against the venture, but the “cabinet” announced they would press on regardless!

Anyway, Collins gives a very balanced view in his first piece, and includes some praise for the council where it's due, but he also gets into analyzing issues such as why getting out of these contracts is so difficult, and how buyers are taken in by convincing sales people. But here is one of his key paragraphs:

One has to wonder how a mega outsourcing deal can improve services, provide a good profit margin for an international IT company, save the council money and create hundreds of jobs. Doesn’t something have to give? Is there so much inefficiency, and so much money floating around the council and its potential NHS partners, that a major supplier can cut tens of millions of pounds, spend to transform services, and make money?

In the second piece, Collins looks at the way certain Cornwall councils have reacted to the involvement of our old friend Dave Orr. As many of our readers will know from his frequent comments here, Orr has campaigned for years to get to the bottom of the Southwest One IBM-led outsourcing joint venture in Somerset. As Collins reports, a “cabinet member” councilor in Cornwall has “launched an extraordinary attack on a former IT strategy analyst Dave Orr who emailed members of the county council with his analysis of its outsourcing plans”.

The good news is that the council is now meeting later this month to consider matters again, and the leader has said that if there is a majority against, the deal won’t go ahead. I’m not philosophically opposed to outsourcing, and Orr and Collins have raised many issues so I won’t duplicate them all, but here again are a few key questions for councilors to ask:

  • What alternatives to the JV have been considered? And why does this have to be done in such a hurry (just like the Somerset deal was…)?
  • Who bears the risk in the new venture?
  • Specifically, where will the 500 new jobs come from – are they guaranteed? If the new jv doesn’t win work from other councils / hospitals (which it won’t for years, even if it does eventually succeed), will these jobs still be created by the winning bidders? What will 500 people do all day? Where will they sit, who will pay the £10M a year cost of them… etc?
  • Who is going to manage the JV for Cornwall given procurement is I believe part of the outsourcing?

Voices (7)

  1. Dave Orr:

    I am for “Right Sourcing”.

    Outsourcing something transactional & predictable can be captured in a manageable contract e.g. hosting a mainframe; running payroll; cleaning & catering an estate of buildings etc.

    Then, it is indeed possible for “the client to have a strong grip on the facts, implications and risks”, as Tony Collins states above.

    I am all for engaging with the private sector for expertise, capacity & capability…..but in manageable way i.e. by programme or by project and by retaining control of business direction and continuity.

    Following Somerset’s disastrous joint venture with IBM for SW1, I have concluded that 10-15 year joint ventures through complex contracts, is a terrible way to engage the private sector.

    Essentially, there is a natural tension between Public Authorities wanting as much services and goods for as little cost as possible and the Contractors wanting the opposite! Ever thus.

    Outsourcing a cluster of compex & interacting public services for 10-15 years, that will have unpredictable changes upon them – not least from future Government legislation, socio-economic & technological changes etc, is nigh on impossible to capture in a complex contract that can flex and stay “fit for purpose” for up to 15 years.

    Effectively, Somerset has recognised that by taking back from SW1, apart from IT (a strategic error for business flexibility), all non-transactional services from April 2012.

    The cost of procuring SW1 (via IBM) just for Somerset County Council was £4m (including legal fees). The long and complex contract is over 3,000 pages long, yet has completely failed to cope with real wordl change in the budget cuts following the banking crisis and ensuing recession.

    Ironically, the cost of services was given a 5% discount in something called the “unitary charge”. That was worth (without inflation £1.7m per year) and has now been lost as Somerset reduced spend in SW1 with IBM as a result of funding cuts!

    Yet the unitary charge paid every year to SW1 for IBM is inflated by RPI (not CPI) annually. During that time the Government and Local Government froze pay for 3 years, to be followed by a 2 year pay cap of just 1%. Consequently, will services in SW1 end up costing more than if they had remained under Council control?

    A National pay freeze intended to reduce the real term labour costs in Councils, has ended up in the pockets of the contractor. This due to the contract not flexing for the National austerity measures that followed the banking crisis, recession & massive debt.

    BTW – The Prime Minister promised that the low/moderate paid (<£21K) would get a flat pay rise of £250 per annum, so that they did not bear an unfair burden, as "we are all in this together". In Local Government, that promise was never fulfilled.

  2. Willing to help:

    Read this & thought, brilliant, I am going to weave some of this into a few presentations to buyers new to public procurement over the next few weeks.

  3. Tony Collins:

    Good questions Peter, particularly the one about the 500 new jobs which are promised by Cornwall council but not yet guaranteed by either of the shortlisted bidders BT and CSC. Would CSC or BT’s lawyers allow a guarantee for 500 new jobs in the contract? Would any contractual “commitment” be engulfed in caveats and ambiguous clauses? Would Cornwall publicise the 500 jobs as guaranteed without showing anyone the contracts?

    As you say, I am not against outsourcing, so long as the client has a strong grip on the facts, implications and risks, but the more I look at Cornwall’s preparations the more misgivings I have. The council’s answers to questions are supposed to be reassuring, but, in fact, deepen the uncertainties and show the council’s reliance on supplier promises which are always difficult to enforce in contract. For example Cornwall says it will recoup its investments from the supplier. Will the supplier be donating profits to the joint venture? Is the supplier a charitable, philanthropic institution?

    Cornwall seems more naive than was Somerset County Council in 2007 when it signed, in a rush, a joint venture contract with IBM, Southwest One. That deal proved a failure – yet the hundreds of contractual documents I have seen indicate that Somerset obtained what it thought were some strong commitments from IBM.

  4. Dave Orr:

    LET THE PEOPLE OF CORNWALL DECIDE: With Council elections only months away next May, then why don’t the various political parties make their position on this controversial joint venture a manifesto issue for those elections?.

    I was giving sincere advice based upon Somerset’s disastrous & costly experiences with IBM in SW1:

    =======================================================

    Procurement is essentially about “buying stuff” and should be something that we all fundamentally understand. After all, throughout our lives, we all “buy stuff”, whether in our home or working lives.

    At heart, even if it is a large and complex procurement like Cornwall’s joint venture, the fundamentals of “caveat emptor” still apply:

    – If it “looks too good to be true”, is it?
    – If you don’t really understand what you are buying, then is that likely to turn out to be a risky venture like Somerset’s?
    – Beware the (usually grossly oversold) transformational powers of “whizzy new IT”!
    – Do you know what and how much you get in the price; what is an “extra” at additional cost and the rates for that?
    – Be as open and transparent as possible; everything should be in the public domain (including Risk Logs and Gateway Reviews) – other than truly profit margin sensitive information.
    – Value your staff and colleagues as they do (mostly) share common interests in your joint endeavour.
    – Do not start by marginalising your existing services – typically by labelling that option as “status quo”, “no change”, “as is”.
    – If the current management of a service is judged to be incapable of bringing about improvements and efficiencies needed, then it is highly unlikely that they can manage someone else doing that!
    – Beware a “Preferred Option” (like a joint venture) being decided early on and before the Business Case is properly developed and mature – as in Somerset & Cornwall.
    – When people are selling you something and stand to make a sales commission from the deal, do you look at them as impartial?
    – Have you assessed the risks of something going wrong & how would you deal with something going wrong, when it does?
    – If it goes badly wrong, do you have a Plan B before you do the deal?
    – Apply the test: “Would I do this, if it were my money or if it were my company”.
    – Beware having aspirational pictures painted by expert sales people from large, sophisticated companies of how your (rosy) future will look.

    Watch out for the “Yes Minister” approach to procurement; long & complex reports with extensive appendices, where the key detail is the proverbial “needle in the haystack”; excessive use of consultants paid for by your own organisation i.e. payment allows influence of opinion & final reports.

    Anyone watching Grand Designs on Channel 4 will be familiar with the gap between “When will you move into your new home?” at the start and “When you actually moved in to a finished home?” at the end!

    The amount of work to get things right should determine the project elements and timetable, not a political timetable or an arbitrary date set by the Leader or Chief Executive or an electoral deadline.

    Do not dismiss the capability of your existing services to make the improvements and efficiencies with the in-sourcing of private sector expertise (doing it yourself with outside help).

    With the right management, the right staff culture & attitudes and with in-sourced private sector expertise, existing services can be the accountable and manageable option, whilst retaining flexibility (and under democratic control).

    Can the “virtuous circle be squared”? Can the contractor (quite properly) make a reasonable profit, cover their risk & borrowing costs, recover their bid costs and bring in 500 new jobs, whilst Cornwall saves 20% and protects and even enhances employment in the local economy?

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