Who’s right – Milton Keynes or North Tyneside? Balfour Beatty gain, Mouchel lose

You can’t help worrying when you see a certain confluence of certain stories in the press  - here's the first from LocalGov.co.uk.

Milton Keynes Council has announced plans to end its partnership with outsourcing firm Mouchel and bring staff back in house. “The political and economic environment has changed dramatically over the past nine years and both Mouchel and the council agree that, as a result, the flexibility of the existing contract is insufficient to meet the council’s future requirements.’

That’s David Hill, the council CEO speaking.  This isn’t being presented as related to Mouchel’s well-reported problems, although that can’t exactly have made MK feel more comfortable with the agreement.

Then, on the other hand, we have this, reported here by the Register website..

North Tyneside council is to outsource all its ICT services, along with finance, procurement, revenues and benefits, customer services and human resources to mega-services provider Balfour Beatty. The company has been named preferred bidder for a contract which is intended to help the north east council to cut its costs. North Tyneside faces budget cuts of 28 per cent and has a target to save £47m over the next four years…. Balfour Beatty said that it expects the contract to be worth up to £200m if the initial 10 year term is extended by a further five years.

One benefit of the deal is that all the staff affected are transferring to Balfour, so no redundancy cost to the Council – Balfour say the surplus staff will be deployed working for their other customers.

There are a few questions here. I like the company generally from what I’ve seen of them, even did a bit of consulting for one of their divisions a few years back, but Balfour Beatty doesn’t have a longstanding or significant track record in finance, procurement, HR or related service delivery – they’re very much from a property and construction heritage.

But more importantly, has North Tyneside been clever enough to build in the flexibility that Milton Keynes now say is lacking from their outsourced arrangement? Can Tyneside re-configure services to meet unexpected new requirements? What if the economy weakens further and Tyneside have to find another 30% savings? Who has the liability if Balfour’s can’t find work for the staff they’ve taken on – who owns that risk? Have Tyneside got enough intelligent client capability left in-house to manage Balfour successfully (a particular worry if they’re outsourcing procurement)?

Then there's the elephant in the room - the SouthWest One venture we discussed yesterday. Have other councils learnt anything from the experience of Somerset when it comes to major outsourcing initiatives?

I’ve got nothing against outsourcing conceptually. But I do worry about the capability of our councils, police forces and similar bodies to structure these contracts and manage the providers over long contracts. And a ten year contract, as in this case, with a five year extension, is simply too long in my view. Who knows where we’re all going to be in 2022? That strikes me as poor practice, and 5 years plus 2 plus 2 would be my recommendation for this type of contract.

Good luck to Balfour Beatty and North Tyneside though. I hope it all goes well for you and the staff involved.

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Voices (2)

  1. Verity Smith:

    One of the issues that I’ve experienced first-hand with Procurement Outsourcing is the impact of the us and them culture. If their procurement team thought stakeholder buy-in was hard before, they’re going to have an uphill struggle once TUPE’d over….

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