Hampshire County Council

Cabinet Item 7

27 November 2006

South East Centre of Excellence (SECE)

Report by the Director of Property, Business and Regulatory Services

1

Summary

1.1

The purpose of this report is to advise Cabinet of progress on developing the work of the South East Centre of Excellence (SECE) where the County Council is the lead authority for the construction workstream for the 74 local authorities in the region. In addition SECE is providing similar support to the 5 police and 8 fire authorities across the region.

1.2

The success of the Council in developing this workstream raises issues for the County Council in relation to its leadership role in local government, issues and implications for staff, workload, financial and contractual matters, including remuneration, pay and benefits. Potentially, work on the scale now envisaged is not without risk.

1.3

Continuing to lead in this workstream has implications for the Council's business partners and the different roles that the Property, Business and Regulatory Services department plays for other Councils. This in turn has an impact on how the department is organised. This report deals with all these issues.

1.4

This proposal does not link to the Corporate Strategy, but, nevertheless, requires a decision to ensure the County Council's increasing role in leading and supporting other Councils and public agencies through SECE is enhanced and recognised, whilst positioning the Council to contribute to both regional and national programmes of work.

2.

South East Centre of Excellence (SECE)

2.1

The SECE was born out of a desire by the former ODPM Office (probably inspired by the Office of Government Commerce - OGC) to improve procurement arrangements in local government. This was related at the time to the early implications of the Gershon Report and what was believed could be achieved in cashable and non-cashable terms through efficiencies in procurement. It was probably true to say that, at that time, there was variable practice in all forms of procurement across central and local government. The County Council had at the time been well regarded for its supplies and procurement arrangements (largely organised through an annual Business Plan to the Buildings, Land and Procurement Panel) and for its leadership in construction services.

2.2

The County Council then, with Surrey and Kent County Councils, made a bid to the ODPM to host the new centre, which in the event ended up being hosted by Kent County Council with Hampshire being allocated the leadership of the `construction workstream'.

3.

Construction Workstream

3.1

The selection of Hampshire County Council was largely based on the work that the Department had undertaken on construction procurement and construction frameworks. This was built around greater collaboration with contractors through longer term arrangements, developing supply chains and sub contractor arrangements, looking for improvements in time, final cost and overall quality. These issues were then developed around `construction frameworks' and significantly a move away from the universal practice of lowest cost competitive tendering and the difficulties and contractual claims that that approach had given rise to over many years. Hampshire's approach as demonstrated in the diagram given in Appendix 1 provided much wider and sustainable benefits, across a range of performance indicators.

3.2

The real trick was to get, for other councils, similar benefits (and possibly more) to those that Hampshire was achieving, and to get individual councils of different political persuasion and with varying views of governance to co-operate across the South East of England. It also reinforced the use of local arrangements that have been proven to work. There was probably a presumption in government that this collaboration would not happen.

3.3

To achieve a critical level of `sign up' for County and Unitary Councils it was essential to create a critical mass of workload that could sustain a regional-wide procurement framework. This task has largely been done. A list of Councils and the potential workload is given in Appendix 2. The workload is approaching £500 million and could rise to £1 billion with the addition of capital spending by the Learning and Skills Council.

4.

Different Roles for SECE

4.1

As the work for SECE has developed it has been necessary to:

· Create a regional framework (of major contractors)

· Develop governance arrangements to manage the framework

· Build capacity to manage and define projects to go into the framework

· Provide professional resources for SECE and individual Councils (who often have little or no property development resources)

· Develop sub regional arrangements around clusters of authorities

4.2

This has meant that the Department has acted as:

· The lead authority for the development and management of wide ranging frameworks, their governance, workload programming and performance

· A `critical friend' to Councils to facilitate projects and their development

· `Strategic adviser' on procurement, design, and development options (sometimes for some very large schemes up to £50 million in value)

· Feasibility and design adviser to determine what can be done before a project goes to the framework

· Professional consultants (with partners) providing some or all of the above roles and a full set of design services to implement and build the project.

4.3

Each of these roles brings with it significant responsibilities, organisational and contractual issues, legal issues and issues such as the separate legal status of each authority, creating common governance and indemnity insurance requirements. Some of the staff are also undertaking roles for which there are incomplete contractual and potentially no reward mechanisms. These issues need to be resolved. Operationally each of these roles carries with it different levels of risk, which has to be managed.

5.

The Benefits for Local Government

5.1

The development of this approach has many potential benefits. Individual Councils can access specialists, scarce and (relatively) expensive professional resources in local government that they would otherwise rarely be able to obtain.

5.1.1

The aggregation of individual contracts into larger programmes of work creates opportunities for significant efficiency savings through lower costs (discounts on scale), shared learning, access to contractor capacity, and supply chains that would not be justified at the level of an individual project. Councils do not need to `reinvent the wheel' and irrespective of the size of an authority benefits can be obtained. These benefits were clearly demonstrated on the ENHANCE programme (where speed and reduced cost were paramount) and the evaluation regularly undertaken for Hampshire County Council's framework arrangements also supports this.

5.1.2

At the level of a `cluster of Councils' the benefits mentioned above are achievable and within the region, local government has construction procurement arrangements considered to be innovative and best practice in terms of delivering capacity and value for money. Performance through the framework should bring outcomes for local government greater than those achieved on many central government contracts.

5.1.3

It should also be noted that the South East Centre is developing three construction frameworks. The one that has so far attracted most attention is the major framework for capital projects. It is also proposed next year to launch a second and third tier framework for projects from between £500,000 and up to £2.5 million and up to £500,000 in value respectively. These would also have significant benefits to a wide range of authorities.

6.

Benefits for Hampshire County Council

6.1

One of the major benefits for the County Council was that it could provide regional and national leadership on a major procurement workstream. In creating the SECE framework it has also had the opportunity to improve Hampshire's model and build into the SECE framework the experience and learning obtained over several years. SECE is funding the next generation of framework agreements (which have proved so successful for the County Council) for all authorities in the region including the County Council. SECE have committed to pay the County Council £1.25million over three years for developing the construction workstream, so the cost of supporting other councils has not fallen on the County Council. Through carefully planning and programming of projects through the SECE framework significant efficiency savings will be generated for the benefit of all authorities including the County Council. Some of the Council's staff through their roles in Hampshire and the SECE development are now leading practitioners in their field and represent a significant resource to the Council and local authorities in the region.

6.2

The County Council has also played a full part in the development and management of SECE hence laying to rest any notion, at least in construction, that any other form of `regional model' should be imposed in local government in the south east. It is obvious from our work with Councils that we have often simply helped staff and Members in other Councils to do something that would (probably) not have been achievable in other circumstances. The Department has attempted to do this even where relationships have in the past been poor! It obviously enhances the Council's reputation with central and local government to be contributing to the work of other councils and to central government departments. Arguably it foreshadows much of what appears in the recent White Paper about co-operation and collaboration between authorities.

7.

Future Developments

7.1

The potential workload could develop further. Discussions with the five regional police forces in the South East and the Metropolitan Police are at an advanced stage. Discussion with central government departments (the Learning & Skills Council) could lead to major college development in London and the South East. For SECE itself there are major workstreams in the following areas developing which will be managed within the Department:

· Civic office redevelopments

· Programmes of work centred around new schools (the SECE framework is the ideal delivery vehicle for BSF and the new primary schools initiative)

· Second tier frameworks based around clusters of authorities

· A workstream centred around fire authorities

· Specialist frameworks including consultancy arrangements

· Maintenance services

· District Councils

· Strategic sourcing in conjunction with OGC

· Services to Schools

· Asset Management opportunities

8.

Responding to the Opportunity

8.1

It is obvious that SECE has the ability to allow many Councils to enjoy `construction benefits' that would probably be outside of their reach. Increased collaboration on construction procurement will have significant benefits for Councils and fits with the government's view of leading authorities developing arrangements that others can enjoy and creating joined up activity across local councils. This is akin to the much talked about `shared services' model for local government services. To some extent creating the opportunity, defining the benefits and providing the frameworks brings the first (and possibly easier) stage to a completion. The next stage needs to focus on governance arrangements and implementation - with the latter the real `proof of the pudding'.

8.2

For Hampshire it is probably a significant opportunity to provide further leadership. It also represents a business opportunity for the County Council to implement these arrangements. The extent to which these would represent a significant financial return is hard to evaluate at this stage - a lot depends on the different roles the County Council will play and the extent to which our own resources are used beyond that which SECE funds. What is known is that when projects are procured in joined up programmes of work such as with Enhance, significant efficiency gains can be achieved for the benefit of all. The SECE major framework will create the opportunity for even greater benefits through aggregation across more than one authority. From an organisational perspective it would seem likely that if Hampshire continued to play a leading (but not sole) role in this workstream then several managerial issues need to be considered. These would be:

· Capacity issues

· Management and leadership

· Delivery

· Reward strategies

· Risk Management

8.3

At one end of the spectrum it makes sense, for the County Council to deal with the capacity issue by way of partnerships with other public (or more likely) private organisations. This in essence is already at the heart of the Department's own capacity building strategies. It would also be conceivable to recruit resources (some - not many in the current market) to meet a significant demand from other Councils. This would have to be done at market rates, but covered by income from SECE or fees from authorities. For the time being at least, management and leadership would have to be retained by the County Council. Over time it would be possible to develop a regional organisation working across local authorities, (but under their governance) to progress this activity.

8.4

Delivery and implementation would require in some cases the use of Council staff as well as resource from other SECE authorities and private sector partners. A separate organisational arrangement could be considered for this, which had more flexible reward strategies better able to cope in the current market.

8.5

The development of SECE and the resultant workload by way of income from fees could be substantial. MACE, an existing partner (on Ashburton Court) have suggested a joint venture by which they second staff to the County Council at their expense to provide more capacity for project development work, essential to `feed' the framework.

8.6

Within the Department it would make sense to organise a team around a senior manager who could focus on SECE development. It will be important to develop a structure based analysis of the evolving workstreams' requirements. This is likely to then lead to individual staff managing a key workstream (i.e. the framework, the work of a council or `cluster of councils', a specific group of organisations e.g. fire or police authorities or a client such as the Learning & Skills Council).

8.7

The County Council has a policy whereby work for external organisations is covered by a separate indemnity insurance arrangement. The underwriters for the policy will be advised of our role in SECE.

9.

Partnerships with the Private Sector

9.1

Creating capacity for the County Council and SECE opens up further opportunities to develop more longer term collaboration with partners. The County Council already has such arrangements in place in its framework for consultants. Increasingly this blend of public and private organisational capacity provides a more effective vehicle for dealing with `peaks' in demand and is useful (if not always the lowest cost option) in difficult recruitment markets where the County Council is uncompetitive. Further refinement of these arrangements is a logical extension of the County Council's property services and capacity building.

9.2

In future the national programme of `Building Schools for the Future' organised through Partnership for Schools (PFS) could use the SECE framework for local authorities in the South East, providing local government with strategic capacity to deliver a major programme of school regeneration. This issue is being further researched with PSF. Such national programmes require significant architectural and development skills which the County Council, through SECE, could deliver. Two major national construction companies have already approached the County Council on the related Academies' programme, requesting the Council's involvement with them and the use of the Council's design resources. A forum for BSF funded projects is being hosted by the Council in December 2006.

10.

Conclusions

10.1

The benefits for local government are significant. It is therefore recommended that the County Council continues to develop its leadership of SECE, recognising the need for capacity for Hampshire's work for SECE and for other councils. It is recommended that developing a focus for this work within the Department and over time with private and other public sector partners is the most effective way forward in difficult recruitment markets. This would require some adjustment to the Department and consideration of a range of pay and reward issues. Increasing the County Council's role in both leading and supporting other councils through its leadership of SECE, positions the Council to contribute to both regional and national programmes of work and perhaps is an early example of what may come to pass in local government as the concept of `Shared Services' and collaboration develop.

Recommendation(s)

That the Cabinet approve:

1

The continued development and contribution of the County Council to SECE be approved

2

The Director Property, Business & Regulatory Services be authorised to develop the necessary partnership and organisational arrangements to create capacity in Hampshire County Council

3

The County Council continues to develop regional and national leadership on construction procurement arrangements.

This proposal does not link to the Corporate Strategy, but, nevertheless, requires a decision to ensure the County Council's increasing role in leading and supporting other Councils and public agencies through SECE is enhanced and recognised, whilst positioning the Council to contribute to both regional and national programmes of work.