Barnet Council, Andrew Travers and the myths propping up One Barnet

Last night was the Business Management Overview and Scrutiny Committee at which the One Barnet outsourcing project was discussed. I was pleased at the probing questions put forward by Cllr Brian Salinger and Cllr Hugh Rayner; they have experience and a dose of common sense. However they seemed to have been fobbed off by vague and rather vacuous responses from acting CEO Andrew Travers and supported by the somewhat bizarre comments of Cllr Rowan Turner who, it appeared, didn't have a clue what he was talking about.

The issue of flexibility is a perennial problem in contracts. Make them too inflexible and every time you make a change it costs you money - that was indeed Cllr Rayner's point. However, making contracts too flexible simply adds costs as the contractor builds in the need to change into their contract price. I have seen it time and time again where clients ask for a load of flexibility and the contractor simply costs it into the price. The more naive client thinks they have a very accommodating contractor but contractors are in business to make money, pure and simple. With the DRS and NSCSO contracts they are extremely complex and simply specifying the service is difficult enough. Identifying and modelling the financial consequences of changes to the contract and building that into a change mechanism is colossally complex and exceptionally difficult to achieve in a workable format. That is where I think this contract will go horribly wrong. For what its worth my experience suggests that the lawyers on both sides will make the contract as tight as possible setting up an adversarial position from the outset.

Joint venture versus supply contract is the next issue that was glossed over. My experience is that JV's can work well when the objectives of the two parties are closely aligned. The classic is when two parties come together to supply services to a third party for profit. in that case both client and contractor share the desire to maximise profit. In Barnet's case the situation is quite different with the majority of the services provided without a direct charge to the end user. So for example you don't get charged when you contact the council but that process has a cost and the customer has no alternative - you can't go to another council to ask them about your council tax bill. As such the council will have an objective about dealing with the enquiry efficiently and resolving the problem whereas the contractor simply wants to deal with the query as quickly and cheaply as possible. In a JV there will be continuing conflict between the two partners and it is for this reason that there is a very high risk that the contractor may end up breaching the agreement, just as has happened at SouthWest One where the JV is suing one of the partners, Somerset County Council.

Length of contract was something Cllr Turner ventured his opinion on. In my experience there is no set length for a contract. It is a balancing act which considers how much time the contractor needs to start making a difference, and how long they need to recoup any capital investment they make in the contract. Some contracts are ten years because that is how long the contractor needs to write off their investment. Other contracts where there is very little capex can be as short as two or three years. However, contractors will always push for as long a contract as possible because they know that the capitalised value of the revenue stream from the contract can help to boost the value/share price of their company. They also know that bidding or re-tendering for contracts is an expensive process and needs to be avoided for as long as possible. From a client perspective the first two years are where the contractor is getting into their stride and hopefully by year three they are performing at their optimum.If the contract term extends significantly belong that time, the issue becomes one of how to keep the contractor motivated - carrot or stick. the problem is if you are locked into a contract the ultimate stick, contract termination is not in the repertoire. You also get issues relating to continuing investment in infrastructure and training which get put on the back burner when there are still five or six years left to run on the contract.

Now it may be that all these matters have been adequately addressed but, because of the secrecy shrouding this process, we will never know. Only the consultants advising the council, a handful of senior officers and the select members of the cabinet who have actually bothered to read all the information will have any idea whether these critical issues have been adequately addressed (although I doubt that is possible).

Conservative councillors, YOU need to think very carefully now. YOU have a responsibility to inform YOURSELF about the risks this contract poses. YOU need to seek out as much information and satisfy yourself that there are adequate safeguards. Arguing that officers told you it will be alright will simply not stand up  to scrutiny or possibly even legal challenge when this all goes horribly wrong  - which it inevitably will. All of the warning signs are there and you have been offered briefings by independent experts such as APSE.

I strongly urge Conservative Councillors to call a halt to proceedings and at the very least set up an independent scrutiny team to review all of the details of the proposals, to rigorously question senior officers and, if need be, bring in independent consultants to review the process to date. Only when you have addressed all your concerns can you make a rational decision as to whether or not to proceed with One Barnet.