Service Reviews – Outline Business Case - Somerset County Council

(Cabinet – 2 May 2012)
• The service provider carries out the “essential” part of its activities with the
contracting authority. Legal advice received is that this would represent
approximately 95%.
• The authority exercises the same kind of control over the service provider as it
does over its own departments. This means that control would need to extend
beyond the County Council simply maintaining a shareholding, and would
preclude the external organisation subcontracting without careful consideration
of the legal implications of doing so on both a case-by-case and cumulative
basis.
• There is neither private sector ownership of the service provider, nor any
intention that there should be any.
Legal advice obtained in 2010 and updated in 2012 (see Appendix D) indicates
that any services purchased by the customer through a direct payment would not
be considered to have been purchased by the contracting authority due to the
introduction of a third party (the customer). This would mean that any significant
expansion of direct payments in Somerset would impact on the viability of the
provider and/or trigger a competitive procurement, as it could not undertake more
than 5% of its business in this way, without risking legal change and potential
compensation.
Although the establishment of the organisation itself would have relatively limited
costs associated with it, the process of awarding the contract would be likely to
attract significant legal costs in order to ensure that SCC did not leave itself open
to legal challenge and potential damages. The cost for a similarly sized County
Council to create a similarly sized organisation providing social care services was
approximately £600,000. However we have no information regarding the make up
of this figure.
3.3.2 Benefits
• During the initial meetings with carers they expressed an overwhelming
preference for a transfer to a “not for profit” organisation, should the service not
be retained within SCC. This option would therefore be potentially less likely
(than an outsourcing approach) to encounter resistance from carers, and other
stakeholders.
• This can be implemented as part of a phased approach, allowing SCC to better
manage risk through the transition phase. The first phase would involve setting
up a local authority controlled company. During this phase, the new
organisation would develop internal infrastructure and consolidate its financial
and legal position. Following the expiry of the initial contract period an open
market tender exercise would need to take place for the service to move
outside of the limitations imposed by complying with the Teckal exemption.
• This would allow the LDPS the potential to build a strong brand identity and
reputation ahead of any open market tender exercise.
• This would allow the LDPS to further develop a user centred and outcome
focussed service delivery approach, in line with customer and commissioner
expectations ahead of any open market tender exercise.
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