Service Reviews – Outline Business Case - Somerset County Council

(Cabinet – 2 May 2012)
• This would enable SCC to retain access to the capacity to tackle struggling
providers for a given period and therefore discharge its statutory responsibilities
with the new organisation acting as “provider of last resort” for adults with
learning disabilities.
3.3.3 Disbenefits and any potential mitigations
• During the initial feedback meetings a number of people who used services
expressed a preference for directing their own care using a Direct Payment.
Legal advice received is that there would be a risk of legal challenge if the
LDPS were to undertake more than 5% of its business in the form of services to
individuals in receipt of a direct payment, while subject to any contract awarded
under the Teckal exemption.
• There is potential for legal challenge if an organisation awarded a contract
under the Teckal exemption was invited to participate in the market testing of
new business from SCC and was awarded this business in a way that could be
viewed as being anti-competitive or favouring the organisation
• Initial financial and resource outlay will be high. While the formation of the legal
entity itself is relatively simple, significant work will be required in relation to the
transfer of business and staff, and to ensure the awarding of the contract is not
open to challenge. Potential costs include pension related work, legal work,
registration, consultation, infrastructure and the procurement of external
business expertise.
• The level of risk could be high for an organisation of this (small) size until well
established.
• There is an elevated risk of organisational failure in the first year unless skilled
management with proven business acumen is embedded in advance of the
externalisation. There would be extremely high levels of operational, financial
and reputation risks to SCC should the new entity fail. This is due to the
specialist nature of the services provided and the limited capacity within the
market for other providers to “step in” in a timely manner.
• It is estimated that the process of setting up the entity would take a minimum of
12 months, based on the operational status of the in-house service at this point
in time.
• There would be very limited opportunities for external capital investment during
the initial contract period as any independent sector investment is likely to be in
breach of the Teckal exemption. This could potentially be mitigated by the
separation of the assets into a separate legally distinct entity to that providing
care and support, but this would need further exploration as part of the
development of the full business case, should this option be taken forward.
• Should the externalised organisation fail to win any tender at the end of the
initial contract period SCC could be responsible for funding any resultant
redundancy costs. It would also be responsible for funding any one-off costs as
a result of service reconfiguration as part of the transfer process.
• Costs are likely to remain higher than an outsourcing arrangement due to the
need to the need to continue to procure back-office services from SCC and/or
Southwest One or set them up from scratch. There would also only be very
limited opportunities to share fixed and management overheads with privately
funded provision while complying with the Teckal exemption.
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