Service Reviews â Outline Business Case - Somerset County Council

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(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. A - 24
(Cabinet – 2 May 2012) 3.3.4 Risks associated with this option 24 Option Description of Risk Likelihood Mitigation C C C C C C and D C and D It becomes apparent that service cannot provide services funded by Direct Payments and remain within the protection of the Teckal exemption leading to this option becoming unviable Failure to follow due process could lead to a legal challenge to the externalisation of the service by an existing provider in the market which delays the process of externalisation and/or results in it being abandoned and/or results in substantial costs The organisation is externalised but fails and services need to be brought back in-house and/or outsourced with significant costs and reputation damage to SCC The service is externalised as a LATC but fails to win a tender at the end of the initial period resulting in significant wind-up costs to SCC The externalised organisation does not fully understand its cost base or is unable to procure appropriate business/commercial expertise resulting in benefits being unrealised or with unexpected consequences to the operational delivery of services There is significant opposition from customers, staff and unions to the externalisation/outsourcing which effects resource requirements, and timescales. There is double funding of overheads/back office services due to the externalised /outsourced organisation deciding to make its own arrangements for services while costs to SCC remain 4 Currently seeking updated legal advice. If confirmed this could result in this option being recommended for rejection 2 Examine in detail at an early stage as part of full business case development if this option is taken forward 3 Examine the potential of embedding proven business acumen ahead of externalisation as part of full business case development if this option is taken forward 3 Examine risk and potential consequences in detail at an early stage as part of full business case development if this option is taken forward 3 Examine the potential of embedding proven business acumen ahead of externalisation as part of full business case development if this option is taken forward 4 If a decision is taken not to pursue an externalisation option then the rationale will need to be clearly communicated through a set of key messages to ensure consistency 4 Advice received corporately is that some double funding may be necessary in the short term 24 This is an initial list of the main potential risks and full risk profiling exercise would need to be undertaken as part of the development of a full business case to identify the full scope of the risks associated with any one particular option A - 25
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Service Reviews â Outline Business Case - Somerset County Council