The 4Ps is dead, long live Local Partnerships

19 Aug 09
On August 18, a new organisation to promote more council collaboration was born. David Williams asks its enthusiastic chief executive and finance director what the future holds
19 August 2009

On August 18, a new organisation to promote more council collaboration was born. David Williams asks its enthusiastic chief executive and finance director what the future holds

Falling tax revenues, ever-tighter grant allocations, increasing demand for services, risk-averse lenders, contractors struggling with cashflow: anyone working in local government could be forgiven for thinking the recession might be a time to hunker down, try to survive, and not attempt anything too clever.

But not Richard Buxton. The hugely energetic chief executive of Local Partnerships, which was launched on August 18, sees only a future teeming with possibilities and innovative ways of working – and saving money.

For him, the key is that councils must collaborate more – with private contractors or, just as likely, other public bodies. He tells Public Finance: ‘What I am convinced of is if you take a typical local authority [and it] says we will have nothing to do with the outside world, the chances are it is missing an opportunity.

‘Everybody recognises that, regardless of what happens in the general election, local authorities are going to be under very significant financial pressure. Our job is to help them maximise whatever they can do with whatever resources they’ve got.’

Local Partnerships is itself a rather elaborate exercise in collaboration, being jointly owned by the Local Government Association and Partnerships UK. The latter body works chiefly with central government, and is owned by the Treasury, the Scottish Government and a number of private investors, including investment banks, assurance firms and public sector contractors.

Local Partnerships has taken over from 4Ps, the LGA’s former procurement support arm, created to spread expertise and to advise and support councils setting up new partnerships.

Buxton hopes that as the new organisation is not wholly owned by public bodies, it will be able to go beyond the work of 4Ps by giving financial backing to schemes.

‘That’s the sort of thing we should be doing,’ says Buxton. ‘Whether it’s an infrastructure project, or services transformation – if we really believe we’re adding value then we should be able to put our money where our mouth is.’

What these partnership projects could look like is potentially far broader than traditional outsourcing and Private Finance Initiative models. Buxton cites Essex County Council’s multibillion pound outsourcing contract, currently under negotiation with IBM. But he goes on to suggest that a new set of instruments could emerge, and that local authorities might even find a way to reinvest pension fund money in infrastructure and services.

Local Partnerships director Brian Standen adds that he expects councils to invest more upfront than they have in previous years, possibly through finding new uses for councils’ prudential borrowing powers.

So where does all this leave the PFI? Will it be superseded by a new generation of smaller, smarter, more flexible and localised options? And with banks setting profit margins three times higher than they were two years ago, is it too expensive?

Standen believes the system’s strengths – such as forcing bodies to calculate the value of a new facility over its entire lifespan – will ensure it will be around for years to come.

‘If you look at the forward planning for how much money is available to the public sector, and the continued demand for new buildings, someone somewhere will have to find a means for funding it,’ he says. ‘So whether it’s PFI or something similar to PFI in the future, a lot of private finance money will inevitably go to fund infrastructure which is used to deliver public sector services.

‘But do I believe it’s the only means of procuring? No, definitely not. It’s part of the tool kit. It’s not the only tool we have,’ he adds.

Local Partnerships’ job will be to help councils make sense of the options, and show them how to get the most out of any arrangement they enter into. Despite this – and the directors’ obvious appetite for finding new ways for authorities to raise capital and improve services – the organisation will remain a practical rather than a political body, says Buxton.

‘We’re not advocating more private investment in public services. Absolutely not. I genuinely believe that a well run public sector organisation has the potential to be just as efficient as the most well run private sector organisation.’ Such efficiency could be brought about by councils working together – or with other public bodies.

This thinking fits closely with the philosophy behind the new Comprehensive Area Assessments and the government’s Total Place pilots: that looking at local service providers as single entities no longer makes sense.

The attitude can easily transfer to procurement – Buxton argues that the public sector as a whole must be brought into decisions on, say, building a school.

Thinking creatively about whether a health centre could be built on the same site, or whether a job centre could be paired up with a council one-stop shop can improve services and reduce marginal costs, he says.

If more councils are going to be entering into more partnerships more often, one of Local Partnerships’ most pressing tasks will be to ensure they are better able to manage contracts.

‘The most important part of our role is to help local authorities be an intelligent client,’ says Buxton. He points out that no council can be expected to have complex contract negotiation skills in-house because it’s only rarely that an authority enters into a major agreement with a partner.

‘The honest truth is not all local authorities recognise some of the problems they’ve got,’ says Buxton. ‘Local authority contract management skills are not as strong as they might be, given [some] contractors historically have worked on the basis that they price relatively low upfront and make their money on the variations under the contract. That’s the typical commercial strategy.’

It is comparable to the builder who offers to tile your bathroom for an enticing knock-down price, only to hike up the costs with unforeseen expenses during the job.

‘I’ve seen too many examples of local authorities and other public bodies who have entered into long-term contracts who haven’t understood how to work with the supplier,’ Buxton says.

While the need for such expertise might be increasing, it isn’t new. 4Ps was originally set up in 1996 with a similar remit. But 12 years on, the National Audit Office and the Commons Public Accounts Committee were still berating councils for letting contractors take them for a ride.

Standen counters that, wholly owned by the LGA, 4Ps was never able to help as many councils as needed helping. With access to more resources courtesy of Partnerships UK, he plans Local Partnerships’ annual turnover to rise from 4Ps’ £7m last year to £12m.

Buxton suggests there will be plenty of work out there to keep Local Partnerships busy for some years yet. ‘If suddenly councils had all the [necessary] expertise, we wouldn’t exist – and would have no problem with not existing. We would happily hang up our hats and say: “Job done – local government is as good as it’s ever going to get.”

‘But I suspect there will still be a need for organisations that are able to help with the types of issues we’re dealing with.’




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