Councils working with the private sector must not be 'seduced by warm language of partnership' warns Audit Commission

Released 17 January 2008
Partnerships intended to overcome the drawbacks of traditional contracts between the public and private sectors often fail to live up to expectations.

For Better, for Worse: Value for Money in Strategic Service-delivery Partnerships(1) (SSPs) looks at partnerships lasting 10 or 15 years designed to deliver services such as council tax collection, IT and property management. It examines why many SSPs have not yet generated all the expected benefits of partnerships with the private sector, such as greater flexibility, economies of scale, innovation and risk and profit sharing.

The Audit Commission concludes that councils should enter into these complex partnerships only if they have the high level of expertise needed to get good value for public money as circumstances change over a long time.

This is a significant issue for councils and their private sector partners alike. The 14 SSPs studied by the Commission are worth more than £2.6 billion, with individual contract values ranging from £50 million to £425 million. Three of the earliest councils to adopt SSPs have terminated their agreements early, incurring additional costs.

More than half of all councils are already engaged in, or seriously considering, some form of service partnership. Councils with SSPs often gain capital investment and meet or surpass their performance targets. The anticipated cost savings are between 1 and 15 per cent over the life of a partnership, although these need to be seen in the context of the new government target to achieve 3 per cent efficiency savings per annum.

Michael O'Higgins, Chairman of the Audit Commission, said:
‘Complex, long-term partnerships with the private sector can succeed, but they're far from easy. If managed robustly, these agreements become true partnerships that deliver benefits for users and council taxpayers alike. But all partnerships are risky – even within the private sector, two out of every three fail.‘Our report highlights the opportunities, but also the challenges of partnerships, so both the public and private sectors know how to get the best from working together. Local authorities should not be seduced by the warm language of partnerships. Robust option appraisal before being committed, designing flexibility into the arrangements and strong contract management from the start, are the vital ingredients for success. ‘The Audit Commission's framework, launched with this report, will help councils get better value for money by managing their existing partnerships more effectively, or by weighing up the pros and cons of entering one. We have drawn on the experience of councils that have pioneered SSPs, as well as existing technical guidance.’

The framework identifies issues that councils will need to consider at the initiation, procurement and contract management stages, with links to supporting documentation. The framework is available as a pull-out section of the study report and on the Audit Commission website at www.audit-commission.gov.uk/strategicpartnering.

NOTES TO EDITORS
1. Strategic service-delivery partnerships are long-term public private partnerships through which contractors deliver a service or range of services for councils. They can include back office and transactional services, or specialist services such as highways or building and design services.

2. A copy of the report and the accompanying framework are attached and also available at www.audit-commission.gov.uk/strategicpartnering

3. The study builds on the Commission's previous work in this area, most recently the national studies Competitive Procurement (2002), Governing Partnerships: Bridging the Accountability Gap (2005) and Healthy Competition (2007).

4. The Private Finance Initiative (PFI) and shared services between public bodies, including Section 31 pooled budget arrangements, are outside the scope of this study. Nevertheless, we anticipate that the study's recommendations will be relevant to all forms of procurement that are based on a collaborative approach, rather than traditional contracting.

5. The Audit Commission is an independent body responsible for ensuring that public money is spent economically, efficiently and effectively, to achieve high-quality local services for the public. Our remit covers around 11,000 bodies in England, which between them spend more than £180 billion of public money each year. Our work covers local government, health, housing, community safety and fire and rescue services.

6. As an independent watchdog, we provide important information on the quality of public services. As a driving force for improvement in those services, we provide practical recommendations and spread best practice. As an independent auditor, we ensure that public services are good value for money and that public money is properly spent.

7. For further information about the Audit Commission, visit our website at www.audit-commission.gov.uk