Next Steps in the Joint Provision of Building Control Services in Dorset
BOROUGH OF POOLE
5th December 2006
NEXT STEPS IN THE JOINT PROVISION OF BUILDING CONTROL SERVICES IN DORSET
STATUS - EXECUTIVE POLICY
1.0 / PURPOSE AND POLICY CONTEXT
1.1 / The purpose of this report is to inform Cabinet of the progress made to date in respect of the joint provision of Building Control Services throughout the county;
1.2 / To seek members approval to undertake the next stages of investigatory activities in conjunction with other Dorset Building Control Authorities.
2.0 / DECISION REQUIRED
2.1 / To consider the content and implications of Cornwell Associates final report and agree the next stages of developmental and investigatory work.
2.2 / To agree to officers undertaking developmental and investigatory work to facilitate further partnership working with other Building Control Authorities within Dorset and in the event of a breakdown of wider partnership working, with Bournemouth, subject to further reports demonstrating its viability.
3.0 / INTRODUCTION
3.1 / In Summer 2005, the principle of delivering Building Control services jointly across Dorset was supported by seven of the eight councils concerned. Senior officers of each council formed the Dorset Building Control Strategic Partnership Board to drive the process forward. Only Christchurch Borough Council chose not to participate.
3.2 / A firm of consultants, Cornwell Management Consultants plc, was commissioned in January 2006 to prepare a business case and implementation plan for the joint service.
3.3 / The consultants’ report was finalised in October and is attached as an appendix XX.
4.0 / DRIVERS AND OJECTIVES OF JOINT DELIVERY
4.1 / The drivers behind exploring joint building control service delivery are:
- Improved recruitment, retention and training;
- Increased efficiency in service delivery;
- Improved consistency of service delivery in Dorset;
- Avoiding the difficulties of an ageing professional workforce that is now beginning to impact on the Service.
4.2 / Building Control Services in Dorset reflect the national trends in experiencing recruitment and retention difficulties. Fewer people are entering the profession and demand for qualified Building Control staff currently outstrips supply by about 15%. This has the effect of increasing wage levels, where job evaluation schemes allow, but also leads to councils competing for a dwindling pool of qualified staff. Moreover, many local authority Building Control services are small, with few opportunities for training or career advancement in the same Council, adding to the pressure to move. In many Councils, long-term vacancies remain unfilled, with the work being covered by costly agency staff. Further expense is incurred with abortive recruitment drives. By re-organising local authority building control services in Dorset into a single organisation:
- staff retention would improve;
- the organisation would be large enough to provide for personal development and career advancement;
- the Service would be able to offer opportunities for new entrants to the profession;
- the Service would be more certain of retaining trained staff and there would be fewer alternative career options locally.
4.3 / Since 2000, Building Control workload has increased by over 30% and has not been matched by increases in staff. While some working practices, processes and equipment have been adapted to respond to the demand for a modern, efficient, customer-oriented service, many building control managers in Dorset would admit that there is still some way to go; the small-scale of many of the Dorset Building Control services making the business case for investment difficult to prove. Moving to a single organisation provides the perfect opportunity for investing in modern technological solutions, reviewing business processes and staffing requirements to make the service as efficient as possible. The more efficient the service, the more keenly it will be able to set its prices, minimising competition from the private sector in the area. Increasing efficiencies in enforcement and other non-fee earning work could be passed on as savings to the Council Tax payer.
4.4 / While the building control services are currently aligned with administrative boundaries, many of their larger customers are not and receive a significantly different service across Dorset in terms of quality and speed of service, fees and interpretation of regulations. The Dorset services have already attempted to move to a more consistent position but it would be automatically achieved from joint delivery by a single organisation.
4.5 / Such obvious benefits led to the decision to produce a business case, which would identify the costs and benefits of joint delivery to see whether it made financial sense, with the following objectives:
- The outcome retains ownership by and accountability to the participating Councils;
- Strong links are maintained with other Council services, the central Local Authority Building Control Services representative body and other local authority colleagues;
- It encourages and provides an entrepreneurial ethos within the framework of good business practice for the benefit of all stakeholders;
- There will be tangible benefits for the Service’s clients;
- Staff will not be adversely affected as a result of any strategic partnership/consortium arrangement;
- In the longer term there should be no increased costs to the participating Councils arising from the operation of this initiative.
5.0 / THE BUSINESS CASE
MEETING THE OBJECTIVES OF JOINT DELIVERY
5.1 / The consultant’s report sets out the current position of the councils in terms of staffing, workload, costs and income and ICT and presents six possible future operational models for consideration on a scale from greater co-operation to full-blown joint delivery. These are:
- Option 1: Shared resources
- Option 2: Two Host Authorities
- Option 3: Two Host Authorities, single manager
- Option 4: Two Host Authorities, single manager, single administration unit
- Option 5: One Joint Authority, single organisation, existing staff numbers
- Option 6: One Joint Authority, single organisation, fewer staff
5.2 / The extent to which the proposals meet the objectives of the exercise are set out below:
5.3 / Retention of ownership and accountability by the participating Councils
The six operational models rely on three different types of governance. Under Option 1, Building Control services would continue to be managed as at present, with emergency and specialist support being available from neighbouring councils and regulated in terms of level, cost and duration of support by a Service Level Agreement. Options 2, 3 and 4 require two or more authorities to host the service on behalf of the others, with staff either seconded or transferred to the Host Authority. This form of governance has a weak track record and it is more difficult to find a suitable governance vehicle that retains ownership and accountability of the non-host authorities. Options 5 and 6 could be achieved by either a Joint Committee, comprised of representatives of each Council who would jointly direct the operation of the service, or a Company limited by guarantee.
5.4 / Options 1, 5 and 6 fulfil the objective of retention of ownership and accountability by the participating Councils. However, a Joint Committee is favoured over a Company as it better retains a local government identity in the new organisation.
5.5 / Strong links maintained with other Council services
This was not actively considered in the consultant’s report, as it was perceived as an objective that could be achieved by management arrangements under a Service Level Agreement, regardless of what Option was favoured. Obviously, the further service provision moves from individual authorities, the more robust the SLA would need to be.
5.6 / Provision of an entrepreneurial ethos within the framework of good business practice for the benefit of all stakeholders
Building Control services run as quasi businesses and are required to break even on fee-earning activities on a rolling three-year basis. As a result of this they already have a greater entrepreneurial ethos than many other Council services. Option 1 is unlikely to improve this any further but the potential for entrepreneurial ethos should increase through options 2-6, as any structure that requires the individual services to rethink how they operate in the process of joining together to achieve better business practices and processes for the benefit of stakeholders.
5.7 / A true entrepreneurial ethos can only be achieved by the development of the “single entity” options, (i.e. options 5 and 6). This is particularly true under a company structure because it is the duty of the Directors of a company to take decisions solely for the benefit of the company. However, the Board considered the governance arrangements for these options and felt that a company did not provide sufficient control or accountability for the local authorities involved. They also felt that it would be difficult to distinguish such a company from the existing private sector competition, (i,e, Approved Inspectors), to Local Authority Building Control services. Following advice from the then ODPM that company governance was not appropriate for regulatory services, the Board agreed that this objective could not be used to guide the choice of delivery option. However, it should still be retained as a key objective for whichever option is favoured.
5.8 / Provides tangible benefits for the Service’s clients
The benefits to clients from joint delivery would be a consistent approach across Dorset and, in the medium term potentially, lower fees as a result of efficiency savings.
5.9 / Option 1 provides no measurable benefits for customers over the current arrangements. Option 2 provides for two different approaches rather than seven, improving consistency, with some efficiency savings feasible. With a single overall manager, countywide consistency would be achieved from Options 3 – 6, although further efficiency savings would be difficult to achieve with Host Authorities, making the best options 5 and 6.
5.10 / Staff will not be adversely affected as a result of any strategic partnership/consortium arrangement
This has been a high priority for the Board. Obviously, any arrangement that disrupts the workplace, working practices and terms and conditions of nearly 80 staff is likely to affect individual staff significantly. The key for the Board has been to pursue options that improve the overall offer to the majority of staff and that compensate individuals for any adverse impact. Only Option 1 fully achieves this objective, as it proposes no change to current staffing arrangements. However, this option also provides no measurable benefits over current arrangements. In options 2-5, most if not all staff will be required to move to a different place of work and agree different terms and conditions, potentially including salaries. Given the extent of salary differentials between the East and West parts of the county, salary harmonisation would be easier in options 2-4, (which retain two employers), where options 5 or 6 move to a single employer. However, once harmonisation within two employers is achieved it would be extremely difficult to move to a single organisation in the medium term. Option 6 proposes a reduction of 11 FTE posts in order to recover the start-up costs over a period of five or six years. The Board considered that an option that required redundancy was inappropriate as one of the primary drivers of this initiative is improved recruitment and retention and that compulsory redundancies do not meet the objective of no adverse impact on staff.
5.11 / In the longer term there should be no increased costs to the participating Councils arising from the operation of this initiative
The business case sets out costs for the “single-entity” options only and shows that it is not possible to move to this form of joint service provision without an initial increase in costs. The main financial pressures on the participating councils are set-up costs, the redistribution of recharges, charges for non-fee earning work and loss of fee income.
5.12 / The set-up costs reflect the complexity of bringing together seven different organisations into a single entity. The business case shows over £0.5m of investment in ICT would be required, with other one-off costs such as project management, process re-engineering, and legal advice bringing the total to nearly £900,000. These costs would, of course, be avoided by Option 1 and might be reduced by the Host Authority Options 2-4. However, some of these costs need to be seen as an investment to create a higher performing and more efficient service at the end of the process, which arguably would need to be found in any case. It is the Board’s view that these estimated costs could be pared down considerably with further detailed investigation and imaginative solutions. Set-up costs could also be repaid using surplus future income, see 5.14 below.
5.13 / It is common practice in local authorities to charge central support costs, such as finance, personnel, IT, legal and senior management to service budgets. Removing Building Control services from direct council provision means that many of these costs would need to be redistributed to other council services, effectively increasing the cost of local service provision in the council. In some circumstances, these costs can be reduced where they relate directly to the provision of Building Control services (for example, where a full-time post is supported Building Control) but the business case shows that all participating councils would need to absorb significant amounts of recharges. Again, it is the Board’s view that with a pragmatic and imaginative approach, the participating councils could reduce the impact of recharges by sharing the delivery of support services between them.
5.14 / Approximately 30% of the work of a Building Control service is provided to directly benefit the general public and cannot be covered by fee income, for example, enforcement work and making dangerous structures safe. This cost is a direct charge on the Council Tax payer. However, many councils supplement some of this cost with their fee income, by charging fees that more than cover the cost of the fee-earning service. In all but Option 1, the costs of non-fee earning activities would be charged back to the council transparently and is likely to result in extra costs in real terms for most participating councils. It is possible that, where a fee surplus is earned, some or all of the surplus could be redistributed to the participating Councils. Whilst this would help to absorb the financial impact of the transition, it is not sustainable, as the DCLG requires councils to reduce their surpluses to a break-even point by investment in the service or reduction of fees.
5.15 / On a similar basis, some Councils subsidise other council services with the surplus income from their Building Control service, out of line with the DCLG requirement. This makes the removal of that income source even harder to budget for and is unlikely to be a favourable candidate for repayment from the new organisation.
5.16 / Whilst the business case sets out the costs of joint delivery and its impact on the participating Councils, it is clear that much more detailed and intelligence work needs to be undertaken by those responsible for budget setting in each Council. However, what is evident is that, without staff redundancies, it will not be possible to achieve the objective of no increased cost to the Council. What is not clear at present are the exact costs and the transitional mechanisms that could be used to minimise their impact. Ultimately, however, the business case shows that it is possible to merge the seven Dorset services without increasing the ongoing costs of providing the service.
5.17 / The following table sets out how each operational option achieves the original objectives. Options 5 and 6 meet the most objectives but the tension between no adverse impact on staff and no increased costs is clear:
Objective/ Option 1 / Option 2 / Option 3 / Option 4 / Option 5 / Option 6
Ownership/accountability / √ / x / x / x / √ / √
Links with Council services / √ / √ / √ / √ / √ / √
Entrepreneurial ethos / X / x / x / x / √ / √
Tangible benefits for clients / X / x / √ / √ / √ / √
Staff not adversely affected / √ / √ / √ / √ / √ / x
No increased costs / √ / x / x / x / x / √
6.0 / CONCLUSIONS
6.1 / The business case demonstrates that joint delivery of the building control services of the seven participating Dorset councils is possible and viable, and would also improve the quality of service to clients, whilst retaining sufficient local accountability. However, the two objectives of not adversely affecting staff and no increased costs appear to be mutually exclusive and further detailed work is required to reduce the potential financial impact on participating Councils.
In view of this, the Board has agreed that Member support from each participating council is required to:
- Work towards the joint delivery model set out in Option 5
- Undertake a more detailed investigation on the costs and impact of the proposal using in-house staff from key disciplines, such as finance, personnel and IT.
Head of Building Consultancy Services
Telephone 01202 633212
7th November 2006
Dorset Building Control Strategic Partnership
Business Case for the establishment of a Dorset-wide consortium - Executive Report
Cornwell Management Consultantsplc
Home Barn Court
Surrey KT24 5LG
Tel: 01372 456086
Fax: 01372 450950
Purpose of the document
4.future operational model
Why change is needed
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Purpose of the document
1.1Cornwell Management Consultants plc (Cornwell) was commissioned by a consortium of seven of the Dorset Local Authorities to consider the most pragmatic models for merging the respective Building Control organisations into a single entity, through which each Authority would procure its service requirements. The work was undertaken between January and September 2006 and this document summarises the business case, benefits, risks, costs and other implications of different operational and governance models and recommends a preferred solution. Christchurch Borough Council is represented on the Steering Group, attended the workshop sessions and will be involved in considering this business case document, but did not elect to engage in detailed consultation.