Decision Maker: Cabinet

Outcome: Recommendations Approved

Is Key Decision?: Yes

Is Callable In?: Yes

Date of Decision: September 24, 2024

Purpose:

Content: Salford City Council - Record of Decision (Cabinet) I Councillor Jack Youd, Deputy City Mayor in exercise of the powers contained within the City Council Constitution do hereby approve: ·         To delegate authority to the Executive Director of Place in consultation with the lead member to develop a detailed business case for the establishment of a wholly owned Teckal compliant company for the delivery of Technical services, to be brought back to Cabinet for consideration and approval Reasons: In Feb 2020, after a 15-year partnership with Urban Vision, all services were brought back in house. The main driver was to improve the quality of service and to also generate cost savings. However, without the understanding of true service costs, it was not possible to explore any alternative delivery models including a trading company.   This report provides a summary of service delivery challenges, in particular around recruitment and retention. To ensure continuous service delivery, disproportionately high volumes of works are being outsourced, making the current delivery model unsustainable in its current arrangement. This report provides an overview of the future service delivery options explored, along with a recommended option to take forward for further delivery.   As part of this options review a detailed analysis has been undertaken over the last 18 months. Due to recruitment and retention challenges technical services is required to outsource 90% of the highway’s construction works at an average cost of £20m per year. Similarly, around 50% of engineering consultancy work is being outsourced at an average cost of £1.2m per year. Using the current GM and SCC frameworks, where value for money and social value is limited.   Recruitment of experienced staff is challenging in the current model with significant evidence of industry competitors including other local authorities paying higher salaries, compared to Salford. Market supplements and succession planning options have been applied where possible but are not sustainable solutions for the long term.    Evidence shows remaining in the current arrangement even with modifications, placing more reliance on external suppliers, will lead to a reducing directly employed work force with limited skills and increasing outsourcing costs. The current inhouse delivery model will evolve technical services to become a commissioning authority, which has been explored as the strategic partner option 2.   An alternative model of a wholly owned trading company has been explored, as part of this options analysis. The operational assumption of increasing directly employed staff by offering market competitive salaries and reducing outsourcing will generate financial profits and create local jobs. Based on the current pipeline this is a financially viable option and is sustainable. However, HR impact (especially equal pay) needs a detailed risk analysis if this option is chosen to be explored further. In addition, it will be helpful to engage with other LATCOs nationally to better understand the risk and opportunities.   The current model is not considered to be sustainable as it is not possible to recruit senior skilled officers. In order to continue with the current model, it will be critical to modify the structure and appoint commissioning officers to oversee better procurement of services. This will however continue with 90% of the construction and 50% of design work being outsourced. Inevitably this model will lead to higher volumes of outsourcing.   A wholly owned TECKAL compliant company option is considered to be financially viable, based on the work undertaken by external consultants. HR has highlighted that there is an equal pay risk with the LATCO model. To better understand this risk, engagement with other LATCOs and an equality audit is required.   The Teckal option provides a platform for the Council aspiration to create local employment and self-delivery. Assessment of Risk: The risk assessment focuses on the financial viability and sustainability of the LATCo model. Stress testing of the financial model is crucial to ensure that the LATCo can operate effectively within the projected budgets and revenue streams. Key risks include the successful recruitment of skilled staff, managing operational costs, and aligning the LATCo's objectives with the broader strategic goals of the Council. Legal Advice obtained: This report builds upon the initial options report, and summarises the findings of external consultant Inner Circle’s appraisal of options for the future delivery of the service. The Shared Legal Service attended meetings with the consultants and Council teams, and provided information for consideration within their analysis. The Shared Legal Service notes findings of Inner Circle’s analysis which are described in this report. This report highlights the various considerations, benefits and risks associated with the three options for comparison and evaluation. The Council must ensure that it complies with all applicable statutory duties associated with the procurement and/or the delivery of the services, including achieving best value, maximising public funding and ensuring that the Council is transparent and accountable with how it is used. Shared Legal Services notes that following consideration of the available information, the recommendation is to proceed with the development of a business case for the development of a teckal LATCO. Shared Legal Services is happy to provide all necessary legal support to the Council in respect of this option.   Financial Advice obtained: David R Mills, Strategic Finance Manager, 8th August 2024 The work undertaken by InnerCircle on this proposal identified a number of options, as identified in this report. This paper is seeking support to develop plans in support of a local authority trading company under the Teckal exemption, where at least 80% of the activity of the company must be with the Council. Further work will be required to produce a detailed business plan that is supported by financial statements clearly identifying all risks and opportunities. All implications of implementation of this project will have to be factored into the Medium Term Financial Plan.   Procurement Advice obtained: Whichever future delivery model is agreed, procurement will work with the project and legal teams to establish the basis and under which relevant procurement regime, if any, contracts are to be let and delivered.   HR Advice obtained: HR has been consulted and comments and implications are contained in the body of the report these are high level dependent upon the option significant work will need to be undertaken to ensure compliance and to build a clear structure and employment platform that is legally compliant and minimises risk to the Council and service delivery.   Climate Change Advice obtained: N/A   Contact Officer: Shoaib Mohammad                             -       The appropriate scrutiny to call-in the decision is the Growth and Prosperity Scrutiny committee.      Signed:            Councillor Jack Youd      Dated:         24.09.24                                                        Deputy City Mayor   For Democratic Services use only   This decision was published on   24.09.24                                           This decision will come in force at 4.00 p.m. on 01.10.24                                                   unless it is called-in in accordance with the Decision Making Process Rules.