Reviewed by PLC Public Sector in October 2012.
Case study: Shared services IT project
A case study detailing the materials available on Practical Law that would assist local authorities with shared service projects.
Borset City Council wants to outsource its IT function. Its neighbouring authority, Borsetshire County Council, is thinking of doing the same thing. Both councils want to explore working together to establish whether their IT needs can be outsourced as a combined package to:
Benefit from any economies of scale the market can offer.
Make savings by eliminating duplication.
How Practical Lawcan help
Getting to grips with the issues
Any shared service project will lead to numerous issues that will need to be addressed:
One of the first issues that will arise is whether the local authorities have the necessary powers to collaborate in this way. In addition to having the requisite powers, the formal decision-making process must be followed:
Documenting the relationship between the public authorities
The parties then enter into a memorandum of understanding (MOU) before embarking on the project. The MOU sets out which council is responsible for the scoping exercise and the eventual procurement:
Public procurement regime
The project has established the business case to proceed with the shared services arrangement. The councils then consider how to procure a private sector partner to run the new shared IT service:
They decide the competitive dialogue procedure is most suitable because of the complexity of the project:
The Competitive Dialogue procedure can be lengthy and costly, so the officers working on the project need to produce a summary briefing for inclusion in the report to members to explain why this is the best procurement option:
The partners will also need to think about what documents are required for the procurement process:
Specifying the requirements
The partners may need some assistance assessing key issues for the specification.
The new service will involve a transfer of staff from both councils and one of Borset City Council's existing sub-contractors to the new provider. The councils must consider how to apportion liabilities, what indemnities to give the new employer, and the best and most cost-effective way of protecting the employees' pensions:
The councils need to consider what documents they will need to deal with the proposed transfer of staff:
Secondment of staff
Borsetshire County Council then decides it does not want all of its staff to transfer; some will be seconded instead:
Borsetshire County Council holds a lot of sensitive information about its service users in its data centre. It wants to ensure that it has the right to require the service provider to carry out all necessary checks and monitoring in relation to its staff as is required under the Safeguarding Vulnerable Groups Act 2006:
Once the specification is determined, the councils also need to draft the contract terms and think about how they will manage the contract (what service levels to apply and how they will be measured):
The councils also need to consider whether the service provider will occupy the whole or any part of the councils' premises and, if so, on what terms:
Another council may want to purchase under the contract too. The OJEU notice (www.practicallaw.com/9-385-1432) must permit this and the contract terms specify how such third parties will access the contract. The terms may also provide for the councils to receive a commission from the service provider in respect of any third party spend going through the contract. This commission is intended as a contribution to the councils' procurement costs. The below clause will need tailoring if the third parties will share any staff, premises or other resources:
Awarding a contract
The partners carry out a successful procurement process to find their private sector service provider. They must now ensure that contract award complies with the provisions brought in under the Remedies Directive: