SE/STUC PPP Staffing Protocol

Draft Technical Guidance Note on Scoping of Services and In-House Bids

UNISON Briefing

Introduction

The Scottish Executive Financial Partnerships Unit has issued for consultation a draft technical advice note for PPP projects. This advice note provides supplementary guidance to the PPP Staffing Protocol on the factors to be considered in scoping the services to include or leave out of a PPP and the options in relation to in-house teams.

The advice note can be viewed at: http://www.scotland.gov.uk/pfi/technicalguidance.pdf

This UNISON briefing sets out our initial views on this draft guidance note. We have had discussions with the Financial Partnerships Unit (FPU) through the STUC and these will continue until ministers consider this guidance after the election. However, as Public Service Organisations are already referring to this document we have decided to publish this briefing as interim guidance to branches. This briefing should also be read in conjunction with the UNISON Scotland guide to the PPP Staffing Protocol.

Overview

It is important to emphasise that this is draft guidance. In UNISON's view the advice note is fundamentally flawed and undermines one element of the Staffing Protocol dealing with staff transfers. We have made it clear to the FPU that the advice note lacks balance. It accepts that staff transfer is not necessary, but then seeks to make that decision as difficult as possible for PSO's to take.

This Technical Note has been prepared by Partnerships UK (formerly the Treasury Taskforce). They are a private sector controlled body tasked with promoting PPPs and therefore cannot be regarded as an objective body. The following is taken from their website:

Partnerships UK completed a capital raising exercise in March 2001 which enables it to become a public private partnership: a joint venture with the public sector owning a minority interest and the private sector owning a majority. The governance structure has been designed to balance private sector disciplines with Partnerships UK's public sector mission. A majority of board members come from the private sector and the public sector is represented by two non-executive directors appointed by HM Treasury.

UNISON Response to the Advice Note

The key points in our response are as follows:

Organisation of the PPP Project

• The Introduction continues to emphasise that risk transfer (and therefore off-balance sheet status) is necessary to secure funding. Whilst for policy reasons this is required in local government schemes it is not required in all schemes according to the Treasury. Even if risk transfer is required the aim should be optimum not maximum risk transfer. Risks transferred to the private sector will all be charged back to the PSO, even if in practice they constitute very little actual risk.
• The guidance separates Facilities Management into 'Hard FM' (services which impact on the direct value of the asset like building maintenance) and 'Soft FM' (which impact on the services provided in the asset like catering). The guidance claims that if Hard FM remains in-house then it is "very unlikely that satisfactory justification or an off-balance sheet position could be achieved" (Note 1). UNISON recognises that it may be difficult to exclude Hard FM from a PPP project. However, we take the view that the hard/soft FM difference is a matter of policy not law and therefore sub-contracting and secondment options are viable. This view is shared by APSE (Association for Public service Excellence) who state "There is no legal reason why a sub-contracting arrangement back to a public sector body should be treated differently from sub-contracting to a private sector body".
• The advice confirms that 'soft' FM can be an 'element' of PPP projects and grudgingly states PSO's "will explore any opportunities" (A1). But then throws up as many obstacles as possible to this approach including:
• Need for an integrated approach
• Additional interfaces
• Financial risk if DLO fails
• Innovation if FM and design together
• Value for Money (VfM)

• There is a major emphasis on considering market conditions and attracting sufficient bidders. The purpose of a PPP is to focus on the needs of the service not the private sector. The whole guidance is bidder led (A4), claiming it is "The crux" of the issue (A4). There is no mention of the benefits to PSO's of an integrated DLO/DSO (see below).
• A number of current schemes (mainly schools) are fairly advanced and the guidance seeks to encourage no change in FM provision because of this (summary 9 and A3). This is contrary to the Protocol, which set the November date around the ITN stage.
• Assumes without any evidence that private sector FM is better VfM (A1) or necessary to achieve risk transfer (A3). The large number of private sector FM failures in Scotland are not mentioned.

Options

• The advice note sets out four options:

1. Exclusion of FM services from the project pre-procurement
2. Exclusion of FM services from the project by 'Best Value' testing at ITN stage
3. Sub-contracting of an in-house team
4. Secondment of staff

• The exclusion option (favoured by UNISON) is played down in a brief paragraph. There are no positive factors described only the negative and even these assumptions are presented without evidence. Key arguments UNISON would use in favour of exclusion are:
• The risk of collapsing the in-house service leaving few options if the private sector service fails. Remember, with a PPP project the PSO is committed for 25 years or longer.
• The maintenance of teamwork. An issue particularly highlighted in the NHSiS plan. By excluding FM services from the PPP project the PSO has one team working to common objectives.
• Reduce the cost of monitoring the private sector provider.
• No incentive to under cut the specification for cost cutting reasons
• No two-tier workforce. A key element of the Staffing Protocol.
• Economies of scale for the PSO in maintaining a larger DLO/DSO with consequential economies of scale in central services.
• Stable industrial relations.
• Avoids the risk of claims for sex discrimination implicit in only transferring FM services.
• No complicated "back to back" contractual relationships with the initial responsibility placed on the PPP contractor and then part of that responsibility being passed back to the PSO.
• Option 2 is similar to option 1. However, there is no need to undertake a new Best Value exercise. It is also not necessary (as claimed by the guidance) to go through a form of testing the price and quality against the PPP contractor. The guidance focuses on price with little mention of quality factors. In fact the guidance could be described as 'son of CCT'. Again there is no mention of the monitoring costs of a PPP – the emphasis is on need to monitor the DLO.
• Option 3 does have its complications, which is why it is not UNISON's preferred option. However, again it is presented as an option with many obstacles to be overcome and the reader is left with the impression that it would be more trouble than it is worth. In practice this is a standard contractual relationship which most DLO/DSOs are perfectly capable of undertaking in accordance with the APSE guidance.
• Option 4 (secondment) is an option which should apply to hard FM as well as soft FM. However, it is dismissed in a short paragraph presumably because it is not popular with PPP providers. It may be untested in the schools sector, (which appears to be the author's primary experience) but there are Scottish examples in the water industry. In England this has also been used in Liverpool Council with staff seconded to a joint venture company established with BT in 2001. Again these are not mentioned along with any explanation of the benefits to the PSO and the PPP, which are similar to those set out for option 1.
• Note 1 covers the differences between Hard FM and Soft FM, which are covered above. The emphasis is on the problems 'additional interfaces' could cause. However, these interfaces only exist if PSOs include FM services in the first place.
• Note 2 simply highlight the need to bring standard contract documentation up to date to reflect the PPP Protocol. Again all the emphasis is on the risk of keeping FM in house. No mention of the advantages or risks inherent in external FM provider.
• Note 3 again assume all advantages in privatising services.

Conclusion

In summary, an unbalanced document that appears to be aimed at promoting the transfer of all FM services to the PPP project. This undermines a key element of the PPP protocol.

Branches are advised to follow the advice in the UNISON guide to the PPP Staffing Protocol and press for the exclusion of at least soft FM services from the PPP project, using the arguments set out above. Hard FM can be addressed through secondment or sub-contracting. The aim remains to ensure that no staff have to transfer to the PPP project.

For Further Information Contact:

Dave Watson, Scottish Organiser (P&I) d.watson@unison.co.uk

Further reading:

UNISON Scotland Guide to the PPP Staffing Protocol www.unison-scotland.org.uk

The Involvement of DLOs and DSOs in Local Authority PFI Schemes 2002 (APSE)

and the APSE circular to local authorities in Scotland on the guidance note at http://www.apse.org.uk/

April 2003