Dave Ayre, CIPFA Property Manager
This is the first in a series of articles written for CIPFA Property's e-newsletter where we explore some of the general pros and cons of the main service delivery options starting with in-house services.
This is the question that is increasingly being asked by national politicians, councillors and the general public alike. Since 1979 and the election of the Conservative Government led by Margaret Thatcher the question of whether services are delivered primarily in house or by privatised services has become a much more politically charged debate. The election of a Government whose ideology was driven by the free market think tanks of the Adam Smith Institute, the Institute for Economic Affairs and the Centre for Policy Studies shattered a post war consensus which had allowed public sector organisations the discretion to run public services as they saw fit. There followed a series of high profile forced privatisations of public utilities and Compulsory Competitive Tendering CCT was introduced in local government and the NHS which initially impacted on the asset management services of construction, maintenance and facilities management.
From CCT to best value
Tony Blair’s New Labour Government of 1997 saw the abolition of CCT and its replacement by Best Value and the requirement for services to be subject to Best Value reviews and the four Cs of;
- Challenging the way existing services were operating
- Comparing performance with other authorities or organisations
- Consulting with all relevant stakeholders
- Competing where appropriate
Although the requirement for Best Value Reviews and the Audit Commission watchdog was abolished by the Conservative / Liberal Democrat administration of David Cameron elected in 2010, one of its legacies was the benefit of applying options appraisal techniques and Business Case development to decisions on how services should best be delivered.
Strategic Asset Management should be in-house
The simple fact is that delivering asset management services in the public sector is not a binary choice between in-house and privatised services. Public sector organisations have a range of service and project delivery options available to them from in-house delivery to outsourcing, public private partnerships and collaboration between two or more public sector agencies. Most organisations deploy a combination of these service and project delivery options. However, it is vital that strategic asset management is an in-house service ensuring that the organisation’s assets are helping to deliver corporate priorities and are safe for the public and workforce alike. The public sector and particularly local authorities will always be the provider of last resort, accountable to its community for the delivery of services and key projects regardless of the option selected.
The right combination of service and project delivery models will vary depending on the size and diversity of the organisation, its policies and objectives and the diversity of its land and property portfolio. Organisations should carry out an appraisal of the options and prepare a robust business case to make sure that they have chosen what is the most appropriate for them and their communities.
In-house service delivery
Very few, if any organisations have the capacity and organisation to be able to deliver all asset management functions from their own in-house teams. Some large public sector organisations with long-term capital and revenue works programmes are able to establish teams for every technical and functional expertise required to deliver asset management services primarily in-house. The challenge for organisations wishing to deliver most services in-house comes from the unevenness of the asset management cycle. Assets can deteriorate at different rates, for example a prolonged period of low temperatures can cause highways to deteriorate at a quicker rate and frozen pipes in buildings can all thaw at the same time, causing multiple failures across the property estate or housing portfolio. Organisations with in-house construction and maintenance workforces may struggle to build capacity and expertise for the peaks in their workload, install certain specialist items of equipment or deliver specialist services on an infrequent basis. There is often a heightened level of activity across a school buildings portfolio during the school summer holidays when minor works and planned maintenance such as re-roofing, re-boilering and re-wiring works can be carried out without disrupting the education of pupils. It is not usually efficient for in-house services to be resourced up to their peaks in workload. However, there are management approaches that can be deployed to maximise the use of in-house services:-
- Programme management – systematic forward planning and programme management can be used to smooth out the peaks and troughs of workload in planned maintenance and new build construction programmes. Regular condition surveys and inspections can help to inform plans which can make the level of reactive maintenance more predictable. Work can be allocated across multiple teams and skill mixes within teams can be adjusted to allow some teams to specialise in designing and/or delivering minor works, and others to focus on more complex larger capital projects.
- Communication, openness and trust are vital to effective programme management. Technical and works teams must be open and honest with programme managers so that potential slippages in project programmes can be identified early and corrective action can be taken, or early warnings provided to client services. Regular communication needs to take place with client services and an open and mutually respectful relationship must be developed so that the implications of slippages on service users on the one hand and the reasons for delays on the other are understood by all parties.
- Prioritisation – projects and works can be prioritised to smooth out peaks and troughs and this can be factored into programme management decisions. Projects that are not so time critical can avoid the school holidays to prioritise projects that need to be complete by the beginning of the new school term.
Many organisations derive real value for their communities by retaining an in-house workforce delivering some if not all of their asset management services. It is often in times of crisis, emergency or the need for rapid change and response that in-house workforces can show their added value:-
- Severe winter events - In-house resources can quickly be deployed to deal with winter emergencies, driving snow ploughs, gritters, clearing footpaths and using all-terrain vehicles to transport care workers to the vulnerable.
- Flooding – Workforces can be engaged in filling and transporting sandbags and constructing temporary flood defences, staffing emergency planning centres and being a key part of emergency planning logistics and deployment.
- Animal and public health emergencies – Public sector workers are often able to show an ethos not always present with others, responding to animal health emergencies such as foot and mouth disease outbreaks and human health emergencies such as Coronavirus in a multi-agency response.
- Market regulation – The costs of asset management activities can fluctuate according to changes in the international, national and local markets. Construction and maintenance costs are currently caught up in an inflationary cycle driven by the combination of post-COVID economic bounce-back, materials shortages, delivery delays and labour shortages. In-house services experience many of these same pressures, but other factors can affect costs such as the overall level of construction activity in the market place. Major national or local construction projects such as high-speed rail can distort the market. Peaks in activity, such as works to schools during school holidays feed into tender prices that would otherwise be lower at other times of the year. External consultancy services are frequently more expensive than in-house architects, engineers and cost consultants. Retaining an in-house workforce can help to insulate the organisation from extreme fluctuations in market costs, helping to make capital and revenue works programmes and their associated budgets more predictable and manageable. They can also provide a degree of protection from market failure, ensuring a continuity of essential services when private sector providers collapse.