It all sounds terribly New Labour. Out go adversarial compulsory competitive tendering and beggar-my-neighbour private finance initiative contracts. In comes 'best value' - local authorities and private companies working together to provide better services for less money. As with many modernising government projects to emerge over the past couple of years, the proposed magic ingredient is information technology. And, as with the PFI before it, the difficulty with best value is how to turn 'motherhood' sentiments about collaboration and re-engineering into reality.
'I can't think of anyone who thinks it's a bad idea,' says Mary Pitteway, strategy manager at Bull Information Systems, one of the leading IT suppliers to local government, 'I can't think of anyone who thinks it's going to be easy'. Deadlines for best value are fast approaching. Under clause 21 of the Local Government Act 1999, the requirement to submit services to CCT will be repealed (in England and Wales) on 2 January 2000. Local authorities will then have to draw up their first best value performance plans.
The deadline for this is 31 March 2000. The Department of the Environment, Transport and the Regions has published large amounts of guidance on its website.
It says the new best value regime will require authorities to take 'all reasonable steps' to ensure that the quality and cost of services reflect what local people want and can afford; to ensure that the efficiency and quality of services improve continuously over time; and to set targets for improving services which 'aspire to reach the standards of the best'.
This is all good raw material for mission statements. But finding measurable ways of doing things better and cheaper - which is what best value boils down to - is more difficult. John Serle, co-ordinator of the best value group of the Society of Information Technology Management (Socitm), which represents local government IT managers, says best value will create three pressures for innovation in IT. First is in local authorities' IT departments themselves.
Local authorities will have to demonstrate that their IT 'boiler rooms' are providing the best possible value for money. If best value means simply keeping a lid on extravagance, there are signs that this is already happening. According to Socitm's annual trends survey, authorities' IT budgets in 1998/99 added up to £1,020m, which was nearly 4% lower than the previous year. Of this, £260m went on systems to tackle a one-off problem, the millennium roll-over. This year's survey, to be published in early December, is likely to show spending continuing to drop, a trend that (taking inflation into account) has been happening since 1992. Secondly, local authorities will have to instal IT systems and management procedures to measure best value. Socitm is working with the Audit Commission to draw up a set of nine so-called key performance indicators to be assessed. The computer technology itself is not trivial.
Sandwell District Council in the Midlands has announced it will have to order a £500,000 system to compile statistics for the government's performance assessment framework and best value. Thirdly, and most ambitiously, best value means radically reshaping services around local government's 'customers'. Such schemes usually involve creating partnerships with other public bodies and private companies to find seamless ways of collecting revenue and dispensing services.
This is the vision that excites central government - and the IT industry. 'There is no way that this can be accomplished without turning access to information inside out,' Pitteway says. While local government seems to be moving faster than central government to re-invent itself - projects such as the Lewisham Integrated Services Prototype, which links different departments' information systems to speed up service and fight benefit fraud is an excellent example - few local authorities seem to have thought best value through. Socitm's next trends survey will show that authorities' attitudes to best value vary greatly.
The danger, says Dave Denison, consultant on the local government market at IT services firm ICL, is that authorities will concentrate only on the first, most superficial challenge: to cut their IT costs. The danger here is of repeating the mistakes of CCT.
'The traditional CCT view was to look at each department in turn and gain efficiency savings in that,' Denison says. 'This missed the big picture. One barrier to more creative thinking, Denison says, is that many local authorities see best value as outsourcing (itself a euphemism for privatisation) being peddled under another name. It shows how much the political wind has shifted in the late 1990s that IT firms which once sold 'business process outsourcing' as a miracle cure are distancing themselves from it.
'There is still tension about whether to outsource,' Denison says. 'Most local authorities don't want to turn their back on their responsibility to their staff and there is a particular service ethic which is not yet convinced that the private sector can deliver services better.'
Hence the appeal of best value, which appears to offer a middle way. The DETR is trying to get more innovative ideas off the ground by promoting a series of pilot projects. They include: - Local franchise partnerships. These involve local authorities and private firms working together to deliver services within a 'commercially based environment'.
The idea, proposed by ICL, is to set up shared organisations to handle tax collection, payment of housing benefits and other large-scale administrative processes which could benefit from commercially managed IT. The idea is to set up a central processing centre, or hub, capable of serving several outlying local authorities. In theory the hubs could serve a local authority anywhere in the country, but Denison says that even in the digital age, human contact between front and back offices is still essential, so he is looking for link-ups between neighbours. 'It helps if you know the people,' he says The first such partnership is due to go live within a year. - Payroll partnership network.
Again, the idea here is to share large-scale administrative processes, in this case payroll. Bath and North-East Somerset and South Gloucestershire local authorities have agreed to a partnership network with a private contractor to secure best value in running a combined payroll service. Some staff will transfer to a private service supplier to create a combined team to run payrolls jointly according to agreed levels of service.
The authorities hope that the network will include a benefit or profit share arrangement, with all risks shared by the private contractor. The hope is that these ideas will catch on. The outlook is good: few people in the local government IT scene shed any tears for CCT. 'The culture of CCT was adversarial with the private sector,' says Pitteway. 'By definition it fragmented services into little boxes. There was an incredible emphasis on cheapness, short-term costs.'
Ironically, however, best value has arrived just as the public sector is beginning to get the hang of the other 1990s funding revolution - the PFI. Last July, Derby City Council managed to negotiate a £4m technology and service contract in five weeks from beginning negotiations to signing the contract.
The successful bidder, Bull, claims this is a record; the process normally takes months, if not years. Under the contract, the company will automate the processing of council tax and business rates and promises to save time and costs by re-engineering internal processes. As a PFI deal, the computer firm is managing the entire project and is responsible for procuring third party services and technology.
The council says the contract is preferable to a complete out-source because it brings together the two organisations' strengths. 'It releases our staff from the frustrations of paper-based systems so they can focus on delivering a truly best value front-line service,' says Alan Graves, chair of Derby City Council's finance and property subcommittee. For most public bodies, however, the cost and time of arranging PFI is out of proportion to the likely benefits. The situation was most absurd in healthcare, where at one stage even a departmental system costing a few tens of thousands of pounds had to be tested for PFI suitability. The effect was to freeze spending, leading to a crisis in the IT industry.
It remains to be seen whether best value procurements will be quicker off the mark. Pitteway is optimistic: she says that the process of drawing up a best value deal 'appears to map closely with PFI' - with the exception of the quagmire of the procurement itself. Before the procurement, both regimes require similar processes of assessing business need and planning performance measures. After a project has gone live, procedures for reviewing services and measuring the supplier's performance should be similar to those negotiated under the PFI.
There are still some worries. One difficulty arises from the long timescale of IT partnership contracts. Under the PFI, these typically run from seven to 15 years, or in some cases even longer.
These contracts cannot be too specific about technology. At the end of a ten-year contract, all the original systems will be obsolete, so the contract must be flexible in specifying technology, but ensure that the supplier makes the necessary upgrades. The solution is a 'strategic partnership' type of relationship rather than a contract to supply a specific service. However, the industry argues that this will not happen if the contract always goes to the lowest bidder.
There are signs that the Treasury is moving to recognise the industry's claims that IT is a special case. Andy Carty of the Treasury's PFI taskforce says that it will no longer allow companies to sign loss-leader deals. He says that some deals had ended with a 'stupid Dutch auction' in which suppliers made unrealistically low bids, in the hope of adding on services later. New rules will force bidders to demonstrate how they expect to make a profit, Carty says. 'You won't get the deal unless you show the profit.'
With the best value bandwagon rolling, anyone who sounds a note of caution risks being branded a 'force of conservatism'. Nevertheless, some scepticism is in order. Not for the first time, there is a feeling in the town halls that Whitehall is forcing local government to go where it fears to tread itself - to re-engineer itself in a way attempted by only the brightest and best private firms, with IT budgets an order of magnitude greater.
Pitteway sums up the challenge: 'It's taken the private sector two decades to do it and we're not all there yet. It's easy to say and very hard to do.'
For further information see: www.local-regions.detr.gov.uk/bestvalue/ -
Michael Cross is a freelance journalist
CASE STUDY: INNOVATION AT NEWHAM
The London Borough of Newham claims to be solving two pressing problems at a stroke thanks to an innovative joint venture with a private supplier. It has created a limited company called New Deal IT Services to run its IT and to extend computers into other agencies as required by 'joined-up government'. The venture is also creating 24 apprenticeships under the New Deal scheme for the young unemployed. Newham council already has 4,000 PCs and a network of community service kiosks in places such as health centres and police stations. It is also pioneering lifelong learning schemes and 'teledemocracy', allowing voters to contact their councillors online. New Deal IT Services, which is jointly owned by the IT firm Bull, will run systems under a service-level agreement along the lines of best value. The company will also supply the councils with hardware, software and networking equipment. Richard Steel, the borough's head of IT services, says the project's goal is 'to make Newham a place where people want to live, to alleviate unemployment and make the community aware of its resources'.
CASE STUDY: GATESHEAD FORGES ROUTE TOWARDS BEST VALUE
One route towards best value is to design local government services around the citizen, so that staff dealing with any enquiry know as much as possible about their 'customer'. Cutting the number of repeated enquiries saves time, money and improves morale all round. The trouble with most one-stop shops is that they are tacked on top of legacy systems. Gateshead Council is one of the first in the country to adopt a new IT services and software strategy, supplied by ICL, which it claims will radically change the way it deals with its citizens' needs. The system, called Pericles, is a suite of programs developed specifically for local government and running on Microsoft software. At Gateshead, the new systems will handle business rates module, with modules f or council tax and benefits to be added next year. The council says Pericles will cut duplication of information and free IT resources, allowing officers more time to concentrate on delivering services to the citizen. ICL's Pericles, and its underlying Microsoft NT Enterprise technology, will enable Gateshead Council to become more responsive to citizens' needs, providing the framework to deliver joined-up information across the council. Pericles is a product of the global alliance between ICL and Microsoft and is in line with ICL's declared strategy to design, build and operate systems and services which enable government to create, maintain and develop personal relationships with the people who use their services. Julie Knox, IT manager at Gateshead Council, says: 'One of Gateshead's priorities was to seamlessly migrate from our existing bespoke system to Pericles, while still delivering cost-effective services directly to the public. 'We chose ICL because, with Microsoft, they have given us flexible technology allowing us to provide services such as online electronic forms in the future.'
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