Financial assessment and implications of the four main options The results of the financial assessment of the options are: Assessment criteria Outsourcing Remodelled provision CIC LATC Ability to make savings and be sustainable Will make the savings but could lose significant control over services Limited scope to make required savings without reducing services Social Enterprises (SE) have proven record of becoming more efficient and reducing costs have proven track record of becoming more efficient and reducing costs Ability to and develop new services 3rd Party providers are free to trade services cannot trade freely SE’s are free to trade LATCs are free to trade BoP can benefit from profits Contract is only mechanism for BoP. Would not share in additional profits BoP in full control of all aspects of these services Asset locks prevent BoP from enjoying all additional profits. Control is not guaranteed BoP has full control of the Co and can direct reserves to where it decides, but Corporation Tax may reduce full availability Summary Any savings /profits not all for BoP Will not deliver savings Any savings /profits not all for BoP Any savings/profits and control for BoP Summary appraisal The acceptability of each of the options considered has been summarised in the table below from our complete analysis which is provided in Section 9. Option 1 – Outsource of provision to the market: Qualitative assessment Quality Viable but with significant risks Whilst in theory this option has the potential to maintain or improve quality and is accessible to private funders and DP service providers may misjudge capacity and/or capability and ability to maintain quality in achieving their cost models. Current market analysis identifies risks relating to quality in complex provision. Cost Viable but with Outsourcing typically achieves the lowest of services. However, providers will
significant risks retain any additional savings or income generated outside the contract. Governance and flexibility Viable but with significant risks This will be dependent upon good contract management. Providers are unlikely to commercial data and any accommodation of policy initiatives could incur additional costs. Also there is no “Provider of Last Resort” that is fully in control of BoP. Acceptability to stakeholders Viable but with significant risks Outsourcing option is unpopular with staff. Service users and carers are concerned about the threat to quality. This could be mitigated by appropriate stakeholder management. Nevertheless there is a future risk to staff terms and conditions. Financial implications Viable but with significant Whilst outsourcing could be financially viable, the market issues present significant risk to the Council. If some services are left in the Council the resources needed to manage and support these services will reduce the cost reduction benefit gained from a lower contract price. Also, the Council needs to consider how they can tap into savings. Overall Available but with significant risk due to market conditions Outsourcing is a viable option and this is reflected in the number of independently provided adult services across the country. There is a potential to reduce cost and ensure a financially sustainable service. However, this is not without significant risks and current experience within Poole would ward against this as a solution due to limited supply and potential quality issues. The Council will lose ultimate control of the service affecting, for example, the flexibility to implement new policy initiatives. Equally, the Council will not be able to generate income from this option and any savings made ultimately rely on the negotiations over contract value and terms. It is also likely that the service as a whole would have to be ‘parcelled-up’ and tendered in individual service offerings which increases the real risk of some niche, expensive services remaining in the Council. Option 2 - Continue with a remodelled in-house provision: Qualitative assessment Quality Viable but with risks In house provision guarantees service of last resort and could make effective use of the Council’s partners. However, financial pressures may lead to a compromise in quality through a reduction in service provision and staffing levels. Cost Not viable In the current climate and given that the service will be undergoing some
cannot generate external income to supplement revenue. The closing of services to meet cost savings will result in unplanned outsourcing to the market. Governance and flexibility Not viable Whilst this option allows flexibility in terms of policy initiatives and allows the Council to maintain ultimate control, it is inherently unsustainable and commercially inflexible. BoP would remain the Provider of Last Resort. Acceptability to stakeholders Viable This option is preferable to most and service users as there is a perceived level of job and service security. It is natural that the option involving the least change is the most acceptable. Financial implications Not viable Achieving future savings will require significant reconfiguration of services is likely to require the closure of some existing provision. Overall Not viable Financial and demographic pressures and consequential top down Government policy means that to continue in-house provision is not viable. As the Government follows its ambitions to increase the number of Direct Payment service users through SDS, the Council will ultimately bear the cost of both running a service and paying out Direct Payments which service users may not be prepared to pay for. Eventually, the need to make savings will result in a stripped down service where quality is compromised and service user needs are unmet, and eventually the only option will be outsource the services to the wider market. The benefit of this option would be a continuation of ‘business as usual’ and this enables BoP to remain a direct provider and could continue to facilitate the management of the modernisation agenda. However, this would be likely to lead to an ongoing rationalisation of services and these services would therefore be vulnerable as a target for savings through service cuts. This in turn could lead to a reactive externalisation not necessarily in a planned or productive manner which may not be in the best interests of the Council. Creating an internal business model either through zero based budgeting or creating a Direct Services Organisation will not deal with the inherent structural and cultural issues of providing the services from within the Council. Option 3 – Create a new Community Interest Company (CIC), a form of Social Enterprise: Qualitative assessment Quality Viable This option increases competition in the marketplace as it is accessible to private funders and DP service Service users commission their own provision and therefore will drive the delivery of high quality services. Cost Not viable Social enterprise options can improve efficiency, reduce costs and achieve