Agenda Item No. 4
THE VALE OF GLAMORGAN COUNCIL
CORPORATE PERFORMANCE AND RESOURCES SCRUTINY COMMITTEE: 21 MARCH 2017
REFERENCE FROM CABINET: 20 FEBRUARY 2017
C3475 RESHAPING SERVICES – CATERING PROJECT (RE) (SCRUTINY COMMITTEES - LEARNING AND CULTURE AND CORPORATE PERFORMANCE AND RESOURCES) -
Cabinet was provided with an update regarding the Reshaping Services Catering project and its approval was sought to refer the proposals contained in the report to the Scrutiny Committees (Learning & Culture and Corporate Performance and Resources) for their consideration before reaching a final determination.
The Reshaping Services strategy provided a framework for the Council to work within for the next three to five years. The programme was the Council’s proactive response to central government’s austerity drive that had created a period of unprecedented financial pressure in the public sector. The Council’s budget had been under pressure for a number of years with £35million in savings identified between 2010/11 and 2015/16. Further substantial savings had been identified as being necessary in future years. Failure to deliver the required level of savings would not be an option for the Council. According to many analysts the period of austerity was likely to continue for councils and the public sector. It was clear that the scale of the challenges to come meant that “business as usual”, however well managed, would not be enough.
The Catering Service had been identified as a ‘Tranche one’ service review project, with savings of £300k required in the 2016/17 financial year. There was also an additional £47k of savings prescribed in the Final Proposals for the Revenue Budget 2015/16.
A project team had been established to identify the most sustainable model for the future delivery of the Catering Service. The report set out the results of the business case development work that had followed the principles of the Cabinet Office’s Five Case Business Case Model which was recognised as good practice in this area and which provided a framework within which to fully evaluate proposals.
The scope of the project included the following services:
School Meals: primary, secondary and special schools
Administration and Monitoring of Free School Breakfast provision in primary schools
Staff Catering: vending provision
Administration of the School Milk Grant
A series of specific project objectives had been developed based on the Reshaping Services strategy’s objectives as follows:
To identify and implement the most suitable service delivery model for the Catering Service.
To create an efficient service that was able to adapt to future financial challenges.
To maximise opportunities to increase uptake and promote healthy school meals.
A wide variety of alternative delivery models for the service were identified during the baseline assessment process in 2014 and Cabinet in approving the programme, required the project to evaluate the range of options. These options were:
Option 0: Do Nothing: This option was used to compare any potential changes against the existing service model.
Option 1: Internal Service Transformation: This would be achieved through a reconfiguration of the current structure and processes to ensure the service was efficient to meet future financial demands.
Option 2: Collaboration: Collaboration would involve working with a public sector partner to deliver a shared catering service. This would most likely be delivered with a neighbouring authority such as Cardiff Council or Bridgend Country Borough Council.
Option 3: Outsourcing: Outsourcing to the private sector would involve contracting an external provider for the required services.
Option 4: Arms-length Company: This involved the creation of a separate legal entity that was either wholly or partly owned by the local authority. This model would be achieved through the creation of a co-operative/mutual or a local authority trading company. This option would be based on a local authority trading company with a cooperative (i.e. inclusive of stakeholder views) ethos.
An options appraisal had been carried out by the project team to identify the strategic fit, value for money and service impact of the various delivery models. The options appraisal had been informed by information gathered from training with Grant Thornton, (Chartered Institute of Public Finance and Accountancy and Association for Public Service Excellence), learning visits (to Plymouth’s local authority trading company (CATERed) and Sandwell’s mutual (SIPS Education), soft market testing (meetings with suppliers) and formal discussions with other authorities. The full options appraisal was included in Appendix A attached to the report.
Based on the High level Options Appraisal the Arm’s Length Company and the Internal Service Transformation were the highest scoring models. In line with best practice, full business plans had therefore been developed for both models to enable a detailed assessment to be made as to which model was the most appropriate model for the future sustainability of the service. The Business Plan for the Internal Service Transformation was attached at Appendix B to the report and the Business Plan for the Arm’s Length Company (Local Authority Trading Company) was attached at Appendix C to the report.
Appendix D attached to the report provided a full analysis of the potential savings that could be achieved with the implementation of both models. The aim of both models was to operate the service and fully recover its costs. This would result in the removal of the Council subsidy of the service. The maximum potential saving associated with both models was £228,664. The local authority trading company model was able to achieve this by 2020/21 and the internal transformation would achieve the full savings one year later.
When considering the two models to determine which was most appropriate for the catering service, the impacts on key stakeholders had been explored and details were contained in the Business Plans. An equality impact assessment had been completed for the preferred option and was attached at Appendix E to the report.
Based on the evaluation above and the information contained in the Business Plans, the local authority trading company was considered to be the most appropriate model to meet the objectives of the project, which were:
To identify and implement the most suitable service delivery model for the Catering Service
To create an efficient service that was able to adapt to future financial challenges
To capture opportunities to increase uptake and promote healthy school meals
This selection was due to the following:
The ability to achieve full cost recovery by 2020/21, generating a total cumulative revenue saving to the Council of £228,664;
Offered the potential to achieve significant surpluses that could be invested into the service and school kitchen. This would ensure the future sustainability of the service;
Offered the ability to trade with external organisations to generate additional surpluses to invest in the service and school kitchens. Based on anticipated turnover in 2017/18, the Teckal exemption would allow the company to generate an additional income up to a maximum of £860,365, which could be reinvested in the service;
A strong impetus to drive cultural change throughout the service to provide a more commercial approach;
A change in relationship between the service and the Headteachers, resulting in greater involvement in the day to day running of the service;
Provided a separate identify from the Council which, based on other examples, was likely to result in increased uptake of school meals;
Greater procurement flexibility would allow the service to adapt to the needs of customers. This could include providing locally sourced food for example;
Provided an opportunity for the Council to develop knowledge, skills and experience of greater commerciality that could be applied to other services as appropriate in the future.
The Business Plan set out the activities that would be undertaken by the service/company over a five year period. It was proposed that the local authority trading company would be created in year three of the business plan following two years of internalised service delivery.
Members were aware that staff and trade unions had been engaged throughout the formation of the project. The report proposed that should Cabinet endorse the project, staff and trade unions would be formally engaged during the timescale for consideration by Scrutiny Committees. The views of all stakeholders would then be reported back to Cabinet to inform any final determination. As described in the Consultation section of the report, Unison had helpfully provided a series of comments/questions to date and these along with responses were attached at Appendix F and G to the report respectively.
At the meeting, the Cabinet Member for Regeneration and Education commented that this report detailed a very in depth piece of work that had been ongoing for 18 months.
This was a matter for Executive decision
Cabinet, having considered the report and all the issues and implications contained therein
(1) T H A T the contents of the report, providing an update on the Reshaping Services Catering project which is a tranche one service review within the overall Reshaping Services Programme, be noted.
(2) T H A T the proposals to create a Local Authority Trading Company as outlined in the report be approved as a basis for referral to Scrutiny Committee (Learning & Culture) and Scrutiny Committee (Corporate Performance & Resources) for consideration and continuing consultation with trade unions and staff before reaching a final determination.
(3) T H A T subject to resolution two above, the implementation plan involving the creation of a Local Authority Trading Company in year three of the business plan as described in Appendix B of the report be approved.
(4) T H A T subject to resolutions two and three above, delegated authority be granted to the Director of Learning & Skills, in consultation with the Leader, Cabinet Member for Regeneration and Education and Managing Director to:
Undertake the necessary consultation and engagement activity as described in the report; and
Respond as appropriate to the engagement and consultation; and
Report back to Cabinet any material changes to the proposals resulting from the consultation process; and
Progress the implementation of the proposals following conclusion of all necessary consultation and engagement activity.
(5) T H A T Cabinet receive a future report detailing the progress made after the first year of the business plan including progress against the actions taken, any changes that are required to the underpinning assumptions, and setting out proposals relating to the governance of the company.
Reasons for decisions
(1) To provide Members with an update on the development of proposals for the Catering Service (which was a tranche one service review project within the Reshaping Services Programme).
(2) To enable the views of the Scrutiny Committees to be sought and involved in Cabinet’s consideration in reaching a final determination and following this consideration, to authorise the creation of a Local Authority Trading Company for the service.
(3) To enable the effective management of the project, including the creation of a Local Authority Trading Company in year three of the business plan following a period of preparatory work.
(4) To ensure the process of required consultation and engagement work with Trade Unions, staff and other stakeholders was undertaken efficiently and effectively in line with Council policies and procedures.
(5) To enable Cabinet to consider the progress being made and to enable the company to be established, including the development of the Articles of Association and Company Board.
Attached as Appendix –