COMPETITION AND EFFECTIVE PROCUREMENT
This paper updates and supersedes the chapter on Competition in the “Guide to Best Value and Planning”.
It is important that this paper is not read in isolation. The Chapter in the Guide on “Partnerships” also provides important advice (and will be updated in due course) which can help local planning authorities deal with the competition element of Best value. The “Costs” chapter is also of direct relevance. The abandoning of the Best Value Performance indicator (BVPI) on the cost of the Planning service by ODPM should not be interpreted as undermining the very valuable advice in this chapter on how to measure the cost of a service.
THE CONTENTS OF THE PAPER ARE AS FOLLOWS:-
; Key messages
; Where competition fits into a Best value review
; Can Planning be delivered other than in house?
; Sharing Planning work
; Addressing competition in Best value
; Some specific advice on selected issues
; Government and other support for procurement
1.0 KEY MESSAGES
; For Planning services to be competitive they need to be considered in
terms of their constituent parts or tasks
; An authority should be open minded in its examination of how a service
is delivered and who actually delivers it
; Good procurement depends on preparation and it is never too early to
begin that preparation
; Throughout the review and subsequent delivery of service issues of
probity, propriety and performance are of paramount importance and
the relationship between them must be carefully managed and risks
; The Review should be conducted so that it identifies the appropriate
service delivery options through:-
(a) fundamental challenge to the existing service to establish the key
areas requiring improvement and the best means by which to deliver
(b) robust and rigorous comparison
(c) consultation to inform the option identification process
; clear evaluation criteria should be developed so that the preferred service
delivery option is consistent with:-
(a) corporate objectives and ethos
(b) potential risk: and
(c) potential conflicts of interest that should be dealt with through
; The preferred option for service delivery should deliver the desired service
improvements, having regard to the five “E‟s” and drive the service to be
amongst the best performers
; There must be support from senior managers, elected members, staff and
the local community for the chosen service delivery option.
2.1 The aim of this section is to help planning authorities gain the expertise needed to address competition and effective procurement by:
; Demonstrating how the competition element of Best value applies to
the planning service; and by
; Providing guidance to planning managers and the Best value review
team to help ensure competition and competitiveness are properly
addressed in the review process and that procurement of the service is
effectively executed whether as part of the review or as a post review
2.2 Much has been written on competition and procurement since the Guide was published. Reference will be made in the text to recent useful sources of information and practical help. It is not intended to replicate this published information. Although key messages from these sources are flagged up the Reader is encouraged to explore them in depth separately in order to benefit from the wealth of detailed assistance and advice they contain.
3.1 This section provides some background material on:
; Government advice on competition
; The ethos of competition
; An introduction to procurement
; The National Procurement Strategy for Local Government in England
; The role of the Local Strategic Partnership (LSP)
(a) Government advice on competition
3.2 Circular 3/03 “Local Government Act, 1999, Part 1: Best Value and
Performance improvement” is essential reading. It draws heavily on the Byatt
report on local Government procurement (ODPM, 2001), the Treasury report on the role of the voluntary and community sectors (Treasury, 2002) and the Government‟s own pre-circular review of Best Value (ODPM, 2002) and
repeats the call in each for more innovative approaches to commissioning, procuring and providing services. The emphasis is on really challenging existing ways of doing things and involving both service users and staff in the challenge process.
3.3 The Government also confirms its commitment to “diversity and plurality amongst service providers….with no ideological preference for any one form of provision over another….the highest standards of service provision are
more likely to be achieved where there is genuine competition and choice for service users and a mixed economy rather than where any one supplier dominates the provision of services” (ODPM, 2003(a)).This pragmatic view about who delivers a service, whether public or private or voluntary sector, reflects earlier advice from the IdeA who described Local authority aims for competition as” What works is what counts” (IdeA, 2001)
3.4 The Government‟s definition of Best Value in the Circular is “ the optimum combination of whole life costs and benefits to meet the customer‟s requirements”. This approach is seen as allowing sustainability and quality to be taken into account when service delivery options are considered.
(b) The ethos of competition
3.5 The competitive element of best value is not Compulsory competitive tendering in another guise. It is concerned with establishing delivery
mechanisms that work with the ethos and values of the Council. However the
service is delivered, it has to fit with the organisational culture of the Council.
3.6 The Government is looking for local planning authorities to work positively in addressing competition, developing new ideas, joint working and genuine plurality in the way in which planning services are delivered in the future. This is part of the wider modernisation agenda: the changed world in which services operate demands the use of private, public and voluntary sector skills if modernisation is to deliver the responsive, convenient, quality services people demand.
3.7 One of the four key principles of public sector reform set out in “Strong local Leadership: Quality Public services” covers “….expanding…choice so that users of public services are given the kind of options that they take for granted in other walks of life, and taking full advantage of alternative means of provision where these would offer best value”(DTLR, 2001).
3.8 Unlike the rest of best value where Planners are encouraged to consider the whole planning service and beyond, when working on the competition element, planning has to be broken down into its constituent parts and
sometimes even into tasks. There is an underdeveloped market for a whole
planning service, but there is a very competitive market for parts of it. Indeed alternatives to in house delivery of parts of the service are very common and there is considerable potential for joint working and resource sharing between partners both public and private.
3.9 Not all services need or have a market and some are not best placed to have one. The Planning service is one of these. For reasons of probity and
risk, deliver of the entire service by the market is often unfeasible.
Therefore more sophisticated working arrangements may need to be
3.10 Indeed the focus is very much on partnerships and joint service provision, which is particularly suited to a service such as Planning due to its wide ranging influence and the need to work with others to effectively implement its policy.
3.11 However, competition has been the most undeveloped area of Best value to date and Planning is no exception. Some authorities have made valiant efforts to follow the guidance and place the user at the centre of the question as to who is best placed to deliver services competitively. A few authorities have been singled out for praise for the thoroughness with which they have considered competition – for example Hambledon and Ryedale
District Councils (see reports on www.audit-commission.gov.uk). But the majority of authorities have fallen short in genuinely considering the options or have put up arguments for not doing so that do not hold up under scrutiny. Planning Inspectors have frequently highlighted a complete lack of or inadequacy in the treatment of competition in reviews. Examples of some of the critical comments of Inspectors on the handling of the Competition element taken from reports on individual planning services spanning the period 2000 to 2004 can be found in Appendix 1.
? An introduction to Procurement
3.12 Procurement is a process of acquiring goods, works and services –
though in this paper we are principally concerned with services – covering
both acquisition from third parties and from in house providers. The process covers the whole cycle from identification of needs through to the end of a service contract or the end of the useful life of an asset. It involves options appraisal and the critical “make or buy” decision which may result in the provision of services in house in appropriate circumstances.
3.13 Procurement is about making choices. The choice that Members make about a particular contract or form of partnership is a very clear signal of what type of authority the council wants to be and how it wants to be seen now and in the future.
3.14 Essentially the principles of good procurement are:
; A thorough research of the market
; A review of related activities to ensure the scope for further
improvements is maximised
; A search for innovation in quality performance and cost
; Clear evaluation criteria
; A reasonable timetable that gives those tendering time to prepare
3.15 There are a number of logical steps that form part of the procurement
process. We shall explore these in more detail later.
3.16 In the context of a procurement process obtaining best value for money means choosing the bid that offers the optimum combination of whole life costs and benefits to meet the customer‟s requirements. This means looking at both cost and quality in line with stakeholders‟ requirements.
3.17 This is not simply a question of looking at the lowest initial price option. It requires the assessment of ongoing revenue/resource costs as well as the initial capital investment.
3.18 To define “quality” local planning authorities must think in terms of “outcomes”; will the preferred delivery option achieve the desired service outcome at the lowest possible cost?
3.19 It is important not to fall into the trap that quality and outcome considerations supersede or replace cost considerations. It is imperative to understand the cost of the service in order to understand how competitive it may be in relation to other providers. Early years of inspection suggest that the relationship between cost and quality in Planning is not direct so understanding both aspects of the service is necessary.
3.20 The Council‟s requirement can also include social, environmental and other strategic objectives and should be defined at the earliest stage in the procurement cycle. The criteria of Best value for money is used at the award stage to select the bid which best meets the requirements.
3.21 Advice and experience on procurement is changing rapidly and it is recommended that the Reader consults the IdeA‟s website for the latest material – www.idea.gov.uk/knowledge. The site has a specific section on
procurement. The Guidance includes:
; The strategic context
; Managing the procurement process
; Managing contracts and supplier relationships
; Project management for procurement
; Tools and techniques
; Supplies procurement pack.
; Services procurement pack.
; E-procurement toolkit.
3.22 Help is also provided by the Local Government Task force (LGTF) and Housing Forum on www.lgtf.org.uk. The Reader might find the LGTF‟s top ten
tips for procurement useful. These are set out in Appendix 2.
(d) the National Procurement Strategy for Local Government
3.23 The National strategy highlights the potential for procurement to improve cost effective service delivery and meet or even exceed the demands of external and internal challenge whilst achieving Community Plan objectives (ODPM, 2003(b)).
3.24 The strategy covers the main challenges in local Government procurement by promoting themes that need to be addressed now and in the future. The key themes are providing leadership and building capacity, partnering and collaboration, doing business electronically and stimulating markets and achieving community benefits. It spans three years and covers authorities in England only.
3.25 The vision is to ensure that councils will be delivering significantly better quality public services through sustainable partnership with the private, public or voluntary sectors.
3.26 Councils must obtain greater value for money by putting in place procurement options that meet their procurement strategy and by continuously improving through collaboration with partners as well as delivering new and innovative ways to procure. Stimulating markets to create new and exciting opportunities for local authorities and to move forward without sacrificing good quality is another objective. The timescale for councils to implement the strategy starts with an adoption of the themes in 2004 and working towards a full health check on how they are achieving them in 2006.
3.27 At the heart of the strategy is the objective that by 2006 all councils will have put in place an appropriate procurement strategy, which is operated through a mixed economy of service provision, including small firms, social enterprises, minority owned businesses and the voluntary and community sectors. This should include collaborating with partners at local, regional, national and European level.
3.28 The Strategy is an important document and, as with other key documents identified in this paper, the reader is encouraged to read it thoroughly.
3.29 Significant messages are given in each chapter with examples for Councils to reach their strategic objectives under each theme. Councils are expected to measure where they are with their procurement function and to benchmark it against other councils who follow the strategy.
3.30 In reality many authorities are still developing their procurement strategies and performance data and are yet to reach the point where they know how to get the best from a relationship with a private company or
partner. However, the Audit Commission has found that competition and partnership are among the most frequently cited sources of innovative and important improvements for best value. Indeed the Commission recognise that there is a strong relationship between attitude to competitive procurement and service improvement judgements in Inspection reports (and, indeed, more recently in Comprehensive performance assessments). “ When used well (procurement) is the mechanism to challenge current services and to determine new models for service delivery. In order to achieve these benefits a strong element of competition should run through the whole process. Effective procurement is fundamental to service improvement” (Audit Commission, 2002).
3.31 Strong performance in procurement and project management will be rewarded in rounds 7 and 8 of the Beacon Councils scheme in 2007/8.
(e) The role of the Local strategic partnership
3.32 The Local Strategic Partnerships (LSP) is a key vehicle in achieving improved services and should, therefore, be an important player, with the Council, in the procurement process. It should bring together service deliverers, local communities, those who use local services, the voluntary sector, social entrepreneurs and businesses. It can be supplemented by various other partnerships ranging from local compacts between local authorities and the voluntary sector to delivery partnerships with the private sector.
4.0 WHERE COMPETITION FITS IN THE BEST VALUE REVIEW
4.1 The framework for Best value set out in the Guide contains a common framework that consists of three key stages. The issue of competition, as one of the four “C‟s”, is evident at various points throughout the review process and is particularly tied into the challenge element. Two specific examples are provided below which illustrate how competition fits into the review process and how the use of the four “C‟s” to review a service is an iterative process.
4.2 Example 1: -
In challenging “the need for the service” and “what sort of service should be provided” issues such as consultation with the community and
comparison with other providers must be considered.
4.3 Consultation should establish user needs that help to specify the service (alongside Government advice).
4.4 In respect of comparison the question that needs to be asked is whether any of the providers can better deliver the service thereby testing the competitiveness of the existing service.
4.5 One must demonstrate: -
That consideration has been given to whether the service needs to be ;
provided at all; and
; Whether the local planning authority should be the agent for providing
the service and the extent to which there are alternative providers.
4.6 Assuming it is possible to make the case for continued provision of all of the service then a strategy to secure continuous improvement must be developed which critically and rigorously assesses the service delivery options, including partnership and potential providers.
4.7 Example 2: -
In challenging the cost effectiveness of the current service it will be
necessary to subject the service either to external competition or to a rigorous comparison exercise which produces evidence that the service is delivering best value. One source of cost information is benchmarking with other local planning authorities using the cost accounting framework recommended in the guide. In addition one should look at internal cost comparisons with other services.
4.8 It is important to remember that quality of outcomes must also be benchmarked as cost alone is clearly an inadequate measure.
4.9 To ensure rigour, a thorough analysis of the data will be required and the outcomes and conclusions documented; information is then used to prompt further questions about current and potential performance (and the relationship between them) and the possible courses of action available.
4.10 This is likely to lead to further challenge in respect of the type of service to provide, how much it might cost and whether the local planning authority is best placed to provide it. A thorough appraisal of service options will be needed at this stage.
4.11 A key issue is to ensure that such comparison is on a like for like basis, in particular that the authorities full in house costs are compared to those of external providers.
4.12 Finally, in order to move competition forward as part of the Best Value review, once current and comparative performance of the planning service have been established, the crucial next step is to consider who is best placed to provide the service.
4.13 Local Planning Authority staff will already obtain services direct from contractors in some authorities. Increasingly service level agreements are being put in place which show support service costs “above the line” and
enable real choices about procurement and whether to buy internally or externally. The principles of good procurement ought to apply as much to the relationships between in house teams as it does to the relationship between a
client, external contractor or a partner. Planning services are also increasingly likely to be involved with customer service centres and one stop shops.
4.14 If it is decided to secure improvements to the Planning service from an external source then decisions must be made on what to procure; the exact scope of the procurement exercise; the type of relationship; how the service or function will be packaged; and what the management arrangement will be.
4.15 Best value and changing rules relating to service provision enable local authorities to
; Work across organisational boundaries to provide integrated
services (pooling resources with other authorities, transferring or
delegating functions, developing a single provider or integrated
; Contract out services to public, private or voluntary
organisations for any activities where there is currently appropriate
; Develop a wider range of partnerships (more powers to use
companies, joint committees and not for profit organisations; more
clarity about local authority companies and joint ventures; and powers
to second or loan staff)
; Provide goods and services to others
; Make better use of assets by exploiting their commercial potential
4.16 Decisions on service delivery options must be informed by
; Risk assessment – a rigorous assessment of pros and cons
; Wide consultation in respect of the need for the service and the best
ways in which need can be met. Some authorities have built into their
initial consultation work questions on how people would feel about the
private sector delivering the service
; Fundamental challenge as to why the service is delivered and how it
can best be provided
; An objective consideration of the scope for using fair and open
competition wherever practicable as a means of securing an efficient
and effective planning service
; Rigorous comparison with the best of the other Providers to test who
else is able to deliver the required service.
4.17 The procurement process will be dealt with in more detail later in the paper.
5.0 CAN PLANNING BE DELIVERED OTHER THAN IN HOUSE?
5.1 It is possible to maintain probity and the transparency required to deliver an effective planning service whilst at the same time offering the service to the marketplace.
5.2 Not withstanding this there are some distinctions here between development control and policy functions. The nature of development control and its regular decision making and obvious possibilities for conflicts of interest can present more probity problems than planning policy functions.
5.3 It has been suggested that legal barriers to using external providers exist, due to the required standards of conduct in making planning decisions. However, these are issues of competence, integrity and procedural rigour
rather than insurmountable problems prejudicial to external service delivery per se. Clearly though, it is essential that any prospective external provider or partner understands the need to exercise proper professional judgement and has clear mechanisms in place for avoiding potential conflicts of interest.
5.4 Many examples exist where external consultants have been used to help deliver the service. As long ago as 1993 the then Berkshire County Council‟s legal advisors concluded there was no impediment to any of the authority’s
planning work being contracted out, provided that formal decisions will be made (and seen to be made) by the Council whether by the
Committee, or Officers under delegated powers. This formed the basis of
the full scale contracting out of the Council‟s professional and technical planning and related environmental work.
5.5 The then Council simply ensured that all its agents, whether in house staff or contracts have authority to carry out tasks. This was dealt with by a simple identity or authority card procedure. After the abolition of the County Council, the successor unitary authorities and the joint strategic unit agreed a single composite authority card for use by consultants‟ staff across the county.
5.6 The London Borough of Sutton is not alone in using an external consultant to process all householder applications. The way in which the scheme operates means that the decisions prescribed by statute, the parameters
for identification of neighbours and consultees, decisions regarding the validity of applications, requests for further information and the ultimate decision itself, are made by the local authority.
5.7 Probity cannot therefore be used as an excuse to avoid competition. Some authorities have used these reasons for not assessing options in a detailed manner and have been rightly criticised (see the earlier comments from Inspectors‟ reports). Local Planning authorities do need to be alive to propriety issues and avoid the risk of conflict of interest that may arise from consultants taking local contracts, for example in development control. But the nature of the market is such that this can easily be avoided if consultants regularly work in geographical areas adjoin their own and the problem is easily overcome through agreeing protocols of engagement with private
sector partners or providers. For example these could cover the broad requirements of the authority such as:-
; The approach to service delivery
; The approach to customer service, or