Taskforce calls for mutuals to be exempt from EU procurement regulations

There should be a temporary exclusion for new public sector mutuals from EU procurement regulations, a report from a Government taskforce has recommended.

The Mutuals Taskforce, chaired by Professor Julian Le Grand, also called on the Government to “continue to negotiate for greater clarity of and improvements to EU public procurement rules that support newly formed public service mutuals and for clarity on existing rules”.

Its other recommendations included:

  • Implementation of the Rights to Provide, “with clear pathways and appeals processes”;
  • Training and guidance for public service commissioners;
  • Analysis of investment opportunities in mutuals by Big Society Capital.

The Taskforce’s report, Public Sector Mutuals: The Next Steps, revealed that the number of public service mutuals outside central government had grown from nine in 2010 to 58, with another 40 projects in the pipeline.

The number of services where mutuals are operating has also diversified, from just four in 2010 to 12. New areas include fire services, libraries and housing.

The report said: “It is the view of the Taskforce that emerging, new and established mutuals all face challenges. Underlying many of these challenges is the fact that mutuals move out of the public sector as fully functioning, established organisations, already delivering services upon which people rely.

“While these challenges are not insurmountable – public service mutuals are being set up and are growing all the time – there is much that can be done to ensure opportunities for the creation and growth of public service mutuals are maximised.”

Professor Le Grand insisted that mutuals delivered higher quality services at lower cost to tax-payers, but acknowledged that the path to mutualisation should be made easier.

He said: “Public service mutuals develop differently to other SMEs, often becoming businesses overnight. This must be reflected in new regulation, new investment and greater support.

“But, most importantly, we are calling for change inside the public sector. The will to develop mutuals and improve public services is there at the very top of government and on the frontline. But too often there is a gulf in the middle where risk-averse managers, ignorant of the benefits, impede progress.” 

Writing in the foreword to the report, Professor Le Grand also claimed that existing mutuals often operated in a competition for service contracts “on a playing field that is far from level, with bidding requirements sometimes skewed in favour of large corporate organisations”.

Francis Maude, Minister for the Cabinet Office, claimed that forming a mutual allowed frontline staff to focus on local needs with less bureaucratic interference.

He said the Government would consider how to take the recommendations forward, adding that in particular he was “already aware of the problems with EU procurement regulations” and would push for reform.

A copy of the report can be viewed here

Philip Hoult

THE TASKFORCE’S RECOMMENDATIONS IN FULL

Rights and pathways for employees

Recommendation 1: By December 2012 each relevant Department should set out a clear plan and vision for developing and implementing Rights to Provide. These plans should be embedded in and tracked through Departmental business plans. This recommendation applies primarily to Department for Business, Innovation and Skills; Department for Communities and Local Government; Department for Education; Home Office; and, Ministry of Justice.

Recommendation 2: Each Department (cited in recommendation 1) should, by April 2013, set out a clear pathway for staff wishing to explore and pursue mutualisation in the service areas for which the Department is responsible – working closely with the Mutuals Support Programme if and when support is required.

The pathway should include:

  • Information on how to exercise their Right to Provide and for parent bodies on how to respond.
  • A clear ‘escalation point’.
  • Advice on practical issues such as tax implications, employment rights, pension provision and use/transfer of assets.
  • Clear options on the legal forms available.

Recommendation 3: The Cabinet Office should convene and coordinate a network of Mutuals Ambassadors.

Recommendation 4: Departments should use their websites and other forms of communication with workforces and service providers to signpost to sources of information, advice and support for leaders and employees interested in mutualisation.

Support for employees mutualising

Recommendation 5: The Cabinet Office (including the Government Digital Service) should work with Departments to ensure the Mutuals Information Service is proactively marketed across relevant Government communication channels, including cross-Government and individual Departmental websites.

Recommendation 6: The Cabinet Office should regularly review the delivery model of funds and support available across Government, including the Mutuals Support Programme.

Recommendation 7: The Mutuals Support Programme and other available funds should target the development of specific skills that are necessary at the different stages of mutualisation such as business, commercial, and leadership skills.

Recommendation 8: The Cabinet Office should work with other Government Departments, in particular the Department for Business, Innovation and Skills, to commission the collection and analysis of evidence emanating from mutuals providing public services and working in other sectors across the economy.

Improving Commissioning process

Recommendation 9: The Cabinet Office should develop and disseminate clear and transparent standardised procedures for procurement of services currently covered by Part B (or the regime that replaces Part B) of the EU regulations. As part of this, the Taskforce recommends that the Cabinet Office should advise commissioners across the public sector to use the flexibilities available, working with the regulations, to compete and award longer contracts depending on the service being commissioned.

Recommendation 10: The Cabinet Office should issue guidance for commissioners setting out clear expectations in respect to the assessment of financial standing, including on the use of any requirements for performance bonds.

Recommendation 11: The Cabinet Office should provide information for commissioners on the importance of taking into account staff experience where this relates to the delivery of services ‘in house’ and on how best to do so.

Recommendation 12: The Government, led by the Cabinet Office, should continue to negotiate for greater clarity of and improvements to EU public procurement rules that support newly formed public service mutuals and for clarity on existing rules. In particular the Cabinet Office should:

  • Press for a temporary exclusion for mutuals.
  • Ensure ‘in-house’ provisions continue to provide a route for the development of mutuals, where appropriate.
  • Ensure use of the innovative partnership approach
  • Ensure that any changes (to part B Services) continue to allow for flexible approaches to the procurement of these services.

Support for Commissioners

Recommendation 13: The Cabinet Office should ensure mutuals feature in the Commissioning Academy programme to:

  • Equip commissioners across the wider public sector with the understanding and knowledge required to design commissioning processes that are open to new models of public service provisions, such as mutuals, SMEs, new market entrants and startups.
  • Provide commissioners with an understanding of the business model of mutuals and the benefits they can generate to enable them to engage in effective pre-procurement market engagement with mutuals, along with other new models of provision, as part of their sourcing strategies.

Recommendation 14: Building on the Mystery Shopper Service, a service should be made available by the Cabinet Office for commissioners to seek advice on designing commissioning and procurement processes.

Recommendation 15: The Cabinet Office should provide commissioners with information and real life examples for commissioners on how to implement the Public Services (Social Value) Act.

Tax barriers and Access to Finance

Recommendation 16: Big Society Capital should conduct an analysis into the size and scale of the mutual sector to assess the potential opportunities and barriers to investing in mutuals.

Recommendation 17: As part of the employee ownership review HM Treasury should explore statutory reliefs on gains for employee benefit trusts and other employee owned businesses. As part of the review looking into financial barriers to social enterprise HM Treasury should explore the opportunities for encouraging investment into mutuals that are social ventures.

Source: Public Service Mutuals: The Next Steps, a report from the Government's Mutuals Taskforce.