Kent CC reaches milestone in hunt for commercial partner for legal services

Kent County Council has this week issued an OJEU notice inviting expressions of interest in forming a joint venture/alternative business structure with its Kent Legal Services (KLS) arm.

The contract, worth an estimated £100m over the full ten-year term, would also cover the delivery of legal services to the local authority and other clients.

Publication of the OJEU notice comes after the county council held a market engagement exercise over the course of the summer.

This was undertaken after the authority's Transformation Advisory Group selected plans for a commercial partner and ABS out of six options for the in-house legal services operation.

The notice, which can be viewed here, said the county council (KCC) and the successful tenderer would work together “to maximise profits and build on the success of KLS’ past achievements by devising an innovative and ground breaking public-private joint venture”.

The notice suggested that traditional models of legal service delivery or outsourcing would not allow the county to achieve this.

It added that a key priority was the return to the authority of a significant and sustainable income stream that exceeded the current level of return made by KLS.

“The creation of a JV/ABS will enable KLS to improve capacity and acquire technology, capital, leading edge business systems, additional expertise and resources in sales and marketing to enable the existing client base to be grown and new clients to be secured, all within a highly competitive external legal services market,” the notice said.

Kent said that, “given KLS’s excellent track record and capacity to continue to grow its offering to both internal and external clients”, the time was right to seek expressions of interest from the private sector to invest in the future of the service.

Such investment would significantly increase the contribution KLS could make to the funding of frontline services, and further improve its efficiency and performance for the benefit of its clients and the Kent community, it said.

Led by Geoff Wild, Director of Law and Governance at the authority, Kent Legal Services has an annual turnover of approximately £9m. Of this, between 6-8% is undertaken for external clients, generating a surplus of around £2.5m pa (before deduction of corporate overheads).

According to the OJEU notice, the county council envisages that the role of the commercial partner in the JV/ABS “will involve, as a minimum, the provision of the following:

• An initial capital investment together with working capital and on-going investment from within its own resources.
• Comprehensive transition support, for both staff and systems.
• A clear business plan for rapid and sustainable growth.
• The delivery of innovative on-going process improvements.
• Business development expertise, in particular the ability to introduce new market entrants and generate increased profitability.
• Proven, significant existing and expanding sources of work for the JV/ABS to service and new leads to produce significant new external income streams.
• Sales and marketing expertise and resources to secure new external clients and ensure that the JV/ABS achieves and sustains a position as a market leader in the provision of legal services to the public sector.
• The ability to swiftly develop and implement automated systems achieving significant cost reductions and enabling more cost effective solutions to be offered to clients.
• Expertise of other client environments and access to teams operating in broader markets capable of extending and developing existing services.”

This list is not exhaustive, the notice stressed.

“The commercial partner will be expected to deliver on-going process improvements and investment to the JV/ABS so as to ensure that it can be successful in the face of competition for public sector work from other local authorities, local authority ABSs, traditional law firms and the new breed of law firms who are setting up with significant automation to enable reduced fees,” Kent added.

The successful bidder will be expected to either have already received approval from the Solicitors Regulation Authority for an ABS, or be committed and prepared to immediately enter into the process of having an ABS submission approved by the SRA.

The OJEU notice sets out a number of key objectives for the joint venture/ABS, namely to:

1. Continue to provide existing clients of KLS (including internal KCC clients) with high quality and value for money legal advice and guidance. “The service will need to be capable of Lexcel and ISO compliance from day one."
2. Reduce the annual cost of legal services to KCC over the lifetime of the contract.
3. Provide legal services to any entities…. in which KCC has an interest from time to time. This will include any local authority trading companies and other local authority external delivery vehicles.
4. Return to the county council “a sustainable and significant income stream provided by the shared profits of the JV/ABS, with growing returns in the medium to long term”. The return will be expected to exceed surplus levels currently delivered by KLS.

The confirmed list of the services in-scope immediately and those that may be considered as a possible further expansion will be discussed during competitive dialogue, the notice said. However, it did set out an anticipated, though non-exhaustive, range of legal services that will be provided.

The scope of the procurement exercise includes the award of a contract to the JV/ABS for the provision of legal services to KCC.

Kent said it would assign all its legal work to the JV/ABS during the contract. However, it is “envisaged that the overall contract term will include break provisions and/or will be subject to the achievement of specified targets and outcomes”. 

The exact nature of the contract period, volumes of work, break provisions and the targets and outcomes will be determined during the dialogue phase of the procurement process, the notice added.

A minimum of three and a maximum of five top scoring organisations will be invited to participate in the competitive dialogue.

The end date for expressions of interest is 12 pm on 10 November 2014.