aoc conference - shared services strategy and structures - march 2013; ruth smith m&r
TRANSCRIPT
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Title goes here Subtitle goes here
Name Surname One
Name Surname Two
Strategy and Structures
for Shared Services
12 March 2013 Ruth Smith
National Head of Procurement
Law
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Shared services strategy – where to
start?
o What does sharing services really mean?
“By shared services we mean institutions cooperating
in the development and delivery of services, so sharing
skills and knowledge, perhaps with commercial
participation.”
Learning & Skills Council (2008)
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Where to start?
o Your vision – what do you want to achieve?
o Which services?
o Who will collaborate?
o Private sector input?
o Timescales?
o Cost and resource?
o Governance and project management?
o … and don’t forget about EU procurement ! …
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So many models so little time!
Inter-college
co-operation
Informal joint
working
Teckal Company
Joint purchasing
/ outsourcing
Contract for
services
Employee
Mutual
Joint
Employment
Framework
Agreement
Which model?
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Plan your strategy … lots of models … and
opportunities …
Structure
Strategy
Procurement
Vision
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Understanding where EU procurement
may apply – a quick reminder
The key elements:
o Contracting Authority
o Written contract or Framework Agreement
o For works, goods or services
o Consideration
o Above financial threshold
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When EU procurement applies
o Are you a ‘contracting authority’ (CA):
o “a corporation established, or a group of individuals appointed to act
together, for specific purpose of meeting needs in the general
interest, not having an industrial or commercial character, and
– Financed wholly or mainly by another CA; or
– Subject to management supervision by another CA; or
– More than half board of directors or members are appointed by
another CA.”
o R. v HM Treasury Ex p. University of Cambridge (Case C-380/98)
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Your model: when may EU procurement
apply?
EU Procurement may apply EU Procurement does not apply
Joint Purchasing ‘Teckal’ companies
Framework Agreements Inter-college co-operation
Contracts between separate
legal entities
Informal joint working
JV Cos (with private sector) Joint appointments / employment
Employee mutuals ?
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Collaboration where EU procurement
applies
o Joint purchasing / outsourcing: Two colleges jointly outsource their back office finance and payroll function to the private sector
o Framework arrangement: One college procures a framework agreement for back office support services on behalf of itself and a number of others
o Central purchasing body
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Collaboration where EU procurement
applies
o Joint ventures with Private Sector: A college forms
a joint venture with the private sector to provide HR
and payroll services to other Colleges in the area
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Collaboration where EU procurement
applies
College Private sector
JV Co
College B College D College C
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Collaboration where EU procurement
applies
o Employee mutuals (currently …): Spin out employee
mutual provides services back to its originating college
Mutual
College
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Collaboration which avoids EU
procurement o The ‘Teckal’ (or “in-house”) company
o Three colleges want to merge their finance and accounting functions through establishing NewCo
New Co
College A College B College C
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The ‘Teckal’ company
o Must satisfy 2 tests:
TEST 1: Colleges exercise [joint] control over NewCo
similar to that which they exercise over their own
departments
– Power to give directions over strategic decisions
– Private sector capital will be fatal to the control test
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The ‘Teckal’ company
TEST 2: NewCo carries out the ‘essential part’ of its activities with the controlling Colleges
– So NewCo’s activities must be devoted “principally” to the colleges with other activities of only “marginal” significance
– Not market-orientated
(Risk Management Partners Ltd v Brent LBC [2011] UKSC7)
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Collaboration which avoids EU
procurement
o Inter-college co-operation
o Co-operation between colleges with the aim of
ensuring that a public task that they all have to perform
is carried out
(Case C-480/06 Commission v Germany [2009])
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Inter-college co-operation – key
requirements
o Only between public entities – not private sector
o “Contract” is non-commercial in character (no profit)
o Provides a means to ensure a public task which
colleges are required to perform is carried out
o Governed solely by considerations and requirements
relating to the pursuit of objectives in the public interest
o Of little or no interest to a private sector supplier
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Other collaboration which avoids EU
procurement
o Informal joint working - no contractual relationship
o Joint appointments / joint employment
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A look to the future – proposals for new
EU Procurement Directive o On Teckal … and joint control …
– Decision making body - representatives from all participating colleges
– Decisive influence over strategic objectives and significant decisions
– NewCo does not pursue interests which are distinct from the controlling colleges
– No payments to NewCo other than reimbursement or re-allocation of funds
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A look to the future – proposals for new
EU Procurement Directive
o On Teckal … and the Essential Part test
– “More that 80% of its activities” carried out with the
controlling entities
– 80% based on average total turnover in the last 3 yrs (or
if not available “credible” turnover based on projections)
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A look to the future – proposals for new
EU Procurement Directive
o On Inter-college co-operation … the conditions:
– Genuine co-operation to jointly carry out public service
tasks
– Governed solely by considerations in the public interest
– Participating colleges perform, on the market, less
than 20% of activities concerned by the co-operation
– No financial transfers other than reimbursement or re-
allocation of funds
– No private capital
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A look to the future – proposals for new
EU Procurement Directive
o And new opportunities to reserve contracts for
Mutuals …
– Organisations whose “main aim is the integration of
former employees of public authorities into the private
sector”
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A look to the future – proposals for new
EU Procurement Directive
o And new opportunities to reserve contracts for Mutuals …PROVIDED:
– 75% of mutual’s employees have left a contracting authority to
deliver public services through the mutual
– Mutual provides services exclusively for contracting authorities
– Employee ownership or engagement has significant impact on mutual’s governance
o Maximum term of 3 years (from date Mutual operational)
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Conclusion: Think carefully about your
strategy – get that right and the rest should
follow
Structure
Strategy
Procurement
Vision
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Contact Details
o Ruth Smith
o Mills & Reeve LLP, National Head of Procurement Law
o Email: [email protected]
o Tel: 0121 456 8434
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