Content

Salford City Council - Record of Decision (Cabinet)
I Councillor Jack Youd, Deputy City Mayor
in exercise of the powers contained within the City Council
Constitution do hereby
approve:

·        
To delegate authority to the Executive Director of
Place in consultation with the lead member to develop a detailed
business case for the establishment of a wholly owned Teckal compliant company for the delivery of
Technical services, to be brought back to Cabinet for consideration
and approval
Reasons:
In Feb 2020, after a 15-year
partnership with Urban Vision, all services were brought back in
house. The main driver was to improve the quality of service and to
also generate cost savings. However, without the understanding of
true service costs, it was not possible to explore any alternative
delivery models including a trading company.
 
This report provides a summary of service delivery
challenges, in particular around recruitment and retention. To
ensure continuous service delivery, disproportionately high volumes
of works are being outsourced, making the current delivery model
unsustainable in its current arrangement. This report provides an
overview of the future service delivery options explored, along
with a recommended option to take forward for further
delivery.
 
As part of this
options review a detailed analysis has been undertaken over the
last 18 months. Due to recruitment and retention challenges
technical services is required to outsource 90% of the
highway’s construction works at an average cost of £20m
per year. Similarly, around 50% of engineering consultancy work is
being outsourced at an average cost of £1.2m per year. Using
the current GM and SCC frameworks, where value for money and social
value is limited.
 
Recruitment of
experienced staff is challenging in the current model with
significant evidence of industry competitors including other local
authorities paying higher salaries, compared to Salford. Market
supplements and succession planning options have been applied where
possible but are not sustainable solutions for the long
term. 
 
Evidence shows
remaining in the current arrangement even with modifications,
placing more reliance on external suppliers, will lead to a
reducing directly employed work force with limited skills and
increasing outsourcing costs. The current inhouse delivery model
will evolve technical services to become a commissioning authority,
which has been explored as the strategic partner option 2.
 
An alternative
model of a wholly owned trading company has been explored, as part
of this options analysis. The operational assumption of increasing
directly employed staff by offering market competitive salaries and
reducing outsourcing will generate financial profits and create
local jobs. Based on the current pipeline this is a financially
viable option and is sustainable. However, HR impact (especially
equal pay) needs a detailed risk analysis if this option is chosen
to be explored further. In addition, it will be helpful to engage
with other LATCOs nationally to better understand the risk and
opportunities.
 
The current model is not
considered to be sustainable as it is not possible to recruit
senior skilled officers. In order to continue with the current
model, it will be critical to modify the structure and appoint
commissioning officers to oversee better procurement of services.
This will however continue with 90% of the construction and 50% of
design work being outsourced. Inevitably this model will lead to
higher volumes of outsourcing.
 
A wholly owned TECKAL
compliant company option is considered to be financially viable,
based on the work undertaken by external consultants. HR has
highlighted that there is an equal pay risk with the LATCO model.
To better understand this risk, engagement with other LATCOs and an
equality audit is required.
 
The Teckal option provides a platform for the Council
aspiration to create local employment and self-delivery.
Assessment of Risk:

The risk assessment focuses on the financial
viability and sustainability of the LATCo model. Stress testing of the financial model
is crucial to ensure that the LATCo can
operate effectively within the projected budgets and revenue
streams.

Key risks include the successful recruitment of
skilled staff, managing operational costs, and aligning the
LATCo's objectives with the broader
strategic goals of the Council.
Legal Advice obtained:

This report builds upon the initial options report,
and summarises the findings of external consultant Inner
Circle’s appraisal of options for the future delivery of the
service. The Shared Legal Service attended meetings with the
consultants and Council teams, and provided information for
consideration within their analysis. The Shared Legal Service notes
findings of Inner Circle’s analysis which are described in
this report.

This report highlights the various considerations,
benefits and risks associated with the three options for comparison
and evaluation. The Council must ensure that it complies with all
applicable statutory duties associated with the procurement and/or
the delivery of the services, including achieving best value,
maximising public funding and ensuring that the Council is
transparent and accountable with how it is used.

Shared Legal Services notes that following
consideration of the available information, the recommendation is
to proceed with the development of a business case for the
development of a teckal LATCO. Shared
Legal Services is happy to provide all necessary legal support to
the Council in respect of this option.
 
Financial Advice obtained:

David R Mills, Strategic Finance Manager, 8th August
2024

The work undertaken by InnerCircle on this proposal identified a number of
options, as identified in this report. This paper is seeking
support to develop plans in support of a local authority trading
company under the Teckal exemption,
where at least 80% of the activity of the company must be with the
Council.

Further work will be required to produce a detailed
business plan that is supported by financial statements clearly
identifying all risks and opportunities.

All implications of implementation of this project
will have to be factored into the Medium Term Financial
Plan.
 
Procurement Advice obtained:
Whichever future delivery model is agreed, procurement will work
with the project and legal teams to establish the basis and under
which relevant procurement regime, if any, contracts are to be let
and delivered.
 
HR Advice obtained:
HR has been consulted and
comments and implications are contained in the body of the report
these are high level dependent upon the option significant work
will need to be undertaken to ensure compliance and to build a
clear structure and employment platform that is legally compliant
and minimises risk to the Council and service delivery.
 
Climate Change Advice
obtained: N/A
 
Contact
Officer: Shoaib Mohammad
                         
 

-      
The appropriate scrutiny to call-in the decision is
the Growth and Prosperity Scrutiny committee.   

 

Signed:
           Councillor
Jack Youd     
Dated:         24.09.24                               
                       
Deputy City Mayor
 

For Democratic
Services use only

 

This decision was
published on   24.09.24                                          

This decision will
come in force at 4.00 p.m. on 01.10.24                   
                              
unless it is called-in in
accordance with the Decision Making Process Rules.