From April 2000, local authorities will be asked to abandon compulsory competitive tendering for best-value procurement. But will they?
The last dark corners of public sector procurement are finally to be illuminated by the bright lights of partnering, private investment and the Egan agenda. Now that the private sector has embraced partnering and benchmarking, and central government has adopted frameworks and continuous improvement, the local authority sector is set to absorb the new thinking in its latest procurement philosophy: best value.

The new regime replaces the little-loved compulsory competitive tendering rules with a duty on local authorities to seek quality, value and efficiency in the services they provide to tenants, communities and council tax payers. Best value already exists in pilot form and will become a statutory requirement for local authorities once the Local Government Bill becomes law next April.

The DETR, which is responsible for local government, is promoting best value as a way to attract private sector innovation and investment into failing public services, often through partnering arrangements or joint ventures. At a conference held in London earlier this month, local government minister Hilary Armstrong said: “We expect councils to knock on the doors of potential suppliers, and that the private sector … will ensure every council knows the benefit of new forms of procurement.” The consultants and contractors that have woken up to best value are looking forward to more opportunities in local authority design, housing, transport and construction than they enjoyed under CCT. Under that system, local authorities resented being “compelled” to deal with the private sector, and often deterred bids with highly restrictive contracts or by packaging the work so that few firms would be interested. However, even if those days are over, Building’s discussions with several “beacon” councils that are piloting best value suggest that many local authorities will not readily open up contracts to private partners.

Reforming CCT was a Labour manifesto commitment after it concluded that the “in-house is best” mantra and the “lowest price wins” philosophy had resulted in short-term savings at the expense of quality. Now, best value has its own “four Cs” slogan. Councils must “consult” the tenants or residents on the receiving end of their services, “compare” the service offered with other local authority or private sector benchmarks, “challenge” themselves to raise standards and “compete” with neighbouring councils or private firms.

Best value applies to the same white- and blue-collar council services as CCT. And, where local authorities decide they want open competition, they will be bound by the same legal framework that existed under CCT. For instance, they will be subject to the financial thresholds and tendering procedures of the European Union procurement rules, and must abide by the Local Government (Contracts) Act and Transfer of Undertakings (Protection of Employment) legislation.

The carrot for local authorities will be the prospect of efficiency savings, estimated at up to 2% a year. The stick comes from the inspection bodies in the Best Value Forum, which will work with local authorities to set targets for year-on-year improvements in efficiency, cost and quality. A new Best Value Inspectorate will be established for housing; major capital projects, including construction schemes, will remain under the control of the Audit Commission.

Local authorities are going to be judged by the Audit Commission on delivering best value

Barbara Young, BRE

“Local authorities are going to be judged by the Audit Commission on delivering best value,” confirms Barbara Young, director of consulting and innovation at the Building Research Establishment. “That means a whole new emphasis on performance and monitoring performance.” And for any company wishing to work with a local authority, it means “linking its performance with business outcomes … and delivering the benefits of partnering in a cohesive way”.

The private sector firms that have heard this message have already taken it to heart. “The best-value approach appeals much more than CCT, because we’re good at it and used to working in frameworks,” says the director of one major consultancy that is interested in civils, highways and building design. “A lot of potential work is already covered by the private finance initiative, but there might be opportunities in technical services to form joint ventures or partnerships.” Consultant Mouchel has been one of the best value winners so far, securing competitively tendered “partnering” arrangements for highways design and network maintenance in Hertfordshire and North Yorkshire, and for property services in Bedfordshire. “We’ve developed joint mission statements and partnering protocols, so it’s very different from old-fashioned outsourcing,” says government services director Roger Whitmore.

WS Atkins was not a fan of CCT, as it often found that the odds were stacked against it whenever a contract came up (the contracts it won were usually the result of voluntary outsourcing). But David Robinson, managing director of Atkins’ transport and highways operating company Atmos, is “optimistic that best value will offer more real opportunities than CCT. It suits the Atkins culture”.

Robinson has found that some local authorities are already inviting the firm to look at wider packages of work. “The whole tone seems to be improving. They’ve said ‘make us proposals’, or are moving towards longer five- or seven-year commissions.” But he also believes that “a body of local authorities will look at best value as a way of avoiding CCT” and that even councils that are best-value enthusiasts will take 18 months to two years to get going.

These notes of caution seem to be well placed. Pilot local authorities that were exempted from CCT in December 1997 in areas such as housing maintenance, building and design services and building control often appear to view best value as a signal to improve their existing methods, including the use of in-house direct labour organisations and direct service organisations, rather than radically changing their approach. And although “competing” is one of the tools of best value, some local authorities seem to regard it as the least welcome of the four Cs.

Best value will offer more real opportunities than CCT. It suits the Atkins culture

David Robinson, WS Atkins

All services at Braintree District Council in Essex have been part of the pilot. Where the upkeep of 9000 council houses is concerned, quality manager Mike Letch says: “The council has the view that services are best provided in-house, where we can demonstrate that we’re at least as good as the competition.” Its review will focus on finding “hard evidence that we are providing best value”.

The London Borough of Greenwich’s beacon status covered the maintenance of its 31 000 council houses, worth £26.5m a year and currently shared between its DSO and private contractors. Although the council started a review of the costs and quality of its service in December 1997, it is still six months away from completing it, and any actual policy changes are even further off.

A review of housing and street maintenance at Oldham Metropolitan Borough Council, which lasted just nine months, has converted some private sector contracts won under CCT into “partnering” arrangements, but left in-house contracts untouched.

Several authorities are now involved in best-value pilots for building control. However, John Shaw, head of building control at Gosport Borough Council, says that his or other departments are unlikely to embrace collaboration with private sector rivals such as the National House Building Council. “We’re a public sector service in competition with the private sector – it’s a dilemma in terms of best value.” The NHBC takes a different view, and has compiled a report outlining how its inspectors could work alongside councils.

Best value at a glance

  • More opportunities for private sector firms to win local authority work
  • Comes into force next April
  • Replaces compulsory competitive tendering with procurement that takes quality into account
  • Local people will be consulted
  • Councils will benchmark
  • Councils will challenge themselves to raise standards
  • Councils will compete with each other and private firms
  • Will apply to white- and blue-collar services
  • Savings estimated at 2% a year