It’s all about relationships

By Jamie Hailstone | 14 December 2017

If you peruse through most council chief executives’ and senior executives’ ‘to-do lists’ then the chances are you will find references to becoming more entrepreneurial, income generation and utilising land and buildings in a more cost-effective manner.

As demand for council services grow and questions remain about local government finance after 2020, the pressure on local authorities, both as service providers and as place-shapers has never been greater.

One option might be for councils to take account of the experiences that have been gained from the ‘Public Sector Plc’ (PSP) initiative which has considered how the market can enhance a council’s use of its own resources and thereby increase capacity.

In support of the PSP initiative an event was held in the House of Lords which looked at various issues around adopting a PSP Relational Partnering approach. The Commission, set up to examine this option, then more recently held a roundtable event with local authority directors in association with The MJ to look at the progress made so far. The Local Government Council Consortium Group (which comprises the 21 local authorities currently working in partnership with PSP) launched the Commission in January this year.

One representative at the recent event said he believed the PSP Relational Partnering approach helps take development projects ‘out of party politics’.

‘In the last two years, we’ve brought a fairly substantial housing development onto a piece of land, which was mostly derelict before. We’ve also brought in a national company onto another piece of land at an amazing rate. It will bring hundreds of jobs into the area, as well as the infrastructure around it. Nothing would have happened without PSP.’

‘We have a number of projects like that, it’s a way of taking the politics out of things,’ he added.

‘It’s a different way of working,’ admitted another. ‘But I remember trying to explain it to my then chief executive and the comment he made was “I would rather it succeeded somewhere else first”. I think the hardest job is still helping members, officers and the wider public to recognise that there is no catch and why shouldn’t we do it.’

One key area being considered by the Commission is how councils can appraise best value when deciding to work with the private sector on a regeneration or building scheme.

One representative asked whether the validation process, which is embedded into the PSP Relational Partnering approach could replace the UK’s current procurement regime, particularly in the light of Brexit.

‘Since our last meeting, it has become increasingly obvious that the result of negotiations are likely to mean the UK will not be part of the single market anymore,’ said one delegate. ‘It does seem to me that this opens up the possibility that we can change our procurement legislation, slightly, so as to allow just this approach.’

The delegate added that at the time of the meeting, the UK government had yet to publish a position paper on what Brexit might mean for procurement rules.

Another area being considered by the Commission is what the PSP Relational Partnering approach could mean for the broader public sector.

One of the delegates said one of the reasons why this approach has not gone beyond local government is the differences in culture and organisation, among other public sector bodies, notably the NHS.

‘I think what we concluded on our panel is that probably the best way into other organisations is to focus on what might be some of the key issues which are cross cutting across the public sector.’

The delegate said housing and particularly homelessness is a huge issue for both the NHS and local government. ‘Although local authorities are housing authorities, they don’t always deliver housing anymore,’ he added. The other area which came up was social care. ‘There’s a mutual appreciation of the issues between the two sectors and how the effects of reductions can have a knock on effect on accident and emergency, and bed blocking. The Government is trying to address this, but it could be an area for [PSP] to get involved in.’

Another topic of conversation was how public and private sector partners work together, with one delegate commenting about a mindset in some local authorities that ‘financial gain is the only reason [business] people come in through the door’. He added there is a ‘strong’ historic tradition of the sectors working together in other countries, notably the USA.

‘I’ve got a quote here from 30 years ago, which says we have an opportunity with a growing number of organisations which recognise the interdependence of public and private sectors to create a consortium dedicating to strengthening public service in the interests of more effective government,’ said the participant.

‘This is one of the objectives of the Harvard public/private career programme. So there’s a strong tradition in other countries to do exactly what we are doing here.

‘It’s already out there and it’s been out there a long time. There are so many projects going on that should be breaking through.’

One private sector delegate said he believed ‘most authorities are better off than they think they are’.

‘We are working with one local authority which is sitting on a business that is worth £7 or £8m a year, but it’s only turning over £1m,’ he said. ‘In about six weeks, we added 15% to their top line. Most local authorities are sitting on a different type of property, rather than just a physical property,’ he added.

‘Most local authorities are sitting on what’s called an eco-system. In the private sector some of the most valuable properties around are these eco-systems, like the one Apple runs, or Facebook and Google run.

‘Local authorities have within their reach a huge amount of soft assets in terms of customer relationships and the talent of their people. All they need to do is exercise some of those and nurture the eco-system they are involved in and they will be sitting on some of the most valuable properties in this country.’

Another delegate said the key to persuading people to come into a PSP Relational Partnering model was to show it will produce tangible benefits, which can be given a ‘pound value’.

‘You don’t want to fall into the trap of just saying regeneration is a good thing,’ he added. ‘You need to focus on the strategic value added of the PSP model and relate it to those things.

‘If you can demonstrate accelerated benefits with a pound sign attached to it, that can be quite powerful.’

Another person added that in their experience, the key people to persuade are the financial officers, because ‘they are the most conservative and they are the most wedded to an established way of doing things’.

‘What you need to be able to present to them is the argument wrapped about the five case business model, which focuses on strategic, management, economic, financial and other benefits. And you need to articulate the ‘do nothing’ position, so you come up with a series of options.

‘This is what the regional development agencies failed to do,’ he added. ‘They did not articulate what their strategic added value is. You have a real opportunity within that kind of framework. If you get the nuts and bolts right, you can sit down with your finance director and say these jobs are worth this much and these houses are worth this much.’

‘One of my colleagues was sat down in a London borough, to discuss housing delivery models and a partnership type approach,’ recalled another delegate.

‘At the end of a very convincing presentation, this finance director said “I have some unspecified and ill-defined reservations about this proposal”. This just summarises what you come against.’

Another recalled having a meeting when he was the head of service at a local authority with a council chief executive about country parks. ‘I remember having a conversation with a chief executive at the time and he said “why are we running country parks in a time of austerity. Should we be getting rid of them?”’

‘My answer was actually why would you want to sell off something that makes you money. These are brilliant assets with a huge footfall, why don’t we make the best of them. But at the time, it was a case of “surely this is commercial and local government doesn’t do commercial and as a result they lose lots of opportunities”.’

There was much discussion about whether some councils are risk averse and the importance of building relations between the public and private sector over time. The issue if councils worry about becoming too entrepreneurial was also raised and how PSP can achieve a sustainable return for local authorities looking to become more commercial.

‘At times of hardship, people go into a bunker, but at times of hardship you also get the greatest innovation and the greatest risk taking,’ said one delegate.

‘We need to not create a culture of failure, but a culture when councils can innovate.’.

The broad consensus was that local authorities had assets and property portfolios which had the potential to be unlocked in terms of adding value and avoiding missed opportunities. The use of PSP Relational Partnering could be an opportunity to do this.

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