aoc conference - shared services strategy and structures - march 2013; ruth smith m&r

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Name Surname One

Name Surname Two

Strategy and Structures

for Shared Services

12 March 2013 Ruth Smith

National Head of Procurement

Law

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)

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 ! …

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?

Plan your strategy … lots of models … and

opportunities …

Structure

Strategy

Procurement

Vision

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

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)

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 ?

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

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

Collaboration where EU procurement

applies

College Private sector

JV Co

College B College D College C

Collaboration where EU procurement

applies

o Employee mutuals (currently …): Spin out employee

mutual provides services back to its originating college

Mutual

College

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

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

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)

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])

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

Other collaboration which avoids EU

procurement

o Informal joint working - no contractual relationship

o Joint appointments / joint employment

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

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)

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

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”

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)

Conclusion: Think carefully about your

strategy – get that right and the rest should

follow

Structure

Strategy

Procurement

Vision

Contact Details

o Ruth Smith

o Mills & Reeve LLP, National Head of Procurement Law

o Email: ruth.smith@mills-reeve.com

o Tel: 0121 456 8434