Joining up is hard to do

So three London boroughs have studied how they can merge entire departments, including the ones delivering or commissioning highways, transport and parking services.

The report from Westminster, Kensington & Chelsea and Hammersmith & Fulham on ‘Tri-borough Working’ has concluded that the savings to be had from fully amalgamating two highways and transport departments could be as low as £350,000 a year, or, in the best case scenario, £500,000. The biggest savings are to be had elsewhere.

Potentially frontline parking services could also be joined up, to reap further savings, on top of £300,000 that could be saved by merging two councils' back-office parking departments. Again, worth having, but still small beer when you consider that the three councils face a collective £100m blackhole from 2012/13 until 2014/15.

Part of the difficulty is that due to the contracts Westminster holds, that authority could not join any highways, transport or parking merger with the other two authorities until 2014, and even then only if either Westminster, or the other two authorities, were to decide to change their delivery model.

Unlike the other two councils, Westminster has a slimmed down, commissioning department, with few staff to either provide services or to micro-manage those provided externally. Hammersmith & Fulham and Kensington & Chelsea will need to decide whether or not this model suits them.

This will require “much more detailed work to full understand how the range of highways functions are undertaken in all three boroughs and the extent and cost of policy work, service commissioning and operational management and delivery. Only then can a properly informed decision be made”, the report says.

So it's not only about merging council departments, which will of course make it easier to reduce staff overheads. It's about a more fundamental reappraisal of what a council highways and transport department is for. That's where there could be far bigger savings.

We can limit the impact of these cuts

Amid all the stories of doom and gloom, it's easy to forget that not every cut means a reduction in service. Take Oxfordshire County Council, for example. The authority is cutting its bus subsidy budget by £900,000 for the coming financial year, but predicts "very little impact" to services.

The council's revised procurement process has seen "more competitive bids for subsidised services overall". They are not the only ones. The Association of Transport Co-ordinating Officers latest annual survey of bus contract prices showed that in 2010 the industry had its first significant fall in contract prices for 13 years.

There's an argument to be had about the extent to which efficiencies can limit the impact of the cuts in funding for local government. But it's clear that, in some areas at least, both the way that the client arranges procurement, and the way that operators provide services in response, could be overhauled in order to make the available money go further.

Separate procurement of transport in different departments can be merged. Rigid contracts that prevent innovation by providers can be loosened. Productivity can be increased - as the Local Government Association has acknowledged with its programme to improve it.

It is a matter of urgency that these things are done now, given rising costs, and given falling budgets. That is not to say that the reductions in funding can be pain-free across the country, given the size of councils' budget black holes, and given that where efficiencies have already been made, the scope for further savings will be less.

But residents will not forgive councils or contractors that simply throw their hands in the air and say that there's nothing that they can do, because there is.

Is there a compelling case for more investment, not less?

The fabled sunny uplands are still some way off. So it was a surprise to read today that Plymouth City Council is giving consideration to putting more money, not less, into footways.

The fact that a scrutiny committee is still seriously thinking that there is a strong case for additional capital funding for footways is not because its members are mad. It's because there's a compelling economic case, given the amount of money that is leaked in insurance payouts due to inadequate maintenance for footways. And that is a short-term economic case that does not even take into account the economic argument of a 'stitch in time, saves nine'.

Nonetheless, these councillors recognise that there is only so much money to go round, and so, quite rightly, make recommendations on overhauling the service levels for maintenance so that what money is available goes that bit further. 

Giving thought to why so much money is spent on reactive repairs, and why defects are repaired in the timescales that they have been, has got to be the way forward if we are indeed to do 'more for less'.

So this is how big a challenge it will be

Shortly before Christmas, the news that all local authority chiefs had been bracing themselves for: the provisional funding settlement.

Shire counties face an average reduction in formula grant from this coming April of 13%, shire unitaries 12%. Metropolitan councils 10% and London boroughs 9%. While council officers now know exactly what they have to contend with, they have been expecting large cuts for over a year now, whoever was in Government.

As the Local Government Association chair Baroness Margaret Eaton commented: "Councils knew the cuts were coming and did all they could to prepare". She went on to pledge that councils would "now pull out all the stops to minimise the impact of these cuts and build on our record of delivering new and better ways of doing things".

This is rightly where the focus must be. Councils should not simply be saying, 'what services do we have to deliver, and what can we stop doing?' They should be interrogating why things are done as they are now, and this should go beyond looking at what their statutory responsibilities are. 

As the Highways Term Maintenance Association has highlighted, there is a cost associated with every key performance indicator. Why do street lighting faults necessarily have to be fixed within five days, for example. Often, the answer is that this has always been the deadline.

However, the greater the frequency of reactive repairs, that means far more travel, fuel used, manpower taken up. Ideally, less and less money should be spent on reactive maintenance, and more and more on longer-lasting planned work that gives you more bang for your buck.

Similarly, if a council is subsidising an hourly bus service to 95% of residents, do they know whether that is what is actually needed to meet accessibility needs? Are these services relied upon, or is there a demand for something different?

Reviewing how things are done is the urgent need right now. Better that, than suddenly having to cut things in a less planned and less intelligent way.

Big savings are possible - with a change in provider, and change in attitude

As each week passes, more and more local authorities are re-letting their contracts with providers of highways maintenance, highways design and transport consultancy.
Dissatisfied with the savings that have been made under the arrangements with their current contractors, many are re-tendering rather than re-negotiating the deals they have. Others are poised to do the same over the next few weeks.
This has born fruit, in Surrey County Council's case, with a full 22% in efficiency savings on current costs to be made following procurement.
Surrey is to replaced arrangements that it found unsatisfactory on performance as well as cost with three levels of contract. A core deal, for day-to-day maintenance; specialist deals for drainage grass-cutting; and two regional deals for major highways schemes.
However, it is important to note that the savings are not being delivered solely by the market.
The re-tendering and competitive dialogue with bidders has resulted in Surrey questioning its own practices, and to a stark admission: the authority acknowledged its "failure to transform the council's internal highways structures and culture".
Its exertion of control over its contractors had "created unnecessary interference and conflict with the supply chain and prevented the council from delivering its strategic management role".
The challenge for councils is to craft slimmer contracts with fewer performance indicators and less duplication, contracts that entail a degree of trust. If the prize is cutting waste by 22%, that has to be what highways managers are aiming for.

Transformation needed to halt service salami slicing

Efficiency savings are there for the taking, with every pound saved meaning one pound more for frontline highways and transport services.

As Hertfordshire County Council reports, while efficiencies have been delivered for a number of years, a review has found a further £4.1m in savings in highways services alone, or 10% of the authority's revenue budget for highways. Operational improvements, management reductions and increases in income have all contributed to this impressive saving.

However, despite these efforts, the county's leadership wants more savings to be found. With the highways service set to be re-procured, cabinet member Cllr Stuart Pile wants all possible ways of securing better delivery to be considered.

This political imperative comes as councillors are given stark choices on frontline service cuts. Despite the efficiencies that will be made, the county faces a corporate budget blackhole of at least £42m, and possibly £92m. This could mean that the county council re-trenches to core provision, providing the minimum necessary to allowing safe passage of its roads. The doom-laden scenario would see an acceleration of the deterioration of its roads and switching off street lights outside pedestrian areas.

Should the politicians decide they want a better-than-minimum highways service, "above bronze" in the officers' report, there would be more funding for cyclical maintenance: clearing gullies, maintaining signs and lines: items important for ensuring safe use of the roads. But that would mean bigger cuts elsewhere.

The bus subsidy budget could be trimmed by nearly £2.4m with little impact on rural services, cutting those that are nice-to-haves rather than life-lines, the evening and Sunday services. Further cuts would mean a watering down of what the council defines as transport "need" in rural areas.

So where can still more savings be found to stop the dreaded salami-slicing of services? Hertfordshire is going through a re-procurement, so can fundamentally challenge the way services are currently delivered.  Further outsourcing, including of highways development control services, is on the table. It'll be interesting to see if they can pull off a transformation that'll mean the cuts are not as bad as first spelt out.

Back to the bad old days of screwing down prices?

Lee Baker
Are we set to return to the 'bad old days' of outsourcing, 80s style, before genuine public-private partnerships? The days when externalisation of services was focused more on obtaining the lowest possible prices than on service improvement and efficiencies.
The saga of outsourcing firm Serco asking its suppliers to provide a 2.5% 'cash rebate' in order to meet the Whitehall demand for multimillion-pound savings on procurement contracts was highlighted at this week's Association of Directors of Environment, economy, Planning and Transport conference.
ADEPT president George Batten told the group's annual meeting in Warwikcshire that while the solution to the need to maximise savings in order to protect frontline services from cuts was likely to involve greater partnership with the private sector, this partnership would be undermined by the public sector merely screwing down prices.
After the Cabinet Office asked Serco to explain itself, Serco issued a statement that its offer of savings to the Government "will not result in any of the Government's cost saving programme being passed on to our suppliers".
Batten commented, rightly, that playing the game of 'passing on the pain to others' is not in the spirit of partnership. His vice president, Matthew Lugg, agreed that the seeking of savings authorities should not take "an adversarial approach that just demands a lower price".
But despite this, Cllr Clyde Loakes, representing the Local Government Association, admitted that his authority, Waltham Forest, has been calling its suppliers in and asking them to reduce costs, saying: "we can't continue to pay as if authorities are not facing these cuts".
Cllr Loakes is right that no authority can carry on paying what they are now. But re-thinking local highways and transport and other services must involve considering how delivery models can be changed to secure savings, rather than simply saying 'give us it cheaper'.
The problem, of course, is that local government only has until April until a 7% cut bites, and the clock is ticking.

Are highways & transport mergers the answer to revenue cuts?

Local authority transport and highways departments have generally only made annual savings of two or three per cent of their budgets in recent years. Asked why they have not moved more swiftly to make their organisations leaner, directors have responded that they've delivered all the savings asked of them.

There was simply no incentive. Why fundamentally transform the way services are delivered, if you are then asked to deliver even more savings a few years down the line, with much less scope to find savings? Now, the rules of the game have changed. Councils are being asked to cope with a 7% a year cut in revenue, and with hardly any time to prepare - there are only 153 days until the first cut will kick in.

It's against this context that three London boroughs - Westminster, Kensington & Chelsea and Hammersmith & Fulham - have announced that they will progress plans to merge services, where it makes economic sense to do so. This would be the first time that highways and transportation departments go further than merging backoffice functions, and merge frontline delivery too.

Two of the three boroughs' highways departments have already been sharing a director for over three years now. Graeme Swinburne, who is both director of highways and transportation at the Royal Borough of Kensington and Chelsea and the director of neighbouring Hammersmith & Fulham's highways and engineering department, told LTT 42 months ago that he would consider the case for joint working between the two departments. There were a range of options, he said, up to, and including merging the two boroughs' highway departments.

The prize for taking this forward now could be great in terms of protecting frontline budgets for highways maintenance and local transport schemes. However, the councils emphasised in a statement that there had to be "a democratic case" for change. At a time that senior council officials are saying that national highways service standards need to be reviewed, there will be questions over the scope for political divergence over the priorities for a smaller pot of funding.

It'll be very interesting to see the conclusions of the three boroughs' deliberations in February.

Funding cocktails live on?

Lee Baker, editor,  EfficiencyNetwork

Senior council officials don't seem to have bought the rhetoric. The Chancellor yesterday hailed the "radical simplifying of funding to local authorities, giving them greater choice over how to use their money".

But as council officials examine the fine print of the spending review, they are finding that the coalition Government has not gone as far on removing the restrictions on pots of money as they have urged. Councils want maximum flexibility to reduce multiple bidding processes, many which end abortively. Their dream is a future where funding cocktails will not need to be painstakingly assembled in order to deliver something like a new road link for a regeneration project.

The Department for Transport has been singled out as thwarting this dream. While the DfT has agreed to reduce the number of  different funding streams, it still wants to have a say on how much of them are spent. The DfT's civil servants might soon be far fewer in number, but they still want to devote time to scrutinising councils' proposals for spending.

The DfT will invite bids for its new £560m sustainable transport fund.  Ditto the £1.4bn regional growth fund, a third of which is earmarked for transport schemes unlocking economic growth. And it is down to the DfT, not local authorities, how to get better value out of the bus service operator grant, despite the  cry from the Local Government Association and ADEPT to let councils decide how best to spend money on buses locally.

In more welcome news, there will be £6m funding for councils to develop more efficient ways of delivering highways services. Freedom to make savings is necessary but not sufficient to protect front line services; there needs to be investment, robust business cases and, then, widespread sharing of what's been achieved.

More action needed to allow the public sector to get bigger bang for its buck

Lee Baker
COUNCIL officials have long planned for scenarios that will see their revenue budgets shaved by a quarter, and have said that half of this can be absorbed without affecting service delivery by securing greater efficiency savings. 


They accept that new delivery models - contracts that fuse client, consultant and contractor, procurement and projects that cut across service areas and administrative boundaries -  allow councils to do 'more for less'. But they want reforms to allow this to happen: maximum financial freedom, minimum Whitehall interference.


They will be reading the small print of the spending review to form a judgement as to whether or not the Chancellor has delivered this. But the Local Government Association's immediate reaction this afternoon suggested that ministers have not gone far enough.


Baroness Margaret Eaton, the LGA's chairman, said that ministers had to "move much faster to redraw the way public services are delivered". While ring-fencing has been removed from local authority revenue allocations, what will be done to allow the public sector to get bigger bang for its buck by merging funding streams held by other bodies?


Leicestershire and Leicester councils wanted funding streams that help deliver economic development to be rolled into a single pot - to end the Whitehall turf war that means the Department of Business, Innovation and Skills, say, may not accept funding being given to a transport project even if it unlocks projects that deliver jobs.


The spending review did announce that £4bn of funding from Whitehall departments will be "rolled into formula grant". The implication, of course, of removing restrictions from budgets and letting councils decide what projects to prioritise on the ground could, of course, mean that transport loses out.


As Steer Davis Gleave said in its analysis of the Spending Review today, it will be interesting to see what happens to the new formula grant from the DfT and whether highways and transport departments can hold on to their allocation. More than ever before, they will have to think outside a transport silo to prove the worth of investing in transport.