The challenges of getting public sector outsourcing deals right has been highlighted after a local authority chief executive was suspended in a row over a deal to outsource its fleet services.
Phil Halsall, chief executive of Lancashire County Council, was suspended last month following allegations over the tender to shift its fleet services function to an external provider.
The council has pointed out that the suspension is a formality to allow an impartial investigation to be completed, but the decision highlights the challenges local authorities face as they attempt to reduce costs by partnering with private companies.
The complex, multi-million pound tendering agreement effectively outsourced the fleet to a private company, along with its staff.
The external provider would then have provided fleet services to Lancashire County Council, including end-to-end fleet management; maintenance and fleet related services, covering fleet management, fleet maintenance, third-party services, such as glass and tyre repair along with shared service support, customer account management and procurement services.
The current annual budget for the fleet is around £5 million, covering 2,000 vehicles and pieces of equipment for the county council.
Staff campaigned against outsourcing
Council staff had campaigned against any outsourcing over fears of job losses.
The contract was originally awarded to BT, but this was revoked to facilitate the investigation.
The focus on Halsall is thought to come through his involvement in a council joint venture with BT, called One Connect, of which he is a director.
One Connect Limited is a £400m joint venture partnership established between Lancashire County Council and BT, which began operations in 2011 as one of the largest public - private partnerships in the United Kingdom.
The Partnership is jointly owned by BT (60%) and Lancashire County Council (40%) and has around 800 staff seconded to it from both Lancashire County Council and BT.
One Connect has a 10-year contract and offers guaranteed upfront savings and guaranteed procurement savings to the County Council.
Council members often take board roles when they create council-owned joint ventures and three other board members are from the council, including the former Conservative leader.
The situation has been made more complex following a change in the power structure at the council, which was Conservative-led when the decision to award the contract was taken, but has since become a Labour/Lib Dem-controlled administration.
The fall-out from the aborted outsourcing contract has continued following the decision of the chief executive of One Connect, David McElhinney, to resign.
He left his post last month which prompted one councillor to say: “I know he is not at all happy with what is happening, he is not happy with the culture of fear which seems to prevail at the county council. He just doesn’t want to be a part of it.
“The two men who have done so much to improve service at the county council; one has resigned and one suspended. The council has gone from showcase to basket case in such a short space of time.”
The BBC recently reported that Halsall has dismissed allegations of wrongdoing as “complete nonsense”.
Damian James, chairman of fleet operators association ACFO, said: “Getting public sector procurement right can prove to be a complete minefield for the unwary with legislative compliance essential.
“Notably there is a wealth of European regulation governing the process – and potential challenges from many stakeholders not least trade unions and the public at large.”
Council statement
A council statement said: “The chief executive of Lancashire County Council has been suspended pending the outcome of a disciplinary investigation.
“The council’s Urgency Committee made the decision in a meeting held at County Hall. It follows an independent review of the tender process for a contract to run the council’s fleet services.”
The council’s in-house provider, Lancashire County Commercial Group, will continue to provide the fleet maintenance and repair service until further notice.
The review is not being published, because it contains “exempt” commercial information.
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