Scottish Government

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Western Isles Joint Public Sector Bid

Part 1: Summary Table

Further Narrative to Bid

The geographical isolation of the Western Isles has created both a distinctive culture and unique set of challenges for public sector service provision. The structure of the islands' economy depends heavily on diverse, good quality public sector employment to retain and attract a thriving business sector.

Efficient public sector services must be at the heart of the economy and the services provided must be properly targeted at community need. The Western Isles therefore proposes an Efficient Government Bid which seeks to join together a wide variety of support services across the islands' public sector and leverage efficiencies from collaborative effort.

Impact on Efficiency

The Gershon Report made evident the already well-known need for public sector bodies to collaborate where this gives rise to greater efficiencies. Notwithstanding the different traditions and regulatory environments of the various parts of the public sector, the Western Isles believes that collaboration will produce both meaningful time and monetary savings, more effective working, greater mutual understanding between employees and greater economies of scale. In a geographically distant community of less than 26,000 inhabitants the diseconomies of scale and time can be considerable. A collaborative project - provided it is based in the Western Isles - can go some way towards challenging these effects of scale and distance.

Effective collaboration at support service level would also reflect the effective community representation and voice across the Western Isles contained within the Community Planning Partnership. This partnership provides a voice for the wide and varied stakeholders within the community from the private, public and voluntary sectors and continues the tradition of a high level of community participation in the democratic process (local authority elections regularly produce turnouts of between 60-80% of the electorate).

Benefits of sustainable public sector service

Sustainability of public service provision is a key aim for the whole community. Around 40% of the employed population works in the public sector and this generates a substantial and significant opportunity for the local private sector. The local private sector is often reluctant to invest and expand unless it can rely upon stability from the public sector. The provision of efficient, relatively stable public sector service provision therefore provides a solid foundation for the rest of the local economy.

Over the past decade, there has been a marked shift of skilled employment away from the peripheral areas of Scotland and into centralised (often call-centre based) offices. Whilst this has been of benefit to the areas concerned, it has often devalued and de-skilled jobs left in peripheral areas. Creating a support service partnership across the public sector in the Western Isles will provide stability, better career paths, continued high-skill employment and consequently significant whole-community benefit for the Western Isles. It will also give the opportunity to examine public sector support services processes from end to end and to innovate and streamline where appropriate.

Consultation and stakeholder analysis

The initial investigation, and indeed any later, stages of this exercise will be carried out with the full engagement of the community as a whole, including a wide range of public bodies, individuals and communities, the voluntary and the private sectors. All will be given the opportunity to put forward ideas, debate and discuss how alternative configurations of support and governance could affect service provision and sustainability. Each stakeholder will have their own detailed priorities and these must be considered in the wider context but all must contribute and input if the concept of community sustainability is to be fully developed for the Western Isles.

Initial stakeholder consultation with the Western Isles Health Board, Lews Castle College, Western Isles Enterprise and the Hebridean Housing Partnership has produced a management board framework which is ready to oversee such a project, and named middle managers able to provide technical advice on individual strands of the project. Trade Unions are aware of and ready to be consulted on proposals, and specific permission has been sought from Councillors to embark on this bidding process.

Options for integrated models of public sector provision

There are two models most widely discussed for improving efficiency through co-operation. One is sectoral integration, such as groups of Local Authorities or the whole NHS sharing back office services across a region or the whole of Scotland. The second is geographical integration, where a number of different organisations in the same area share services.

The effect of geographical isolation means that the first model is likely to be much less effective at delivering efficient government for the Western Isles. Integration with mainland services produces much wasted time, travel, misunderstandings and diseconomies of scale. Experience from both the commercial sector, the privatised utility sector and from the workings of other public agencies shows that any benefits of agglomeration derived from the first model are counterbalanced by the effects of distance. Even in an electronic era, many transactions require personal contact and the relative fragility of some types of electronic communication undermines the benefits of joining with one of the proposed E.G. mainland consortia for the purposes outlined in this bid.

The second (geographic) model is therefore preferred for the Western Isles. A number of pilot projects have taken place already - some under the aegis of bilateral projects like Joint Futures ( NHS Western Isles and Comhairle nan Eilean Siar), others independently.

Our bid to the Efficient Government fund therefore has two strands of work, to run in parallel. This will ensure that the overall theme of options for local co-operation in the delivery of public services in the Western Isles and community confidence in the public sector be maximised.

First Priority - Shared Efficiencies, Shared Savings

The first element of the proposed project is to confirm where there are opportunities for savings by sharing back office services between local partners. The second phase of the project provides for implementing shared services wherever possible. The focus of an Efficient Government funded project will not only enable what otherwise will go unfunded, it will provide the authority and legitimacy to external partners who may wish to join in.

It is anticipated that any implementable recommendations will require significant organisational change. This will necessitate both extensive stakeholder consultation and proper project management. It is axiomatic that such projects will require investment in new protocols, some retraining, some upgrade or adaptation of ICT or other equipment and perhaps some changes to accommodation requirements. Many of these will require upfront investment but the maintenance of such changes will be able to be funded from efficiencies gained.

Changes to management arrangements will be a key aspect of the detailed investigation of each area of service and new approaches may be desirable. The findings of this investigation would then be subject to appraisal against agreed criteria, including the maintenance of any advantages of current arrangements, but led by the consideration of contribution to long-term community sustainability and better public service delivery.

Areas for Investigation

The following areas of 'back office' support have been identified by an initial sifting process and discussion with partners as being of the greatest potential value for collaboration:

1. Property maintenance. The Comhairle maintains an in-house team of 54 skilled trades staff providing 69,000 chargeable hours organised at the Commercial Operations Unit in 3 depot locations in Stornoway, Balivanich and Tarbert. The Unit is responsible in work teams for a variety of contracts including Building Maintenance. The Unit has an annual budget of £4m with overhead costs of £0.6m; it is currently profitable as required by law. At present, 99% of income is provided internally; there is spare capacity to carry out routine maintenance for other organisations. The other island organisations currently carry out low level maintenance using individual tradesmen; in many cases there is no schedule of planned maintenance and emergency spend with local contractors is significant. Many of the office locations for the Comhairle, Health Board, College and LEC are adjacent: dependent upon the labour rates used a saving of 3% of time and resources is a reasonable estimate (based on normal building industry contract variances) and this would free up to £120,000 annually for the Comhairle to re-invest in modern equipment and to lower the overhead costs of the building maintenance activity.
2. Vehicle maintenance. The Comhairle maintains three vehicle workshops with 13 appropriately skilled staff, a Fleet Manager and holders of Certificates of Professional Competence in both Commercial and Public Transport vehicles. Current annual revenue budget for the operation is £1.35m with overheads of £0.15m. Aside from the Post Office, no other public sector agency maintains local garages - a number contract to local garages, but others send vehicles off-island for servicing. Agencies who have indicated (either now or in the past) an interest in using the Comhairle's garage include the MCA, the Health Board, the College, the local Housing Partnership and some blue light agencies. Some agencies do not have satisfactory vehicle servicing schedules and given the difficult road and climate conditions, experience a loss of resources as vehicles rapidly deteriorate or require emergency repair. The Comhairle currently has 130 vehicles of highly mixed natures under its management and maintains regular servicing schedules. There is spare operative capacity to carry out maintenance for other public sector agencies. The Health Board currently uses a mix of local contractors and incurs charges in exporting specialist vehicles to the mainland. If the Comhairle's garage became the central public sector location for non-specialist vehicle servicing, public sector agencies would free up considerable time costs in avoiding exporting vehicles to the mainland for repair, and there would be reduced overheads in spares, staff training, journeys and management costs. A revenue saving of up to 5% or up to £75,000 per annum would appear possible based on a Best Value Review carried out internally within the Comhairle in 2003/04.
3. Reprographics Unit. The Comhairle maintains a print and reprographics unit in Stornoway which services the Council's own needs at an average cost of 3p per copy. At present, an average of 300,000 additional copies per annum are undertaken for the Health Board (including two regular long runs of 41,000 for meals and menus) which does not have its own print unit. There is only one commercial printer on any of the islands. There is spare capacity in the Comhairle's machines and the Unit could become a central public sector print unit for all the islands, reinvesting revenue into more sophisticated machines to carry out a wider variety of printing tasks which are currently commissioned from commercial printers on the mainland. Between the two agencies, around £140k of annual commissioned print spend currently goes to external sources. There would be savings in time to send copy to mainland printers and revenue spend if the units could formally combine into a Western Isles Print Shop: although the savings would be ploughed back into service provision or reducing overheads it is estimated that up to 10% of spend on externally-commissioned print runs could be saved ( i.e. £14k per annum) if such an entity were set up.
4. Health and Safety. The Comhairle has recently merged its Health and Safety and Emergency Planning teams to provide a wider base of management for long-term community risk and a single tier of management. The Comhairle already provides efficient Emergency Planning cover for the Health Board at an annual cost of £25,000. Since the advent of the Civil Contingencies Act, many public sector entities have overlapping specific legal duties in both areas. It is proposed to contemplate operating a single Health Board/Comhairle Health and Safety team. This would produce savings in travelling time and expenses as many Health Board and Comhairle locations are co-located. Operating efficiencies from having a single management structure, protocols, location and other efficiencies of scale based on both unit's current costs are estimated at 5% based on the efficiencies already generated by the merge of Heath and Safety and Emergency Planning which has a total expenditure of £269,000 per annum, giving back around £14,000 per annum.
5. Shared accommodation. Stornoway, a town with around 12,000 inhabitants, is the central base for the Western Isles Health Board, Comhairle nan Eilean Siar, Western Isles Enterprise, Visit Scotland Western Isles, Lews Castle College, Hebridean Housing Partnership, Northern Constabulary's Western Isles Division; and a number of smaller public sector organisations. All of these public sector undertakings occupy office space in Stornoway, often with heavy duplication of generic office support resources. The Health Board is looking for new headquarters office space and wishes to investigate entering into joint property procurement and occupancy in Stornoway with the Comhairle. The Comhairle has identified the revenue savings of such a move for the Emergency Planning shared function: taking the current costs of this function for all 'blue light' agencies an annual saving of £30,000 could be achieved against collective annual budgets of around £300,000. This gives a 10% estimate of savings on any further collaborative exercise.
6. Shared PC maintenance. All agencies named above have extensive IT requirements, once again often of a generic nature. Collaboration between the ITPC support functions could ensure that costs to maintain each PC could be driven down through economies of scale. In particular, PC maintenance in the Southern Isles for all public sector agencies is very expensive. All agencies base staff in Stornoway and require regular travel (most schedule one per month each month) to allow PCs in remoter islands to be serviced and user needs addressed. The Comhairle's IT section has just entered into agreement with the Hebridean Housing Partnership to provide PC cover: given the additional travelling time and slightly differing configuration, it is estimated that only 2% savings are possible.
7. Patient Transport/Special Needs Transport. Both the Comhairle and the Scottish Ambulance service provide escorted transport for patients with specific needs. Combining the assets of both fleets could minimise the number of journeys undertaken, saving both time and fuel. At present it is not possible to accurately estimate spend on each area as neither organisation tracks costings in a way that permits direct cost comparisons.
8. Grounds Maintenance. All public sector agencies on the islands have some need for grounds maintenance. The Council and the Health Board have let their contracts to external grounds maintenance businesses in separate contracts. If the contracts were packaged together, it is entirely possible that greater savings would be possible especially as many of the Council and Health Board establishments across the islands are in close proximity. The Comhairle's annual spend in 2004/05 was £344,000.
9. Staff Training. Non-specialist staff training is purchased and/or provided separately for most agencies, although there is some sharing of training through joint purchasing to Lews Castle College. Travel costs to and from mainland training makes each organised training event very expensive. Collaboration on generic staff training would ensure that sufficient numbers existed to bring trainers from the mainland and thus provide savings in travel costs and staff time for all organisations involved, and to better meet equality of opportunity targets as staff with caring responsibilities often find it difficult to undertake mainland travel. In 2004/05 the Comhairle spent £1,733,805 on staff training of which £141,131 was travel and subsistence. It is estimated that up to 20% of the existing training curriculum is directly duplicated in the Health Board, the LEC and the College and a further 30% can be customised. This aspect of the project would provide significant mutual efficiencies of cash and time: up to 20% of each organisation's budget.

In conclusion, many of the efficiencies depend upon the active participation of the various agencies to produce the economies of scale which appear possible. After further investigation, some may require 'pump-prime' capital which may be able to be sourced internally to act as an engine for maximising savings.

Second Priority - Changing Governance

The second element of the proposal is to support and improve options for the community oversight of public service delivery. It could be concluded that unless public agencies co-operate to understand and meet public needs in a more effective way then the modest efficiencies arising from back office collaboration may not achieve their full potential. An openness to consider different models of management and governance is considered essential when seeking to develop long term strategies for community sustainability.

There is an opportunity at this time to engage in innovative thinking, not limited by the constraints of current models and set the long term benefit of the community as the key driver. These investigations are likely to generate ideas on how to more effectively take forward management and governance aspects of co-operative front-line service delivery.

The Local Government Act 2003 has created new options for some public sector agencies to take a more innovative approach to the management of public funds. There are also many different models of collaboration, partnership, co-operation and joint working all ready in place in the Western Isles. We know from collaborative working with other islands groups that both Orkney and Shetland are considering similar models.

This proposal creates the opportunity to consider best practice from elsewhere in Europe, to try to determine if possible developments in this area could contribute to efficient governance for the Western Isles.

While both strands of work need to support each other there is a need for a more practical and technical investigation of the costs/benefits/issues of the first area of shared support services and perhaps more academic and conceptual work in the second area. Assembling a team which provides both those strengths will be a key challenge for the project and again Executive participation would be necessary.

Both pieces of work must be rigorous and of high quality and should report together to support progress in the short term but also allow understanding of how far development of one area might be limited or led by taking forward the other. Both strands would also consider very carefully the safeguards to guarantee unbroken high quality service delivery which have to be born in mind while evaluating options.

Bid Staffing Structure

The current proposal would be for an investigation team to be appointed by the bid partners to carry out the initial scoping phase, which would inform Stage Two of the bid. They would then become a change management team to take forward implementation of relevant support service integration and modernisation of governance. Staffing should stay stable throughout the project to incentivise the Scoping team to produce implementable solutions.

The project would be expected to start to generate efficiency savings from 2006 onwards as shared back office services were implemented and from 2007 forward as partners began to join in the collaborative service ventures.

Throughout, the project would seek to generate internal efficiencies in all partners by simplifying processes and would also seek to integrate with Modernising Government activity to deliver transactional, flexibility and accessibility benefits.

Specific savings are projected from an eventual decline over time in the number of staff required to do the same amount of work in HR, Finance and general administration. However, the main efficiencies come from increased capacity, more effective processes, leveraging purchasing power, and through economies of scale. Many of these effects are further reinforced by other, linked local initiatives such as those produced by the 2005 Electronic Government targets or by work accomplished under the Joint Futures agenda for the NHS and Council. It is further anticipated that such a powerful collaborative effort may produce sufficient spare capacity to attract back work currently being undertaken away from the Western Isles in regional centres. The Consumer Direct joint DTI/Council project undertaken at Shawbost proves that such a solution can rapidly increase capacity to the point where it becomes a national model for effective distant working.

Bid Projected Savings

Total bid benefits

If all of the above projects can be realised, the potential annual benefits are considerable. A total project scoping and implementation cost of £327,840 should produce an annual revenue saving of £323,000 for the Comhairle alone: dependent upon the dates of implementation this means that the benefits will outweigh costs by the end of 2007.