Competition: Kent County Council
18 March 2011 | By Luke McLeod-Roberts
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Kent County Council (KCC) legal chief Geoff Wild is not averse to going against the grain. At a time when the political orthodoxy is that public sector organisations should cede control of certain services to the private sector, charities and individuals, and reduce both their size and remit, Wild has continually sought to see KCC move into new areas of income generation and market activity while making sure his organisation stays within competition and procurement rules.
Last year he formed a joint venture (JV) with East Midlands and Wales firm Geldards, called Law: Public. The collaboration is capable of taking over entire local authority legal departments at a fraction of the margins commanded by the private sector competition. The JV charges on average £150 per hour for legal advice on areas such as adult and children’s social services, employment and planning.
When Law: Public was launched some questioned whether the arrangement was compliant with procurement law. However, under EU law legal services, along with social care and healthcare, are classified as ’Part B’. This means that they are considered non-priority for the purposes of cross-border commerce. A public body can enter into a relationship with a private entity without going through a formal tender procedure.
The arrangement potentially lay open to challenges from private sector competitors if they thought they should have been picking up the work in the place of Geldards. But Wild argues that due diligence suggested this would not be the case.
“Small local firms don’t tend to specialise in public sector work - they rather act for individuals and small businesses [so don’t view us as competitors],” he says.
“The main beneficiaries would be big firms such as Eversheds, Nabarro, Pinsents and Wragges, and they are wary of challenging the initiatives of local authorities because they act for local authorities and it risks damaging their own reputation. They don’t like it but it’s difficult to see what they can do about it.”
The first contract under this arrangement came last year with South Derbyshire District Council. The authority, which previously had an in-house legal capability of around four lawyers, will outsource its legal function to Law: Public, retaining one non-lawyer as a monitoring officer. While there is no fixed term to the appointment, Wild thinks it is likely to endure.
He says that KCC and Geldards worked closely with the Solicitors Regulation Authority to ensure that Law: Public was compliant with its rules. Rather than being a separate company, Law: Public is a brand name under which the partners jointly trade. Wild ensured that there is no fee-sharing between the entities and when instructions are received they decide which party is best equipped to take on the work.
Wild hopes to extend the scope of Law: Public under a local franchise arrangement. “My longstanding dream is of a jointly-owned legal service in the public sector,” he says. “It has the potential to be a vehicle in which all local authorities could invest through local franchises.”
Wild’s confidence about Law: Public is partly a result of his dealing with a host of similar issues - including procurement law and state aid - thrown up by KCC’s past ventures into non-traditional areas.
In 2003 KCC set up Kent Top Temps, which aims to circumvent the expense generated by acquiring temps through private agencies with its own temping agency. Since then it has provided locums to meet Kent’s fluctuating recruitment needs for a variety of jobs.
Five years later the local authority established Kent Top Travel, which runs bus services in the county, competing for contracts on an open tender basis with the private sector.
“We subsidise local bus routes with council taxpayers’ money,” explains Wild. “If it’s just going to line the pockets of company directors then we’ve got a fiduciary duty to protect that money so that the subsidy we pay is reasonable.”
KCC set up separate companies to manage these interests and appointed directors. It had to ensure there was demarcation between the remits of these individuals as company directors, public employees and county councillors.
“All work done by these companies for Kent is either on a Teckal basis [established in the decision of the European Court of Justice in Teckal Srl v Comune de Viano & Azienda Gas-Acqua Consorziale (AGAC) di Reggio Emilia] or through open procurement,” Wild explains.
KCC successfully tendered for certain bus routes and Wild claims it was able to charge the public a fraction of the costs levied by private sector operators.
“Local bus companies have been up in arms,” he says. “They’ve cried foul, claimed it’s unlawful and said there are conflicts between the council’s interest and that of the private sector. Their lawyers have been in touch and the issue of state aid has been raised. But the reality is that local authorities are perfectly entitled in law to trade, provided it’s through a company.
“In the end they went to the press and claimed we were killing small businesses. There will always be those who feel threatened, but provided there’s no legal basis for a challenge I’m not too bothered.”
Wild says that private bus companies have had to streamline their own models and reduce the price of travel. As a result, they are winning back contracts.
“We feel that’s good,” he concludes. “We genuinely don’t want to drive them out of business. We’ve spent an awful lot of time trying to stimulate the local economy. If it continues we’ll just cease to exist.”