Croydon: a case in point

In 1993 the London Borough of Croydon began to explore moving legal services to the private sector, encouraged by leading members of the Conservative council. According to council lawyer Miles Smith, some of its internal client business was "withering".

One example was Croydon College, a long term consumer of its services. Presented with a simple ideological target, the legal department set out to "take a fresh and basic look at what we were doing".

Smith sounded out the marketplace informally, including law firms which showed great interest in the idea. The council then appointed Touche Ross to carry out formal market testing.

The study identified two areas of work – corporate legal services and specific case work.

Corporate work involved chief officers at the top end of the organisation – "work where you need to have an understanding of the organisation".

This was in contrast to legal services, which included case work and advice.

To outsource the work, the council had to examine specifications, evaluating tenders, settling procedures, monitoring instructions and performance, progress reporting, paying bills and trouble-shooting.

Positive interest came from the private sector which "strongly suggested that some of the work would be done cheaper by the private sector," Smith said.

However, there was little interest from the private sector in the corporate work.

"Firms could not see how the closeness which was involved could be provided from outside," he said, adding that savings were unlikely as this work was done at a senior level and it was difficult to transfer.

There was also concern about conflicting instructions from departments.

The authority considered it had a number of options, including no in-house provision or simply retaining one senior lawyer. However, it was considered that the range of work was too broad.

The solution was to retain a small team of senior lawyers to undertake corporate legal work, contract management and non-legal duties.

The council kept six solicitors and seven support staff, transferring 20 fee-earners and 10 support staff.

The contract was divided into three packages: social services litigation, civil and criminal litigation, and property, contracts and planning. Pricing was along the lines of price per job where possible and blended hourly rates for the rest. The contract also included tendered price variation factors for volume changes and a range of output standards.

Most of the work goes straight to Stoneham Langton & Passmore and not through the corporate team, Smith said.

Instructions are monitored with the local authority looking closely at the figures and asking questions if, for example, the figures rise in a certain area.

The council samples a selection of about 30 files each month, two thirds picked at random and at 24 hours notice.

They set a day aside to look through files checking initial response times and time charged.

Smith said that although the externalisation process had worked well, the speed of events meant that contract planning was not as well dealt with at the specific stage as it should have been. The local authority should have required Stoneham Langton & Passmore to produce performance monitoring data and they should have implemented more input standards.

From the firm's point of view, TUPE requirements meant that it had to examine working arrangements like flexi-time and superannuation as well as blending salaries.