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					                                                 Report to Scrutiny
                                            Item Number: 8


Contains Confidential Or    No
Exempt Information

Subject of Report:         Use of Consultants at Ealing Council

                           Value for Money Specialist Scrutiny Panel
Meeting:
                           8th December 2010

                           Kate Graefe
                           Head of Strategic Procurement
Service report author:
                           graefek@ealing.gov.uk
                           Tel: 020-8825 9843

                           Guy Fiegehen
                           Scrutiny Review Officer
Scrutiny officer:
                           fiegeheng@ealing.gov.uk
                           Tel: 020-8825 8182

                           Councillor Yvonne Johnson
Cabinet Responsibility:
                           (Finance and Performance)

                           Mark Newton
                           Director of Business Services
Director Responsibility:
                           mark.newton@ealing.gov.uk
                           Tel: 020-8825 9645

                           This report summarises the Council’s arrangements for
                           engaging consultants and the reasons for doing so and, in
                           an appendix, details recent and current contracts. Across
Brief:
                           the country councils are also looking to cooperate more
                           closely in the hire of consultants to improve value for money
                           for taxpayers.

                           1. Using the information provided, to question officers
                              about the value for money for taxpayers from the
Recommendations:              Council’s use of consultants.
                           2. To propose any improvements to make these
                              arrangements more cost-effective.


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1.   Use of Consultants at Ealing Council
     1.1 The purpose of this report is to look at the spend on consultancy for the
         Council with a focus on whether the Council are getting value for money.
         When analysing the spend, the following definitions have been used:
          Consultancy: the use of external resource for provision of expertise that is
             not available in-house on a specific project or programme of works;
          Agency (including interims): temporary workers/management within the
             council, assignments are typically covering a headcount or 'business as
             usual' role within organisational structure and not project focussed. The
             analysis of spend falling within this definition is the subject of a separate
             report.
     1.2 The data that has supported the creation of this report has come mainly from
         Agresso; some data and/or clarification has been provided from service areas.
         The data reviewed covers the 3 years from FY0708 to FY0910 inclusive but
         with focus on FY0910 to best determine current spend patterns when
         engaging consultants. As far as possible, the spend data has been ‘cleansed’
         by reviewing sample invoices so that the spend being analysed is in line with
         the above definitions.
     1.3 Total spend for consultancy from Agresso is £10.04m for the 3 years FY0708-
         FY0910 and £3.32m in FY0910 with the level of spend being relatively
         consistent year on year. Compared to total non-employee costs of £818m (as
         per the FY1011 budget book) of which consultancy is part, this equates to
         approx 0.41% of the annual Ealing Council spend. As the table below
         illustrates, the majority of spend is for smaller engagements across a
         reasonably wide supplier base:

          £5,000,000                                                350

          £4,500,000
                                                                    300
          £4,000,000

          £3,500,000                                                250

          £3,000,000
                                                                    200
                                                                              Spend
          £2,500,000
                                                                              Number of Suppliers
                                                                    150
          £2,000,000

          £1,500,000                                                100
          £1,000,000
                                                                    50
            £500,000

                  £0                                                0
                          >£100k        £50k-£99k        <£50k

                                     FY0708-FY0910


     1.4 In terms of comparison with other London boroughs, the only council that
         could be found to have published their consultancy spend (via Finance
         Scrutiny reports online) is Waltham Forest, who spent £4m in FY0910, and

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    approx £14.5m in the 3 years from FY0708-FY0910. When compared with the
    West London Alliance [WLA] authorities (including Hammersmith and Fulham
    who still work as part of the WLA in terms of procurement), the level of spend
    at Ealing was very similar to 2 other authorities and the 3 rd lowest spend
    overall, the lowest level of spend for FY0910 being approx £2m. It has not
    been possible to access information to compare other data such as number of
    suppliers by authority, although pan-London spend analysis shows that approx
    1,222 consultancy suppliers were used across all authorities;
1.5 Appendix A states the expenditure by directorate, which shows that the
    majority of spend is in the Adults & Children’s and Housing & Regeneration
    directorates. The larger spend in Adults & Children’s reflects the fact that this
    area accounts for the largest proportion of overall council spend. The
    expenditure in both areas can be linked to a number of big stand alone
    projects around transport and regeneration as well as Building Schools for the
    Future.
1.6 Examples of use of consultancy within Ealing Council is as follows:
    1.6.1 Over the last two years, £48k was spent with Turner & Townsend on the
          review of the highways service (including the Mouchel contract)
          resulting in the development of the Highways Improvement Programme,
          which is expected to save £930k in FY1112 following the in-sourcing of
          the contract. This was approved by Cabinet on July 2010.
    1.6.2 One of the larger projects requiring the support of consultants is the
          Building Schools for the Future [BSF] Programme. As with other
          examples, the reason for using external consultants was to provide
          additional capacity and experience to an in-house team, the latter also
          devoting a significant amount of time to the programme. Consultants
          have been engaged to support a number of areas of work as follows:
               Legal: Capacity and experience on BSF was not available in-house,
                advisors were appointed in consultation with legal contracts team;
               Finance: Lack of capacity and experience on major project finance,
                advisors (Grant Thornton) appointed in consultation with Corporate
                Finance
               Technical: Appointed in consultation with Housing and
                Regeneration
               IT: Lack of capacity and experience in-house
               Education: (Initially Cocentra and then Capita). Initial work in this
                area was completed in-house but additional capacity and expertise
                was needed once the Outline Business Case and then the
                procurement process parts of the process were reached.
                Partnership for Schools [PfS] placed a particular emphasis on
                Education Strategy as part of the overall BSF programme.
            Partnership for Schools [PfS] scrutinised the arrangements the Council
            made and were content with the additional capacity that was provided.
            Apart from Legal services and Education Advice, Technical and
            Finance advice was recruited from the PfS frameworks


                                        3
    1.6.3 PriceWaterhouseCoopers were engaged to assist the Council progress
          backdated VAT claims. Services were not charged until the claims
          were paid and in FY0910, resulted in a net gain to the council (claims
          minus consultancy fees) of approximately £1.23m.
1.7 The consultancy work provided to the Council falls into 2 types: consultancy
    that by its nature is so specialist that only one directorate would use it and
    more generalist consultancy that might be used by a number of different areas.
    Examples of companies offering the latter would be PriceWaterhouseCoopers
    and the Tribal Group.
1.8 In almost all areas reviewed, consultants have been engaged to supply
    specialist skills, experience and capacity.
1.9 In addition to the above, the nature of the larger appointments shown in
    Appendix A would suggest that that internal expertise and/or resources would
    not be available to support the types of projects listed and consequently
    without the use of consultants, some major programmes would not have been
    able to progress.
1.10 The process used to appoint consultants is the same as for any contracts with
     suppliers in that budget must be identified and approved before appropriate
     quotations and tenders are sought in accordance with Contract Procedure
     Rules. National, regional and sub-regional framework contracts are used if
     and as appropriate. As the number of frameworks available to local
     government increases, there will potentially be more opportunity to use them,
     which in turn could allow the Council access to improved rates through the
     economies of scale of larger contracts.
1.11 In relation to ongoing consultancy project cost control: the majority of the
     spend for the top 18 consultancy suppliers (those suppliers with which Ealing
     has spent more that £100k over the last 3 years) is covered by a Purchase
     Order (99% based on FY0708-FY0910 data).
1.12 In summary, the main findings and initial recommendations of this analysis are:
       The analysis suggests that the Council uses consultancy for specific
        purposes where there is a need for external expertise and/or capacity;
       As councils across the UK look to collaborate more on the procurement of
        contracts, the opportunity is now arising for increased use of consultancy
        frameworks such as Buying Solutions as well as frameworks set up on a
        regional and sub-regional basis. Both more generalist and specialist rates
        could be benchmarked using the Capital Ambition site where possible prior
        to any engagement;
       There is evidence of effective spend control for consultancy. However, the
        council will continue to take opportunities to further improve value for money
        by adopting best practice guidance as this is formed at a national (OGC)
        and regional level.




                                        4
2.    Legal Implications
      2.1 There are no direct legal implications from this report.


3.    Financial Implications
      3.1 There are no direct financial implications from this report, although
          implementation of the initial recommendations could lead to reduced costs on
          projects for consultants in the future.

4.    Other Implications
      4.1 This report directly links to the Council objective of delivering value for money
          and also looks to assess value for money in back office spend to protect
          frontline services, thereby contributing indirectly to the objective of securing
          public services.
      4.2 No Equality Impact Assessment was undertaken in relation to the production of
          this report, individual assessments being carried out as appropriate for each
          consultancy engagement.
      4.3 No further implications have been identified in relation to community safety,
          human rights, staffing and workforce or property and assets.

5.    Background papers
      5.1 When comparing the consultancy spend to the overall council spend, the
          Council Budget Book (available on the Ealing Council website) has been
          referenced.
      5.2 When comparing the consultancy spend of the Council to others, Financial
          Scrutiny reports available on the London Borough of Waltham Forest website
          have been referenced
      5.3 No further public documents have been referred to in writing the report

Consultation

 Name of          Department                      Date sent    Date        Comments
consultee                                         to           response    appear in report
                                                  consultee    received    para:
                                                               from
                                                               consultee

Internal
Mark Newton       Director of Business Services
                  Group
 Ian O’Donnell    Executive Director
 Helen Harris     Director of Legal Services
 Richard Costella Head of Finance
 Cllr Yvonne      Cabinet Member for Finance
Johnson           and Performance




                                             5
        Report History
Decision type:                            Urgency item?
EITHER: Key decision [state the date it   No
was first entered into the Forward Plan
OR Non-key decision
OR For information (delete as applicable)


Authorised by Cabinet     Date report      Report deadline:          Date report sent:
      member:               drafted:
    XX.XX.2010            XX.XX.2010         XX.XX.2010                XX.XX.2010

     Report no.:        Report author and contact for queries:
                        Kate Graefe, Head of Strategic Procurement




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