Social and Economic Impact of Delt Shared Services

Transcription

1 Social and Economic Impact of Delt Shared Services June 2016

2 Contents Executive Summary Introduction Supporting economic growth Reducing costs Reducing risk Improving service delivery Improving health and wellbeing Driving the transformation agenda Annex A: Consultees... A-1 Annex B: Breakdown of Delt expenditure on bought-in products and services... B-1 Annex C: Wider shared service opportunities... C-1 Contact: Chris Gibbon Tel: cgibbon@sqw.co.uk Approved by: David Mack-Smith Date: 13 June 2016 Director

3 Executive Summary 1

4 1. Introduction Background 1.1 At a time of intense pressure on budgets for public service delivery, combined with increasing demand for services such as health and social care, public sector organisations are considering radical approaches to changing their operational models. 1.2 One key area for such change is Information and Communications Technology (ICT), which has become hugely important to the delivery of public services, and is a vital part of transformation. Any successful restructuring of service delivery will typically need to be underpinned by reliable and flexible ICT systems and services. 1.3 In 2013 Plymouth City Council (PCC) and NHS Northern, Eastern and Western Devon Clinical Commissioning Group (NEW Devon CCG) took the visionary step of agreeing to combine their ICT support operations into a single shared services organisation: Delt Shared Services. 1.4 This was a bold move in that there was only one other example of a local government/nhs shared service partnership (Hoople). 1.5 Critically, rather than seeking solely to strip out costs, the partners set up Delt with a view to retaining high quality ICT jobs within the local area protecting and developing the local skills base in order to contribute to Devon s economic growth, while helping to improve the quality and effectiveness of its clients service delivery. 1.6 Inevitably, there were many challenges in establishing a new company, managing the transition of operations, and in getting Delt underway rapidly. However, after its first 18 months of operation Delt is now well-established, and has made rapid progress towards achieving the objectives set for it by the partners. The company Delt s Vision and Mission (from the current Business Plan) Why Delt? Doing things better, locally Vision: To build flexible, progressive and connected services for our customers Mission: To deliver services that are Better, Faster and Cheaper 1.7 Delt Shared Services Ltd is a publicly-owned private limited company, which launched on 1 October Delt s two founding partners (and owners) are Plymouth City Council and NEW Devon CCG. Delt was set up following the award to the partners of 500,000 from the Government s 9.2 million Transformational Challenge Award fund. Its status as a limited company guaranteed by shares wholly owned by the public sector enables it to use the Teckal Exemption. As a result, Delt has the potential to expand by incorporating other public sector partners without the need for expensive procurement processes. 2

5 1.8 Delt has taken over the ICT functions and staff of Plymouth City Council and the NEW Devon CCG. The new company supports around 6,000 users across the two client organisations. It operates from four bases (two in Plymouth, and Exeter and South Molton), and has just over 100 members of staff. Its turnover was 11.7 million in 2015/ It is important to note that while Delt is a free-standing company, it is not a purely commercial operation. As the Business Case puts it, Delt Services delivers value to the partners and customers and not to remote shareholders! It is intended to be a not-for-profit organisation. Its Business Case indicates that any profit is to be distributed to the partners or, if large reserves accumulate, used to fund community-based projects. This study 1.10 In February 2016, SQW was commissioned by Delt to undertake an independent assessment of the social and economic impacts associated with Delt s operations in Devon and the wider South West region. The study has focused on the company s six core objectives: supporting economic growth reducing costs reducing risk improving service delivery improving health and wellbeing driving the transformation agenda Our research has involved three key strands of work: Reviewing background data and documentation provided to us by Delt, including financial and service performance reports, and the company s business plans. Consultations with 12 stakeholders from Delt and the two shareholder/client organisations. The development of an economic impact model, which draws on employee and financial data provided by Delt, together with secondary data and a number of SQW estimates where necessary. This report 1.12 Our report is structured around the six objectives, as follows: section 2 provides an assessment of the economic impacts associated with Delt s operations, for Devon and the South West section 3 considers Delt s progress in reducing costs section 4 assesses progress in reducing risk 3

6 section 5 discusses achievements in improving service delivery section 6 considers the health and wellbeing aspects section 7 sets out evidence of progress in driving the transformation agenda There are three annexes: Annex A lists the stakeholders consulted for this study Annex B sets out the assumed apportionments to Devon and the South West of the various costs incurred by Delt on bought-in products and services Annex C provides a discussion on the wider market context in which Delt operates, in terms of public sector back office functions and shared services. 4

7 2. Supporting economic growth Summary Delt employs about 100 staff (97 FTEs) across four sites in Devon. Adding in indirect and induced effects, Delt s operations support about 153 FTE jobs in Devon, and 166 jobs in the wider South West. Its operations contribute approximately 7.5 million p.a. to the Gross Value Added of Devon, and about 8.7 million p.a. to the GVA of the wider South West region. The firm actively invests in the professional development of its staff, and this contributes to improving the overall skill levels of Devon s workforce. Between the establishment of Delt and the end of March 2016, 23 additional members of staff achieved the ITIL Foundation Certification, three attained the advanced ITIL qualification and 16 were trained in Microsoft Windows support. The With Delt scenario provides about 110 incremental jobs and 5.5 million in incremental GVA for Devon compared with the alternative Outsourced scenario. Having established a successful operation in its first 18 months of business, there are opportunities for Delt to extend beyond its current client base and service portfolio. The UK public sector spends over 20 billion p.a. on back office functions (ICT, HR and Finance), including about 2 billion p.a. spent by local government on ICT. Introduction 2.1 In this section we consider the current economic impact of Delt on Devon and the wider South West region, in terms of employment and Gross Value Added (GVA) 1 : the direct effects through Delt s employment of staff, plus the depreciation associated with capital investments and net profit before tax the indirect effects associated with Delt s purchase of goods and services (including the services of temporary staff) induced effects arising from the employees of Delt and its suppliers spending their wages in the local economy on goods and services for their personal use, for example on accommodation, food, shopping, entertainment etc. the resulting total employment and GVA for Devon and the South West associated with Delt s operations. 2.2 We also consider the incremental economic impacts of the current situation versus two alternative (hypothetical) counterfactual scenarios: 1 Gross Value Added is a measure of economic output. At a national level, it is closely linked to Gross Domestic Product, as follows: GVA + taxes on products - subsidies on products = GDP. 5

8 a Do Nothing scenario in which Delt does not exist and its functions continued to be provided through the shareholder organisations, Plymouth City Council and NEW Devon CCG an Outsourced scenario in which Delt does not exist, and its functions were outsourced to a commercial operator, with many jobs relocated elsewhere in the UK and only the bare minimum of employment and supplier expenditure retained within Devon and the South West. 2.3 The results summarised here are derived from a bespoke economic impact model developed for this study, which has been provided separately to Delt. 2.4 Finally, we provide a brief overview of further potential opportunities for Delt, associated with addressing the wider shared services market elsewhere in the UK. Direct effects 2.5 There are various ways of calculating the GVA associated with a company. For the purposes of this study, we are using the income approach : GVA = Compensation of employees + Depreciation + Net pre-tax profit. Direct employment and staff costs 2.6 The primary economic impact of Delt on Devon and the South West arises from the fact that it employs a considerable number of skilled ICT professionals in a part of the country where such jobs are relatively scarce. 2.7 As of February 2016, the company employed a total of 101 members of staff, all but nine of whom are full-time. The Full Time Equivalent (FTE) employment is approximately Retaining jobs in Devon was the main reason for going for this model PCC Stakeholder 2.8 Including an uplift on basic salary costs of 22%, to reflect overtime, accrued holiday pay, employer s National Insurance contributions and pension costs, the total staff costs amount to 3.4 million per annum as shown in Table 2-1. Table 2-1: Total staff costs Total staff costs ( k) Senior management 720 Senior technical & customer services 1,554 Junior technical & customer services 1,083 Total k 3,356 Source: SQW analysis of data from Delt 2 2 In this and other tables in the report, the totals are not always exactly equal to the sum of the figures shown, as the numbers have been rounded. 6

9 2.9 As we are concerned with workplace-based (as opposed to residence-based) GVA, we can assume that all of these staff costs contribute to the GVA of both Devon and the South West, as Delt s employees are based in four sites across Devon. Depreciation 2.10 Estimating the depreciation associated with Delt s operations is less straightforward partly due to the fact that the company has only recently been established, and partly because many of the capital assets purchased by the company are transferred over to the shareholder organisations For the purposes of this study we have estimated the depreciation at approximately 250,000 p.a. This has been derived by depreciating over five years the total 1.3 million expenditure in 2015/16 on Purchases of ICT hardware and Capital purchases for NHS recharge (for the purposes of an economic impact estimate it does not matter whether these assets are held on the balance sheets of Delt or its shareholders). Arguably, this may significantly understate the total depreciation associated with Delt s operations, as it excludes the depreciation of relevant equipment bought by the shareholders and Delt in previous years. The capital equipment purchased by the firm will largely be to replace older equipment (servers, personal computers etc.), and we would normally expect the annual depreciation to be closer to the figure for annual capital investment. However, in the absence of more detailed information on the total relevant assets within Plymouth CC and NEW Devon CCG (for example, whether the older assets have already been fully depreciated), the 250,000 p.a. assumption for depreciation is taken as a conservative estimate The purchased equipment is located entirely within Devon, so we can assume that 100% of the depreciation goes towards the GVA of Devon and the South West. Net profit 2.13 From the draft audited accounts for 2015/16 we see that Delt made a net profit before tax of c. 992,000 in 2015/16. As this is retained within Devon (whether it is re-invested within Delt or distributed to the shareholders), we can assume that 100% of this profit contributes towards the GVA of Devon and the South West. Total direct GVA 2.14 The total direct GVA associated with Delt s operations, for Devon and the South West, is therefore 4.6 million p.a., as summarised in the table below. Table 2-2: Summary of total direct GVA associated with Delt s operations Direct GVA ( k) Total annual staff costs in Devon/SW workplaces ( k) 3,356 Net annual pre-tax profit retained in Devon/SW ( k) 992 Depreciation of fixed assets located in Devon/SW ( k) 250 Total direct GVA in Devon/SW ( k) 4,597 Source: SQW analysis 7

10 Staff development 2.15 Delt is also concerned to ensure that staff are able to grow their careers at Delt. Budget was set aside for internal training from the outset, with more than 21,000 used in the first Skills Licence, and over 28,000 in the second. In the first year all staff were encouraged to take courses related to their roles. Between the establishment of Delt and the end of March 2016, 23 additional members of staff achieved the ITIL Foundation Certification, three attained advanced ITIL certification and 16 were trained in Microsoft Windows support The leadership team too benefited from career development. All the team attended a ten-day development programme. Delt also received skills council-funded training for supervisor and management development from a Devon-based provider Delt is also keen to ensure a talent pipeline is maintained, something that is especially important in a location where suitably skilled workers may be in short supply. The Business Case pledged to grow our own talent by the specific policy of employing apprentices and recruiting, where possible, from local universities. Delt has created a sense of pride in the area the company is keen to create a pipeline of local talent. CCG Stakeholder 2.18 This effort is concentrated on young adults. Delt takes three student placements annually from local universities. Delt actively manages its student placements and aims to maintain relationships during the students final year, with a view to early recruitment on graduation. Delt also offers many of its students the option of continuing in a part-time role during their final year Delt currently has two Level 3 apprentices and one Level 2 apprentice. As the apprentices develop, Delt aims to recruit them to permanent positions. So far Delt has retained all three of its apprentices as full-time permanent employees. Delt is also in the process of agreeing to provide higher apprenticeships as part of its succession planning process Relationships are also being established with local schools. Three pupils will be coming to do work experience this year, and Delt is designing an in-house project for them to work on Most of Delt s staff are based in its Plymouth offices, and hence almost all of them live in Devon or just across the border in Cornwall (see Figure 2-1). Over time it is inevitable that some staff will move on to other firms, and take the skills acquired and developed with Delt into their new roles. In so doing (as the Business Case notes) this may help to build a bigger mass of successful ICT companies in the local area. 8

11 Figure 2-1: Where Delt staff live Source: SQW analysis of employee data from Delt. Note that each dot represents a postcode: more than one employee may live in any given postcode, and postcodes may overlap on this map Indirect effects 2.22 There are also economic impacts associated with Delt s spending on bought-in products and services. To the extent that these products and services are supporting supply chain employment in the local area, these purchases generate indirect employment and GVA in Devon and the South West. 9

12 Figure 2-2: Map of the location of Delt s UK suppliers Source: SQW analysis of 2015/16 transaction data from Delt, May As would be expected for a business of this type, Delt buys its supplies from firms across the country, and much of the hardware and software used by the firm originates from global vendors. However, our consultees noted that Delt tries to use local suppliers wherever possible (within the boundaries of its procurement policy): examples including the suppliers of audio-visual kit, vehicle signage and branded clothing. Figure 2-2 shows the location of Delt s suppliers, on the basis of the supplier postcode recorded in Delt s log of financial transactions for 2015/16. 10

13 2.24 It should be noted, however, that the addresses held on Delt s financial systems for these suppliers (for remittances) do not always reflect where the relevant economic activity takes place. For example, charges for BT circuits are associated with a London postcode, but in practice the costs associated with installation and maintenance of such circuits is largely associated with the access network, and will involve locally-based staff at BT and its subcontractors (hence supporting local employment in Devon and the South West) In order to derive an estimate of the supply chain impacts, we have gone through Delt s list of approximately 3,200 financial transactions in 2015/16, and identified whether the recorded supplier postcode sits within Devon and/or the wider South West. For each of the suppliers, we have also researched on their websites where possible whether they have any operations in Devon and/or the South West (if so, then we have generally assumed that the relevant expenditure is supporting employment in Devon or the South West). There are four further key assumptions: Temporary staff costs are assumed to be 95% based within Devon and the South West, as advised by Delt. For fixed line telecommunications services, we believe that the bulk of the costs lie in the access network, and we have therefore assumed that 80% of the relevant expenditure supports local employment. For mobile telecommunications services, there will also be significant costs associated with the access network (base station maintenance and depreciation and backhaul costs), but the costs associated with mobile devices, spectrum licence cost depreciation and core network intelligence and switching are likely to outweigh these; we have assumed that 40% of mobile services expenditure is supporting local employment. For CCG costs recharged to Delt (which have a supplier postcode in West Yorkshire), we have assumed that 20% of these costs can be considered to be supporting local employment, as advised by Delt Annex B includes the resulting estimates across 58 cost categories (using the Detail Code Name in the transaction log) of the costs supporting local employment in Devon and the South West. Of the 6.6 million total, we estimate that approximately 2.1 million is supporting supply chain employment in Devon, and about 3.2 million is supporting supply chain employment in the wider South West. Note that this excludes the capital purchases (on Purchases of ICT hardware and Capital purchases for NHS recharge ), but includes costs associated with the services of temporary staff provided by employment agencies. Table 2-3: Delt expenditure on bought-in products and services Total cost in 2015/16 ( k) Annual cost supporting Devon employment k Annual cost supporting SW employment k Delt expenditure on bought-in products and services (excluding capital equipment) 6,596 2,066 3,213 Source: SQW analysis 2.27 For each of the cost categories we have assigned a Standard Industrial Classification (SIC) industry code that best matches the relevant expenditure (e.g. 61 Telecommunications for 11

14 telecoms circuit rental, or 81.2 Cleaning activities for cleaning and hygiene costs). For each of the relevant industries we have sourced data on average UK GVA/turnover ratios and GVA per job from the ONS Annual Business Survey for Applying these ratios to the apportioned supplier turnover shown in Annex B, we calculated the total first round effects on employment and GVA in Devon and the South West. We then applied an assumed 25% uplift to these figures, to account for subsequent rounds of expenditure (as local suppliers spend some of this revenue in turn with their own suppliers, some of which are based in Devon, and so on) In total, we estimate that Delt s purchases of bought-in services are supporting 30 further supply chain jobs in Devon (38 in the South West), and 1.5 million in indirect GVA in Devon ( 2.4 million in the South West), as summarised in the tables below. Table 2-4: Total indirect employment associated with Delt s expenditure on bought-in products and services Devon South West First round employment Uplift for round 2+ effects 6 8 Total indirect employment associated with products and services Source: SQW analysis Table 2-5: Total indirect GVA associated with Delt s expenditure on bought-in products and services ( k) Devon South West First round GVA 1,215 1,886 Uplift for round 2+ effects Total indirect GVA associated with products and services ( k) 1,519 2,357 Source: SQW analysis Induced effects 2.29 Finally, there is an additional economic effect associated with the staff of Delt and its local suppliers spending their wages in the local economy (on accommodation, food, entertainment etc.). Informed by the Type 1 and Type 2 multipliers 3 from Scotland s input output tables for the Computer Services sector (equivalents are not available for the South West), and by our analysis of where Delt s employees live, we have assumed uplifts for induced effects of: 20% on the total direct plus indirect employment in Devon (23% for the South West) 22% on the total direct plus indirect GVA in Devon (25% for the South West) This results in an estimated additional 26 jobs, supported by induced effects, in Devon (31 in the South West), and an additional 1.4 million in GVA for Devon ( 1.7 million in the South West), as shown in Table 2-6 and Table Multipliers are used to reflect the indirect and induced effects discussed earlier. Direct effects are multiplied by Type 1 multipliers to give the total direct plus indirect effects. Direct effects are multiplied by Type 2 multipliers to give the total direct plus indirect plus induced effects. 12

15 Table 2-6: Calculation of induced employment effects Devon South West Total direct employment Total indirect employment Total direct and indirect employment Total induced employment Source: SQW analysis Table 2-7: Calculation of induced GVA effects ( k) Devon South West Total direct GVA 4,597 4,597 Total indirect GVA 1,519 2,357 Total direct and indirect GVA 6,116 6,954 Total induced GVA ( k) 1,360 1,738 Source: SQW analysis Employment and GVA totals 2.31 In total then, we estimate that Delt s operations support approximately 153 jobs in Devon, and 166 in the South West (Table 2-8). The firm s activities contribute about 7.5 million p.a. to Devon s GVA, and 8.7 million p.a. to the GVA of the wider South West (Table 2-9). Table 2-8: Total employment effects Devon South West Total direct employment Total indirect employment Total induced employment Total employment Table 2-9: Total GVA effects ( k) Devon Source: SQW analysis South West Total direct GVA 4,597 4,597 Total indirect GVA 1,519 2,357 Total induced GVA 1,360 1,738 Total GVA ( k) 7,476 8,693 Source: SQW analysis Comparison versus alternative scenarios Comparison versus Do Nothing scenario 2.32 In the economic impact model developed for this study we have also developed estimates of the employment and GVA associated with the functions currently undertaken by Delt, if they had remained as is within the shareholder organisations. 13

16 2.33 The key differences versus the With Delt scenario are as follows: Do Nothing involves five fewer staff at senior management grades than the With Delt scenario, reflecting the need for new roles in a standalone company: Operations Director, Finance Director, Head of Financial Accounting and two Client Relationship Managers. Do Nothing assumes a lower level of pre-tax profit than the With Delt scenario, as this is primarily driven by cost savings achieved as a result of the combined and more commercial operation (mostly from reduced expenditure on products and services being bought-in from outside the region). We have assumed 202,000 net pre-tax profit (which is the level of profit from Delt s first six months to March 2015, scaled up to an annual figure) under the Do Nothing scenario, as opposed to 992,000 under the With Delt scenario These two differences result in the With Delt scenario providing 6 incremental jobs in Devon and the South West versus the Do Nothing scenario, and 1.3 million in incremental GVA for Devon ( 1.4 million for the South West) Table 2-10: Comparison of FTE employment for With Delt versus Do Nothing With Delt Devon Do Nothing Difference With Delt South West Do Nothing Difference Direct employment Indirect employment Induced employment Total employment Table 2-11: Comparison of GVA for With Delt versus Do Nothing ( k) With Delt Devon Do Nothing Difference With Delt Source: SQW analysis South West Do Nothing Difference Direct GVA 4,597 3,498 1,099 4,597 3,498 1,099 Indirect GVA 1,519 1, ,357 2,357 0 Induced GVA 1,360 1, ,738 1, Total GVA ( k) 7,476 6,133 1,344 8,693 7,319 1,374 Source: SQW analysis 14

17 Comparison versus Outsourced scenario 2.35 The economic impact model also includes estimates of the employment and GVA associated with the functions currently undertaken by Delt, under an Outsourced scenario in which Delt does not exist, and its functions had been outsourced to a commercial operator. Under this scenario, we effectively assume a worst case situation in which many jobs are relocated elsewhere in the UK and only the bare minimum of employment and supplier expenditure is retained within Devon and the South West The key differences versus the With Delt scenario are as follows: While the Outsourced scenario includes the same number of staff as the With Delt scenario, many of these jobs are assumed to be located outside Devon and the South West. We have assumed none of the senior management, 35% of senior technical and customer service jobs, and 20% of junior technical and customer service jobs are retained in the region under the Outsourced scenario. The level of net profit is assumed to be the same as the With Delt scenario, as we would expect the Outsourced operator to seek similar efficiencies to those achieved by Delt. However, under the Outsourced scenario, we assume that none of this profit is retained within the region. The level of depreciation is assumed to be the same as for the With Delt scenario. However, capital assets such as servers may well be located outside the region (in the Outsourced provider s data centres), and so a lower proportion of capital investment is located within the region. We have assumed that 20% of the annual depreciation is retained within Devon and the South West. Regarding the various categories of bought-in products and services (including temporary staff), we have made different assumptions in some cases for the share of expenditure which would be supporting employment in Devon and the South West under the Outsourced scenario. For example, the above assumption regarding the reduced numbers of Devon-based staff leads to lower office- and staff-related expenditure being retained in Devon. Overall, we estimate that 1.2 million of the expenditure on products and services would be supporting employment in Devon ( 1.7 million in the South West) under the Outsourced scenario, versus 2.1 million in Devon ( 3.2 million in the South West) under the With Delt scenario These differences result in the With Delt scenario providing 110 incremental jobs in Devon (118 in the South West), and 5.5 million in incremental GVA for Devon ( 6.1 million for the South West) versus the Outsourced scenario. Table 2-12: Comparison of FTE employment in Devon and SW for With Delt versus Outsourced Devon With Delt Outsourced Difference South West With Delt Outsourced Difference Direct employment Indirect employment Induced employment Total employment Source: SQW analysis 15

18 Table 2-13: Comparison of GVA in Devon and SW for With Delt versus Outsourced ( k) Devon With Delt Outsourced Difference South West With Delt Outsourced Difference Direct GVA 4, ,787 4, ,787 Indirect GVA 1, ,357 1,226 1,132 Induced GVA 1, ,000 1, ,229 Total GVA ( k) 7,476 1,982 5,495 8,693 2,545 6,148 Source: SQW analysis Future opportunities 2.38 Having established a successful operation in its first 18 months of business, there are considerable opportunities for Delt to expand beyond its current two clients. We do not attempt here to provide any estimates of future revenues or market share for Delt, but Annex C provides some information on the market context for shared service operations and the scale of UK public sector expenditure on back office functions. In particular, we note the following: As of 2015, there were some 49 English councils which had not as yet entered into any back office shared service agreement according to the Local Government Association Map of Shared Services, In 2009 HM Treasury estimated total UK public sector expenditure on relevant back office functions to be about 23.6 billion p.a.: 16 billion on ICT, 4.1 billion on HR functions, and 3.5 billion on Finance functions. HM Treasury estimated that local government spent about 2.7 billion on ICT in 2007; extrapolating recent data from Delt s own operations, an indicative estimate for the current spend by UK councils on ICT is in the order of 2.0 billion p.a. 16

19 3. Reducing costs Summary Delt realised savings of 992,000 in 2015/16. The company is able to take advantage of economies of scale in its buying and has adopted a more hard-nosed commercial approach to securing discounts from large suppliers. Delt has much clearer oversight of where costs are being incurred, and is able to address them. By separating ICT from the rest of the PCC and CCG s activities, Delt has brought an end to the practice of shadow ICT (ICT costs being paid through, say, the stationery budget or general expenses). Introduction 3.1 Delt s approved Business Case had several objectives, but cost reduction was clearly an important driver for undertaking the move to shared services in the first place. The Business Case stated that Delt should aim to be better, faster and cheaper. It estimated that the new arrangements might save around 8.9 million over ten years for the baseline scenario of the current two clients, and the latest Business Plan (2016 to 2026) has estimated the potential baseline ten-year savings slightly higher at 9.5 million. 3.2 There are several elements of the shared services approach which permit cost efficiencies. These include the following: The design allows for a sharing of overhead costs between partners, and the streamlining of processes into common systems which are cheaper to maintain. By combining the ICT resources of two organisations, Delt can benefit from economies of scale in a manner that the two individual services could not. Attracting and retaining better-trained and more specialised staff leads to lower expenditure on correcting errors. Cultivating a working environment which provides high quality opportunities should reduce staff turnover and hence lower recruitment costs. 3.3 Interviewees also noted that the industry experience and expertise of some of the new senior people recruited by Delt has helped identify cost-effective solutions and made it more alert to new opportunities. The successful introduction of Surface Pro tablets is one example; many local authorities have struggled to use such equipment effectively. 17

20 Another is the relationship with Babcock. Through the industry connections of senior Delt staff the partners have been able to take a leading role in a year-long trial of a new cybersecurity system Babcock has developed, with the option to continue with it after the trial. Direct costs reductions 3.4 Many of the cost savings arise from Delt having a much clearer overview of where ICT costs are being incurred by the partners. It has, for example, been able to rationalise multiple print contracts and software licences that were being self-managed within different sections of the partners. Delt should be continually asking themselves: How do we, with finite running costs, become slicker in our working practices? CCG Stakeholder Mobile telephony costs have come down, partly through economies of scale, and partly through a more hard-nosed commercial approach to negotiation contracts, but also through being fully aware of what is going on, and identifying services that were not in fact being used. 3.5 Savings realised in 2015/16 against the baseline position amounted to approximately 992,000. Examples of the type of savings it was able to achieve include 465,000 on software and maintenance and support, 140,000 on printing/photocopiers and 95,000 on mobile phones. 3.6 While cost reductions were less of a priority for the CCG, the complexity of its ICT arrangements was leading to higher costs. Indeed, one of its previous ICT providers was about to double its contract price as a reflection of how complicated it was to deliver services to the CCG s multiple sites. Other beneficial effects on costs 3.7 Other savings have flowed indirectly from the better use of ICT. The use of Lync, for instance, has reportedly cut down travel costs for the CCG by enabling meetings to be held online. The Surface Pro tablets allow social workers to make more productive use of the time spent travelling. 3.8 Nor are these indirect benefits confined to ICT. The attractive branding of Delt vehicles has led to staff being more willing to drive them in preference to their own vehicles, which because of the differences between mileage rates for different types of transport is leading to savings. 18

21 4. Reducing risk Summary Delt has broader and deeper collective resources (human and technical) than the IT teams of PCC and the CCG had separately. This allows the partners access to a greater depth of expertise and to have more confidence in their security processes. System resilience is improving through real-time replication of data and two high availability off-site data centres for back-up and protection against system failures. Introduction 4.1 As ICT becomes an ever more central part of business life, it carries with it a high degree of risk. It is increasingly vital for the delivery of services, but at the same time its complexity is growing. The risk is compounded by budget cuts, which are putting pressure on public sector organisations ICT functions and may lead, for example, to delays in upgrading key ICT infrastructure. In this climate, a shared services approach offers a number of ways to mitigate risks. Reducing risk through scale 4.2 The first set of benefits flow from the greater scale of Delt compared with Plymouth City Council and NEW Devon CCG individually. The partners benefit from a larger IT department, better equipped to deal with malware attacks and other threats. This protection in scale has been particularly notable for the CCG, whose former ICT staff account for only around a quarter of Delt s current staff. 4.3 The pooling of funding and personnel has resulted in better opportunities for security of services and software. One interviewee commented that Delt provides access to the bigger toys that are not normally available to companies in the South West, as there are very few organisations in the South West big enough to support an IT department of 100 people. The Babcock cybersecurity system is one of these opportunities, whilst the purchasing of AirWatch licences, a mobile device planning system bought through Vodafone, has been another. Reducing risk through simplification 4.4 The second protection comes from system simplification, such as digitising data, records and papers, as well as creating better remote access and less complex (and hence more secure) backup of systems. One interviewee noted that this has been especially important for the CCG, which was formed from the merger of two Primary Care Trusts and as a result inherited ICT systems that were more bitty. The split between the North, East and West 19

22 Devon areas compounded these problems. Delt s ICT has started to knit these systems together, by using a single domain and working to create consistency across systems. Having a single ICT provider was a key motive for the CCG in agreeing to the shared services model: it was even more important than costs savings, in one interviewee s opinion. Reducing risk through certification 4.5 A third gain that reduces risk comes from protection in certification. In its first year Delt has become public sector network (PSN) compliant. This is a significant status to hold; organisations without it as Plymouth City Council was for the last few years can (in theory, at least) be denied access to secure government networks. Complexities inherent in aligning the CCG s IGSoc system with the PSN system also proved another area of intricacy. Interviewees felt that this PSN status was achieved by Delt more rapidly than would have been the case had the pre-existing arrangements continued. Reducing risk through better communication 4.6 The single ICT platform put in place by Delt has helped to enable better communication practices (e.g. sharing documents more easily online and the use of Lync). This has helped both partners to reduce risks associated with miscommunication, and allow greater crossorganisation working. 4.7 The partners are also, through Delt, able to share learning. This is true for potential threats as well as When lessons can be learnt from multiple clients, it saves each client for benefits and efficiencies. If, say, a security issue from having to go through a painful emerges for one partner, Delt is able to apply the process itself. learning from the incident across both of them, for example in responding quickly to malware attacks. Delt employee This sharing approach can also be extended to, for example, learning lessons from PCC s use of tablets by staff, which preceded their introduction in the CCG. Reducing risk through protection against infrastructure failure 4.8 Delt has also started to upgrade the infrastructure it inherited, with significant resilience benefits for the partners: It has moved from tape-based to disk-based backup, a more expensive but much more reliable approach. It also now has two off-site data centres, both designed with service maintenance in mind diesel-powered generators to kick in in the event of a power cut, and air conditioning to prevent servers overheating. These so-called high availability data centres offer a level of protection against major system failures that the CCG in particular did not have access to before. 20

23 5. Improving service delivery Summary Delt has steadily improved the quality of service it offers across a range of metrics. It has set more demanding targets for a comprehensive range of KPIs, drawing on industry best practice, and generally exceeds the targets set in its service level agreements. Delt is more customer-focused than the clients previous ICT functions, and the professionalised arrangement is leading to a more strategic approach to defining clients required work programmes. More generally, by introducing more effective systems (and getting them to work properly) Delt is improving the productivity of the partners workforce. The introduction of Surface Pro tablets, for example, has enabled Plymouth City Council social workers to make notes direct to computer while visiting clients, saving considerable write-up time. Introduction 5.1 As stated earlier, cost reduction is a central aim of the move to shared services. However, if it results in poorer services it may be regarded as something of a false economy. The Business Case therefore makes it clear that one of Delt s goals is to improve service delivery. 5.2 At one level, this involves doing the basics better than before. Delt s service desk stretch targets for, say, answering the phone or providing a first time fix for problems were therefore set at levels in excess of those being achieved by Plymouth City Council and the CCG. Using benchmarking figures from Socitm, 4 Delt was keen to compare itself with industry standard practice, in order to develop realistic and productive targets for the company. The evidence so far suggests these ambitions are being met. Performance statistics 5.3 Under the terms of its service level agreements (SLAs), Delt has to report on five key metrics, though it also collects information on some others too. The table below gives an indication of performance levels for each metric for the most recent month provided to SQW, February See: 21

24 Table 5-1: Performance metrics for Delt Metric SLA upper benchmark % Feb 2016 for PCC % Feb 2016 for CCG Incident Resolution >80% 93% 94% Service Request Delivery >80% 85% 81% First Time Fix Rate >60% 61% 78% Service Desk Response Rate >80% 70% 72% Service Availability >98.5% 98.6% 99% Source: Delt Incident resolution (overall) 5.4 This metric measures the number of priority 1-4 incidents (issues where users find something is not working as it should be) raised with the ICT Service Desk in a month. Each incident is categorised as P1 to P4 depending on its urgency and severity. Each priority level has a different target for resolution of the problem. For P1 (the most pressing) it is one working day, for P4, the least pressing, it is ten working days. 5.5 The number of incidents reported to the service desk from PCC staff has grown steadily over time, from around 1,800 in March 2015 to 2,700 in February Delt was been able to resolve 90% or more of these incidents within its target times for every month in that time period. This compares with an upper benchmark of >80% set in the SLA. 5.6 The number of incidents reported by CCG staff is much lower, with 290 being logged in February Of these, 94% were resolved within their target times. The upper benchmark for the CCG was raised to >90% in February Service Request Delivery 5.7 The number of Service Requests (e.g. requests for the provision of equipment, services or software) raised with the Service Desk varies considerably from month to month. The number from PCC staff in February 2016 was 876, a relatively low figure (in October 2015 it was 1,143). Of the February requests 85% were dealt with within the target time, thus exceeding the SLA benchmark of 80%. In the previous twelve months, Delt has fallen below the benchmark just once, in September The CCG generates far fewer Service Requests: 98 in February Of these 81% were delivered within the target time, compared with the new SLA benchmark for February of 85% (raised from the earlier 80%). This was attributed to a temporary redirection of resources to deal with a backlog of old calls. First time fix rate 5.9 First time fix relates to issues that can be fully addressed by the Service Desk (in other words, it excludes temporary workarounds) within 30 minutes of the call. This timeframe is recognised as the industry standard, and in February 2016 this replaced Delt s previous metric of completion within 45 minutes. The total number of incidents raised with the Service 22

25 Desk in February 2016 by PCC staff that counted towards the first time fix rate value was 2,262. While the number of such reports fluctuates, the trend has generally been upward Of these, 61% were dealt with within 30 minutes. The SLA target is 60%, but from February 2016 this applies to the 30 minutes timeframe instead of the previous 45 minutes (in January 2016, 78% had been dealt with within 45 minutes) The total number of Incidents raised with the Service Desk by CCG staff in February 2016 which counted towards the First time fix rate was 345. Of these, 78% were resolved in 30 minutes or less For comparison, the First time fix metric was 48% within 60 minutes for PCC before Delt. Service Desk Response Rate (Telephone Answer) 5.13 The total number of telephone calls received by the Service Desk in February 2016 from PCC was 3,073. Of these, 70% were answered within 30 seconds. However, the average wait time for the call to be picked up was 38 seconds, compared with a SLA benchmark of 30 seconds. The average call length in February 2016 was 245 seconds over four minutes The Service Desk received 481 calls from the CCG in February In all, 72% were answered within 30 seconds, though again the average was above that threshold, at 40 seconds. The average call length for the CCG was over 5½ minutes Delt has recognised that performance around this metric has been below target, but points out that this may reflect a trade-off: its good performance on first time fixes implies relatively longer calls, which means more queuing and a slower pick-up for unanswered calls. It is considering ways to resolve this dilemma. However, the figures are still markedly better than before Delt, when for PCC 71% of calls were answered within 45 seconds. Service Availability 5.16 Delt measures service availability at PCC for ten primary services and ten secondary services, as set out in the PCC Service Level Agreement. It monitors whether services are available with no known errors, and includes such things as , Lync, the Plymouth.gov.uk website, print services and desktop and remote logins. Each of these is measured individually, and an overall average is also calculated. The headline figure was 98.6% for PCC in February 2016, just ahead of its SLA benchmark of 98.5% For the CCG, the overall average service availability for its eight core services was marginally higher, at 99%. Co-working 5.18 At a more fundamental level, the aim of shared services is to provide a means for public sector organisations to work collaboratively and, in so doing, to improve service delivery. When Ofsted labelled our previous system clunky and not user friendly. PCC Stakeholder 23

26 appropriate, this could include anything from the sharing of calendars to the sharing of relevant client or patient information Perhaps the most notable example to date has been the integration of health and social care in Plymouth. Developed through a Section 75 agreement between Plymouth City Council and the NEW Devon CCG, this pooling of relevant Adult Social Care and CCG budgets, in order to facilitate the creation of a single community health and social care delivery model, was enabled by the single ICT platform put in place by Delt A second example is the access for hospital doctors to GPs records for hospital patients. This scheme is being rolled out nationally, but Delt has implemented it in Devon ahead of some other parts of the South West, such as Cornwall. Single provider 5.21 Delt s creation means the partners are served by a single ICT provider. This has been especially important for the CCG, which was quite disjointed before: there is now just one number to call and Delt is making life easier for people. Delt has enabled the streamlining of these various processes and demands into a simpler system, with a greater degree of standardisation across practices. Delt could work towards owning the problem in the moment and getting it right first time, every time. CCG Stakeholder Customer-focused 5.22 Delt is seen as being more than an ICT department; it is an ICT company and, as such, partners are treated as customers. Plymouth City Council consultees in particular mentioned that this changing dynamic had helped to improve the relationship between those delivering ICT and those using it Interviewees emphasised that the necessary conditions for effective service delivery did not come from Delt alone; the need for shareholders to finance their service requests has led to a greater degree of forethought and planning than had previously been required. As such, there is a more strategic approach to defining the work programme. From Delt s perspective, the forthcoming provision of a service catalogue will assist in this two-way dialogue which should result in more effective service delivery. New and better technologies 5.24 The provision of equipment and support which allows partners to work remotely is highly valued. A Delt consultee suggested that this was helping to broaden the horizons of partners. Consultees suggested that the new Delt structure has allowed progress such as this to have been made more quickly than would have otherwise been the case. It was suggested that the input of an external expert (i.e. Delt) was key in allowing for decisions to be made more smoothly in instances such as this. Moreover, the combination of IT expertise and procurement capabilities within Delt is cited as having allowed for better software and hardware purchases for partners. 24

27 More strategic focus 5.25 Several of the consultees felt that there is now a more strategic approach to defining the work programme. The Partner Relationship Manager/ Intelligent Client relationship is strong and allows productive conversation about needs rather than wants it has forced the partners to think more carefully about what their ICT priorities actually are. Delt helps the client to understand where they want to be and how to get there. Delt employee 5.26 One interviewee observed that ICT is now a much more visible service, and its status has grown as a result. Departments within PCC and the CCG are more aware of their own requirements and are clearer on the cost implications. 25

28 6. Improving health and wellbeing Summary Delt takes the health and welfare of its staff seriously, and has a number of measures in place to support their physical and mental health. More widely, it is also contributing to the health of CCG patients by making ICT systems talk to each other better. Delt has, for instance, implemented a system called MIG (Medical Interoperability Gateway), which allows doctors at Plymouth hospitals to see the GP records relating to a patient something that in an emergency is potentially life-saving information. Delt also works with local third sector organisations, such as Mind, the mental health charity. Introduction 6.1 Delt works to improve health and wellbeing in several ways: directly with its own employees; indirectly by providing high quality jobs, and, through the services it provides, for the partners staff and the Devon public. For Delt s staff 6.2 The company recognises the need for an ergonomic working environment, and for managing the stress factors which arise in an office setting: The move to a new office space has provided opportunities for staff to help design their working environment, and to feel engaged in decision-making processes. The election of a Staff Forum and the appointment of a Staff Director have been important in developing HR policies, and these measures are intended to help increase productivity, reduce absenteeism, enhance morale and retain high-quality employees, as well as benefiting staff health and well-being. 6.3 Delt provides substantial health and wellbeing gains simply by employing over 100 people: having a job is strongly correlated with better mental and physical health. A 2006 study for the Department of Work and Pensions 5 confirmed this it found that (p vii): employment is generally the most important means of obtaining adequate economic resources, which are essential for material well-being and full participation in today s society work meets important psychosocial needs in societies where employment is the norm 5 Waddell, G. and Burton, A.K. (2006) Is Work Good For Your Health and Wellbeing? The Stationery Office 26

29 work is central to individual identity, social roles and social status employment and socio-economic status are the main drivers of social gradients in physical and mental health and mortality. 6.4 Moreover, Delt has recently become an accredited Living Wage employer, which will help to contribute to a higher quality of life for its employees. This is applied to everyone working at Delt, regardless of whether they are permanent employees or third-party contractors. 6.5 Delt has worked hard to cultivate a positive working environment for its staff: Delt organises social events for its staff and the office includes recreational facilities to promote the development of strong collegiate relationships. Delt also invests in training and development for its staff, something which is valued highly by employees; this provision is seen as being specifically tailored for the individual, in order to promote career progression and individual development. Interviewees recognised Delt s achievements in this area. Delt has already built a strong staff ethos, with employees acting as ambassadors for the company. This was seen as particularly impressive given that Delt inherited its staff from two separate organisations. Delt people were seen as friendly and approachable. Delt has a new, different dynamic. PCC Stakeholder Delt tries to support a good work-life balance through flexible working and home working; the company is currently undertaking an internal equipment review to understand the relative benefits and implications of moving from desktop computers to laptops and/or tablets in order to assist with this. Delt also pays attention to occupational health by, for example, trying to reduce the risk of repetitive strain injury. The wider health and wellbeing of Delt staff is also valued, as reflected in the provision of discounted membership at a local gym. 6.6 Consultees discussed the potential for health and wellbeing benefits linked directly to Delt s status as a publicly-owned ICT company: Moving into a limited company status inherently required contract negotiations with relevant unions regarding the transfer of staff. As a result of this process, the total reward package for staff (including annual leave and working hours) became negotiable within the company, rather than being part of a national employee contract. Given some of the typical demographic differences between ICT employees and those in other sectors (notably the younger average age), the ability to tailor contracts accordingly may well have health and wellbeing benefits in the longer term. 27

30 For partners staff 6.7 Delt s effects stretch beyond just its own staff, however. Its services enable PCC and CCG staff to work more effectively. This should, in time, increase their productivity and reduce their levels of stress. Those members of staff who frequently work remotely, in particular, are benefitting from Delt is a wholesome company, with a focus on more than just profit. CCG Stakeholder the introduction of Surface Pro tablets. Most noticeably, this has so far helped adult and children s social workers; the new technology not only allows social workers to have patient and client data to hand when necessary, but it also helps in creating efficiencies in travelling and conducting write-ups. PCC consultees in particular drew attention to the positive impacts of this on social workers wellbeing. For the general public 6.8 The complexity of measuring health and wellbeing outcomes and impacts, coupled with the relatively short timeframe since Delt s inception, means that consultees found it difficult to comment concretely on its effects on the general public. However, it was largely felt that positive outcomes for the health and wellbeing of the public were likely. 6.9 The access to information granted to hospital doctors by the MIG system should allow them to offer more appropriate care. Delt s work with GPs should also help them offer a more standardised service, less dependent on the level of ICT skills available within an individual GPs practice, which again should help improve the overall health of Devon s population. Delt s work in updating the security and functionality of GP IT equipment is resulting in a smoother service for both practice staff and for end users Delt also has an impact on the third sector organisations in its locality. It supports two local charities nominated annually by staff with time and skills, as well as money. Delt has also offered decommissioned equipment to local charities (while such infrastructure no longer serves Delt s needs, it is still more sophisticated that many local charities would normally have access to). This can have direct benefits for Delt too. For example, it undertook some ICT work for the Plymouth branch of Mind, helping it build a server to support a small local network; in return Mind is now scheduled to run some mental health workshops on workplace stress for Delt employees. 28

31 7. Driving the transformation agenda Summary Both local government and the NHS continue to be under considerable pressure to make savings in order to maintain services. Delt s primary contribution to the transformation agenda is in helping its clients implement their strategic roadmaps. Plymouth City Council is currently bringing its highways contract back in-house, which will require the ICT elements of that contract to be brought back too: something that Delt is undertaking. As well as responding to a pipeline of projects, Delt is also starting to take more proactive steps. It is, for example, working on a service catalogue, which will allow users to see the service options available to them. Introduction 7.1 Delt s agreement with NEW Devon CCG and PCC foresees shared services operating as an agent for change with a proactive, rather than passive, role. In the modern world, service transformation revolves around the management and sharing of information. As set out in Delt s Business Plan: Delt recognises that information is one of the most critical assets owned by our partners and customers and that the ability to quickly store, access, search, validate and, critically, share this information, will be the definitive measure of success of our wider partnership. 6 It is seen as Delt s responsibility to streamline data processing and, as a result, allow partners to gain additional value from the data which they possess. As an example, the use of standardised reporting tools and the upskilling of staff was expected to lead to better management information being produced. This in turn was expected to underpin evidencebased decision-making. 7.2 This represented a challenge for Delt. As a new company, and one which was set up very quickly, it has had to grapple with its own internal issues, such as the need to put financial systems in place, as well as addressing legacy issues from the partners, such as outdated infrastructure. This is a sizeable agenda in its own right; asking Delt to drive the transformation agenda as well is an ambition that it is still coming to terms with. 7.3 Nevertheless, some progress is being made, and there was a recognition from interviewees that the shareholders too would have to change their behaviour to make this work. Road-mapping 7.4 Delt s primary role in transformation is to support PCC and the CCG in implementing their strategic roadmaps for the future. 6 Delt Shared Services, Business Plan

32 For the CCG, this means understanding and realising the strategic thinking of NHS England and the Department of Health more broadly. Meanwhile, the City Council is currently committed to a major transformation programme. For example, there is currently a plan underway to bring the Council s outsourced Highways contract back in-house, which will generate a significant number of ICT requirements which will fall under Delt s remit. 7.5 Crucially, to date, Delt has supported the integration of services across both partners, a key element in the digital roadmaps of each. This The work on joining up the digital medical records from PCC and the CCG has been very, very strong. has included work on joining up the digital medical PCC Stakeholder records from PCC and the CCG in order to allow for easier access to mutually important information. This is assisting in progressing the CCG s goal of digitalising records, integrating and sharing them so that they can be accessed in real time, at the point of care From PCC s perspective, Delt has been a vital player in the CareFirst project, a web-based case management system for Children s and Adult s Social Services. Meanwhile, the introduction of tablets is reaping rewards for both partners in terms of creating efficiencies for peripatetic workers and frontline staff (notably social workers). Consultees comments reflect an eagerness to take this further. 7.7 In realising different aspects of the partners roadmaps, consultees expected PCC and the CCG to lead on direction, but for Delt to provide relevant expertise where necessary. There was the expectation that Delt would, in time, become more savvy in pre-empting partner demands with relevant solutions and in finding areas of common interest for both partners as a means of finding shared resolutions. In some areas, this is already happening; one consultee referred to the potential benefits which could be achieved for both partners if current plans for a Plymouth-wide Wi-Fi network were to be established. Professionalisation 7.8 The process of creating a shared services platform demanded better organisation, planning and accountability than had previously been the experience of either partner. 7.9 Having a properly defined services framework, from a single provider, is seen as beneficial, particularly for PCC, which did not have an internal equivalent previously. This framework has brought better structure and discipline to partner ICT demands and has helped to establish a more commercially-minded ethos within partners. Consultees mentioned that this is having further impacts upon partners back office work, including the CCG improving its management reporting structure. PCC has just launched its first ICT strategy, which was developed with considerable input from Delt. 7 Strategic-Vision-Statement-v0-8.pdf page 5 30

33 7.10 Delt s current work in designing a FirmStep dashboard for clients will assist further in this process of professionalisation, allowing partners to view and understand service opportunities more easily, thereby providing a greater degree of clarity in planning processes. Partnership structure 7.11 Consultees considered it important that Delt operated as a partner, rather than as a supplier, and key to this is the Customer Relationship Manager/ Intelligent Client interface. This relationship is in many ways more akin to independent advice and is valued as such by partner consultees There were some mixed responses from consultees regarding the relative roles of Delt and the partners in driving the change agenda. Whilst most interviewees were satisfied with the current balance, some felt that Delt could be more proactive in finding solutions for future client needs. There can be friction sometimes, as neither side are sure on the rules of the game. CCG Stakeholder 7.13 However, the trust which has been developed between Delt and its clients has resulted in a more formal and productive conversation between the parties, to determine need not want, and to encourage better future governance and planning. Interviewees saw Delt acting as a critical friend, rather than as a salesman. 31

34 Annex A: Consultees A.1 We are grateful to the following people were interviewed for this study. Annette Benny Director from NEW Devon CCG Carole Burgoyne Plymouth City Council executive user/ stakeholder Martine Collins Head of Commercial Services at Plymouth City Council Jim Goodwin Intelligent Client at NEW Devon CCG Dr Paul Hardy CCG user/ stakeholder Steve Hambleton Delt employee, Customer Relationship Manager for Plymouth City Council Gail Irvine Delt employee, Customer Relationship Manager for NEW Devon CCG Darren Newland GP practice manager Giles Perritt Delt Director from Plymouth City Council Joe Smith Delt employee Judith Smith Delt employee Kelvin Spinks Intelligent Client at Plymouth City Council A.2 We are also very grateful to Lynne Hyland (Head of Business Support) and Giles Letheren (Operations Director) of Delt, who acted as the steering group for this project and supplied much of the information on which this study draws. A-1

35 Annex B: Breakdown of Delt expenditure on bought-in products and services Table B-1: Assumed apportionment of relevant costs to Devon and the South West Cost category Total cost in 2015/16 ( ) Annual cost supporting Devon employment Annual cost supporting SW employment ADSL Service Advertising and Marketing 1, Charges For Services 663, , ,666 Circuit/Broadband Line Rental Charges 367, , ,524 Cleaning & Hygiene 18,116 17,816 18,116 Consultancy Fees 114,110 3,459 25,879 Criminal Records Bureau checks 3,910 3,910 3,910 Donations External Audit Fees 7,373-7,373 External SLAs 189,473 70,195 70,195 Fines and penalties Fuel costs 11,611 1,493 10,375 General Office Expenses 7,443 3,379 3,389 General Repair & Maintenance Hardware Maintenance & Support 281,337 52, ,732 Health & Safety At Work 7,551 2,229 2,229 Health & Safety Supplies Hire of Equipment Hospitality ICT Consumables Insurance 20,306 20,306 20,306 Insurance Premiums 12,239 12,239 12,239 Legal and Professional 7,968 6,130 6,130 Medical Expenses Mobile Phone Call Charges 28,759 13,521 13,521 Mobile Phone Rental Charges 114,104 45,463 45,463 Other Indirect Employee Expenses 4, Photocopier Rentals 102, Photocopying/Click Charges 79, Postages 94-8 Printing Professional Fees 36,316 6,016 13,766 B-1

36 Cost category Total cost in 2015/16 ( ) Annual cost supporting Devon employment Annual cost supporting SW employment Purchase Of Books/Media Purchase Of Catering Provisions 4,571 2,068 2,866 Purchase Of Equipment 1, Purchase Of Furniture 35,493 33,670 33,670 Purchase Of ICT Software 683, ,150 Rail Fares 2,894-2,759 Removals & Storage Costs Rent and Rates 110, , ,081 Repair & Maintenance Of Vehicles 2,952 2,814 2,814 Repair or Maintenance of Equipment Repairs Under Insurance Software Maintenance & Support 2,296,968 14, ,327 Staff benefits & uniform 8,116 7,893 7,893 Staff Gifts Stationery Supplies 2, Subscriptions 23, Sundry Support Services Direct Charges 61,010 61,010 61,010 Telephone Call Charges 101,746 76,446 79,996 Telephone Line Rental Charges 114,164 93,139 93,139 Temporary Staff 876, , ,135 Training 99,770 72,819 92,919 Travel & Subsistence 12,131 1,122 10,085 Utilities 1,997 1,997 1,997 Vehicle Hire Charges 19,861 19,861 19,861 Vehicle Pool Charges 52,618 2,221 52,165 Total ( ) 6,596,337 2,065,738 3,212,704 Source: SQW analysis of Delt financial transactions for 2015/16 B-2

37 Number of shared service arrangements Social and Economic Impact of Delt Shared Services Annex C: Wider shared service opportunities C.1 As well as assessing the current value of Delt, it is important to identify the potential of Delt including the opportunity for future growth and rewards both regionally and nationally alongside the provision of other shared service offerings. This annex provides an overview of the current profile of shared service delivery, helping to highlight potential opportunities and areas for expansion for Delt in the future. Current profile The number of shared service agreements in place between local councils has increased substantially over the last few years C.2 The Local Government Association (LGA) collects information directly from local councils each year to monitor the progress in shared service agreement delivery between councils in England. In 2012, there were 220 shared service arrangements in place or in development. Figure C-1 shows that significant progress has been made since then, with 416 shared service agreements in place in 2015 an increase of 89%. These arrangements now involve a total of 332 participating local councils and have delivered efficiency savings of around 462 million 8. Figure C-1: Number of shared service agreements, Source: Local Government Association Map of Shared Services, 2015 The use of shared service agreements remains low as yet in the North West and Yorkshire and the Humber C.3 Of those 416 shared service agreements in place, around a fifth (22%) are located in the South East of England. A further 17% are in the East Midlands, with 14% located in the East of 8 Local Government Association (2015) Shared Services Map C-1

38 England. Relatively few shared service arrangements are in place as yet in the North West (6%), and Yorkshire and the Humber (4%). Figure C-2: Number of shared service agreements in England as at 2015 Source: Local Government Association Map of Shared Services, 2015 Over half of the shared service arrangements between councils in 2015 were either in back office services or customer facing services C.4 Figure C-3 shows a breakdown of shared service arrangements by type, highlighting that local councils have made most progress in sharing the delivery of back office services (e.g. HR, finance, ICT) and customer facing services (e.g. call centres). To date, a relatively small number of shared service agreements have been introduced in the areas of housing and culture, tourism and sport. C-2

39 Figure C-3: Breakdown of shared service arrangements by type Back office services 155 Customer facing services 89 Environment, waste & transport Shared management & CEX Procurement & capital assets Children & young people Adults Other public sector organisations Housing Culture, tourism & sport Number of shared service agreements Source: Local Government Association Shared Services Map, 2015 Future potential C.5 Against a backdrop of public austerity, local councils have turned to sharing back office services as a way of delivering financial savings in 2015 over a third of all shared service arrangements were in this area (see Figure C-3). With this trend likely to continue, there is the opportunity for Delt to expand its customer base and service portfolio over the next several years. C.6 One area of potential opportunity may lie in those local council areas which, as yet, do not have a shared back office service agreement in place. Data collected by the LGA provides a breakdown of shared service arrangements by type, as well as specifying each of the local authorities involved in the agreement. Using this information, Figure C-4 and Table C-1 highlights those local council areas yet to take advantage of a back office service agreement. It is important to note that the scale of this opportunity is likely to be much larger than indicated below for those local authorities where a back office shared service agreement is already in place, there may be scope to offer services in other areas or extend a more competitive service offering. C-3

40 Figure C-4: Back office shared service agreements in England Source: Local Government Association Map of Shared Services, 2015 Table C-1: List of local authorities without a back office shared service agreement, according to the Local Government Association Map of Shared Services 2015 Wycombe Tower Hamlets Bristol South Bucks Hackney Kingston upon Hull Chiltern Wolverhampton Stoke-on-Trent Stroud Dudley East Riding of Yorkshire Gloucester Gateshead Halton Worthing Knowsley Medway Bromley Liverpool North East Lincolnshire Hounslow Newcastle upon Tyne North Lincolnshire Hillingdon Sandwell Poole C-4