An alternative view

Shared professionals iStock 000009503395Small Newsletter pic 146x219Sam McGinty reports how he has been persuaded that local authority-owned alternative business structures might work in certain circumstances, although he is yet to be fully won over.

I was pleased to attend LGG’s famous Weekend School earlier this year at Exeter University. While I was there to make the most of the training on offer, I was also there as an exhibitor, promoting the services of my authority’s legal team, NWL Legal Focus.

Are you an ABS? I was asked more than once. No, I replied, we just get on with it.

This wasn’t intended to be discourteous to our enterprising colleagues who are now set up as Alternative Business Structures or those who are currently beginning the SRA’s licensing process. We at NWL Legal Focus know our business and although we are always looking for the next opportunity, we are comfortable we do not currently need to become an ABS to drive our work forward. However, many see ABSs as the next step for their team’s development.

Hot topic

The words ‘Alternative Business Structures’ were on everyone’s lips at the Weekend School and several sessions were devoted to this most in vogue topic. ABSs seem to be the most exciting thing happening in local government legal service delivery at the moment. I have always been a bit sceptical about the need for them – are they necessary? Are they more than just the current fashion in service delivery, filling the gap in the headlines left by the old news which was the drive for shared services?

NWL Legal Focus operates our business using the existing powers under the Local Authorities (Goods and Services) Act 1970 and we are even entitled to make a profit pursuant to the R v Yorkshire Purchasing Organisation and British Educational Suppliers Association case back in 1997. This is in common with many other authorities acting in a commercial fashion. With some creative thought and a thorough understanding of our own strengths, we have been successful in selling legal advice, training and management consultancy to a range of authorities and to a greater extent, further education colleges. Our successes have meant that we are now generating in the region of a third of our controllable expenditure and we are well on our way to increasing that proportion this financial year.

These powers are fundamental in shared services and many other joint working relationships (including of course other powers such as section 113 Local Government Act 1972 for sharing officers). As Matthew Adams explained, this is where HB Public Law’s journey began.

Peter Steele of Bevan Brittan and Adams of HB Public Law, presented on the creation of the ABS established between Harrow and Barnet London Boroughs, in partnership with the private practice firm. It was interesting to hear about their journey from shared services to ABS. They advised not to undertake it lightly, naming a range of considerations that in-house teams would have to get to grips with first – time recording, billing, WIP, confidentiality, marketing – not to mention formulating the business case to set up the trading company and then approaching the SRA for a licence.

Crispin Passmore of the SRA also delivered a session at the conference, noting that it now takes just three months to complete the licensing process – a much shorter time than was taken for the first local authority ABS, Buckinghamshire Law Plus. Passmore also hinted that the trading company might not be the only way and that the authority itself might be licensed as an ABS, although it would be a brave authority that took this step.

If everyone is selling...

... then who is buying? This was another question posed several times over the weekend in Exeter. If every legal team spins out into ABSs, who will be left to buy?

Adams stressed that authorities need a good reason to pursue the ABS route – it doesn’t bring the work through the door, you need to have the clients already. However, as authorities are increasingly outsourcing their services to the private sector, the client base of in-house solicitors is getting smaller. An ABS is a way of retaining that work for your procuring authority’s legal team – while also giving opportunities to pursue different clients.

There are of course inherent risks with any commercial venture which authorities considering an ABS will need to give thought to. What if the market dried up or the ABS wasn’t competitive and the company went insolvent? Would the owning authority have to bear the costs of the winding up and what would the political fallout be around an authority owned company going bust?

Within a local authority team, if the demand wasn’t there, there could well be undesirable consequences, such as redundancies and so on – but the team would endure and the employing authority would retain that service, without such a public embarrassment.

Wait and see

Despite my early scepticism about the models being used, the discussions at the Weekend School went some way to convincing me of the need for ABSs in some circumstances. I am not a whole hearted convert and I still find comfort in using the existing structure under the 1970 Act, but who knows what the future holds. While local authorities have certainly improved their commercial skills, are we ready to be businessmen and women and compete with our friends in private practice? I would say yes – but perhaps we had the powers all along...

Sam McGinty is the Principal Solicitor (Contracts and Commercial) at NWL Legal Focus, the in-house legal services team of North West Leicestershire District Council.