Wednesday 24 October 2012
Policy Council's response to questions raised at the States Members' "FTP Inform and Update Event" in relation to reporting progress, renewing the States' commitment to successful outcomes of the programme, and the contract with Capita.
Financial Transformation Programme (FTP)
The Policy Council is encouraged that so many States Members were able to attend the FTP presentation and workshop last Wednesday 10 October for what proved to be a very informative event. Few who attended can be left in any doubt about the energy, effort and commitment that is going into providing better ways of working across and between all departments and thereby reducing our deficit.
What was equally clear however was that the gradual evolution of the programme since it was debated in 2009 and the significant change in the makeup of the States following the last election have combined to create uncertainty about the ownership, focus and operation of the FTP and its future.
Recognising this and reflecting on the points raised during discussion at the event, it is clear that there is a pressing desire for greater political engagement and with this in mind the Policy Council intends that a report on the FTP should be presented to the States at the earliest opportunity. In this respect while the Policy Council recognises that it is under States Resolution to report annually and while in the past it has used either the SSP or the Budget Report as a vehicle for an update, it accepts that a more detailed report is required for debate. Given the Billet submission deadlines the earliest that this can be debated by the States will be the January 2013 meeting.
The Policy Council intends that the Report will, amongst other things, outline the circumstances that gave rise to the original proposals, chart the evolution of the programme since that time and the reasons for it, address governance of the programme both in the past and in the future, and identify the challenges, fears and concerns surrounding the current plans to meet or exceed the £31million target by the end of 2014. It is the Policy Council's hope that through this Report and the ensuing debate we can achieve fresh commitment from the new Assembly to take forward this important programme of transforming the way in which we work while reducing the deficit and at the same time continuing to provide and indeed develop key public services and the policies that drive them.
The Policy Council would wish to stress that notwithstanding the proposed Report it is vital that the current momentum within the programme should continue and Departments are discouraged from seeking to defer key decisions until after the January debate.
Contract with Capita
It is also recognised that many Members are unclear and indeed uncertain about the contractual arrangements that determine when and how Capita is rewarded for their efforts in assisting us in securing savings. The following summary sets out to explain the circumstances in which the FTP was introduced and to clarify contractual arrangements:
Following the dramatic reduction in Corporate Tax as a result of the introduction of the 0/10 regime, the States sought ways to fund the resultant deficit including a drive to reduce States expenditure through efficiencies, reduced subsidies/increased charges built around transforming the way in which the States supplies public services - under the banner of the FTP.
It was recognised by the States at the time and it is recognised by the Policy Council now that although Departments were able to suggest areas where changes might be made, the States simply did not then, nor do they now, have sufficient resources, experience and importantly the right culture to implement such changes in the timescale required. Accordingly the States decided to appoint contractors - initially Tribal Helm, since acquired by Capita - to work in partnership with the States and deliver the FTP over a five year period to the end of 2014.
Although many States Members will be more familiar with contractual arrangements where there is a direct link between the days or hours worked on a project by the consultant and the reward they achieve - a project of this scale and of this nature called for a different approach built around a contract that focused on risk and reward. This offers better value for money and lower risk to the States.
Within this package - which needs to be regarded as a whole - there will be occasions where the contractor:
- Works with the States to successfully deliver specific projects that produce anticipated recurring savings for which they take a reward
- Devotes their resources to substantial "enabling projects" which assist the organisation in operating more effectively but which of themselves do not have any direct measurable financial benefit and for which the contractor receives no direct reward for their input to these projects.
- Supports staff within Departments in the delivery of the FTP through providing specific project management expertise which the States does not have in such areas as Health and Education where they bring experience of delivering similar projects at central and local government level. It is through this part of the programme that Guernsey staff have been able to develop their experience and build the skills necessary to transform the way in which the States delivers public services.
- Delivers projects for which a sound business case has been developed and agreed but where for political or other reasons a decision is made not to proceed. In these circumstances the contractor is entitled to be compensated for the number of man days devoted to the project.
- Carries the cost on projects for which a business case is agreed and significant input is made by the contractors but which, in the event, deliver below the level of anticipated savings and where, in some instances, the reward gained by the contractor is significantly less than the cost of days expended.
Capita are rewarded at a rate of 6.5% of one year's full savings for those recurring benefits identified and delivered through the FTP. This reward is only applied to savings that are actually banked eg. a project yielding the States £100,000 worth of benefit will mean that Capita receives £6,500 and the States £93,500 in the first year and then the States £100,000 per annum (and Capita no further payment) thereafter.
If savings made exceed £31m within the programme period, Capita is entitled to 5% of one years full savings.
Capita also receive in accordance with the contract a total of payment of £1.8m over the five year period for establishing and running the Programme Management Office.
There was a step change in the way in which the programme operated last year in that the Policy Council recognised the need to motivate Departments to increase the pace of financial transformation, which led to individual targets for Departments. As part of this process it is recognised, and agreed, that Departments may, in order to achieve their savings objective, identify recurring and repeatable savings which may not have been identified in the original summary opportunity reports at the outset of the programme and which may not have involved significant or indeed any work on the part of the contractors but would nevertheless count towards the FTP. As such the contractor would be entitled to 6.5% of the first year's savings.
Determining what is in scope and out of scope
The Policy Council will be receiving on a quarterly basis a list of all projects that a combination of the Departments and the Executive Leadership Team recommend should be included for scope within the FTP regardless of whether they were in any original list and the Policy Council will sign off these on behalf of the States. Again those that fall into this category will be subject to the 6.5% payment.
Finally, the Policy Council is convinced that taken in its entirety at the end of the programme the States of Guernsey will have achieved significant change transformation, ongoing reduction in baseline expenditure and importantly established a new culture of delivering on going value for money for the public.
