The Advisory Group - continuously sharing knowledge and best-practice
The latest Advisory Group session offered the opportunity for CEO Adam Cunnington to discuss the growth of Public Sector Plc, present the company’s key updates, and demonstrate real-time examples and successes of our core offerings; land promotion and regeneration, portfolio asset management as well as our new approach to housing development.
Historically, where housing opportunities have been identified, Public Sector Plc has focussed on de-risking local authority sites to make them more attractive to private developers – often exceeding expectations in the capital receipts generated for our partners. We are now able to explore options that generate longer-term revenue, including PRS housing, which is currently being explored by a number of our partners to help support broader housing strategies.
Public Sector Plc’s non-exec Chairman, Richard Smith, also presented our independently verified report on the benefits of our unique Relational Partnering model, which governs all our partnership work and offers a new way for local authorities of any size to deliver their vital property projects.
Traditionally, local authorities who identified an opportunity within their asset portfolio have had three distinct options. They could either (a) do nothing and continue with business as usual (b) rely on internal resources to deliver their project, or (c) follow a traditional procurement model and recruit an external partner to engage in the works. Each option presents significant challenges.
Business as usual
According to the Institute of Fiscal Studies, local authorities in England have seen their funding cut in real terms by an average of circa 26% since 2010. Now heavily reliant on business rates and council tax revenues to finance public spending, any opportunity to improve efficiency or generate capital could prove pivotal in safeguarding essential local services for the long term. Taking a short-term view, based on the existing financial or resource constraints, may result in serious repercussions further down the line, which could eventually impact on the service provided to communities.
In the current operating environment, delivering a large-scale property project in-house presents major challenges. With ever-decreasing funding available, local authorities rarely have sufficient resources to mobilise large-scale projects effectively.
Meanwhile, as budgets have tightened, many senior property roles within local authorities have needed to be withdrawn, leading to a shortage of valuable skills and resources. This has resulted in a lack of clear understanding about how an authority’s assets are performing; where they could deliver better value and what existing constraints may limit any development opportunities.
Third-party contracting has become possibly the most popular tactic adopted by local authorities, as complete in-house service management becomes unachievable and front-line roles take priority.
One of the key drawbacks to this approach is that formal contracts often need to be signed with third parties before a close working alliance has been established. This effectively means handing over an authority’s key relationship – with its local stakeholder customers – to an unproven external organisation.
Further down the line, as a project encounters challenges, both parties may also find themselves restricted by the covenants of a rigid contract; making any necessary changes in strategy harder to implement.
The fourth way: in-sourcing
Public Sector Plc’s approach puts people and relationships first. It is based on the accepted understanding that strong social relationships are key to delivering productivity, effective leadership and innovation on a project.
That’s why Public Sector Plc forms a relationship with a local authority first – before discussing any project-specific opportunities. This helps to establish a culture of commitment to common goals from the very start and doesn’t demand any exclusivity from the authority until projects are progressed.
By setting up jointly-owned entity to deliver property projects (a Limited Liability Partnership - LLP), we can marry the benefits of external expertise with the strength of in-house values and transparent governance. Through this governance process, projects only get the greenlight when they receive unanimous approval from an the members of the partnership and subsequently, from the local authority itself.
But the real essence of Relational Partnering lies in the distinction between ‘out-sourcing’ services (by divesting control to third parties), and proactively ‘in-sourcing’ the additional skills and expertise needed to undertake a project – which enables a local authority to retain control and ensure best value is always delivered for communities.