COMPULSORY COMPETITIVE TENDERING: LOCAL AUTHORITY IT AND FINANCE SERVICES (Hansard, 25 October 1994)

§ The Minister of State, Department of the Environment (Viscount Ullswater)

My right honourable and learned friend the then Secretary of State for the Environment announced to the House the Government's decisions on proposals to extend Compulsory Competitive Tendering (CCT) to local authority and other defined authorities' white-collar corporate and professional services on November 10 1992, (col.744). He undertook that the Government would discuss details of implementing these decisions with representatives of local government and other interested parties. Since then, my officials have had very useful discussions with the local authority associations, the Audit Commission and CIPFA on a number of joint working groups, and with a number of other representative bodies.

We are today issuing two consultation documents inviting comments on the Government's detailed proposals for extending CCT to local authority information technology services, and to finance services.

Following consultation on CCT for legal and construction and property services, orders were tabled before the House in June and July this year for legal and construction and property services respectively. The papers issued today on IT and finance services will be followed later this year by our detailed proposals for personnel and corporate & administrative services.

Copies of today's consultation papers will be placed in the Library. They include a definition of each service which includes the provision of a range of IT and finance services but does not capture the users of IT services and excludes financial tasks carried out as part of the normal duties of managers and other administrative staff whose primary responsibility is to a service other than a financial one.

We recognise that not all of this work is necessarily suited to competitive tendering and potential contracting out. For this reason we propose that local authorities be permitted to carry out up to 30 per cent. by value of IT work using their own staff without going through 28WA competition, all authorities being able to retain a minimum of £300,000 worth of work in-house and free of competitive tendering,. This recognises that certain work must be retained in-house both to enable an authority to fulfil its democratic responsibilities and to act as an expert client for bought-in services.

Similarly, for finance services we propose that the authorities be able to retain 65 per cent. by value of work, with a de minimis exemption of £300,000. An authority will not be able to award any of the remaining 70 per cent. of IT work (or 35 per cent. of finance work) to its own staff unless they have won it in fair and open competition.

As with legal and professional construction and property services, the consultation papers also give details of modifications which we intend to make to the statutory framework for competitive tendering to ensure that authorities will continue to be able to deliver services in a way which meets their own operational objectives.

Following consideration of comments received on the proposals included in this consultation document, I will submit to the House the Statutory Instruments required under the Local Government Act 1988 to give effect to our proposals. I anticipate that, subject to the conclusions we draw from consultation and to Parliamentary approval of the relevant order, CCT for finance services will take effect from 1 October 1996 in metropolitan districts, London boroughs and certain other defined authorities; and that CCT for IT services will come into effect one year later than originally proposed, from 1 October 1997. This will place IT CCT at the end of the extension programme, allowing authorities, if they wish, to deal with market testing of IT work once the outcome of competition for services which are the principal customers for IT is clear.

For counties and shire districts CCT for both services will take effect once the Local Government Commission's review of local authority structure has been completed and, where appropriate, changes have been made. CCT for these services for the new police authorities will be subject to separate consultation.

My right honourable friend the Secretary of State for Scotland and the Secretary of State for Wales are issuing separate consultation papers. The proposals contained therein follow much of what has been outlined above, although implementation dates will take account of the programme for local government restructuring in both those countries. A separate consultation exercise is currently taking place in Scotland on the timetable for Scottish authorities.

Experience with the manual services already subject to CCT has shown that competition brings not only financial savings, but also significant improvements in the management, efficiency and quality of public services. We fully expect that CCT will bring the same benefits to IT, finance and other white collar work.