Section 114 notices issued by Northamptonshire County Council have not only given councils reason to consider their funding disposition but also the service providers contracted to local authorities. Olwen Dutton says all sides should be looking at their contractual arrangements.
In March of this year the National Audit said in a report: “At a time when social care spending is being prioritised by local authorities, failing to understand how funding and demand pressures affect the full range of local authority activities risks unintentionally reducing services to a core offering centered on social care.”
Not just councils, but also providers of services they commission have started to look carefully at the implications of this across the sector.
Concerns in local government — and the sector’s financial viability — were highlighted by the first section 114 notice issued at Northamptonshire County Council and further exacerbated by the second notice issued recently.
To date, no other council has been forced to take the same measures as Northamptonshire, but the rumours about possible similar scenarios at other hard-pressed county councils, together with the almost daily press articles about the growing shortfall in funding, particularly in children’s and adult services, justifies an examination of exactly what can be done to control budgets and prepare.
Statutory
Two things are particularly relevant: the services that the council has a statutory duty to provide and the contractual obligations the council has agreed. The section 114 notice does not override either.
The current pattern of commissioning adult services relies heavily on external providers under contractual arrangements. It’s worthwhile for both the council and providers to take advice on examining those contracts carefully to see what the contractual provisions mean and how much variance is possible.
All the provisions in the contract, without exception, need to be examined to see what each party has committed to and whether or not those provisions have been consistently observed to understand if there is anything that can be done.
Even if everything is being done as it should be, it’s always worth seeing if a different arrangement can be negotiated and put that into force; especially if the contract is an old one, signed in different times.
However, if those arrangements are delivering statutory duties for you, think carefully about the implications if you believe that you have grounds to terminate.
If it’s not the current provider, then who? Can you reduce the provision of services to individuals which the contract provides for?
Especially in the adult social care market, many providers are being pushed hard financially, and it might be that you could not better the existing deal.
In that situation you could be faced both with a more expensive contract and potentially with expensive interim costs while new provision is commissioned. Changing provider also carries with it the expensive and resource intensive risk of legal challenges.
The same applies to any PFI deals that the council has entered into. While many PFI deals are fairly standard, extremely difficult to renegotiate, and more likely to be closely monitored and managed by the provider — given the complexity of the arrangements and the financing and risk — that’s no reason not to look at them very carefully.
Close monitoring
All this emphasises the importance of close and constant contract management and reporting. Even those councils who are not in potential section 114 territory would be well advised to ask if they are managing and monitoring their contracts as closely as they could.
Finally, risk. With many councils now trying to fund services through commercial deals and investments, the pattern of risk is changing, becoming more complex and volatile.
The assessment of those arrangements needs hard-headed and expert analysis from those involved, both at decision time — with the consideration of all the various reasons there may legitimately be for the investment — and in terms of risk and potential mitigation.
For councils involved in trading activities: think hard. Are these delivering to the business case? Are they working and do they really stack up? Is the resource that you are putting into them proportionate to the return you are getting back? It’s a difficult time.
Olwen Dutton is a partner at law firm Anthony Collins.
