Questions & Responses Audit Committee Thursday 28 July 2016


Question from Nigel Behan, Unite Branch Secretary
This Question Relates to Item 7 Paper C Partial Audit Contract Management (and the Unite/ESSU statement submitted to the County Council Meeting on Wednesday 20th July 2016)
stock-photo-learning-disability-words-showing-special-needs-and-gifted-307265765Q1 Q1

Given the critical audit reports on contract management and the High Risks involved in transferring the Learning Disabilities Provider Service (LDPS) to an external provider, I would ask the committee to note the recommendations in the attached critical report by Professor Dexter Whitfield and to commission SWAP to conduct an audit of the LDPS commissioning project to date, to ensure compliance with SCC corporate Risk Management standards and also to ensure best practice is being followed as this project moves into the contract letting phase?

ResponseimagesHG59MX7M Response to Mr Behan’s question
I thank Mr Behan for his comments and questions and will provide a full written response to the many points he has raised. It is not possible in the time we have here to go through all he asks, but I would like to take a moment to respond to one of two key areas.Mr Behan raises a number of issues that are inaccurate – I will address each of these in my written response. But let me make one thing absolutely clear from the outset. This is a good deal for those people currently using our learning disability services. This is a good deal for those people who will use our services in the future. This is a good deal for our staff transferring to the social enterprise and this is a good deal for Somerset County Council.We must all accept the reality of the position we are in with rising demand for our services and significant government cuts. This combination means staying as we are, without transforming is just not an option.

Our objectives both accept the reality of this position, and are rightly aspirational as to how we wish to see the way we support customers with learning disabilities developing in the future – anything else would be a disservice to them.  

I would ask Mr Behan to actually read through the detailed reports that have been produced which make it absolutely clear that some of his comments are way off the mark – such as his comments about Dimensions’ own finances. I’m happy to include detail on this in my written response.

Finally, I would take issue in strong terms with one question in particular.

At no point has there been any statement from the Council that the services that customers receive will be cut as a result of this decision.  While we expect services to evolve over time, this is something that would have had to happen anyway in response to customer demand.

As I have said several times in this response, I will write to Mr Behan with further detail in each of the areas he has identified

Statement by David Orr for Audit Committee 28th July Item 7 Partial Audits Contract Management
I would like to start by commending the Audit Committee and SWAP for highlighting a series of critical issues for contract management. I firmly believe that self and external challenge is a key component of excellent service delivery and effective team working. It is very disheartening to stand here today and see that culture of challenge appears to be lacking in some parts of SCC.

A “Commissioning Council” succeeds and fails on its ability to let and manage contracts, professionally and effectively, which makes these critical reports all the more shocking.

This particularly applies to the letting of Social Care and other frontline service contracts, where safeguarding and harm risks are present.

I will one day address this committee and not bring up the failed Southwest One contract but that day is, with genuine regret, not today.

This Audit Committee and the Finance Director have been diligent in reviewing and publishing Southwest One “Lessons Learned” reports, even when the public scrutiny is uncomfortable.

That is exactly the culture an effective Audit Committee should have.

Why did Senior Managers and Officers across some parts of SCC simply ignore those key Southwest One “Lessons Learned”?

What do these fundamental oversights in contract management say about the professionalism and service culture in parts of SCC right now?

The critical reports before us today may be symptomatic of a deeper malaise in staff morale, motivation and also highlight poor leadership and management culture in some parts of SCC.

People should feel pride in working for this Council and in the delivery of vital public services.

Is there an urgent need after 6 years of austerity and cuts to improve the service and management cultures in some parts of SCC?

Response to David Orr’s Statement
I would like to thank Mr Orr for his Statement which I believe warrants a response. I do not accept that this Council has a poor culture of challenge. Indeed, in recent years we have improved our internal practices in performance management and challenge enormously by establishing a balanced score card approach for our main service lines, we have established a Programme Management Office in ECI and now have a system of boards for our major activities. And I don’t need to go into the approach in performance and challenge being undertaken in the Children’s Service as these are well documented and understood. This culture of performance and challenge is not just at a senior level but runs deep within the Council. Aided by a re-vamped appraisal scheme for staff that has led to a significant step change improvement in appraisals being undertaken as well as routine supervision. We also welcome external challenge.  Indeed, only recently the Place Scrutiny Committee scrutinised the report concerning the LGA’s Peer Review of the Council not once but twice!  I take exception with the negative comments about the Council’s employees. I believe our staff are thought of by many to be professional and hardworking. Our recent staff survey also shows that the level of staff engagement continues to improve, despite the impact of austerity and generally our staff are proud to work for this Council and deliver our services. But, having said all that, I do agree that there is room for further improvement and this is why we commissioned SWAP to undertake the audit in the first place.
David Orr Questions for Audit Committee 28th July Item 7 Partial Audits Contract Management
Please see Appendix G Risk Log for the Learning Disabilities Provider Service (LDPS) overleaf.
The LDPS outsource by 1,200 staff, is the largest transfer of complex social care services (to some of the most vulnerable people in Somerset) yet undertaken by this Council. The procurement programme has been running for well over 2 years, so there has been plenty of time to manage risk to a high standard.
This Committee regularly reviews the Corporate Risk log, produced to a recognised professional standard. The LDPS Risk Log (as Appendix G) overleaf:

    • does not follow a professional, high standard of reporting;
    • has no scoring or impact weighting;
    • does not have an identified Risk Owner;
  • appears to be focused on procurement rather than the full Commissioning Life Cycle.

For example, there are no regulatory or harm risks identified.

Q1a. How does this key Audit Committee reconcile a report here today that Risks are being managed to a common, high standard, when a sub-standard Risk Log like this gets right through to Cabinet and a decision is made to proceed with a significant and High Risk service transfer, without any challenge on the quality and scope of this vital document?
Q1b. This Committee receives professional risk reports from Officers like Pam Pursley, so why is there no proper corporate oversight of risk logs for large programmes and key projects around the Council?
Q1c. What SLT or other management group (including the Operations Director) assessed the LDPS Risk Log as “fit for purpose” before the recent recommendation to proceed at Cabinet?
Q1d. Why should Councillors and the public have confidence that the new groups being formed for contract management oversight will actually work effectively?
Q1e. Should the Council insist that Officers leading large programmes and projects undertake formal training and certification (where Risk & Issue Logs are part of that) e.g. Managing Successful Programmes Practitioner level?
Q1f. Should this Audit Committee ask the SWAP auditors to conduct a review of the LDPS commissioning process (key parts of which remain hidden from public view despite being a Not for Profit Social Enterprise) to ensure that the highest programme and risk management standards have been being applied.
Q1g. Will the LDPS Commissioner, with professional support, review the Risk Log and publicly publish another one to a recognised professional standard and incorporating all of the Commissioning Life Cycle risks?
Response to Questions 1a – 1g
The bid from Dimensions has been subject to a rigorous evaluation process.
Throughout the process since 2013 a risk register has been maintained. The report to Cabinet outlined that the risks included in Appendix G were mainly to do with what happens if things change during the contract, changes to legislation, stakeholder engagement levels or a challenge to procurement process. These are all typical risks for a contract award decision.
The delivery of the necessary work required to establish the new social enterprise, and any associated risks, will be closely monitored by the Council and CCG.
There are 21 risks on JCAD and Appendix G provides a summary of key risks for the contract award. These risks are owned by senior managers and have been subject to regular review. Officers within LDPS have benefited from support from Finance & Performance and Core Council Programme for managing risks.
Governance training, including risk management, has been provided for managers across the organisation and this is supported by a series of e-learning guides.
The SRO for the LDPS project has maintained an oversight of the project risks and continues to do so in conjunction with the Lead Commissioner for Adult Social Care services.
Risk Mitigation
Stakeholders disengaging from the process Stakeholder Plan produced and a range of regular communication channels are used to update stakeholders
Changes to legislation Monitor changes and act appropriately. Robust change mechanism included within contractual documentation
Judicial Review Regularly engage and maintain close links with key stakeholders and legal team. Robust programme governance process in place to ensure appropriate decision making. Co-production with stakeholders on service specifications and as part of the procurement process.
Probity of procurement process Council’s Commercial and Procurement Team have led the procurement process. External legal advice has been sought when required to ensure compliance and confidentiality agreements put in place to maintain integrity of the process.
Selecting the right partner Followed a rigorous and extensive procurement process with numerous stages to ensure a review took place at each stage. Plus considerable stakeholder involvement and co-evaluation throughout procurement process.
Losing key personnel from the service (including

frontline staff) and programme

Maintained strong staff engagement at all levels of LDPS and programme business continuity approach imbedded.
Uncertainty for staff during the transition phase Robust programme governance in place to oversee the transition and monitor and manage the process.
Contract Management Specific contract management team being established to manage the contracts with Dimensions and the new social enterprise on a day to day basis from existing resources.
CQC registration Close monitoring through transition phase to ensure
At Full Council, the Chief Executive stated that the lack of contract management and oversight in the key £10m/year Adult Social Care contract was an “area of known weakness” and that is why the SWAP Auditors were directed there.
Q2a. Why if this was a known area of weakness did SCC wait for the Auditors to investigate and report back before corrective action was taken with all the delays that implies?
Q2b. What other “areas of weakness” are SCC currently aware of? Please list. Are these now subject to additional external SWAP audits as a matter of urgency?
Q2c. As the Auditors can only report on the annually limited number of services they inspect, is this “Commissioning Council” putting enough investment into the external audit of contracted out services (where risks of failure or harm tend to be higher than when managed in-house)?
Q2d. When will the external Auditors return to the partial audit contract management issues (over 3 service lines) identified here today and will that reassurance report be made public?
Response to Questions 2a – 2d
I would like to respond to Question 2 in its entirety.
How we deploy SWAP is set out in the report that came to Audit Committee in March 2016, when the Committee approved the Annual Audit Plan.To get the best Value For Money from SWAP, we ask the auditors to look at areas which officers consider who get the most benefit from the work. We have agreed that the SWAP audits go to areas undertaking great change, or where the senior manager believes that there might be some weaknesses that could be addressed. There would be little value in continuing to audit areas where we already have a lot of positive audit reassurance already.For 2016/2017, the Audit Plan went to Commissioning Board twice in order for key officers to consider where the potential weaknesses might lie. “Best practice” suggests that audits should target areas undergoing significant changes in service provision.

We do not make a particular decision to spend our audit resources specifically looking at contracted out or commissioned services as opposed to in-house services. There is no presumption that one method is inherently more risky than the other. However, in the last few years I can confirm that we have used audit days to look at a number of specific contracts we have let.

We will not know until the auditor completes his or her work if manager’s concerns are borne out and whether there actually are “areas of weakness” to address. And I think that we now have a good process in place for Audit Committee to review the Partials audit and require managers to address any risks identified.

In terms of the contract management audit, you will notice that there are a number of management actions with dates for completion. SWAP has agreed with the relevant managers to hold the Follow Up audit after these dates.

In the tried and tested hierarchical model of service delivery with a Director, Heads of Service and Group Managers, lines of responsibility are clear and staff can readily understand how to navigate that operating model.

At Full Council, I identified that whilst the overall salary bill has fallen 41%, the salary bill for Senior Managers has fallen by only 5%.That could indicate that the “Commissioning Council” operating model is complex as well as costly.

Q3a. Do SWAP as auditors have an opinion on whether the complexity and split reporting lines of the “Commissioning Council” operating model contributed to these fundamental oversights of contract management?
Q3b. Given the high overhead of the Senior Managers in this operating model, then how could these fundamental oversights occur, especially with the over-arching role of an Operating Director i.e. Who is in charge of service delivery and quality – the subject matter expert Director (Adult Social Care for example) or the Commissioner or the Operations Director?
Q3c. Should SCC conduct a review of the current Senior Management operating model to ensure that it is lean, efficient and staff readily understand reporting lines and lines of responsibility?
Response to Questions 3a – 3c
If I may I would like to take all three sub questions together.
Firstly, with regard to the salary bill, this has dropped significantly over the past five or so years due to service efficiencies but mainly by employees transferring out of the Council with services. However, such services still have to be managed from a commissioning perspective and if we have learnt any lessons here in externalisation, it is to ensure that we retain an appropriate clienting function. This necessarily means that the proportion of managers to other employees will change. A perfect example is the LDPS when approximately twelve hundred employees will transfer from the Council. With regard to senior managers, perhaps it might help to say that before the current operating model, we had four Corporate Directors and twenty five Heads of Service below the Chief Executive. When we introduced the current operating model we removed the corporate director and head of service tiers and replaced it with twelve directors.
I do agree that the current operating model is more complex than a traditional hierarchical model as it requires employees to work in a matrix way across the organisation. However, one clear advantage of the current operating model is that it does bring internal challenge with it.  The old model meant that one person was accountable for both commissioning and delivering the same service, leading to an inherent conflict of interest in an organisation that has become commissioning led. Regarding SWAP, it gave no opinion as to whether our current operating model had an impact on our contract management performance. With regard to the way in which we manage contracts, this did not change as a direct result of moving to the current operating model.  We continue to believe that contracts should be managed locally rather than centrally, but what we have done is to bolster the level of support local managers now have. We of course will continue to review the way we operate and the SWAP audit has helped us to do that.
We now know that staff across 3 service lines were not working to a high standard and these poor practices were tolerated for some time.
Q4. Does this indicate cultural issues (across parts of SCC) over the professionalism, morale and motivation of the managers and staff involved?
Response to Q4.
No. What it does highlight is the increasing complexity and volume of contracts that the Council now has and the need to bolster still further our efforts to support their effective execution.



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