The purpose of this report is to provide an update on Hoople from the Managing Director of the company.  In addition, it outlines the approach being taken to jointly review the future approach to commissioning services currently delivered by Hoople beyond the current contract term.

The Assistant Director Place Based Commissioning introduced the item with the following comments: the Joint Venture Company had been established in April 2011; it represented one of the council’s most significant strategic service delivery partnerships; Hoople delivered ‘back office’ services, including human resources, finance and IT; the council currently owned 74.7% of Hoople, with the remaining 25.3% owned by Wye Valley NHS Trust; in addition to the savings already delivered, a recently renegotiated Service Level Agreement (SLA) had achieved further savings in excess of £1.2 million for 2014/15; the council’s current contract with Hoople would come to an end on 31 March 2016; a joint review had been commissioned to examine the options available to the council for future service delivery arrangements, with a report due to be presented to Cabinet on 3 July 2014; and the committee was invited to comment on the proposed criteria, as detailed in paragraph 8 of the report.

 

Mike Dearing, the Managing Director of Hoople, was invited to give an overview of the Three Year Update document; this was appended to the report.  The principal points of the presentation included:

 

a.         The independent non-executive directors of Hoople, Nigel Sellar (Chairman) and Jill Youds, and the council nominated non-executive director, Councillor CNH Attwood, in attendance at the meeting were introduced.

 

b.         The business case for Hoople was based on achieving £11 million cumulative savings over ten years for Herefordshire Council.  It was now forecast that savings of £12 million would be achieved by end of the current five-year service contract.

 

c.         The company made no profit from the SLA services it provided to the shareholders.

 

d.         Hoople worked as a flexible partner, maintaining strong working relationships which enabled the company to understand the needs of the council and to identify new solutions to meet the on-going changes and challenges.

 

e.         With the recent renegotiations, the council spend on corporate services with Hoople was now 50% less than when the contract started.

 

f.          Acknowledging the financial challenges for the shareholders, the company continued to grow profitable business with a range of other customers to support and supplement the existing service range and to maintain and enhance resilience.

 

g.         Hoople sought to maintain employment opportunities locally and staff were developing new service options and seeking new business to support the vitality and viability of the company.

 

h.         It was anticipated that there was the potential for dividends to be paid to the shareholders in future years.

 

i.           Other key successes included: the establishment of a high street recruitment agency; new terms and conditions had been rolled out across the company, helping to drive performance and outcomes; staff culture was now focussed on delivering strong customer service; and Hoople had achieved an excellent balance of public sector values and private sector expertise.

 

j.           It was noted that there were three layers of governance which were used to monitor contractual service performance with the council.

 

k.         Attention was drawn to the principal areas of change in the council contract.  Nevertheless, the company had managed to retain headcount at a reasonably stable level by virtue of external business growth.

 

l.           In concluding the presentation, Mr. Dearing said that he would be leaving the company shortly and wished to thank the shareholders for the original vision for the company and for following this through.  He also wished to thank the staff of Hoople, as the success of the company would not have been achieved without them.

 

The Chairman, on behalf of the committee, extended thanks to Mr. Dearing and to Hoople staff for their significant efforts.

 

In response to a question from the Chairman, Mr. Dearing advised that uncertainty about the shareholders’ positions, especially if misrepresented in the media, could have an impact upon the reputation of the company and other customers’ perceptions.  It was emphasised that the company remained stable and profitable and could continue to operate on a secure basis.

 

A Member commented on: the remarkable cumulative savings forecast; the encouraging levels of external business growth; the importance of maintaining the business and associated employment in the county; the need to explore scenarios associated with any changes to shareholding; and the potential for future dividends was dependent on the life of the business extending beyond the current SLA.  The Chairman considered that the retention of the business and jobs in the county should be a priority for the authority.

 

Mr. Dearing responded to questions and comments from Members, the main points included:

 

1.         The shareholding organisations had experienced significant change during the last three years.  Nevertheless, the interface with the shareholders at a range of different levels had been generally good.  Should either Herefordshire Council or Wye Valley NHS Trust wish to surrender shares, Hoople would continue to be a viable organisation but there were positive benefits for the organisations to remain as shareholders.

 

2.         In view of the high performance of the Revenues and Benefits team and the importance of collection rates for the council, the company had looked very carefully at implications when putting forward savings.  It was acknowledged that there were risks associated with reducing capacity in this area and the issues had been flagged to the council very strongly.  Mr. Dearing said that the council could not expect to continue to cut costs dramatically without significant impacts on service provision.  However, he anticipated that the company could operate within the current financial envelope.  The Assistant Director Place Based Commissioning added that the Chief Financial Officer had worked closely with the company to ensure that the Revenues and Benefits work continued to be delivered to the right standard, adding that the scale of the reduction was relatively small.

 

3.         Members needed to communicate concerns and issues to commissioners within the council, as the company had to respond to the steer from those people responsible for contracting services from Hoople.

 

4.         The constraints on growth and mitigations being put in place included:

 

4.1      A number of service offerings had been relatively transactional in nature but some customers wanted a more holistic service.  Consequently, the company had invested in building capability to offer more tailored solutions.

 

4.2      The development of Hoople provided it with a unique selling point but some public sector bodies were reluctant to contract with companies associated with other public sector bodies.  However, changing financial positions for such organisations meant that many were now looking at alternative service delivery models and Mr. Dearing was reassured by the fact that Hoople was not being precluded from procurement processes.

 

 

4.3      In terms of geography, it would be difficult bid for large managed services without investment to put people in place to run the bids.  However, Hoople had explored a number of partnership options.  The company was already providing training and other services to bodies outside Herefordshire.

 

The Vice-Chairman commented on how interactions could change when services were outsourced, as both sides adjusted to new roles, but she had been impressed with Hoople staff, particularly the level of service and customer attention.  She also commented on the potential complications associated with managing both a partnership relationship and a customer/supplier relationship.  In response to questions from the Vice-Chairman, Mr. Dearing advised the committee:

 

i.           There had been two renegotiations with the council in terms of service cuts in the last financial year: one involved an offer from Hoople following a request, at a month’s notice, which had to be implemented at the start of the financial year; and the other renegotiation was initiated in September and the reductions were agreed at the start of the calendar year.  He said that the notice period had been variable but this was less of a problem than the frequency with which it happened and the scale of the changes, requiring staff to be diverted away from delivery and back into renegotiations.  He added that more certainty would provide staff and the company with greater chance to succeed.

 

ii.          The company had not applied any penalties as a consequence of contract changes made by the council.

 

Mr.Sellar wished his thanks to be recorded to Mr. Dearing for his efforts since joining the company, as its success was largely a result of his vision for the company.  He said that the Board of Directors was actively recruiting a replacement, permanent Managing Director.

 

Referring to the proposed assessment criteria identified in the report, the Vice-Chairman said that the criteria should not undervalue the relationships between the council and Hoople and the benefits to the local economy.  She added that the committee would want some assurance that the authority understood the baseline with Hoople in terms of tangible and intangible benefits before looking at other suppliers as part of any wider procurement.

 

Comments by Members in attendance included:

 

·                Value for money criteria should not be defined too narrowly and should reflect the council’s positions as both shareholder and customer.

 

·                The level of reductions by the council had put the company in a difficult position but Hoople had managed the situation well.

 

·                It was questioned whether Hoople was engaging with the voluntary sector.  Mr. Dearing confirmed that the company had undertaken partnership working with some voluntary organisations and was open to expanding the services and opportunities available.

 

·                The authority could be proud of its involvement in the establishment of Hoople, other suppliers would have sought penalties from the council.

 

·                Any unfounded, negative attitudes within the authority needed to be challenged.

 

The Chairman commented that the company had proven itself and it had been outstandingly flexible and responsive to the needs of the council.

 

In response to a question, Mr. Sellar said that it was hard to value a company during its start-up period but Hoople was profitable on an historic and on-going basis.  He added that the latest accounts would be published shortly.

 

The Cabinet Member Infrastructure commented on the challenging circumstances in recent months and the need for the council to be realistic about its expectations given the extent of the reductions and for the company to be allowed to run its own business.

 

The Leader commented that the spirit of goodwill to Hoople was entirely justified and thanked Mr. Dearing and his staff for all that had been achieved.

 

RESOLVED:  That

 

a)         The update provided by the Managing Director of Hoople be noted; and

 

b)        Subject to the comments above, the approach to the joint review of the future approach to commissioning services currently being delivered by Hoople be noted.