Key Risks ommitted from the Business case

Uncategorised

The Council takes a narrow view of the function of the Business Case “…as the purpose of the business case is to identify the case to carry out procurement process, the risks associated with this process are highlighted” (Response to Trade Union comments, 31 May 2011). But the role of a Business Case is not simply justify commencement of procurement, it is also to establish a case for outsourcing the service. This is an important distinction. There is no in-house bid, so the Council has to look beyond a procurement process to determine whether the development of the options appraisal actually stacks up in the five ways described above.

 

The Council is not consistent because two of the six risks identified in the Business Case refer to the risk of central government changing savings targets or decreasing funding “…during the life of the contract” (page 36).

 

The Council is attempting to privatise risks by omitting from the business case. The risks summarised below are equally important as the six risks identified in the Business Case. If key risks are not disclosed and debated now, then the next stage will be the award of a contract when the risk register will be classified as ‘commercially confidential’. The final Business case may ultimately be disclosed through a Freedom of Information request, but by then the contract will have been signed and will be operational. These omissions would have been identified if the Council had adopted best practice in holding Gateway Reviews at important stages of the options appraisal and procurement process.

 

Key risks omitted by the Council

The following key procurement risks have omitted from the Business Case:

  • Higher transaction costs
  • Judicial Review if unequal treatment
  • Bidders withdraw/submit incomplete bids
  • Bidders submit higher priced bids than affordable

The Business Case identifies only one transition risk, others include :

  • TUPE transfer disputes
  • Loss of critical skills before or at transfer

The Business Case identifies only two key operational risks but there are more key risks that should be included:

  • Cost reductions not achieved
  • Service quality does not meet standards
  • High level service user complaints
  • Corporate policies not fully implemented
  • Sub-performance of subcontractor(s)
  • Transformation delay
  • Innovation limited
  • Technology or system failure
  • Change Control mechanism disputes
  • Data security breaches
  • Industrial relations/action disputes
  • Contractor seeks to renegotiate contract
  • Loss of knowhow/intellectual property
  • Disputes with contractor over impact of outsourcing other Council services

The Business Case fails to identify contract management risks such as:

  • Inadequate monitoring & reporting
  • Effectiveness of performance assessment regime
  • Lack of exit strategy

Financial Risks

  • Hidden costs emerge
  • Increased contract monitoring and management staff and costs
  • Larger budget reductions required
  • In Reduced revenue collection rates reduce income
  • Cost reductions not achieved

Democratic Governance Risk

  • Strategic & operational boards partnership management problems
  • Lack of oversight and scrutiny
  • Accountability & reporting failure

Employment Risk

  • Changes to terms and conditions
  • Increased level of job losses
  • Industrial relations disputes

  • Pensions

  •