With the New Year comes new challenges for Cornwall Council as it starts to regroup after its dispute with BT, over their 10-year £300m outsourcing contract, came to a dramatic end before Christmas. But what led these two parties, so determined to make a difference just two years ago, to a high court judgement that states BTC (BT Cornwall) “was in breach of the agreement such that the defendants were entitled in all the circumstances to terminate the agreement forthwith”? And what steps should any organisation follow when managing the transition of services back in-house, no matter the circumstances that necessitate this?
Journey to the High Court
In March 2013 BT entered into an agreement with Cornwall Council – along with Cornwall Partnership NHS Foundation Trust and Peninsula Community Health CIC – to deliver HR transactional services (including payroll, HR employment support, first point helpdesk and financial processing), ICT, dispatch, printing, telehealth and telecare services across the county.
In an environment where public sector bodies are being asked to do more with less, to tighten their belts and show ever greater efficiencies, outsourcing becomes increasingly attractive as an option. However, it was still a brave decision by the council to attempt such an impressive and far-reaching undertaking.
As mentioned in an earlier article of ours, allegations of a rushed deal, councillor objections to the arrangements, multiple revisions – and, ultimately, the formation of an agreement that was believed by some to be neither clear and concise nor regularly reviewed for suitability and effectiveness – suggest that things did not get off to the most auspicious of starts.
In the fourth quarter of 2014 BTC’s monthly review reports started to suggest that they were unable to meet certain contractual obligations, and, by May 2015 the BBC were reporting that Cornwall Council were fining BT more than £100,000 for ‘failures to deliver’. That report went on to say that just 38% of targets were delivered upon.
Included in the agreement was an obligation for BTC to create 111 new jobs in the first two years of the relationship, with an attempt to deliver a further 240 in the same timeframe. However, with just 35 of those jobs created by the time the council fined BTC, it seems clear that there was now a significant gap between expectation and delivery.
BT agreed to make changes – but these were clearly not enough for the council to be convinced of a great enough shift in the right direction, so in June 2015 the council wrote to BTC with a view to ending their working relationship.
High Court Judgement
On receipt of the council’s letter BTC applied for an injunction to block the termination of their services. Early exits from such agreements are fraught with complicated legal and socio-economic issues, and this case was no exception to the rule. However, in the course of the court proceedings certain things became self-evident about the relationship:
1. BTC suffered ‘substantial problems’ in its performance.
BTC’s own monthly review reports showed that shortfalls had occurred and it has been reported that BTC had not denied that there were issues, though they did cite the size of the backlog of work they inherited as reason for slow progress. However, the court determined that this backlog was not in itself reason enough for them to fail to meet the KPIs they had agreed to at the outset.
2. The agreement the parties were working from was not fit for purpose.
Most significant of all to us, as relationship management consultants, is what the judge had to say about the agreement the parties had entered into. Mr Justice Knowles said the contract was “very hard to work with because of its impractical length and the imprecision in some of its drafting… It runs to several lever arch files without that length providing clarity in return”. And “its oversight and governance arrangements proved inadequate for all parties when things started to go wrong”.
As we’ve mentioned in many previous articles, the potential for success in your outsourced relationships is significantly enhanced by the creation of a clear, concise and well-considered agreement that does all it can to minimise the risk of misunderstandings. This is further improved by including, within such an agreement, a periodic review and refinement process so that the contract, and the relationship it defines, can be reassessed and updated as circumstances, knowledge and experience allow.
3. Public safety issues contributed to the need for an early termination of this relationship.
The poor quality of this agreement document led to uncertainty which Mr Knowles reportedly said extended “to critical business functions for the (council) where public safety and health might well be involved”. This was certainly a factor in the judge’s decision to allow Cornwall Council to terminate the agreement with BTC.
BTC also presented evidence to the court that some of the blame should also rest on Cornwall Council’s shoulders, but the judge felt that there simply was not enough evidence to support this claim.
Ultimately the judge stated that “BTC faced problems of its own making and did not provide to the Defendants the service it had promised to the standard it had promised. The council worked with BTC to try to resolve things but ultimately decided the position was not good enough”.
New year, new priorities for Cornwall Council
With the case behind them Cornwall Council now has the delicate task of transferring 250 staff, and the services they were facilitating, from BTC. A spokesperson from the council said “We will be working with BT Cornwall and the unions to support affected staff, for whom it has also been a difficult and uncertain period, and ensure that the services continue during the transfer process”.
Due to the scale of the project this will be some task, but it was stated by court, council and BTC that the desire is for a swift and smooth transition to take place without any loss or lessening of service delivery.
With this in mind we have put together our top four steps for a smoother, swifter transition from service provider to service provider, should you find yourself in need of a change.
1. Quality through clarity
To get the best possible results – and to stand the greatest chance of success – you need to know, with some precision, what you want, what good looks like and the real business outcomes and objectives you wish to achieve as a result of this change of service provider.
This will involve a thorough review of the operational aspects of the service provision to appreciate the demands of the recipients of the service, what’s achievable, minimum and expected standards, the resources needed to deliver those standards, and so on. This is only possible with the support and buy-in of all relevant stakeholders, so engage with them and involve them in the process as much as possible.
2. Whatever it takes
When considering a transfer of services from one supplier/provider to another, it is essential to fully understand the resources it will take to achieve the outcomes and objectives determined in 1. above. Yes, some resources may transfer from the outgoing provider, especially if a service is being brought in-house, but how many, are they the right resources, what personnel, skills, knowledge and technology will be required, what budget is needed to afford them and what time should be set aside to source them?
Poor planning or timing can have a dramatic effect on those who rely on these services, so priority must be given to assessing what’s needed well in advance of any transfer.
3. Master your management
There are a lot of moving parts in a service transition.
• It’s important to keep your outgoing providers close – so should your new team have questions there is always someone there to answer them.
• As mentioned in 2. above it’s also essential to source and coordinate the right resources at the right time to handle such a takeover.
• Intelligent management is required to monitor and review the new team’s progress and performance, adjusting resources and expectations as and when needed to achieve best value.
4. Regular review and reassess
Good management, however, does not only involve ensuring that agreements are clear – and that everyone knows precisely what they are required to do and when. It also means having the ability to recognise future risks and opportunities, and understanding the need for a thorough regular review and reassessment to optimise performance.
This review process should look at all relevant aspects of service delivery, team capabilities, customer expectations and potential outcomes to decide where changes can or must be made.
When looking to terminate an agreement early it is important to bear in mind the complexities of doing so. We produced an article a short time ago on the subject, titled ‘Early Outsourcing Termination? Save millions on your exit fees with these six questions’ that goes into far more detail than we have space for here. Though there will undoubtedly be times when an early exit could be to everyone’s advantage, things can quickly spiral into legal action as it did with BT and Cornwall Council.
Mistakes were clearly made, potentially on both sides, but praise must be given to Cornwall Council – not only for the foresight to pursue such a bold outsourcing course in the first place, but also for their tenacity in taking their provider to task when they failed to meet their contractual obligations.
The fundamental takeaway from this article, however, should be to ensure that your contractual agreements are always clear, concise and regularly reviewed throughout the lifecycle of your relationship. Ambiguity is the fuel that feeds the fire of discontent and dispute – so avoid it wherever possible.