£2.50 ISSN0967-6155 No.54 -1996

New threat to privatise Post Office

,I

The Communication Workers Union, which represents the overwhelming majority of Royal Mail staffand is currently involved in a bitter dispute with management over attempts to introduceAmerican style 'team working'~has responded angrily to news that the Conservative Party isto includenew plans for the privatisation of Britain's highly profitable postal service in their election manifesto.

The latest blueprint to privatise theservice, which was leaked to a nationalnewspaper in July, involves splittingRoyal Mail's existing national networkinto eleven regional franchises withcompeting companies within eachregion. It appears that theGovernment has modelled the plan onwhat it regards as the 'successful'privatisation of British Rail.The proposals also include the

privatisation of Parcelforce, the publicparcel freight carrier, and a speedingup of the franchising programme forCrown Post Offices. Fearful ofunleashing the tidal wave ofopposition which accompanied theTories last attempt to privatise thePost Office, it would appear that theGovernment intends to leave the

network of sub post offices in thepublic sector under the control of aslimmed down Post Office CountersLtd.The Government is also promising

a 5p cut in the cost of posting lettersalthough it has so far said nothingabout the massive increases that manypeople posting letters destined forremote rural areas will encounter if thecurrent national cross-subsidy isremoved.The Government's last attempt to

privatise the Royal Mail waseventually dropped in 1995 after amassive public campaign led by theCornmunication Workers Union. Thecampaign successfully united a widerange of concerned organisations,communities and politicians of all

political parties forcing theGovernment to make a humiliatingclimb down which it would like toavenge.News of the latest privatisation plan

was followed by the Government'sblatant attempt to intervene directlyin the dispute over hours and theintroduction of team working. On July19 Trade and Industry Secretary IanLang announced that the Royal Mail'smonopoly of deliveries under £1would be suspended, initially for aperiod of one month, unless theunion called a halt to its strike action.The Government had already let it

be known that plans to ban strikes inessential services are to be included inthe Conservative's election manifesto.

inside • Benelit Contracts • Mod Homes Sell 011 • New Handbook Promotes Equal Opportunities • PFI . Showpiece or Shambles

Fears grow over DSS privatisations

BENEFIT CONTRACTSThe government's privatisationdrive in the Civil Servicecontinues at a breathtaking paceundermining fundamentalnotions of public serviceprovision and the Welfare State.Public Service Action looks atsome of the latest disturbingdevelopments.

Two recent announcements bythe Secretary of State for SocialSecurity, Peter Lilley, outlininggovernment plans to privatise thedelivery of child benefit and to allowprivate companies to work with theBenefits Agency in four regions, haveincreased fears about the wholesaleprivatisation of Britain's welfaresystem and massive job losses.At the end of July, Mr. Lilley

announced that the private sector wasbeing invited to submit plans fortaking over the administration ofchild benefit payments to 7 millionfamilies. The work is currentlycarried out by 1800 civil servantsbased at the Child Benefit Centre atWashington, Tyne and Wear. Underthe plans, staff would be transferredto a private sector bidder.There is growing speculation that

computer giants EDS and Sema,lottery operators Camelot or poolscompanies such as Littlewoods couldbe among potential bidders.Civil Service trade unions have

responded angrily to the proposals andare pledging a major campaign tooppose the privatisation. The unionsare not ruling out the use of industrialaction.In a separate but related move, the

Secretary of State also announced thatthe government is also to allow privatesector companies to 'work alongside'the Benefits Agency in East London,Anglia, the West Country andYorkshire as a means of identifyingfurther potential areas forprivatisation.Condemning the move, Civil

Service unions stress that givingprivate sector companies access todetailed Benefits Agency informationwill lead to 'cherry picking' byenabling them to identify areas of workwith the most profit potential.

Fewer services, more sell-o"sThese latest privatisation moves

follow a string of cutbacks and

privatisation announcements affectingthe DSS in recent months.At the end of June the government

revealed plans to sell-off a largenumber of DSS buildings, including700 local benefit offices and QuarryHouse, the new £55m BenefitsAgency office in Leeds which alsohouses the NHS Executive.The government is hoping to raise

around £4bn, a move widely seen aspart of the government's increasinglydesperate strategy to increase revenueto pay for tax cuts. There is littledoubt that the Tories' room formanoeuvre in this respect has beenseverely squeezed because of theneed to set aside £2bn to deal with theeffects of 'mad cow' disease andlower than expected profits from thenuclear privatisation.PFI and estate management. The

sale, believed to be one of the largestand most complicated propertytransactions ever undertaken, is to becarried out under the Private FinanceInitiative and represents around 16 percent of the state's entire non-militaryestate. Annual rented value isunderstood to stand at around £ 160mper year and ministers are aiming tohave identified a 'preferred supplier'by February 1997.The construction group Amec was

recently awarded £150m to rehouse13,000 DSS civil servants inNewcastle-upon- Tyne. The projectincludes the 750,000 square footredevelopment of the ContributionsAgency's Longbenton office whichcurrently employs around 9,000 staff.Amec will also build residentialproperty, a hotel and a major retaildevelopment as part of the deal.In July, the government shut down

the DSS's free telephone advisory

service on social security benefits,withdrew family credit from around15,000 low income families, andannounced plans to slash benefits topeople sharing homes with those inwork. These so-called cost-cuttingmeasures, along with proposals to alterthe dates on which child benefits arecalculated, are expected to savearound £164m annually.All of the above moves are part of

ministers' attempts to reduce DSSrunning costs, currently running£3.25bn per year, by 25 per cent by1998/99.

CUSTODY SERVICEPRIVATISATIONThe government hasannounced thatit intends to privatise the CustodyService which provides security formany official buildings includingNumber10Downing Street,Stjames'Palace,the Treasuryand the Tower ofLondon.The Service, which has an annualturnover of around £14 million,could be privati sed early in 1997although security arrangements forthe Ministry of Defence, and thesecret intelligence agenciesM15 andM16 look set to remain in the publicsector.Privatisation plans have beencondemned by the Labour Party andtrade unions. A spokesman for theTransport and General WorkersUnion described the move as"absurd": "It would be madness toreduce the level of security atbuildings like these," he said.

2 Public Service Action 54 © Centre for Public Services

Property &. linancial companies join lorces

MuDHOThreats of a Tory back benchrevolt over plans to sell off60,000 armed forces marriedquarters failed to materialise,paving the way for one of fourconsortia bidding to become theUK's largest private landlordswith 800 estates in England andWales.

Last minute concessions for servicefamilies by Defence Minister MichaelPortillo successfully averted anotherembarrassing defeat for thegovernment and ensured that thesale, which is expected to raisebetween £1.5 - 2.0 bn, will contributesignificantly to Tory plans to delivertax cuts in the November budget.The significance of the

privatisation is underlined byinvolvement of US investment banksMorgan Stanley and LehmanBrothers, Japan's largest securityhouse, Nomura, and the Dutch-owned investment bank ING Barings,in the four shortlisted consortia:

* Property company British Landleads a group including MorganStanley and SBC Warburg.

* A partnership betweenconstruction group Amec andNomura.

* A consortium including propertycompanies Beckwith CapitalPartners and Hodge & Cotogether with bankers LehmanBrothers and Bankers Trust.

* Holland's largest residential

S SELL OFFlandlord, lNG, supported byING Barings.

Other consortia involving some ofthe UK's biggest fmancial institutions,including the Nationwide and Halifaxbuilding societies, life, assurancecompanies Prudential and Legal andGeneral, the investment arm ofBarclays, BZW, were all eliminated bythe government at an earlier stage ofthe bidding.Under the terms of the sale, the

successful bidder will receiveguaranteed income in rents for 25years and will be allowed to sell'surplus' homes. First year rentalincome alone will be £112m. Some2,500 'surplus' homes will beimmediately available for sale, re-letting or redevelopment.However, Tory plans to press

ahead with the sale before theautumn have run into new difficultiesfollowing revelations that thegovernment is not free to sell all theland.Recent reports suggest that at least

200 plots are covered by theTreasury's 'Crichel Down rules'which were introduced in the 1950s toprevent requisitioned land being soldoff without being offered in the firstinstance to the former owners or theirlegal heirs. Opponents of the sale arenow demanding its postponementand are calling for full informationabout the deeds to the whole estate.

NewsPaymaster - Tories aimlor banking sell-on

In what could be one of theTories' last privatisation efforts in theCivil Service prior to a generalelection, the government hasannounced that it intends to sell-offthe Paymaster General's Office, thegovernment's banker. Around 700staff are employed by Paymaster atits Crawley and Basingstoke offices.

Paymaster,which hasoperated asa government agency since 1993,handles £800 million worth oftransactions every year and providesbanking servicesto all governmentdepartments, NHSTrustsand a rangeof other public sector organisations.The agency also provides theTreasuryand the Office for NationalStatisticswith statistical informationon public expenditure and bankingoperations and is responsible foradministering the Civil Servicepension scheme.

Widespread opposition to thesale has been voiced by the LabourParty, civil service trade unions andpensioners groups. There isparticular concern over the securityand accountability of the civil servicepension scheme.Paymastercurrentlyhandles pensions worth £8bn onbehalf of 1.5 million public sectorworkers. Paymaster's bankingbusiness accounts for a further£800bn per year.

The Labour Party hasstressedthedangers of placing highly sensitiveinformation about public sectorspending in private hands and saidthat it would attempt to stall thesale.

Equal hours - equal paycampaign

UNISONhas launched a campaignfor a standard working week of 37hours or less for all local authorityemployees. A shorter working weekfor all staff could benefit largenumbers of manual and white-collarstaff and will form part of thenegotiations for single status. Inaddition the union's nationalconference agreed a motion forequal rights for part-timeemployees. It called for the right tostatutory pay benefits for thoseearning below the lower earningslimit for National Insurancecontributions.

Public Service Action 54 © Centre for Public Services 3

Competitive tendering strategy

NEW HANDBOOK PROMOTES EQUALOPPORTUNITIES - ."~.. ..

more ambitious about promotingequalities in the tendering process.The report particularly focuses onissues affecting women, black peopleand people with disabilities and takesup the problems they have facedworking under contract in localgovernment.Local authorities are major

employers and in their locality, oftenthe largest employer. The equalopportunities gains achieved in localgovernment over the 1980s havebeen undermined by competitivetendering and the climate of financial

Equalities is fundamental topublic services and must becentral to all types ofcompetitive tendering andmarket testing.

The Centre for Public Services hasproduced a key report on an equalopportunities strategy for competitivetendering aimed at managers,councillors, equal opportunities staffand trade unions. 'EqualOpportunities for CompetitiveTendering' concludes that publicsector organisations should be much

:r:I-::::>~...Jos:Co.::::;ICo.

.8o;';;ii;i0i ! a:

BUILDING EQUALITIES INTO THE KEY STAGES OF THE TENDERING PROCESSPreparation stage

Contract preparation is vital if equalities issues are to be seriously applied in the tendering process.

All services1. Negotiating trade unionl

user involvement2. Client - Contractor Relationship

3. TUPE Policy

4. Service Profiles and Review

5. Public Service Plan or Business Plan

6. Sector Analysis and investigation ofcontractors

Equalities checklistDecision on corporate user involvementEqualities input into tendering. Core equalities values and policiesClient advice on equalitiesInvolvement of equalities staff. Clarity on application of council equalities policiesApplication of TUPE to all servicesEnsure no discriminatory elements.Review equalities elements of serviceService provision and meeting needs across the communityEqualities priorities. Consultation with users.Equal opportunities elementsin various aspects of plan ego staffing, resources, users.Assess equal opportunities policies and practiceRecords on women, race and disability issues and application of policies in terms of users and staff.

Tendering stage

7. Contract Packaging

8. Quality SpeCifications

9. Contract Conditions

10. Monitoring systems

11. Advertising and Selection of tenderers

12. In-house bid preparation

13. Rigorous Tender Evaluation

Check equalities implicationsAvoid areas of all-female workforce.Check equalities input into specificationDecide on method statement and specific requirements. Equalities clauses and standardsContract monitoring criteria and methods. Contract review.Race equality requirementsCompliance with Race Relations Act 1976. Equal opportunities clauses.Monitoring equality requirementsof specifications and contract conditions. Training needs and contract review.Advertisement to include clear criteriaSend questionnaire to all applicants including the six approved questions on race relations andequalities policies.Allowable costsPeople with disabilities and trainees. Equalities as part of the DSO competitive edge.Evaluation according to previously agreed equality criteria.Assessment of contractor's employment policies and specification met in full.Evaluation of answers to 6 race questions.Action to be taken if answers to questions on equality unsatisfactory.

After Tendering

14. Evaluation and review of tendering15. Post-contract monitoring

Resources need to be clearly allocated to ensure equal opportunities policies are applied by either 080s or external contractors, once tenders have been awarded.

Review equalities strategy. Policies appfied to DSOsRegular reports on equal opportunities from contractor. User monitoring. Meetings with contractorReview tendering and equalities strategy

4 PublicServiceAction54 © Centrefor PublicServices

Competitive tendering strategy (cont)suggests methods for ensuring in-house teams and contractors complywith the equalities legislation andpromotes good employment practices.The report, which is supported by

LGIU, ADLO, T&GWU andUNISON, argues for strongercontract compliance and newdevelopments in public sectormanagement in which the promotionof equal opportunities for alldisadvantaged groups is inherent.The handbook produced by

Centre for Public Services as part ofthe Public Service Practice series, isavailable from: 1, Sidney Street,Sheffield Sl 4RG. Cost £18.00 topublic bodies, £10.00 to trade unionsand community organisations.

also urges public sector organisationsto be less cautious and to activelypromote equalities as part of thecontracting process.The guide takes up the

recommendations made by the EqualOpportunities Commission researchundertaken in 1995 by the Centre intothe 'Gender Impact of CCT' andprovides practical checklists for localauthorities, trade unions and serviceusers. It looks at the particular role ofcouncillors, managers and equalopportunities officers in the tenderingprocess.An analysis of the legal context

explains the constraints of thecompetitive tendering legislation andthe context for in-house services. ItTable A

pressures. As a result disadvantagedgroups of staff in local authoritiesinclude:* Women, who form 65 per cent

of the workforce in local government,and are concentrated in lower grade,lower paid jobs.* Black people who are under

represented in local government,comprise 4.2 per cent of localauthority employees, and tend to beemployed in lower grade posts.* People with disabilities who

remain marginalised as attempts totake positive action to improve theirposition have been halted in thecompetitive climate.The overall differences by gender arerevealed in Table A.In addition, the proportion of

women working part-time is veryhigh compared to male employment.Only 15 per cent of all men workingin local government work part-time asopposed to 66 per cent of all women.The new report argues for a

comprehensive and strategic approachwhich incorporates equalopportunities into competitivetendering practice at every stage. It

Gender distribution 1995All eITIployees in local governITIent

PercentagesFeITIaleMale

596580

95913520

Chief ExecutivesChief officers and deputiesAPT&CManualsSource: LGMB surveys of Chief Executives and Chief Offi'cers:Manual Numbers and APT&C Joint Staffing Watch.

HOW COMMITTED IS LABOURTO LOCAL GOVERNMENT?

guidelines are proposed to ensureequity across the country in theprovision of care. Labour intend toestablish a Royal Commission towork out a fair system for fundinglong term elderly care.Quangos: Will be made properly

accountable to the public, but little issaid about the practicalities of doingthis.There is little detail contained in the

document which covers a range ofpolicy areas. There are a number ofkey questions which need to beanswered in relation to localgovernment.- What is best value?- Who will define best value?- Will market testing replace CCT?- How will inefficiency be measured?How will quangos be madeaccountable?

- Will the growth of the PrivateFinance Initiative replace publiclyrun services?

local government.* Simplification of the PrivateFinance Initiative rules.

* Improvement in primary schoolstandards and class sizes reducedto 30 or under for all five, six andseven year olds.

* Greater devolution of power andbudgets to heads and governors inschools.

Other proposals, include:Audit Commission: The Audit

Commission will be given powers towork with inefficient councils inimplementing savings, outlined bynational audit studies, to draw up aplan of action and allocate staff andresources to resolving specificproblems. Auditors will then return tothe authority a year later to find outwhether the plan has been followed.Housing: The Labour Party

supports a three-way partnershipbetween the public sector, privatesector and housing associations.COIllITmnity Care: National

The latest Labour Party policystatement "New Labour, new life forBritain" includes a number ofmeasures under the themes of bestvalue for local residents, devolvingpower to local communities andfreedom for local government.Specific proposals include:* The ending of council tax capping

except for extreme cases.* Enforced competitive tenderingto be replaced by 'best value'criteria to ensure standards ofservice are enhanced.

* Setting up pilot projects to explorethe role for elected mayors inlarge cities.

* Setting up a directly electedstrategic authority for London.

* Establishment of regionalchambers, rather than regionalgovernment, except where there isclear popular consent to have anelected regional assembly.

* A predominantly unitary system of

PublicServiceAction54 © Centre for PublicServices 5

NewsMinimum wage

A new survey into employers'attitudes towards a national minimumwage has revealed that just under halfof those questioned supported theidea. The survey also showed a waningof outright opposition among the mostsceptical, in favour of a regionallyvaried minimum.

Commenting on the results of thesurvey conducted by Reed PersonnelServices,a TUC spokesperson said thatmore employers now recognised thatthere is no future in a low pay, low skill,low productivity route tocompetitiveness. The TUC insists thatarguments for regional variationsremain weak because of the difficultiesin defining regional labour markets,and because, outside London, there islittle variation in real rates of pay.* The Transport and General

Workers' Union research departmenthas produced a practical guide forunion negotiators as part of it'scampaign for a minimum wage of £4an hour.

Based on material supplied by theLow Pay Unit, the booklet providesdetailed information about poverty inwork and examines the real cost of lowpay.

'£4 Now: A Negotiators Guide' ispublished by the Transport and GeneralWorkers' Union, 16 Palace Street,London SW1E 5JD,Tel. 01717399534.

Labour to honourprison contracts

Shadow Home Secretary,JackStraw,has pledged that a future Labourgovernment will end the currentgovernment's prison privatisationprogramme, although it would honourexisting private prison contracts.

Speaking at the annual conferenceof the Prison Officers Association inMay, he stressed that it was widelyaccepted that there could be no freemarket in this area. It was "morallyunacceptable for the private sector toundertake the incarceration of thosewhom the state hasdecided need to beimprisoned", he told delegates.

Mr. Straw's remarks follow agovernment White Paper outliningplans to finance, design, build and runa further 12 prisons, providing 9,600new prisoner places.

Compensation award

OMEN SECURE BIGDISCRIMINATIONPAY-OUTSWomen in two areas of the public sector have recently secured £9.5million in compensation after suffering discrimination at the handsof their employer.UNIONS representing school

meals staff in the north east havesecured a massive £lmillion plussettlement following a sexdiscrimination claim on behalf ofnearly 1,500 women workers.The claim was brought jointly by

UNISON and the GMB on behalf ofits members after Cleveland CountyCouncil imposed wage cuts and a newwage structure on staff following theretendering its school meals service in1994/95. The council subsequentlyadmitted that they had been guilty ofbreaching both wages and sexdiscrimination legislation after acompulsory competitive tenderingexercise.The settlement, which includes the

full reinstatement of previous termsand conditions, payment of backdatedpay losses and compensation for thecouncil's treatment, will have asignificant impact well beyond the casesay union representatives.It will send a clear warning to

employers involved in compulsorytendering exercises that they cannotride roughshod over previousagreements union say union officials.Up to 2,500 women employees of thecouncil could now benefit and similarcompetitive tendering situations inother areas could also be affected.School meals worker for over 20

years, Theres a Higgins, expressed thewomen's delight at the outcome of theclaim. Stressing that the council hadacted unfairly she said: "I'm reallyproud of all the women in the kitchenswho fought these cuts, went tomeetings and stuck togetherthroughout. We were told we had totighten our belts, but I wasn'tprepared to accept a cut in pay whileothers weren't, touched and neitherwere the other women."The case of the Cleveland school

meals staff follows another majorsuccess involving 400 former womenemployees of British Gas. The women

secured £8.5 million compensationafter the European Court ruled thatthe company had been wrong toforce the women to retire at 60.The women, who were awarded

individual settlements ranging frombetween £1,000 to £59,000, werecompulsorily retired by the companyin the late seventies. All of them hadwanted to continue working until 65,in line with male colleagues doingsimilar jobs.UNISON, succeeded in winning a

test case in the European Courtunder the EC's Equal TreatmentDirective and subsequently trackeddown 400 former British Gasemployees who had beencompulsorily retired at 60.Most of the women are now into

their 70s and a number of those tracedby the union have since died, with theunion pursuing claims on behalf oftheir estates.Commenting on the compensation

award, UNISON general secretary,Rodney Bickerstaffe, stressed that thewomen were ordinary workers whohad been doubly discriminatedagainst. "They were all fit and welland capable of giving so much moreto the industry," he said. " Not onlydid they lose five years pay but theirpensions were less than they wouldhave been allowed to continueworking until 65 as men were."* Sunderland, 180 school meals

staff are to receive compensation forthe loss of pay, hours and workingconditions when the school mealscontract for Wears ide was won byCCG Group in 1992. The service isnow under the direct control ofSunderland Council, whose winningtender allowed for a compensationaward.

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Nuclear sell-oil

FALL-OUT SPRENUCLEAR SALE

S OVERControversy continues to shroudthe privatisation of the mostprofitable part of Britain'snuclear industry, British Energy,after share prices plummetedon the first day of the flotationamid continuing concern aboutthe real cost to the taxpayer ofthe Government's desperateattempts to raise money for taxcuts in the autumn.

The sale, which will raise less than£1.5bn is half what the Governmenthad originally hoped for and half thecost of the industry's newest reactorat Sizewell B.

Shares TumbleAny plans by small investors to

make a quick killing received a swiftsetback as shares plunged 12p on thefirst day of trading after seriousdoubts emerged about safety andperformance of key reactors. Openingat a first installment price of 106p,they eventually closed at 94p. Priceswould have fallen further had thegovernment's official broker, BZW,launched a massive share supportoperation.Industry and investment experts

now believe that even bigger falls arealmost inevitable.The history of the nuclear sell-off

has been plagued by controversyfrom the start, mostly due to thesensitive nature of the industry, fearsabout safety, high decommissioningcosts, and responsibility for thestorage of spent nuclear fuel.Share prices were undoubtedly hit

by news that British Energy wasforced to close down two of theindustry's best performing gas cooledreactors at Hinckley Point B inSomerset and Hunterston in Ayreshireafter cracks in welds were discovered.However, the timing of the closureshas been widely criticised, coming justone hour after the deadline for publicshare purchases, leading to bitteraccusations that the Governmentdeliberately withheld information untilafter the sale deadline.The Stock Exchange is currently

holding an enquiry into the timing ofthe announcement.

New leaksA further blow came on the eve of

the sale when leaks were found duringroutine maintenance in the core of thenew reactor at Sizewell B. Its closurecaused particular concern as it hadonly been operating on full capacityfor twelve months and meant that onlyfive out of eight of British Energy'sreactors were in operation when sharedealing opened on July 15.These last minute problems

undoubtedly helped to underminethe share price, despite all thegovernment's efforts to attractinvestors by selling the industry offcheaply and minimising futureliabilities. By the time the sale hadgone through, the government hadreduced the value of the industry'Sassets by nearly £2bn and transferredaround £1 bn of the industry's debtsto the public purse. The latterfollowed negotiations with the

Treasury in March and a decision byministers to pay £230m from publicfunds into a segregated fund fordecommissioning costs. Organisationslike Friends of the Earth continue towarn that existing nuclear liabilities,estimated at £14bn, have been widelyunderestimated, representing a"massive gift from the taxpayer to theprivate sector".In a further attempt to boost

proceeds from the sale, theGovernment announced in April thatinvestors would be offered a share ofa guaranteed £96 million dividend.The move was widely seen as asweetener to attract investors andsome city analysts were quick tocaution that industry's likelyprofitability meant that the give-awaywas 'unsustainable'. When thepathfinder prospectus was eventuallyissued, an unprecedented six warningswere attached to promises of risingdividends.

A Caution

&RadiationContamination

Public Service Action 54 © Centre for Public Services 7

Transport NewsBuses' Trains' ...

TheToriescarved up National Businto over sixtyseparatecompaniesforprivatisation. They split British Railinto a track operator, three rollingstock leasing companies, split railoperations in to numerous franchisesand sold off BR maintenance andother service piecemeal. All toachieve 'competition' and atenormous cost to the public sector.

Within a few years the busindustry is dominated by threecompanies which have ruthlesslykilled-off competition. Now the mostaggressivebusoperator, Stagecoach,has acquired Porterbrook Leasing,one of the three rolling stock leasingcompanies. Porterbrook wasprivatised just sevenmonths ago for£527mbut was sold for £825m- a lossto taxpayers of £298m.

Stage already operate the SouthWestTrainsfranchise, isshortlisted forthe South EasternTrains and cardiffRailway franchises and is biddingfor another twelve. Stagecoachhopes to reduce maintenance costson Porterbrook's 3,775 rolling stockand gain from bulk purchasing forbusand rail operations. What actionthe Rail Regulator takes remains tobe seen.

Cowie and Firstbusexpand

Consolidation ofthe bus industrycontinues with more takeovers. TheSunderland based Cowie Groupbecame Britain's second largest busoperator following the £282mtakeover of British Bus in June andNorth East Bus from NatiopnalExpressfor £24.5m in July.

Meanwhile another northern busoperator, Go-Ahead of Gateshead,acquired London General for £46m.London General, previously part ofLondon Transport, was sold to amanagement and employee buyoutfor £28.5m. It joins a long list ofmanagement and employee buyoutsin the bus industry which, despite thefanfare about employee ownershipor stakeholding, have had a verylimited life.

The third main operator, Firstbus,acquired Strathclyde BusHoldings ina £110mdeal in May and announcedit had formed a joint venture withSouth Eastern Trains to bid for theBritish Rail commuter franchise.

LABOUR TAKES THECONSENSUS ROUTEWhile there are plenty of signsofconsensus developing betweenLabour and the Conservativesover transport policy, neitherparty will commit itself to investfunds to revive public transportand curtail car usage arguesBruce Allan.

Regardless of who wins the nextgeneral election, it seems Britain'stransport policy for the end of thedecade has already been settled. Thenew Labour Party transport policydocument, 'Consensus For Change',marks a shift from former Labourapproaches - especially in embracingthe environment as a central transportpolicy objective - while the recentGovernment green paper signals asimilar turn away from theConservatives' previous 'market forcesand deregulation' approach, towardsplanning, integration and reducing carusage.Both documents share three key

themes: the need to reduce use of theprivate car, so cutting congestion andpollution; a view that local transportdecisions should be taken locally; anda singular unwillingness to throwgovernment money at the problem.The latter has already disappointedseveral vested interests: the CBI hascomplained and produced its own listof pet projects, as have, predictably,the British Road Federation. But themain plank of the 'consensus' remainsquestionable: are people reallyprepared to give up their cars?Labour's "new vision for

transport" rests on this hope - theyassert that "many of us want to leavecars at home" and suggest that publictransport has declined solely becauseof Tory Government policies. But the'car culture' is as strong as ever, andone of the reasons the government wasable to win the argument to deregulatebuses and privatise rail was becausesubsidies were going through the roofas usage declined.The document thus ends up

playing down how far coercion mightneed to be exercised to changepeople's transport habits, for example,introducing the prospect of chargingfor local road usage almost as an aside.Other proposals in this vein that

have hit the headlines include thereform of vehicle taxation, to ensurethat "more efficient, less polluting carswill pay less and less efficient ones willpay more". The RAC has alreadycondemned this as "interference inmotorists's choice" but it may alsoturn out to be unpopular with tradesunions and Labour local authorities inareas where the motor industryprovides jobs, especially the Midlands.This Labour document updates

Moving Britain into the 1990s - thepolicy produced under John Prescottin 1989 - which itself watered downcommitments in 1987's FreshDirections, especially on publicownership.The earlier document had

promised to give local authoritiespowers to buy back privatisedmunicipal bus companies: by 1989this had become a commitment to "areformed tendering process with aflexible licensing system", implyingthat councils would have a right todecide where and when privatelyowned buses run - while the latestpolicy says only that Labour is "keento develop debate on the best form ofregulation" .Similarly, with rail privatisation

well under way - and likely to bevirtually complete before the nextelection - Labour offers no concretecommitment to renationalisation.Though warning Railtrackshareholders "not to expect windfallprofits" from privatisation, the policydocument does not promiseownership, but expands on Labour'sview that they can run the railwaythrough political control of the RailRegulator's Office, attachingconditions to the £2 bn subsidy thatRailtrack and private train operatorsreceive from the government.Retained from the Prescott

document is the view of the reducedrole of government: in the earlierpolicy, the role of the transportdepartment was largely as a 'think-tank', promoting a 'national transportstrategy'. This idea has now beengrandly retitled "Labour's twenty-year vision for transport" and will beimplemented, they suggest, not by theDepartment of Transport, but by localauthorities and regional planningconferences.

8 PublicServiceAction54 © Centrefor PublicServices

Transport policy (conI)

Car culture as strong as ever

The document says that "Labourwill act in accordance with theprinciple that ... decisions should betaken and acted upon at the lowestlevel at which they can beperformed", but in accordance withtargets to be set nationally. Thisimproves upon the Government'sview that local authorities should onlyreceive "advice" on pursuing planningand highways policies to reduce caruse and promote public transport. Butneither they nor Labour address thevital question of making financeavailable for local transport projects.How Labour will distribute publicmoney is the key: if local authoritieshave to rely on raising the council taxfor projects, then big problems willarise, as the financial crisis of theSheffield Supertram project has sographically illustrated.Labour says they will divert

funding from the national roadsprogramme to local 'package'schemes, including both roads andpublic transport improvements -which they say the government isunderfunding - and that these will beexpanded to include rail projects andlocal road-building. But what aLabour transport secretary will do inthe face of demands from localauthorities that are certain to exceedthe funds available, is unclear.No-one who has followed the

recent transformation of Labour'spolicies will be surprised by the lackof any funding commitments, and thisis certainly a less fundamentalshortcoming in an opposition partydocument than it was for theGovernment's own transport greenpaper. But Labour's policy sharessome of the green paper's weaknesses:notably the insistence that private

capital can be brought in to transportschemes once the climate is right forinvestment. Experience to dateindicates a deep-seated unwillingnessby British industry and financialinstitutions to accept any financial riskthat the public purse would previouslyhave borne. Even the Adam SmithInstitute has called the Government'sPrivate Finance Initiative "a disaster".Yet Labour still retains hopes that "asharing of risk" between public andprivate sectors will achieve results inthe future.So, while the promise of "a new

way of thinking" about transport iswelcome, just as with theGovernment's green paper, the keyquestion remains: whether a strategybased on spending little or no newpublic money can ever achieve theshift away from private car use topublic transport that is soenvironmentally necessary.

( Bruce Allan is editor of Public TransportInformation magazine.)

SALE OF 8RDEPOTS

MISHANDLEDA National Audit Office report hasshown that British Rail mishandledthe sale of seven depots raising lessthan it might have done. Inaddition, bidders were not givenequal treatment. Six companies,including two management buy-out teams, bid for a range of thesix heavy maintenance depots but,by the later stages of thecompetition there was littleeffective competition betweenthem, the report stated. The initialvalue of the six bids was £43.5mbut this was reduced to £29.3m bythe time the final price was agreed.Confusion over the treatment ofcash balances led to BR receivingless then it might have done. Thereport also concluded that BRfailed to provide bidders with thesame information on financialforecasts.'British Rail Maintenance Ltd: Sale ofMaintenance Depots' HMSO 1996

PublicServiceAction54 © Centre for PublicServices 9

User boycott 01 privately linanced road

PFI - USA STYLEThe Dulles Greenway is a newprivately financed toll road in theUSA. It provides a compellingstory with major lessons forBritain, particularly since theroad was built by Brown andRoot. This firm runs the largestexternalised local governmentcontract in Britain and hasvarious defence contracts. Wereport on how the Dulles projectsurvived various financial crisesand a user boycott which hasforced toll charges to be slashedcausing further financialinstability.

The Dulles Greenway, the firstprivate toll road in the US since 1816,is a 14 mile extension of the existingDulles Toll Road and connectsWashington Dulles InternationalAirport and Leesburg, Virginia. Thepublicly built Dulles Toll Road hadhigh traffic volumes (up to 80,000trips daily) and large toll incomes.

Fundingdi"icultiesThe Dulles Greenway road was

originated by the Toll RoadCorporation of Virginia (TRCV)whose shareholders included LochnauLtd, the investment company of thewealthy Bryant family, AmericanSecurity bank of Washington andKiewit Construction Company,America's largest road constructioncontractor. At the same time, theVirginia state legislature passed theVirginia Highway Corporation Act,1988 which allowed privatecompanies to construct and operateroads. Investment bankers Goldman,Sachs & Co helped to develop theproposal which was based on trafficprojections of 33,000 vehicles by theend of the first year and toll chargesof $1. 50. Construction and earlymaintenance costs were estimated tobe $145.6m to be financed by bondsissued by Goldman Sachs with totalcosts estimated at $227m.The project was approved partly

due to the anticipated stream offederal, state and local tax revenuesgenerated from toll revenues and anexpected multi-million boom in officedevelopment and increasedhousebuilding in the LoudounCounty development corridor. Gentle

rolling countryside owned by only 26property owners assured easyconstruction.TRCV sought financing in mid

1991 but the total required was $53mhigher at $290m due to 'designimprovements' required by the statehighway authorities. TRCV wasrestructured and renamed the TollRoad Investors Partnership II (TRIPll) to take advantage of tax relief. Thechief executive of TRIP II is MichaelCrane, son of Magalen Bryant, thelead investor.The first financial plan failed.

Goldman Sachs pulled out. BarclaysBank tried to syndicate the deal in1992 but failed. Kiewit Constructionwithdrew despite four yearsinvolvement, mainly because of thelow traffic forecasts. The entireproject staff were dismissed.

Conflicting interests of the partnersBarclays Bank and Kiewit

Construction had conflicting interests.Basically, Kiewit had committed cashand its construction profits as projectequity but was unwilling to take onadditional debt, and it wanted controlof the fmancial model which was beingclosely guarded by Barclays andGoldman Sachs. Barclays knew ofKiewit's high construction profits andthought they could take on more debt.There was also conflict betweenMagalen Bryant and Kiewit, theformer wanting the constructioncontractor to take a larger role whichwould have helped the Barclayssyndicate to succeed and helped theBryant's to secure and/or reduce theirinvestment. Kiewit had other interestsincluding toll road construction inCalifornia and its subsidiary, MFSNetwork Technologies, wassuccessfully winning new automatic

vehicle tolling systems based oncongestion pricing which was notincluded in the Dulles project.

Brown and Rootjoin inBrown & Root then invested in the

project and were eventually awardeda $145.2m fixed price constructioncontract to build the road in 30months.By 1993 the TRIP partners had to

increase their own investment to$82m.

The Partners% share

Lochnau Ltd(owned by Bryant family) 57.0Autostrada International(Italy) 19.2Brown & Root 13.8

However, the bulk of the financingwas to come from financialinstitutions.Banks ($57m short term loans)• Barclays Bank• Nationsbank• Deutsche Bank

Insurance Companies ($279m longterm loans)

• Cigna• Prudential• John Hancock• 7 other insurance companies

Refinancing crisisThe road was 85% completed

when the largest investor, Magalen(continued over)

10 Public Service Action 54 © Centre for Public Services

PFI - USA Style (cont)Bryant, sought to withdraw all or partof the family's $80m investment. Arefinancing plan was prepared byinvestment bankers which includednew bonds, $33m new equity and anextra $14.4m new bond insurancecosts to lawyers and underwritersbut this was suddenly withdrawn inthe autumn of 1995.

The total project cost was $340m,almost 50% higher than originallyforecast, which included:

$mLegal fees 7Land acquisition and rightsof ways 18Costs incurred beforeconstruction 24Construction, engineering,quality control 188Administration and tollequipment 7Financing costs 49Management consultant 2Goldman Sachs 2Bank fees 4Other fees and costs 39

Early completionBrown & Root completed the road

six months early and opened for usein September 1995. TRIP awarded a$0.5m contract to the state police topatrol the road.

Cost overrunsCost overruns total some $33m.

Brown and Root claimed anadditional $6m for changes ormistakes in the design drawings. Afurther $6.5m has been claimed foradditional legal fees. Each of thethree banks and ten insurancecompanies had their own lawyers!More cost overruns are reported in thewetland mitigation project where oneof the subcontractors was partlyowned by the son of CharlesWilliams, the retired Major General,Army Corps of Engineers brought into manage the project.

Bailout considered by the stateThe Virginia state government

approved an increase in the speed limitfrom 55 to 65 miles per hour inJanuary 1996. They also debatedtransferring responsibility forregulating and overseeing the roadfrom the State CorporationCommission to direct control of theState's Transportation Departmentand to forgo $3.5m owed by DullesGreenway for an environmentalimpact study carried out by the state.Both these measures were ultimatelynot approved.

Road users boycottIn the fIrst six months of operation

daily traffic was less than a third ofthat projected. In February 1996 onlyabout 10,500 vehicles daily wereusing the road compared to originalestimates of 34,000. Usage mustreach 25,000 users daily in order toservice the debts and provide a returnto the financiers.The road was effectively being

boycotted by road users because of thehigh toll costs. Tolls on the StateHighway 267 are 50 -85 cents for a10 mile section. Drivers must pay thefull toll whether they use part or all ofthe road and there are no off-peakreductions. An electronic toll systemhas been installed which uses anelectronic meter installed in cars. Thesystem deducts prepaid fees for eachtrip. Drivers do not need to slow at tollbooths.In March 1996 the one-way toll

was slashed from $1.75 to $1.00 foran initial three month period. A fewmonths earlier a third of the tollcollectors were made redundant.

Property bonanzaThe Dulles Greenway toll road is

inevitably linked to propertydevelopment, as with many PFIprojects in Britain. No sooner had thefinancing of the toll road beencompleted in 1993 and a number ofcorporate office developments werelaunched in the corridor. The roadextends from Dulles Airport toLeesburg along a corridor which hasalready seen extensive development ofthe green field sites. Loudon Countyis forecast to be the next majorgrowth area in the Washington DCmetropolitan area. A high proportionof households are in the two car higherincome group. Dulles Airport isexpanding and is expected to increaseits market share of passenger traffic inthe region.If this development continues and

the traffic forecasts of nearly 70,000vehicles daily by the year 2000 provecorrect, coupled with annual increasesin toll charges, then it may turn out tobe a money spinner for TRIP and theinsurance companies. TRIP isoperating on a internal rate of returnof 18 per cent, although state lawimposes a maximum return on equityof 30 per cent.

Other Brown 8. Root PFI projectsBrown & Root are managing

construction of the US$3.5bn Egnatia138km highway in Greece. The roadis partly funded by European Uniongrants and loans from the EuropeanInvestment Bank.

NewsPay Cut halted

Cleaners have halted plans byprivate contractor, Trident, to cut theearnings of 200 staff employed byWest Suffolk Hospital Trust.Although staff were transferredunder the TUPE regulations, thecompany proposed new contractsforstaff which would have involvedcutting up to £40 pay a week. Inaddition, Trident also wanted toslim down and consolidate bonuspayments and alter annual leaveand sick pay conditions. UNISONmembers lobbied a board meeting ofdirectors of the Trust and set inmotion plans for a ballot onindustrial action to oppose the cuts.The termination notices to thosewho did not sign new contractswere due to have gone out, but thecompany postponed the action asaresult of union pressure.

The union claim that thecompany submitted an unrealisticbid, undercutting the in-housebid by£109,000. Staff were assuredby thetrust that they would retain allcontractual rights.

Pall Mall disputeUNISONisplanning to step up its

campaign on behalf of fifty sixmembers sacked by Pall Mall beforeChristmasfor refusing to accept paycuts of between £25 and £35 aweek. The staff were dismissedjustmonths after the company took overportering, catering and domesticservices at Hillingdon Hospital inLondon.

The union recently held a secondnational demonstration in support ofthe dispute and iscurrently finalisinga range of activities aimed at theDavis ServicesGroup of which PallMall is a subsidiary.

Earlier this year the union tookout an advertisement alertingshareholders to the union's concernsabout the activities of its Pall Mallsubsidiary, purchased 350 companyshares in order to raise questions atthe parent company AGM andorganised a lobby of shareholders.

UNISONisalso in dispute with PallMall in Barnsley.Another dispute atBasildon's Orsett Hospital endedrecently.

PublicServiceAction54 © Centrefor PublicServices 11

Newswage inequality warning

The OECD has warned that themassivegap between high and lowpaid workers in many Westerncountries is marginalising workersand increasing public costs. TheOECD report, "EmploymentOutlook", shows that the UK hasone of the highest levels of low payand earnings inequality in theindustrialised world. Labour marketexclusion and wage inequality,which isespeciallyhigh in Britain andthe US, is increasing poverty andcausing strains on the social fabric.

The report argues that countrieswith minimum wages, strong tradeunions and generous welfarebenefits are faring better with alow incidence of low paid jobs. Itconcludes that: "the future

prosperity of OECD countries

depends on reducing economic and

social exclusion in the forms of high

unemployment, non-participation

in the labour market, access tofurther learning opportunities and,

in some instances, growing

inequalities in earnings and

income".

Unemployment twice theonicial rate

According to the first issueof theEmployment Audit, produced by theEmployment Policy Institute, 4.2million men and women who wantpaid work are currently out of a job,compared with the Governmentfigure of 2.16 million officiallyunemployed. Other findings include:* One in five households of

working age currently has no adultin paid employment.* Two-thirds of the extra people

at work sinceunemployment beganto fall are working part-time.

* Three-quarters of new full-timejobs are temporary.

* Starter jobs open to peoplemoving from welfare to work onaverage pay around only half asmuch asthe average of all jobs in theeconomy.

Employment Policy Institute, SouthbankHouse, Black Prince Road, London SEl 7SJ.

Contractors pullout 01 deals

PFI - SHOWPIECEOR SHAMBLES?The press is full of headlinesclaiming that the Private FinanceInitiative is 'at risk of collapse' oris a 'disaster'. But what is thereality?

What do the PFIwithdrawals mean?Three firms have recently

withdrawn from PFI projects.Bovis: Stated that it was "highly

unlikely to bid for any further PFImotorway or road schemes because ofthe high cost of bidding, slow progressin awarding contracts and "the longterm outlook in the road-buildingsector" but added that they will"continue to peruse other PFIopportunities, particularly in thehealth sector." Bovis is also involvedin bidding for £ 1bn of PFI schemesincluding an air traffic control centrein Scotland and the redevelopment ofgovernment buildings in London.Taylor Woodrow: Withdrew from

£1OOm Dartford NHS project withHealthcare Group. Still bidding onfour other PFI projects valued at

£220m.John Laing: Withdrew from

tendering from the £260m RoyalLondon Hospital PFI schemeclaiming that it was too complex and"they could not commit the resourcesthat it required". Still bidding formany other PFI projects.It is important to note that

although the contractors havewithdrawn from tendering, none havewithdrawn from a PFI scheme oncethe contract has been awarded. It isentirely feasible that one or moredecided that they were not going towin or decided to withdraw for otherreasons but then used the situation,with a willing press, to further thecontractor's own agenda on the PFI.

The contractor's agendaPressure from contractors is

intended to achieve two things: Firstly,to reduce and relax the PFIregulations to speed up the process.This will reduce the cost of bidding.Secondly, to try to get the

government to agree to refund thecontractors cost of tendering.

BUSINESS PFI DEMANDSThe Confederation of British Industry (CBI) report on the PFI, 'Private

Skills in Public Service', recornmends that 'best practice' PFI projects shouldhave the following characteristics:

* Output/service-delivery driven* Substantial operating content within the project* Significant scope for additional/alternative uses of the asset* Scope for innovation in design* Surplus assets intrinsic to transaction* Long contract term available* Committed public sector management* Political sensitivities manageable* Risks primarily commercial in nature* Substantial deals (though mega-projects have their own difficulties)* Complete or stand-alone operations to allow maximum synergies

This is in effect a contractors charter. It means public services beingorganised entirely around the interests of private contractors and merchantbanks. The CBI also recommend that "PFI bidding costs be reimbursed infull to all shortlisted bidders where ultimately no PFI contract is awarded."So much for the transfer of risk!

12 PublicServiceAction54 © Centre for PublicServices

•

Wellare State dismantled

POVERTY 0THEINCREASEA recent study by the ChildPoverty Action Group showsthat nearly 14m people, aquarter of the population, areliving in poverty compared with5m in 1979. Inequality hasincreased since the poorestsection of the population sawincome fall 18 per cent, whilstaverage incomes rose 37 percent between 1979 and 1993. Forthe first time since 1945 thepoor's share of national incomeis shrinking.

* Nearly 5 million people, 8 percent of the population are livingbelow the poverty line. A majorreason for this is that they are nottaking up means-tested benefits towhich they are entitled.* A third of the population are

living on the margins of poverty.* A third of all children (4.3m) are

living in poverty compared to 10 percent (l.4m) in 1979.Children at greatest risk of poverty

were those living in families where no-one was in full-time work.

Proportion of children & populationliving in poverty: 1979-1993

1979198119871988/891992/93

Children10%16%24%25%33%

Wholepopulation

9%11%19%22%25%

Source: DSS, Households Below AverageIncome, A Statistical Analysis, 1979-1988/89

and 1979- 1992/93, HMSO 1992 and 1995.

Who is living in poverty?* The composition of the poor has

altered since 1979. The number oflone parents, couples with childrenand single people living in poverty hasincreased while the number of poorpensioners has fallen.

* Couples with children account forthe largest group in poverty (37%)followed by lone parents who make up17 per cent.* The risk of poverty is highest

among the unemployed, people infamilies that only have access to part-time work and lone parent families.* There are over a million more

women in poverty than men, about5.4 million compared to 4.2m men.This is due to high levels ofunemployment, low pay, women'sunpaid work, poor distribution ofresources within households andinsufficient support through the socialsecurity system.* High levels of poverty are found

among black and ethnic minoritygroups. Unemployment rates for blackpeople are twice those of white peopleand those in work are more likely tobe low paid. Poverty among blackpeople is due to immigration policies,inadequate welfare services,inequalities in the labour market, anddiscriminatory social security policies.

Causes of povertyThe report shows that poverty in

the UK is largely determined bythree factors - access to the labourmarket, extra costs of ego children,disabilities, and the overall failure ofpolicies to deal with these.

'Poverty: "The Facts".' CPAG, 1-5Bath Street, London EC1V 9PY.

Newswages inequality in localgovernment

Low pay and inequality betweenmen and women persist in localgovernment. Recent statistics fromthe LocalGovernment ManagementBoard show that the average full-time male white-collar workerearned £382.50 per week in 1995compared with an average of only£278.10per week for women (73percent).

The gender differences for full-time manual workers are equallysevere.Women on average earnedonly 75 per cent of men's weeklyearnings - £183.40 for womencompared with £245.80 for men.

Quangos powerincreases

There are now over 6,200executive and advisory quangos inBritain running many local services.Quango spending was £60.4 billionin 1994/5, compared to councilspending of £73 billion. Quangoexpenditure represents more than athird of central governmentspending. Members of quangos,which are either governmentappointees or self-appointing, nowoutnumber elected local councilemployees by nearly three to oneaccording to a recent report byDemocratic Audit. More than two-thirds of the quangos produce noannual report, had no register ofmember's interests and did notadmit the public to meetings.

Gay and lesbian rights atwork

The TUChasannounced that it isto step up its campaign to win fairtreatment for Britain's two millionlesbian and gay workers and iscalling for new legal rights to enddiscrimination and bullying at work.

Trade unions have also givennotice that they will seekagreementswith employersaimed attackling prejudice in the workplace,and campaign to gain equal pensionand other rights for same sexpartners in line with those currentlyenjoyed by heterosexual couples.

PublicServiceAction54 © Centre for PublicServices 13

DOEConsultation Paper

CCT PRESSURE INCREASESIn May 1995, the Government proposed major increases in the amount of local authority white-collarwork to be subject to compulsory competitive tendering. The following table highlights the main proposalswhich will particularly affect financial services.

Proposed Changes to CCT

Competition requirementsFinance up from 35%-65%IT up from 70%-80%Personnel up from 30 %-40%

Changes to de minimusConstruction/property down from £450,000 to £300,000Personnel down from £400,000 to £300,000Housing management stock basis reduced from 4,000 to 2,500 and 500

Credits and AllowancesAmended to increase work subject to competition

Financial services is one of thelargest white-collar service employersand a service which employs thehighest proportion of women, many ofwhom are in lower graded and low

paid jobs and those most vulnerableto competition from private sectoremployment practices. It is also theservice which along with IT has themost well-developed private sector

market with a number of companieswith experience of running publicsector contracts and keen to expandtheir local government niche.

Implementation timetable challengedThe final revisions are expected in

August 1996, with implementationlater in the autumn. The initialproposals included extremely tighttimetables for implementation. Forthose authorities who are expected toimplement CCT from October 1997or later, the timetable is unchanged.For those authorities with a timetablefor CCT implementation prior toOctober 1997, the new revisionsshould be introduced 12 monthsfollowing the final revisions.The three local authority

associations have challenged the tightimplementation period of theDepartment of Environment'sproposals.

DOECircular 5/98

GUIDANCE ON THE CONDUCT OF CCTThe Department of Environment

produced their latest circular on CCTin May 1996. Although its contentlargely repeats previous guidance tolocal authorities, its effect has been toscare some local authorities into over-reacting. The result has been thatrather than re-affIrming commitmentto a clear CCT strategy, localauthorities are now endeavouring toconsult with private contractors at allcosts and could spend unnecessarymoney, time and resources on this partof the process, rather than ensuringthat they have a watertight processwhich can be justified to electedmembers, staff, trade unions, andusers as well as to the DOE.

The key elements include:

Transparency• Authorities have to clearlydemonstrate how key decisions intendering are made with a "clear andsoundly reasoned account of decision-

making process".• Audit trail decisions• Regular reports to members on thetendering process.

Market• Identifying the market and howtendering decisions affect companies."Make familiar with the market andconsult a reasonable range ofprospective tenderers and take intoaccount any representations madeabout the way work is selected andpackaged" .

Outputs• Specifying outputs and key serviceobjectives• Performance measures• Method statements should be"used sparingly and limited to thoseareas where there is crucial interfacewith tenants or clients" but thereshould also be a detailed specification.

Quality and price• Quality should be specified clearlyand objectively• The balance between quality andprice should be stated• Authorities should demonstratewhy a rejected bid cannot meetquality targets• Follow codes of good practice.

FairnessActing fairly between potentialcontractors in terms of:

• Information• Notification about the volumes ofwork available• Use of model contract conditions• Documentation• Defaults• Performance bonds & guarantees• TUPE regulations and pensions.

14 PublicServiceAction54 © Centrefor PublicServices

CONTR OR UPDATEIT takeover

The computing services fIrm SemaGroup has acquired SyntaxProcessing, the facilities managementsubsidiary of Olivetti, in a £64m deal.The takeover comes with a seven year£340m outsourcing deal to supplycomputing services to Olivetti, furtherboosting Sema's £678m annualturnover.

W.S.Atkins share saleThe family trusts and pension

fund of engineering consultantsW.S.Atkins recently sold nearly 30 percent of the company's shares valuingthe company at £197.8m. Staff andmanagement own about 60 per centof the shares and the family trustsretain a 10 per cent stake. Atkins hasexpanded rapidly in the past five years,acquiring a number of local authorityarchitectural and highwaysdepartments, NHS designdepartments and British Railengineering companies.

Nursing home takeover failsWestminster Health Care's

£70.5m hostile bid for GoldsboroughHealthcare failed in July 1996 whenonly 41 per cent of shareholderssupported the takeover. Westminsteris left with a 9.1per cent share stakein its rival. Goldsborough which owns33 homes with 1,500 beds, has beendiversifying into private hospitals andhomecare services. In contrast,Westminster is the largest privateresidential and nursing home operatorwith 84 homes with 5,500 beds.Although this takeover failed, there arenow 16 private companies and 9 non-profit groups with over 1,000 beds in

Britain and further 'rationalisation' isexpected.

Collapse of management buy-outGateway Leisure Ltd., a company

set up five years ago in Scotland bymanagers involved in compulsorycompetitive tendering has gone intoliquidation. Financial problemsinvolved £122,000 debt and repairbills of £450,000. The contractaffected, Argyll and Bute Council'sleisure services, has been taken backin-house.

Another management and employeebuy-out sells out

Belfast International Airport wasprivatised to a management andemployee buy-out two years ago for£32.7m (the Government alsoreceived the airport's cash reserves of£15.0m). It has now been sold to theproperty group, TBI, which alsooperates Cardiff airport, for £107m.This represents a 125 per centincrease in its value in just two years.Three directors will each receive£6.4m and 200 staff shareholders willget a £96,000 payout. Non-shareholder staff were unavailable forcomment on this latest privatisationasset stripping!

US firms sells Priory HospitalsUS-based Community Psychiatric

Hospitals has sold it's Britishsubsidiary, Priory Hospitals, to amanagement buy-out team for £88m.Priory operates 650 beds in 12 privatehospitals, three day centres and tworesidential schools and has a dominantrole in the private psychiatric sectorwith a 55 per cent market share.

The Top 12 Private Long Tenn Care Companies

COInpany No of hOInes No of beds

TakareWestminster HealthcareCresta CareCourt Cavendish GroupAshbourneGoldborough HealthcareQuality Care HomesSt Andrews HomesNaux GroupCountry House/Boddington GroupANSAPT A HealthcareCommunity Hospitals Group

517048452230282429182313

6930474829142197180514391408124111941112844704

Source: The Fitzhugh Directory 1995 and Financial Times 9 May 1996

l::;:;;,~:;:!,~,~R:':~:I 01UlIOCY ,":HII:'t:i. ..,m'menl Sl·IHC Tel: 0]]4 2726683 Fax 2727(166

The Centre is committed to theprovision of quality public servicesand has unrivalled experience ofworking with local authorities, publicbodies, trade unions and communityorganisations on:III developing strategies to retain

and improve public servicesIII monitoring privatisation and

competitive tenderingIII researching changes in public

service provision

Established in 1973, and based inSheffield since 1989, the Centre forPublic Services is an independent,non-profit making organisationoffering research, strategy, planningand training services to a wide rangeof organisations.

Services include:Research: market and sectoranalysis; local, national andinternational trends and policydevelopments; social and economicaudits; company performance andemployment practices; workforcesurveys.Strategy: Corporate and strategicapproaches to CCT and markettesting; improving service quality,delivery and equality of access; tradeunion and community involvement;strengthening local accountability.Planning: preparation of publicservice, business and employmentplans; trade union and communityplans for improved and expandedservices; implementing public servicepractice in monitoring, tenderevaluation and service delivery.Training: 1 and 2 day courses on astrategic approach to competitivetendering, equal opportunities, andtraining for tenants representatives;workshops on best practice approachto tender evaluation, public serviceplans, contract monitoring etc.The Centre's current workincludes:III Researching the impact of

externalisation of public services.III Analysis of Private Finance

Initiative & Public/PrivatePartnership proposals togetherwith report on strategicapproaches and best practice.

III Assisting local authorities andtrade unions in tenderingstrategies and specifications.

III Researching the public costs oftendering in Northern Ireland.

III Developing equal opportunitiesbest practice advice.

III Training and education coursesfor local authorities, trade unionsand tenants organisations.

III Preparing Public Service Practicestrategies.

III Assessing impact of Next StepsAgencies for AFL-CiO (USA).

PubliCServiceAction54 © Centre for PubliCServices 15

REVIEWS & PUBLICATIONSHealth MattersThe excellent quarterly journal

'Health Matters' covers a wide rangeof issues relating to health policy,public health and environmentalissues, the NHS and other health-related topics. The Spring issueincluded articles on: the new NHScomplaints system, outpatient waitingtimes, why food poverty remains anissue in Britain, and public health andgovernment complacency. Included inthe next issue (due out towards theend of August): what the newbusiness of health authorities shouldbe in today's NHS; women and thehealth care system; making tobaccocompanies pay for the health costs;what patients really think of healthpromotion in primary care; and GulfWar syndrome.Special 0",,'101' PSA peadepsFor a free sample copy and an

opportunity to subscribe at a specialintroductory rateContact: 'Health Matters', PO Box

459, Sheffield S 11 8GJ, Email:health@luna.co.uk, quoting ref: A968.(You can also visit their web pages atwww.luna.co.uk/~health)

Prison PrivatisationThe Prison Reform Trust has

launched a new bulletin coveringglobal developments in prisonprivatisation. 'Prison Privatisation

Report International' also aims tomonitor the performance of theprivate sector, detail the growth of the'penal industrial complex', and analysenew government initiatives.Details of subscription rates are

available from The Prison ReformTrust (see below).The organisation has also recently

published a damning report aboutBuckley Hall, Britain's fourth privatelymanaged prison, situated nearRochdale. Written and researched byStephen Nathan, the report revealsthat the prison's performance duringits first eighteen months has beenseverely impaired by staffinexperience. The Prison ReformTrust alleges that inadequate stafftraining has led to serious problems ofmanagement and control. The reportprovides details of 117 securityfailures at the prison, including tworoof top demonstrations, 19 assaults,and 30 failures to return followingtemporary release.Copies of 'HM Prison Buckley

Hall: the first eighteen months' areavailable from: The Prison ReformTrust, The Old Trading House, 15Northburgh Street, London EC1VOAH, tel. 0171 251 5070, fax. 0171251 5076. Price £4.95

Public Service Practice No 1:Tender Evaluation (1994)Price: £18.00 (public bodies)£10.00 (trade unions)

Public Service Practice No 2:CCT and Equalities (1996)FULLY REVISED EDITIONPrice: £18.00 (public bodies)£1 o.00 (trade unions)Public Service Practice No 3:Monitoring Public Services(1991)Price: £12.00 (public bodies)£5.00 (trade unions)

Public Service Practice No 4:A Strategy for Quality (1992)

Price: £18.00 (public bodies)£ 1O.00 (trade unions)

Public Service Practice No 5:Public Service and BusinessPlans (1993)Price: £18.00 (public bodies)£10.00 (trade unions)

Public Service Practice No 6Checking Specifications (1995)Price: £18.00 (public bodies)£10.00 (trade unions)

Full publication list available onrequest from: Centre for PublicServices, 1 Sidney Street, Sheffield S14RG, Tel. (0114) 2726683.

PUBLIC SERVICEActionResearched, written and producedby the Centre for Public Services,PSA is a journal of news, analysisand information focussing on keyissues and developments in thepublic and recently privati sedsectors.Essential reading for policy

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