Outsourcing, in-sourcing or Local Authority Trading Company?

We have all seen spectacular collapses, expensive failures or lack of best value from outsourced arrangements played out, costing the end customer often who is the taxpayer. So is in-sourcing the only way out for frustrated public authorities or is there another option on the table?

It seems over the last decade there has been a commercial sub-culture that has been quietly building delivering value ‘to and for’ the public sector.

All across the country Local Authorities have been going about their work in setting up businesses, or in other words, LATCo’s (Local Authority Trading Company). The increasing diversity of these LATCo’s has proved noticeable from LATCo’s providing social care to those delivering newbuild housing and others doing everything in between.

 

Talking to one CEO from a Council with an award winning LATCo, he explained how they went from an outsourced JV contract with a national private contractor where they were receiving less than a fifth of the ‘profits’ generated, to wholly owning a LATCo generating and ploughing ALL the surplus/profit back into the General Fund account for the Local Authority to sustain essential services in a climate of austerity and cuts. Of course, that was not the only motivation, the LATCo model also provided them with the arms length ability to retain the commercial expertise to take calculated risks for reward whereas bringing it completely back in-house as a DLO for example would have risked losing that commercialism and adopting a risk averse mindset. The other important advantage for Local Authorities is the exemption that LATCo’s can enjoy from the Public Contracts Regulations which can prove to be a huge cost saving for Council’s and other public bodies.

 

Of course, everything is not perfect; for every successful LATCo there are many that have struggled to make the commercial transition or worse still even collapse and fail. It seems to be relatively easy for Local Authorities to go down the LATCo route attracted by the potential riches that it promises, especially if they set up LATCo’s as pure trading companies. However, the key here is transitioning the culture of the relationship between the shareholder and the LATCo entity to one where there is autonomy, risk is accepted as a norm, there is an independent culture in the Boardroom, and a competitive, commercial, customer centric approach is applied to operational delivery.

 

It’s with these challenges in mind and the expert support that is so often needed, but so often lacking, that several LATCo’s have finally come together to form the LATCo Network - the country’s first federated body for LATCo’s. With over 1000 LATCo entities operating across the country this is a timely development, clear this commercial sub-culture is set to continue and become another sustainable option on the table when Local Authorities are appraising options.

 

If you would like to find out more about joining the LATCo Network, contact me or better still attend the inaugural #LATCoSummit19 which is taking place 11th July this summer at the Coin Street Conference Centre on the South Bank, with Birmingham City Council’s CEO confirmed as the keynote speaker.

 

 

Look forward to seeing you there.

Farooq Mohammed

Board Member / Delivery Partner
LATCo Network - www.latco.network

Tags

Other Articles

Card image cap

Next steps for Local Authority Trading Companies

June 27, 2019

Existing Local Authority Trading Companies may be considering the next steps for...

Card image cap

Income generation potential of LATCo’s

June 27, 2019

As managing director of Lampton 360 and as a founding member of the LATCo Networ...

Card image cap

The Potential of Local Authority Trading Companies

June 27, 2019

In my role as Board Member for the LATCo Network I am often approached by other ...