Avon and Somerset Constabulary are planning to outsource a large proportion of their back office administration and support functions ("Shared Services") to a private consortium.

This may be a good idea. Economic growth is founded upon the increase in productivity that comes with specialisation. For example, are you a subsistence farmer? No? I didn't think so: you've "outsourced" your food production to others.

What about housing, clothing, furniture or entertainment? Do you fufil all these needs from your own resources, or do you purchase such services from specialists? I'm pretty sure that in at least three of these four categories you rely exclusively on the traded ability of others.

It is reasonable to expect that a Police service could improve their service and save money by concentrating on their specialism of Law Enforcement. Isn't it?

The Constabulary have spent considerable time investigating joining a Joint Venture Shared Servces company - now active and branded SouthWest One - formed by IBM, Somerset County Council and Taunton Deane Borough Council.

Now the interesting thing about SouthWest One is that it's more than just an outsourcing exercise - it's also runs a "framework agreement for shared services". You may at this point be starting to feel your eyelids drooping, but stay with me. If you need a break, go and play Buzzword Bingo.

A Duffer's Guide to Public Procurement

If you as a private citizen wish to buy "stuff" you might select your supplier based on advertising or research; maybe the recommendation of a friend. Or you might just buy the first shiny object you see in a shop window. Ultimately, if you make a bad decision, it's your own money being wasted so you've got no one to blame but yourself.

For a public body, buying "stuff" - whether it be goods, services, land or labour - is a much more convoluted affair since not only must the responsible officer be mindful of the economics of the transaction (getting a good price), he must also make sure that he is seen to be fair and impartial, since he is not spending his money but your money.

To ensure that public procurement is seen to be impartial, and that your money is not being given to mates of the local councillor for substandard merchandise, government at local, national and supra-national level have developed procedures for carrying out public procurement.

For example, if Bristol City Council wished to purchase a large quantity of some sort of commodity - let's say it's Bog Roll - they would be expected to carry out a competition at which different Bog Roll suppliers would be asked to bid for the right to supply an appropriate quantity of Bog Roll. Assuming no collusion between bidders, and assuming each provided an equivalent quality of bog roll, then the "most economically advantageous tender" would win, and the taxpayers of Bristol would sleep soundly in the knowledge that they had got a fair deal.

If the Council decided they needed a really huge quantity of bog roll, they might need to go through a more convoluted process in which they would advertise their Bog Roll requirements in the pages of the Official Journal of the European Union.

Such procurement processes for public bodies are not optional. Get it wrong and - as an officer - you may find yourself in trouble and - as an institution - you may find yourself in court. The rationale for legal rules on procurement over and above existing law on Theft, Embezzlement and Fraud is derived from a reaction to previous scandals, and a desire to promote cross-EU trade. But the extra bureaucracy can create as many problems as it solves.

Framework Agreements

If you're trying to get something done in the public sector, and you'd rather not spend half your life running competitive tenders - which are not cheap - one option you have is to enter into a framework agreement which has been set up by another public body. The assumption is that if a framework agreement defines a number of standard goods or services, and that agreement has gone through a competitive tendering process, then it is automatically deemed to be an acceptable way to spend public money on the requisite services.

Therefore, as a public sector procurement professional, you can simply pick the goods and services you need from the framework agreement at an agreed price, just like selecting your lunch off a menu.

Except... this only makes economic sense if the services on the framework agreement are the services you want to buy. If you've got a framework agreement with McDonalds but you really want a Subway sandwich, then you're out of luck.

The suppliers offering a framework agreement do so on the basis that they can take advantage of economies of scale to deliver the same service to multiple clients with a reduction in marginal costs, and thus make a profit. If a new public body comes along and needs something slightly different, the price may not turn out to be so economically advantageous.

It's a difficult balancing act - if a framework is too narrowly specified it may not offer a service that public bodies want to buy. But if it is too wide in scope, the consequent risks are that the absence of specialisation reduces the attractiveness of the price, or that an attempt to deliver an overly flexible service at a fixed price results in someone going bankrupt.

£400 Million over 10 years

The SouthWest One framework agreement for "Shared Services" with Somerset and Taunton Deane is promoted as costing £400m over 10 years. Further, the two councils "expect to save in the region of £200 million over the course of 10 years". Which translated means that they expect in total to cut £20 million of their annual budgets.

What does the National Audit Office have to say about these sorts of deals, using their terminology of "Service-Delivery Partnerships":

Councils should only deliver services through SSPs if they are prepared to manage them effectively.

As a taxpayer, that doesn't fill me with confidence. How does one effectively manage a 10 year contract, where you're in a complicated contractual agreement with other public sector partners. To use my current favourite comparison, even Stalin only tried for a five year plan.

In regard to the decision, the unelected Chair of the Avon and Somerset Police Authority, Dr Moira Hamlin said:

There is no doubt that this was a huge decision today and a bold one for the police authority. We are in a very tight financial position and [this] will continue in the foreseeable future.

Whenever people talk about taking bold decisions with my money, I get very worried.