Barnet Council are about to enter into a new contract with a company called Catalyst. So what you may say? Well this contract has already cost the Council (and therefore Council taxpayers) over £10 million in compensation and legal fees so you would have thought that there would be a great deal of scrutiny over any new contract to be entered into with this company. Well not in Barnet.
In order to understand this a bit more I have set out briefly the background to this contract.
Back in 2001 Barnet Council outsourced its residential care provision for elderly people to Ealing Family Housing Association (now Catalyst) and their care partner The Fremantle Trust. The contract was worth £9 million per annum and covered eleven care homes, four day centres, and over 300 staff all of which were transferred over to Catalyst.
This complex contract involved the rebuilding of a number of the homes and guarantees of the number of places the council would purchase at these homes. For the specific details I suggest you read this document.
The contract experienced problems due to delays with the rebuilding and with a change in needs of the elderly. This meant that more people either stayed in their own home or moved in to extra care sheltered housing rather than moving into a Catalyst care home leaving empty beds at these care homes. In August 2006 Catalyst formally submitted a Deficit Claim to recover cumulative losses on the contract between 2001 and 2005/6. In July 2007 a further adjustment claim was received covering 2006/7. The Council sought financial and legal advice and rejected the first claim, but the second claim remained in dispute. In 2007 the Council unsuccessfully attempted to renegotiate aspects of the contract to mitigate further deficits at which time they decided to go to Arbitration to resolve the Deficit Claim.
Skip forward to March 2011 and the arbitrators decision was finalised with the bill for Barnet Council as follows:
Final Award to Catalyst (including interest and costs) £8,674,000
Council’s final estimated legal costs £2,000,000
Outstanding issues (land swaps) £110,000
Total Cost £10,784,000
Some of these costs were offset against net income from Catalyst giving a final cost to Barnet Council of £10,252,000.
Now I am sorry that I have had to bore you with all of this information but it is essential to understand the background so as to make sense or otherwise of what the council is now doing.
Just over 1 week ago the Council released a Delegated Powers Report which set out the basis for the new contract with Catalyst and agreed that this recommendation should be exempted from call in by the Scrutiny Committee that would normally deal with this decision.
I wrote to the Chairman of that Committee, Cllr Hugh Rayner asking that he reconsider his decision to allow this report to be exempted from call in (so that it can be scrutinised) but he has said he will not do so. The argument is that because an earlier version of the report was tabled last November, albeit that it wasn’t finalised, that was the opportunity to call in the report and we have now missed our chance. I would point out that this tabled at a Cabinet Resources Committee meeting which, although it had 10 items on the agenda, was over in just 20 minutes according to the minutes. So no debate at all then.
Set out below are my concerns about this proposed new contract which I forwarded to Cllr Rayner and perhaps would have been useful to discuss:
• Catalyst appear to have successfully de-risked their part of the contract by simply becoming the landlord. This will guarantee them with a rental stream for the duration of the lease in return for dropping the ‘deficit clause’.
• It is not clear who will be responsible for repairs and upgrading of the homes over the next 21 years and it does not appear to resolve the issue of overall capacity. As such, in 10 years time Barnet could be leasing homes it does not require or which are entirely unsuitable for its needs.
• It is not clear when the “appropriate stage” for the break clause will occur or the terms of such a break clause. For example, it is likely to prove difficult to invoke a break clause on lease which covers all of the homes whilst there are residents in some of the homes. However, if each home has been let under a separate lease, the council would be able to invoke the break clause one home at a time, minimising unnecessary costs whilst retaining sufficient homes capacity to meet on-going need.
• By novating the Fremantle contract to the Council this has shifted the operating risk back to Barnet. Cllr Thomas, who signed off this report, states that “This novation will enable the Council to either negotiate a contract more appropriate to its needs or, retender the care provision and thus provide more flexibility in terms of block beds, the price per bed and the form and location of day care services”. However, it also places the responsibility back with the Council to find a suitable operator at the right price which may, in reality, prove very difficult to deliver.
• It is essential to understand the details of the contract that is being novated to ensure that the terms enable the council to renegotiate the contract with Fremantle without incurring subsequent penalties.
More fundamentally, I would have expected to see a strategy explaining what Barnet anticipates in terms of the changing care home needs of residents over the next 21 years, how this revised deal with Catalyst fits that strategy, what other options were considered, what risk analysis was done to test the robustness of this proposal and, finally, whether this deal represents good value for the rate payers in the medium to long term. I can see that this may be an expedient short term solution but I worry that over the longer term it could prove just as damaging to the council as the contract it seeks to replace.
What the Delegated Powers Report is asking is that we should trust the officers who have renegotiated this contract without having sight of any of the relevant details. Given that the previous version of this contract has already cost the Council over £10 million in compensation and penalties, I am sure most reasonable people would understand why it is so important that, this time around, the Council need to demonstrate the highest standards of scrutiny and rigour so that all of the details can be thoroughly examined in public.
Maybe the other 350,000 residents of Barnet think I am just mad and should let the Council get on and run things the way they see fit. However, I am afraid I have a lack of confidence in the way the Council do things. Just look at the problems that have surfaced in the last twelve months over the Council’s procurement procedures. If this contract goes wrong again, the people who will pick up the bill will be the ratepayers - again.
My view is that this proposed contract should be scrutinised in public so that at least someone can ask these and other pertinent questions. Tell me what you think.