Contracting

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Contracting

• Private Sector Experience
• Andrew Rome

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Private Sector Experience

• Where our experience comes from a bit about
  Sedgemoor
• What we experience and our view of it including
  the opportunities for improvement in how we work
  together.
• What the future might hold.

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• Provide care and education for approximately 150
  of the most challenging young people, from more
  than 70 authorities
• Established (since 1988) single sex, residential
  and educational provisions. Range of services
  extended to include
• Emergency placements and assessments
• A quality fostering provision
• Beyond EBD specialist care
• Small residential special schools
• Registered and inspected by NCSC, DFES/OFSTED,
  BSC, Investors in People, ErnstYoung.
• Service provision from Devon to Cheshire, from
  Hertfordshire to South Yorkshire.

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Our Experience Of Contracting Today

• Predominantly spot purchasing
• More than 50 is emergency purchasing (same day)
• Some preferred provider/consortia placements
• Minority of contracted purchasing
• i.e. Block booking (a number of beds are
  purchased for a period of time)

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Why Is There So Much Spot Purchasing?

• We suggest
• Organisation?
• Is there enough focus on a high level view of
  commissioning and contracting?
• Multi-agency approach?
• Referrals come from social services, education
  and health
• Perception of risk of empty beds under block
  contracts?

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Implications Of Today's Spot Purchasing
Capacity 4 Occupancy 3
Capacity 4 Occupancy 4

• 1 young person left last week
• Waiting for right referral

• 100
• occupancy

75 compared to 100 occupancy Virtually no
cost saving
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Efficiency

• Multiple Homes means the efficiency loss of empty
  beds can be mitigated against on average.

Sedgemoor has over 50 homes, our actual occupancy
rate is 85-90
4 3
2 2
3 2
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Conclusion 1

• Spot purchasing/volatile purchasing leads to
• Sub-optimal efficiencies at provider level, so
• Providers recover that inefficiency in their
  prices to local authorities, i.e.
• The cost of inefficient service purchasing
  increases costs throughout the system.

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Preferred Provider/Consortia

• Huge documentation exercise.
• Massive replication
• Focus on service specification.
• Resources to monitor?
• Place more reliance on NCSC and OFSTED?
• Consortia not having the mandate to negotiate on
  behalf of individual authorities.

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Conclusion 2

• Consortia approaches have focussed on specifying
  quality of service, but
• Although consortia potentially have the power of
  a big buying group, .
• In reality the participant local authorities
  appear not to empower the consortia sufficiently
  to allow them to address the inefficiencies
  (conclusion 1) in the system.

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Why is block booking so scarce?
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Risk Of Empty Beds Under Contract
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Addressing Risk Through Contractual Details

• Block booking is all about
• PARTNERSHIPS
• Example - We might propose including 6 monthly
  reviews in a 3-5 year contract
• Possibility to alter commitment
• E.g. alter number of beds contracted

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• Critically our prices reflect efficiency
• If we get guaranteed occupancy approaching 100
  this would be shared with our customers through a
  net decreased cost/bed

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Examples Of Good Practice

• Southampton City Council
• Developed partnerships with 35 groups and
  organisations to support child care in the
  authority.
• Three year block booking of placements at
  Sedgemoor.

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Examples Of Good Practice

• Telford and Wrekin Council
• Analysed their childcare requirement needs
• Projected their needs
• Consulted over the best way to deliver
  requirements
• Developed a commissioning strategy
• Accessed PFI funds
• They are now building their own provision,
  contracting
• childcare for 25 years

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Conclusion 3

• A minority of Local Authorities are taking steps
  to enter into longer term, higher commitment
  arrangements.
• They will only deal with providers who have the
  scale, pedigree and resources to enter into such
  arrangements.
• They should benefit greatly in commercial terms.

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What the future might hold?
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Market Forces From A Provider Perspective

• Currently
• Large number of small providers of care and/or
  educational services for young people
• Small number of emerging larger providers
• However, the regulatory landscape continues to
  challenge providers to improve standards
• NCSC
• DfES
• HS
• OFSTED

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Department For Education And Skills (DfES)

• On September 1, 2003 the DfES registration
  guidelines for small independent schools changed
• Any school, however small, must now be
  provisionally registered with the DfES
• This has a serious impact on childcare providers
  whose school facilities did not previously need
  to be registered (lt 5 young people)
• It has always been Sedgemoors policy to register
  schools with the DfES and we have strong
  communication links with the Department

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Education Act 2002

• For childrens homes that are not provisionally
  registered and approved by the DfES, following
  September 1, there is a need to outsource
  educational provisions to registered providers or
  to invest in self-built and registerable
  provision.
• This has a further cost implication
• Homes that have no educational provision present
  a risk to placing authorities

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Education

• Sedgemoor provides full time, registered
  education for ALL young people that are placed
  with us.

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Conclusion 4

• Regulatory driven cost pressure
• The market will continue to consolidate.
• Move to a smaller number of better resourced
  providers
• As bigger providers emerge, the economies of
  scale will increase
• The overheads base gets more efficient, so a
  second source of efficiency gain emerges

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The Results Of Consolidation

• Over the last 6-12 months we have seen a huge
  increase in referral phone calls. One implication
  is that there are fewer providers able to meet
  needs.
• LAs are sensing a limited supply of services
• Need to secure a volume of BEST provision, i.e.
  NCSC and OFSTED registered

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Requirements For You, The Local Authorities

• Requirement for standards of care that meet the
  needs of the young people you have responsibility
  for to give young people the best life chances
  including education improvement of outcomes
  through quality services
• At the lowest possible costs
• Need to report performance to the government,
  within the guidelines of the objectives for
  childrens social services

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How We See Contracting In The Future

• Spot purchasing will remain but other, more
  robust contracting will emerge

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FINAL CONCLUSIONS

• There is massive inefficiency (and variable
  quality) brought about by current purchasing
  practices.
• There are clear ways to improve commissioning
  practice.
• Local Authorities should look to partner with
  providers who have the resources to deliver fully
  regulated services in the long term.
• Sedgemoor is one of a limited number of such
  providers.

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Contact us to talk about the opportunities we
have in partnerships together.Andrew Rome01460
25800007773 343715