© 2014 Peopletoo Limited Wholly-owned and Public-Public Joint Ventures: CORMAC Solutions Ltd a successful public sector venture for Environmental Services, Highways and Infrastructure Presentation Supporting Strategic Commissioning in Public Services Welsh Local Government Association

2 © 2012 Peopletoo Limited Why ASDs and Wholly-Owned or Public:Public? Getting the best of the public sector combined with a commercial approach is a real opportunity for Councils to achieve financial returns, improve performance, support the community and achieve collaboration. In the current financial climate, traditional service delivery models do not always meet the financial requirements and political and corporate priorities of public sector bodies.

3 © 2012 Peopletoo Limited Alternative Service Delivery Overview Alternative Service Delivery Strategy: Building a Route Map Wholly Owned Company with Trading Powers Private Sector Community Models Collaboration: Shared Services Collaboration: Shared Services Creating centres of excellence with the private sector to create income generation and employment opportunities Joint Ventures with private & public sector Outsourcing discrete elements A wholly-owned company by the Council (and partners under shared services) with potential trading powers. For example: Streetscene/Waste/Highways, Transport, Social Care, Culture, retained Education services, Support Services Established with partners from the outset or as customers for any shared services opportunities to work together or integrate operational services. Range of vehicles for shared services (WLGA paper). For example: Transport Services, Regulatory Services, Support Services, Planning and Building Control, Joint Commissioning, Health/Social Care Charitable Trusts: Leisure/Activity Trusts Development of Social Enterprise/Mutuals: Advisory services, Sports and Culture, Events, Social Care. Government policy and new social funding Community Ownership – services and assets: Libraries, Neighbourhood Community Hubs, Leisure, Parks Wider third sector providers and Third Sector Umbrella Company Key Criteria: Financial: Efficiency, trading income, assets, equity return, tax, grants Corporate objectives, service performance and resilience Strategic and Operational Control Ease of Procurement and Contractual Flexibility Community Benefits Staff Benefits

4 © 2012 Peopletoo Limited ASD: Further Efficiency, Passporting and Trading build on ‘fit for purpose’ services – efficient, modern and transformed Delivering FURTHER 5 to 10% Focused niche business Own culture, vision and strategy Trading and passporting further services Operational hub creation Management and administration consolidation Longer term financial horizon – invest to save ASD: Further Efficiency, Passporting and Trading build on ‘fit for purpose’ services – efficient, modern and transformed Delivering FURTHER 5 to 10% Focused niche business Own culture, vision and strategy Trading and passporting further services Operational hub creation Management and administration consolidation Longer term financial horizon – invest to save Council: In-house ‘as is’: Robust internal analysis delivering 5 to 10% Council: In-house ‘as is’: Robust internal analysis delivering 5 to 10% Collaboration of Services: FURTHER efficiency, Passporting and Trading Delivering FURTHER 5 to 10% Management and administration Operational integration Economies of scale Resilience Pool plant, fleet and property Increased trading opportunities Collaboration of Services: FURTHER efficiency, Passporting and Trading Delivering FURTHER 5 to 10% Management and administration Operational integration Economies of scale Resilience Pool plant, fleet and property Increased trading opportunities Evolving ASD Model from in-house to arms length, collaboration and commercial entity Creates an opportunity not only for further efficiency but trading commercially or finally a commercial organisation with upfront investment. Active engagement of Cabinet, members, staff and trade unions as well as support from Finance, HR, Procurement and Legal Consider Council commercial spin-out whereby Council sells minority stake to external investors to create upfront funding but retains control together with management and employee-owned share scheme. In-house ‘as is’ – the benchmark Commercial spin out owned by Council & staff Collaboration with other Councils Own wholly-owned

5 © 2012 Peopletoo Limited Key Aspects of Wholly-Owned ASD Develop talent and a culture of: Public Sector Entrepreneurship Fit for purpose organisations, appropriately rewarded and incentivised The development of new organisations and delivery culture. Long term future Reduced bureaucracy, increased decision making BUT Council control Operates as a strong commercial organisation: Profit and Loss, Balance Sheet and Cashflow; Sales and Marketing Strategy Need strong management team to take business forward Council commitment and leadership politically and management team Appropriate ownership, accountability and governance framework between the Council, partners and the ASD vehicle. Comms/consultation key. Commercial principles but contractual flexibility. Support growth in ASD

6 © 2012 Peopletoo Limited Service Delivery Options Council Owned with Trading  White-labelled as Council  Council establish own 100% wholly- owned company  Greater strategic and operational control as well as financial flexibility  Greater proportion of financial benefits retained  Delivery risk rests with Council but supplemented by service management contract  If required, service management contract with external operational team to support Transition and New Organisation, develop new management team and build successful new organisation including trading  Facilitates expansion through collaboration with other public sector bodies Council External Joint-Venture  Externally branded  Joint Venture model with staff TUPE into new JV controlled by external entity  JV partner responsible for transition and management of new entity throughout life of partnership  Strategic control through commercial agreement  Share of financial improvement including trading income balanced to JV  Greater risk transfer  Less financial flexibility given longer term financial commitment – potentially 10 years

7 © 2012 Peopletoo Limited Comparison of ASD models In-HouseWholly- Owned/Trading External JV Financial FlexibilityHHL Strategic ControlHHM Operational ControlHML Community BenefitsLHL Financial benefits & trading income retentionLHM Dividend back to CouncilLHL Risk TransferLMH Corporate Management Fee – internal recovery risk HHL Staff and Trade Union Engagement/RewardHML Ability to raise funding if a spin outLHM Timescales to support immediate savingsMHL Note: Assessment based on High, Medium or Low

© 2014 Peopletoo Limited – Cornwall County Council: Integration of Highway Maintenance, Network Management and Consultancy into Highways Service –Unitary Authority, Cornwall Council: Focus on Consolidation, “Total Place”, “Big Cornwall” and financial savings –Unitary Authority, Cornwall Council: Focus on Consolidation, “Total Place”, “Big Cornwall” and financial savings – Cornwall Council: Integration of all District Environmental Services into one Environment Service April 2012 – CORMAC Solutions & CORMAC Contracting: Established and started trading – Neighbourhood Services: integration of Highways Service with Environment, Waste and Property operational and technical services April 2014 – CORMAC Solutions & CORMAC Contracting: Completed first 2 years of trading, exceeding all desired outcomes and profit targets. CORMAC journey

© 2014 Peopletoo Limited How is Cormac structured & governed

© 2014 Peopletoo Limited What has CORMAC achieved ? CORMAC Solutions Ltd CORMAC Contracting Ltd Priorities & overarching objectives aligned with Council £103m pa turnover 1700 employees – increased job opportunities by 17% Longer term sustainability Services include:  Highway Maintenance  Network Management  Civil Engineering Consultancy  Civil Engineering & Construction  School Crossing Patrols  Facilities Management  Quarry  Environmental Services  Fleet & Workshop Engineering

© 2014 Peopletoo Limited Why is CORMAC different ? All profits can be returned to council – in last 4 years £23m Not private or public but the best of both worlds Wholly owned so members actively engaged Access Skills and Resource of Private Sector in Private Compete for private sector work We take on the risk and financial accountability Long term stability and security Trade Union agreements and positive support Use local supply chains with 14 day payment terms Speed of Set Up and supporting immediate savings Teckal - Local government re-organisation Provide both in-house/wholly-owned & JV model Strong community benefits – apprenticeships and working with vulnerable groups Staff share in success

© 2014 Peopletoo Limited Consider Collaboration Collaboration is key too driving both the commercial and cultural change required and expediting the process Joint approach is needed to develop “a culture to deliver”; Creation of Supply Chain Community, benefitting from economies of scale (buying power) and company alignment; Making full use of the existing management systems through the “group” structure; Benefit from a central control Hub for work gang management and control, fuel management external/internal plant management; HMEP toolkit compliant.

© 2014 Peopletoo Limited Questions?