Public Private Partnerships Staffing
A UNISON Scotland Guide to the STUC/Scottish Executive Public
Private Partnerships in Scotland – Protocol and Guidance
Concerning Employment Issues
- The STUC and Scottish Executive have agreed a Protocol covering
employment issues in Public Private Partnerships. UNISON Scotland
played a major role in the preparation of this Protocol and
has welcomed its introduction as an important step forward
in protecting staff and eliminating the two-tier workforce.
A copy of the Protocol is attached (Appendix 1).
- This guide aims to provide guidance for UNISON branches
in making the best use of the Protocol at local level. It
supplements other UNISON guidance on this issue, which can
be found at the PFI resource page on the UNISON Scotland website
- PPP Schemes
- Public Private Partnerships (PPP) is the umbrella name given
to a range of initiatives, which involve the private sector
in the operation of public services. The Private Finance Initiative
(PFI) introduced by the Tories in 1992 is the most frequently
used scheme. The key difference between PFI and conventional
capital procurement is that the public does not own the asset.
The authority makes an annual payment to the private company
who provides the building and associated services. A typical
PFI project will be owned by a company set up specially to
run the scheme called a Special Purpose Vehicle (SPV). The
SPV is awarded a long contract (typically 25 to 30 years)
to design, build, finance and operate the public service.
- UNISON Scotland is opposed to the use of PPP schemes. Whilst
the Protocol addresses a number of our concerns including
the two tier workforce, there remain major problems with PPP
schemes. These include additional costs, lack of flexibility
and the loss of transparency and accountability. A summary
of these concerns and our alternatives are set out in Appendix
3. Challenging PPP Schemes
- When faced with a proposed PPP scheme, branches should organise
to challenge it. The Protocol (s.1.2) states "PPP
is one of several procurement options available to PSO's:
it is not the only, or preferred, option". The most
cost-effective way of delivering capital schemes is by the
Public Service Organisation (PSO) borrowing the finance, designing
the facility (either in-house or with external assistance
depending on the expertise), built by a construction company
(to a rigorous specification and contract) and operated by
- There is considerable interest, particularly in local government,
in the use of Non-Profit Distributing Trusts (NPDT) or joint
venture companies. The Scottish Executive's position is that
it is willing to consider other models and will evaluate the
Argyll & Bute NPDT. It is not always understood that NPDT's
are not an alternative to PPP. They are simply a different
model of delivering PPP from the commercial SPV arrangements.
Most of the problems with PPP remain. The commercial companies
make most of their profits from providing services, building
or financing the scheme, all of which remain with the NPDT
model. The lack of flexibility inherent in PPP also stays
and there may be lender restrictions on the employment of
staff by the NPDT to minimise risk. On this basis UNISON Scotland's
current view is that NPDTs are largely window dressing.
- Branches should establish a campaign team and prepare a
campaign plan. Guidance on this is set out in the UNISON Guide
"Challenging the Private Finance Initiative"
(Stock No. 1763).
- Branches should be both campaigning against PPP and making
sure that if a PPP project goes ahead we get the best deal
for members. This is known as the twin track approach. Whilst
this guide focuses on using the protocol it should not be
forgotten that an effective public campaign can strengthen
your branch negotiating position.
- What's Covered by the Protocol
- The Protocol covers all Public Service Organisations (PSO)
in Scotland. This includes the main public sector employers
where the majority of UNISON members are employed including
local authorities, health trusts and boards, quangos/ NDPBs,
joint boards, colleges, universities and public corporations
such as Scottish Water. As the Protocol is with the Scottish
Executive it will be more difficult to enforce with PSOs that
are not covered by devolved powers or are managed by PSOs
based in England, unless a scheme relies on funding from the
- There are two main methods of enforcing coverage of the
Protocol. It will be a condition of funding agreements between
the Scottish Executive and PSO's (s.1.4). As all PSOs rely
on Scottish Executive funding, as do most PPP schemes, this
should be sufficient. However, ministers have other levers
including the statutory power of direction over many PSOs
and if required we will expect them to use these powers. Compliance
with the provisions of the Protocol will be achieved through
the PPP contract (s.1.4).
- The Protocol covers all PPP schemes. The main PPP scheme
is the Private Finance Initiative (PFI) and all PFI schemes
are covered. Broader PPP schemes are not as easy to define.
The Protocol defines PPP as "a method which invites private
sector finance and service provision of a specified service
over a long-term contract". The other guidance referred
to in the Protocol is not much clearer. With the growth of
broader PPP schemes, particularly in water and transport,
branches should argue that any scheme contracting the private
sector to provide a service using private finance is covered.
We also have a commitment from the Minister
for Finance and Public Services to begin discussions on a
wider 'fair employment' agenda which we will use to close
any gaps which may develop.
- The protocol is being implemented with immediate effect,
which means 11 November 2002. This is being interpreted as
applying to projects that issue an Invitation to Negotiate
(ITN) after that date. This is Stage 10 of the process and
occurs after shortlisting and refining the proposal. A description
of the PFI process is set out in Appendix 3.
- Trades Union Involvement
- The rights to involvement and consultation in the Protocol
are only extended to recognised trade unions (s.1.3). Other
forms of representation only apply where there is no recognised
trade union. This would rarely apply in Scottish PSOs but
is necessary because of the requirements of the Transfer of
Undertakings Protection of Employment (TUPE) Regulations.
These regulations require employers to organise the election
of representatives where there is a transfer covered by TUPE
and there is no recognised trade union. There is no entitlement
to elect representatives where there are staff who are not
members of a recognised trade union but are covered by collective
- Consultation with the trades unions should be "at
the earliest stage" (s.6.1). Stage 1 of the PFI process
requires the PSO to establish the business need by identifying
the possible need for capital investment (Treasury
Taskforce Guidance). This means branches must now be consulted
at the capital planning stage, well before any consideration
is given to options including PPP. This is an opportunity
for branches to ensure that capital programmes are planned
in line with available resources. Recognising not only the
additional resources allocated in the current three year spending
plans, but also the abolition of capital constraints for local
authorities proposed in the Local Government in Scotland Bill.
- In PPP schemes that do not involve significant capital resources
consultation should also begin at the earliest stage. The
Treasury Taskforce policy statement on consultation emphasises
the need for involvement of trade unions "as soon
as a review which might lead to change is mooted".
For branches with genuine, functioning partnership agreements
this should already be part of the organisations culture.
- Consultation should continue throughout the process. All
PPP schemes have a project board and the Protocol states that
trades union representation should be included on that board
(s.6.9). However, this is not the only route that consultation
and involvement should take. The precise arrangements will
depend on the size of the project, the number of interested
unions' etc. It should be made clear that UNISON's involvement
in a project board does not indicate actual support for the
- Active involvement requires the "full disclosure
of information" (s.6.1). The Protocol also states
that "Openness should be the default approach"
(s.6.4). Restrictions to openness are "confined only
to details which are agreed with contractors as genuinely
related to their commercial interests"(s6.4). Potential
contractors are only involved at Stage 8 of the process when
they are short-listed and therefore by definition there is
no commercially confidential information until that stage
is reached. Financial assumptions at the Outline Business
Case are not confidential. Branches should ensure that the
bid documents make it clear that only very limited costing
information will be "agreed" as confidential.
- The Protocol requires the PSO to agree a strategy on disclosure
of information with the trade unions (s.6.5). This should
not be limited to the project board. Information should also
be disclosed to service users (including parents in schools
PFI schemes) and this is explicitly referred to in the Treasury
Taskforce guidance on consultation. The bid documents should
make it clear that innovative design solutions will be the
subject of public consultation and will not be deemed to be
- Staff Transfer
- It is not a requirement of PPP that public sector employees
transfer to the SPV (s.8.1). It is a decision for the PSO
on value for money grounds (s3.1(b)).
- It is often argued that staff transfer is required for a
scheme to be treated as off-balance sheet. Firstly, PPP schemes
generally do not have to be off-balance sheet. Although there
are significant incentives for the Scottish Executive to treat
them as such because the expenditure does not count against
Departmental Expenditure Limits (DELs) and therefore the block
grant. This is classic Enron economics! In the current round
of schools schemes the Executive have required bids to be
off-balance sheet contrary to the Treasury position on this
issue for this reason. Secondly, to be off-balance sheet the
PSO only has to demonstrate significant risk transfer and
this does not require staff transfer.
- There are two stages to a branch strategy on staff transfer.
- At the options stage branches should seek to exclude as
many services as possible from the project. The debate will
usually revolve around 'hard' and 'soft' Facilities Management
(FM). 'Soft FM' includes cleaners, catering and any other
staff who are not directly involved in maintaining the fabric
of the building. They should be excluded, as the SPV does
not require them to maintain their asset.
- 'Hard FM' will be more difficult to exclude therefore other
options have to be considered. One is the use of the DLO/DSO
on a contract basis and this is specifically covered in the
Protocol (s.3.1(b) and s.5.2). The DLO/DSO has to be provided
with appropriate support (s.5.4). Another option is to agree
that the staff will remain in the employment of the PSO and
be seconded to the SPV. A service level agreement is negotiated
between the PSO and the SPV for the length of the contract.
4. With the elimination of the two-tier workforce through
this Protocol most of the standard value for money assumptions
made in PPP schemes will no longer be valid. They were usually
based on savings made by exploiting new starters on lower
pay and conditions of service. As that can no longer apply
an important incentive to include large-scale staff transfers
in PPP schemes is removed.
5. If any staff do transfer the Protocol provides important
- The application of TUPE principles, even when in legal terms
TUPE might not apply (s.8.1). This should avoid lengthy legal
battles over the application of TUPE. This also includes trade
union recognition and collective bargaining arrangements.
- Any changes to the terms and conditions of transferred staff
will require agreement with the trade unions (s.3.1(e)).
- There is a requirement to consider other options including
redeployment for staff who do not wish to transfer (s.8.10).
- Being offered a broadly comparable pension scheme as assessed
by the Government Actuary's Department (s.8.2). This includes
the option to transfer accrued credits on a fully protected
basis i.e. retain pensionable service. Where possible ( e.g.
in local government) transferred staff will remain members
of the pension scheme by their new employer gaining admitted
6. Branches should enter into negotiations with contractors
at an early stage. There is a joint commitment to work in
a spirit of partnership, including a dispute procedure to
resolve differences (s.8.6). A transfer agreement covering
the main points of the protocol and other matters, between
the trade unions and the contractor is good practice. As with
any TUPE transfer it is important to identify all terms and
conditions, which might apply to the transferring staff, including
access to local facilities etc.
7. New Joiners
- New joiners to a PPP workforce will be offered terms and
conditions that are no less favourable overall than those
of transferred employees'(s9.1). If there isn't a transferred
comparator member of staff, the terms and conditions that
apply for the same job in the PSO (s.9.2). This is the provision
that ends the two-tier workforce for future PPP schemes.
- Terms and conditions (not pensions – see below) are treated
as a package and there is scope for negotiation to reflect
different working conditions in the new facility (s.9.3).
Branches should regard this as a safety net and are free to
negotiate improved terms and conditions in accordance with
their service group policy. However, any changes proposed
by the new service provider should not undermine "the
integrated nature or quality of the workforce" (s.9.3).
The aim of this provision is to protect the team approach
to service delivery when staff from the service provider and
PSO work together.
- New joiners will be offered the same pension arrangements
as transferred staff (s.9.5). Again where possible through
admitted body status. If either of these options is not possible
a final salary scheme or defined contribution, with matching
employee contributions up to 6% (s.9.6).
- As with all aspects of this Protocol it only applies to
new schemes. However, it does set a benchmark and branches
should use this as basis for negotiation with service providers
in existing PPP schemes.
- Bid Evaluation
- The Protocol explicitly makes the link between high quality
services and good employment practices (s.5.1). The Protocol
goes on to indicate that "Quality and good value will
not be provided by organisations which do not manage workforce
issues well" (s.5.1). Under EU rules contracts can
be awarded on the basis of "most economically advantageous
tender", not just the lowest price (s.7.2). Some PSOs
are reluctant to follow this provision fearing a legal challenge
particularly as the European Commission has emphasised the
'economic' aspect of this rule. However, the European Court
of Justice in the Helsinki Concordia Bus case (c-513199) decided
that "factors which are not purely economic may influence
the value of a tender from the point view of the contracting
authority". This decision should reinforce a move
away from the lowest price approach.
- The Protocol sets out a range of workforce issues that bidders
should be evaluated on. These include terms and conditions,
training, industrial relations, union recognition and health
and safety (s.7.3). The Protocol entitles trades unions to
interview the short listed bidders on these issues and the
output specification, together with bidders response to the
final Invitation to Tender (ITN) (s.7.5). They can also require
bidders to provide further information (s.7.7). Branches,
through their Regional Officer, can access information from
UNISON on the performance of most contractors and this should
be helpful in identifying contractors who are unlikely to
meet the high standards set out in this protocol. UNISON guidance
is available on how to analyse the financial information and
what questions to ask the bidder.
- Trades unions are entitled to submit a report on the outcome
of their discussions with the bidder (s.7.8). The bidder will
be allowed to respond to any specific concerns raised by the
trade unions. Whilst the final decision remains with the PSO,
they must explain to the trade unions the reasons for any
decision which runs contrary to concerns raised (s.7.10).
Branches should make it clear to PSOs that if their legitimate
concerns are not taken into account, they reserve the right
to reflect those concerns in their campaign and bargaining
approach to the PPP scheme.
- The involvement of stewards directly involved in this process
can be substantial. Branches should ensure that the representatives
concerned are provided with adequate facilities, time and
training to undertake the task.
9. Monitoring and Review
- The Protocol provides for monitoring of the PPP scheme throughout
the length of the contract (s.10.1). Branches should agree
with the PSO what information they require, the frequency
and what mechanisms (i.e. JCC etc.) will be used to undertake
the monitoring. As a minimum branches should ensure they receive
regular reports on the numbers of staff employed (including
any sub contracting) and the terms and conditions which apply.
- UNISON Scotland will review the operation of the Protocol
within the first year of operation and address any problems
with ministers through the STUC. Feedback from branches would
be welcome and should be directed to the P&I Team at UNISON
10. Branch Checklist
Develop a group of activists who understand
PPP and UNISON's position
UNISON guides and training courses.
Establish campaign team and develop campaign
UNISON Guide "Challenging the PFI"
Ensure proposed PPP scheme is covered by
Section 4 above
Negotiate a consultation process including
involvement in the project board.
Section 5 above
Negotiate a process for disclosure of information
ensuring that the bid documentation limits 'confidential'
Section 5 above
Exclude 'soft FM' services from the scope
of the project.
Section 6 above
Minimise staff transfer in 'hard FM' services
Section 6 above
Negotiate staff transfer agreement covering
Section 6 above
Meet contractor and agree terms and conditions
for transferring staff and new joiners.
Section 7 above
When potential contractors have been shortlisted
seek information on each of them and draw up questions for
Section 8 above +
UNISON Guide "Challenging the PFI"
Prepare report on discussions with bidders
Section 8 above
Agree monitoring and review provisions
Section 9 above
1 Protocol and Guidance Concerning
2 Key arguments against Public
Scottish Organiser (Policy & Information)
PFI resource page on the UNISON Scotland website
PFI resource page on the UNISON UK website
Scottish Executive PFI Unit
UNISON House, 14 West Campbell Street, Glasgow G2 6RX Tel: 0845 355 0845