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Public Private Partnerships Staffing Protocol
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Public Private Partnerships Staffing Protocol

A UNISON Scotland Guide to the STUC/Scottish Executive Public Private Partnerships in Scotland Protocol and Guidance Concerning Employment Issues

December 2002
  1. Introduction


    1. 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).
    2. 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 (http://www.unison-scotland.org.uk/comms/pfi.html).

  2. PPP Schemes


    1. 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.
    2. 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 2.

3. Challenging PPP Schemes

    1. 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 the PSO.
    2. 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.
    3. 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).
    4. 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.

  1. What's Covered by the Protocol
    1. 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 Scottish Executive.
    2. 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).
    3. 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.
    4. 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.

    5. 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.

  2. Trades Union Involvement
    1. 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 bargaining.
    2. 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.
    3. 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.
    4. 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 PPP scheme.
    5. 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.
    6. 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 confidential.

  3. Staff Transfer
    1. 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)).
    2. 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.
    3. 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 protections including:

    • 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 body status.
    • 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

    1. 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.
    2. 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.
    3. 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).
    4. 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.

  1. Bid Evaluation
    1. 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.
    2. 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.
    3. 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.
    4. 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

    1. 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.
    2. 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 House.

10. Branch Checklist

 

Action

Information

1

Develop a group of activists who understand PPP and UNISON's position

UNISON guides and training courses.

2

Establish campaign team and develop campaign plan

UNISON Guide "Challenging the PFI"

3

Ensure proposed PPP scheme is covered by the Protocol

Section 4 above

4

Negotiate a consultation process including involvement in the project board.

Section 5 above

5

Negotiate a process for disclosure of information ensuring that the bid documentation limits 'confidential' information.

Section 5 above

6

Exclude 'soft FM' services from the scope of the project.

Section 6 above

7

Minimise staff transfer in 'hard FM' services

Section 6 above

8

Negotiate staff transfer agreement covering TUPE plus

Section 6 above

9

Meet contractor and agree terms and conditions for transferring staff and new joiners.

Section 7 above

10

When potential contractors have been shortlisted seek information on each of them and draw up questions for the interview

Section 8 above +

UNISON Guide "Challenging the PFI"

11

Prepare report on discussions with bidders

Section 8 above

12

Agree monitoring and review provisions

Section 9 above

     

Appendix 1 Protocol and Guidance Concerning Employment Issues

Appendix 2 Key arguments against Public Private Partnerships

Dave Watson
Scottish Organiser (Policy & Information)
December 2002

Further Information:

PFI resource page on the UNISON Scotland website
www.unison-scotland.org.uk/comms/pfi.html

PFI resource page on the UNISON UK website
www.unison.org.uk/pfi/index.htm

Scottish Executive PFI Unit
http://www.scotland.gov.uk/pfi/

Or Contact:

UNISON House, 14 West Campbell Street, Glasgow G2 6RX Tel: 0845 355 0845

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Further Information

Appendix 1 Protocol and Guidance Concerning Employment Issues

Appendix 2 Key arguments against Public Private Partnerships

PFI resource page on the UNISON Scotland website
www.unison-scotland.org.uk/comms/pfi.html

PFI resource page on the UNISON UK website
www.unison.org.uk/pfi/index.htm

Scottish Executive PFI Unit
http://www.scotland.gov.uk/pfi/

Contacts list:

Dave Watson -
d.watson@unison.co.uk

@ The P&I Team
14 West Campbell St
Glasgow G26RX
Tel 0845 355 0845
Fax 0141-307 2572