Guidance

Stage 3: the case for externalisation

Published 28 March 2017

1. Overview

Should the analysis undertaken during stage 1 and stage 2 conclude that doing nothing is not an option, the case for some level of change will have been strengthened and further work to develop a business case for the means of change is necessary.

This section of the toolkit is designed to support you to consider the option of externalisation in more detail.

2. The case against externalisation

You need to make an objective assessment of the advantages and disadvantages associated with the library service operating within the council or any other options. It is recommended that you define a set of evaluation criteria which you apply to both the case for remaining in house and the case for externalisation, to demonstrate to stakeholders that you have been objective in your assessment. Your analysis should include an assessment at following levels:

• strategic level - do current arrangements enable the library service to act with a ‘single focus’, so it can prioritise the achievement of strategic objectives and priorities?
• service delivery level - is the library service able to take timely decisions so it can respond to emerging trends and needs and do staff, friends group and communities have the ability to shape services to reflect local need?
• back-office level - do current back office arrangements provide the library service with value for money services that enhance the quality of service delivery?
• stakeholder engagement level - do current arrangements encourage effective engagement with a range of stakeholders, including Friends Groups, community groups and other public bodies?

Library staff should be involved in these discussions, as they are in a strong position to understand the challenges facing the service and the steps required to address them. You should also consider how you can involve Friends Groups and community groups.

3. The case for externalisation

Informed by the analysis undertaken so far, the library service should consider whether the potential characteristics of an externalised service would help it to address some or most of the challenges it currently faces. For example:

• would externalising the service help you to deliver your library strategy?
• would externalising the service help you to offset reductions in funding by enabling you to generate increased levels of income?
• would externalising the service help you to keep libraries open?
• by externalising the service would you be in a better position to involve external stakeholders (for example Friends Groups, library users and community groups) in the design of services and decision making process?

4. Assessing whether externalising the library service is a practical option

An early analysis of any potential barriers to externalisation should be undertaken. Questions to consider through discussion between the library service and council include:

• to what extent could the library service be externalised without materially affecting the remaining council run services?
• to what extent could the library service be externalised without being materially affected by the remaining services?
• to what extent could the service offer be restructured in a new organisation to enable better outcomes for users, improved value for money and more freedom to innovate?
• has the council undertaken any work to consider the various procurement routes associated with the externalisation of library services?

5. Summarise your findings

Based on the above analysis, you can draw conclusions about whether there may be a legitimate business case for externalising the library service.

Many of the required changes to the library service could be achieved while the service remains within the council but you need to make an objective assessment about how likely it would be that these changes would take place and whether additional or greater benefits would be achieved externally, including securing new contracts and attracting various forms of grant funding.

Make sure you develop (and help others to develop) a strong understanding of the main reasons for staying in-house or externalising the service.

Don’t just think of the advantages, but also consider the costs and disadvantages:

• will externalising the library service help it to become more affordable and competitive?
• what are the risks to the council?
• will some form of externalisation be the best and most sustainable way to deliver these functions?

York Explore

It is important to note that (at this stage of the investigation process) establishing a strong case for externalisation doesn’t automatically mean that the preferred option is to externalise the service. At this stage of the process, it simply means that various externalisation options can be further investigated, while at the same time investigating the remain in-house with re-engineering option.

6. Delivery model detector

To support the early investigation of whether externalisation represents a viable option for further investigation, you can use the delivery model detector.

The detector is a free resource that works by evaluating responses to a series of questions about a particular service. The questions cover 7 themes that are the most significant factors in determining how a service should be delivered. The 7 themes are:

• ownership and co-production
• community benefit
• governance
• finance
• sustainability
• marketing positioning
• current/proposed business model

Several library services have undertaken this exercise during the early stages of the investigation process. The output can contribute to the process of developing the options analysis based on a service’s perceived suitability to a range of alternative delivery model options, including remaining in-house with re-engineering.

Completing the delivery model detector does not replace the need for an options appraisal.

Similar resources may be available from other consultancy companies. Please contact the DCMS Mutuals Team at [email protected] for further information.

The next section covers the fourth stage of the process - considering the service areas your alternative delivery model might cover.