The community right to challenge (CRC) could be the trigger for more local authority services to be delivered by organisations other than councils and may become a powerful tool to open up public services markets in line with the government's vision in the Open Public Services 2012.
Ushered in by the Localism Act it enables voluntary and community bodies, employees of authorities that wish to form a mutual organisation to deliver services, and parish councils to express an interest in running a local authority service.
For the first time, there will be a legal basis and route map for community groups and employee-led mutuals to get more involved in delivering public services, marking a cultural shift in public service reform to more grassroots action and ideas, rather than top-down initiatives.
A local authority has a duty to consider expressions of interest and, where they accept them, run a procurement exercise for the service. Authorities should now consider their strategies and processes for responding to such requests. Procedures need to be robust procedures to avoid the risk of legal challenge.
The Community Right to Challenge (Expressions of Interest and Excluded Services) (England) Regulations 2012 and The Community Right to Challenge (Fire and Rescue Authorities and Rejection of Expressions of Interest) (England) Regulations 2012 have been laid before parliament and are currently awaiting parliamentary approval. The community right to challenge provisions will be commenced at the same time as the Regulations come into force, which is expected to be on 27 June 2012. CLG has now published draft statutory guidance on the community right to challenge. A final version of the guidance will be published once the provisions have come into force.
Who can exercise the right?
A 'relevant body' is defined as: a voluntary or community body; a body of persons or a trust which is established for charitable purposes; a parish council; or, in relation to a relevant authority, two or more employees of that authority.
The definitions of voluntary and community body have been designed to enable a range of civil society organisations to exercise the right, supporting the government's commitment to these groups having greater involvement in running public services.
Government is committed to giving public sector workers the right to bid to run the service they deliver using a John Lewis-style model. CRC implements this commitment for local authority employees.
Which authorities and services are covered?
County councils, metropolitan boroughs and district councils are all within the current scope of the right. Under the new regulations the right is extended to cover all fire and rescue authorities. The right could in theory be extended to cover NHS organisations and central government departments in future.
Relevant Services
The community right to challenges applies to all relevant services; this is defined as a service provided by or on behalf of a relevant authority in the exercise of its functions, except services which are excluded.
The regulations set out a number of services which are excluded from the community right to challenge:
1.) A relevant service commissioned in conjunction with one or more health services by a relevant authority or by a primary care trust, NHS trust or NHS foundation trust under a partnership agreement or by a relevant authority and an NHS body or a strategic health authority, acting jointly.
2.) A relevant service commissioned by an NHS body on behalf of a relevant authority.
3.) A relevant service commissioned or provided by a relevant authority in respect of a named person with complex individual health or social care needs.
The first two excluded services will only be excluded temporarily until 1 April 2014; this is to allow the new the NHS commissioners, which are being established under the Health and Social Care Act 2012, to become fully operational, consider previous contractual arrangements and develop new commissioning arrangements.
Services which are paid using direct payments and which are managed by individuals fall outside the scope of the community right to challenge as the services are not commissioned by a relevant authority.
Expressions of interest
An expression of interest must be in writing. Relevant authorities may require a minimum level of information to be included:
• Where the relevant body proposes to deliver the relevant services as part of a consortium or to use a sub-contractor for delivery of any part of the relevant service, the information in paragraphs 2 and 3 must be given in respect of each member of the consortium and each sub-contractor as appropriate.
• Information about the financial resources of the relevant body submitting the expression of interest.
• Evidence that demonstrates that by the time of any procurement exercise the relevant body submitting the expression of interest will be capable of providing or assisting in providing the relevant service.
• Information about the relevant service sufficient to identify it and the geographical area to which the expression of interest relates.
• Information about the outcomes to be achieved by the relevant body or, where appropriate, the consortium of which it is a part, in providing or assisting in the provision of the relevant service in particular:
• How the provision or assistance will promote or improve the social, economic or environmental well-being of the relevant authority's area.
• How it will meet the needs of the users of the relevant service.
• Where the relevant body consists of employees of the relevant authority, details of how that relevant body proposes to engage other employees of the relevant authority who are affected by the expression of interest.
• Relevant bodies can be asked by authorities to supply further information; however this is optional, the inclusion of further information cannot be a requirement for considering the expression of interest.
When can an authority reject an expression?
Specific grounds for rejection include:
1. The expression of interest does not comply with one or more of the specified requirements.
2. Inadequate or inaccurate provision of information in the expression of interest.
3. The authority considers that the applicant, or any of its consortium members or sub-contractors are not suitable to provide or assist in providing the relevant service.
4. The expression of interest relates to a service where a decision, evidenced in writing, has been taken by the authority to stop providing that service.
5. The service is already the subject of a procurement exercise.
7. The authority is already actively exploring service provision by a staff-led mutual.
8. The expression of interest is considered frivolous or vexatious.
What about timescales?
The guidance allows relevant authorities to choose to specify periods during which expressions of interest can be submitted. If no period is specified, expressions can be made at any time. In setting policies authorities must consider:
• The need to provide relevant bodies with sufficient time to prepare and submit expressions of interest;
• The nature, scale and complexity of the service for which a period is being specified; and
• Timescales for any existing commissioning cycle relevant to the service for which a period is being specified, or any other relevant authority processes.
Relevant authorities are required to publish their own maximum timescales for notifying applicants of their decision on an expression of interest. Different periods may be specified for different cases. In setting policies, authorities must have regard to:
• The need to notify relevant bodies of a decisions within a reasonable period.
• The nature, scale and complexity of the service for which expressions of interest relate.
• The complexity of the expression of interest received.
• The likely need to agree modifications to expressions of interest in order to accept them.
• Timescales for any existing commissioning cycle relevant to the service for which an expression of interest relates, or any other relevant authority processes (eg council decision making or budget setting processes).
What kind of procurement is required?
A procurement exercise for a service must be conducted where an expression of interest is accepted. Where the service is of a nature or value to which the public contracts regulations 2006 apply, then existing procedures for advertising, tendering and awarding contracts must be followed. Where those regulations do not apply authorities will have discretion to decide how to procure the service, as they do now when contracting out services.
Authorities must consider whether and how an expression of interest and any subsequent procurement exercise, can promote or improve the social, economic or environmental wellbeing of its area. They must also comply with existing public procurement law. Failure to do this could provide grounds for legal challenge.
There are quite a few get-outs which authorities could use to scotch attempts by community providers to take over services. In the current economic climate, it will be interesting to see what appetite there is amongst potential applicants to use the right.
Mark Johnson is managing director of specialist public services law firm TPP Law and works with commissioners and staff teams on employee-led service bids. You can contact him here.
• This article was updated at 10.56am on 29 May 2012.
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