1. Strategy andhere
Title goes Structures
for Shared Services
Subtitle goes here
12 March 2013
Name Surname One
Ruth Smith
Name Surname Two
National Head of Procurement
Law

2. Shared services strategy – where to
start?
o What does sharing services really mean?
“By shared services we mean institutions cooperating
in the development and delivery of services, so sharing
skills and knowledge, perhaps with commercial
participation.”
Learning & Skills Council (2008)

3. Where to start?
o Your vision – what do you want to achieve?
o Which services?
o Who will collaborate?
o Private sector input?
o Timescales?
o Cost and resource?
o Governance and project management?
o … and don’t forget about EU procurement ! …

4. So many models so little time!
Framework
Agreement
Inter-college Joint
co-operation Employment
Informal joint Employee
Which model?
working Mutual
Contract for
Teckal Company
services
Joint purchasing
/ outsourcing

5. Plan your strategy … lots of models … and
opportunities …
Procurement Structure
Vision
Strategy

6. Understanding where EU procurement
may apply – a quick reminder
The key elements:
o Contracting Authority
o Written contract or Framework Agreement
o For works, goods or services
o Consideration
o Above financial threshold

7. When EU procurement applies
o Are you a ‘contracting authority’ (CA):
o “a corporation established, or a group of individuals appointed to act
together, for specific purpose of meeting needs in the general
interest, not having an industrial or commercial character, and
– Financed wholly or mainly by another CA; or
– Subject to management supervision by another CA; or
– More than half board of directors or members are appointed by
another CA.”
o R. v HM Treasury Ex p. University of Cambridge (Case C-380/98)

8. Your model: when may EU procurement
apply?
EU Procurement may apply EU Procurement does not apply
Joint Purchasing ‘Teckal’ companies
Framework Agreements Inter-college co-operation
Contracts between separate Informal joint working
legal entities
JV Cos (with private sector) Joint appointments / employment
Employee mutuals ?

9. Collaboration where EU procurement
applies
o Joint purchasing / outsourcing: Two colleges jointly
outsource their back office finance and payroll function
to the private sector
o Framework arrangement: One college procures a
framework agreement for back office support services
on behalf of itself and a number of others
o Central purchasing body

10. Collaboration where EU procurement
applies
o Joint ventures with Private Sector: A college forms
a joint venture with the private sector to provide HR
and payroll services to other Colleges in the area

11. Collaboration where EU procurement
applies
College Private sector
JV Co
College C College B College D

12. Collaboration where EU procurement
applies
o Employee mutuals (currently …): Spin out employee
mutual provides services back to its originating college
Mutual
College

13. Collaboration which avoids EU
procurement
o The ‘Teckal’ (or “in-house”) company
o Three colleges want to merge their finance and accounting
functions through establishing NewCo
New Co
College A College B College C

14. The ‘Teckal’ company
o Must satisfy 2 tests:
TEST 1: Colleges exercise [joint] control over NewCo
similar to that which they exercise over their own
departments
– Power to give directions over strategic decisions
– Private sector capital will be fatal to the control test

15. The ‘Teckal’ company
TEST 2: NewCo carries out the ‘essential part’ of its
activities with the controlling Colleges
– So NewCo’s activities must be devoted “principally” to
the colleges with other activities of only “marginal”
significance
– Not market-orientated
(Risk Management Partners Ltd v Brent LBC [2011] UKSC7)

16. Collaboration which avoids EU
procurement
o Inter-college co-operation
o Co-operation between colleges with the aim of
ensuring that a public task that they all have to perform
is carried out
(Case C-480/06 Commission v Germany [2009])

17. Inter-college co-operation – key
requirements
o Only between public entities – not private sector
o “Contract” is non-commercial in character (no profit)
o Provides a means to ensure a public task which
colleges are required to perform is carried out
o Governed solely by considerations and requirements
relating to the pursuit of objectives in the public interest
o Of little or no interest to a private sector supplier

18. Other collaboration which avoids EU
procurement
o Informal joint working - no contractual relationship
o Joint appointments / joint employment

19. A look to the future – proposals for new
EU Procurement Directive
o On Teckal … and joint control …
– Decision making body - representatives from all
participating colleges
– Decisive influence over strategic objectives and
significant decisions
– NewCo does not pursue interests which are distinct from
the controlling colleges
– No payments to NewCo other than reimbursement or re-
allocation of funds

20. A look to the future – proposals for new
EU Procurement Directive
o On Teckal … and the Essential Part test
– “More that 80% of its activities” carried out with the
controlling entities
– 80% based on average total turnover in the last 3 yrs (or
if not available “credible” turnover based on projections)

21. A look to the future – proposals for new
EU Procurement Directive
o On Inter-college co-operation … the conditions:
– Genuine co-operation to jointly carry out public service
tasks
– Governed solely by considerations in the public interest
– Participating colleges perform, on the market, less
than 20% of activities concerned by the co-operation
– No financial transfers other than reimbursement or re-
allocation of funds
– No private capital

22. A look to the future – proposals for new
EU Procurement Directive
o And new opportunities to reserve contracts for
Mutuals …
– Organisations whose “main aim is the integration of
former employees of public authorities into the private
sector”

23. A look to the future – proposals for new
EU Procurement Directive
o And new opportunities to reserve contracts for Mutuals
…PROVIDED:
– 75% of mutual’s employees have left a contracting authority to
deliver public services through the mutual
– Mutual provides services exclusively for contracting authorities
– Employee ownership or engagement has significant impact on
mutual’s governance
o Maximum term of 3 years (from date Mutual operational)

24. Conclusion: Think carefully about your
strategy – get that right and the rest should
follow
Procurement Structure
Vision
Strategy

25. Contact Details
o Ruth Smith
o Mills & Reeve LLP, National Head of Procurement Law
o Email: ruth.smith@mills-reeve.com
o Tel: 0121 456 8434