Following on from my post about software partnerships, I wanted to share a few findings from work finished late last year.

I was fortunate enough to spend some time with a group of public sector legal and procurement experts, digging deeper into collaborative models. 

The goal was to identify a ‘flatpack model’ which would make collaboration as easy as going it alone. There are currently 317 councils in England still building or buying almost everything alone. It’s a waste of time and money, and a missed opportunity.

I’m a huge fan of the Flatpack Democracy books. My reasoning was: if an off the shelf model can be found for reinventing local democracy, then we ought to be able to design something to help councils work with each other and suppliers.

I’m using the word ‘councils’ a lot here as most of my work is in local government, but I haven’t yet seen anything to rule out other public sector bodies trying these ideas.

The brief

Based on experience with LocalGov Drupal and other recent collaborative projects, I described how a collaboration might start:

• a few councils decide to form a group or entity of some kind to build or buy software together
   
• each council agrees internally an annual financial contribution (could be anything from a few thousand to several hundred thousand pounds) and they receive the software and related services in return
   
• the group decides through its own internal governance and product development processes how to source the software and services. They either:
   
  • recruit a team and/ or procure a supplier to build bespoke software (since public money is being spent, it ought to be released under an open source licence) 
     
  • procure a vendor to provide off the shelf software with IP likely to be retained by the vendor  
     
• any procurement needs to cover the following:
   
  • councils wishing to buy extra services (for example migration of legacy data or custom features) 
     
  • councils joining the group at a later date. They should receive the same software and support as ‘founding members’

• councils ought to ‘adopt not adapt’ software, collaborating with council and supplier colleagues to understand ‘common needs’ and iterating based on evidence. The few diverging needs that exist ought to be covered by modular architecture and configuration
   
• ideally, all of this happens in an environment of open data standards and APIs where councils are encouraged to use products that support them

From this I identified the following ‘must have’ criteria:

• a lawful and straightforward route for the councils (or other public sector bodies including government) to provide start up and ongoing annual funding

• a lawful and straightforward route for councils to join the group when they’re ready, where they provide annual funding and receive the same offer as all the other participating bodies. Not all councils would be starting in the same place technology wise, so the arrangement needs to allow them to buy ‘extras’ such as data migration or product features
   
• the above needs to happen in a timely way, so we have to use existing legal powers and not devise new ones

What we found

I was pleasantly surprised to hear that everything is doable, although there’s a couple of places where powers are untested or relatively new. Here’s a summary:

The most appropriate legal form is a company limited by guarantee (CLG) without an asset lock 

We worked through a long list of possible legal forms including a council-led consortium, co-ops and community interest companies. 

Our experts identified CLGs as the best route: they’re easy to form and are often used for not-for-profit organisations which this one would likely be. They advised against an asset lock as it would limit the ability of the company to distribute its assets to member councils.

If one of the councils or a shared service company they jointly own is willing to lead, then obviously a new legal entity would not be needed. 

Councils can use existing powers to join and fund companies, without requiring a procurement 

If the councils are creating software for sole use by member organisations of the company, they can rely on the ‘general power of competence’ under section 1 of the Localism Act 2011. 

The Procurement Act 2023 (PA23) also covers ‘vertical arrangement exemptions’ where contracting authorities can award contracts directly to controlled legal entities without competitive tendering. 

PA23 has a ‘research & development services exemption’ which allows direct awards

This exemption is new and generally untested, but could potentially be used for the development of new products and services, or substantial improvements to existing ones. 

This could also apply to a contract with a supplier. If it can be categorised as a research and development contract in line with the exemption, then a competitive procurement would not be required.

If the exemption isn’t valid in a specific case, the company could still run an open procurement or use a framework.

Councils joining at a later date should be able to receive the same software and services as founding members without the need for an extra procurement 

If the arrangement is ‘vertical’ (as described above) there would be no requirement for a particular council to hold an external procurement process before joining.

The company can employ any people it wishes 

Employment contracts fall outside PA23, so it would be straightforward for the company to hire a few staff to coordinate efforts. These could cover product, technical, user research or onboarding – whatever the councils need.

The company would run like a normal company

CLGs are liable for corporation tax on any profits made, even where their members comprise one or more councils.

The company would need a board of directors with a good mix of skills, chosen by the means set out in the articles of association.

It would need to file reports with Companies House and HMRC like other companies, but may need extra oversight as it is owned by councils.

Government could fund the council members of the company

One common funding method used by the UK government to fund councils is Section 31 of the Local Government Act 2003. This was the power used by the Local Digital Fund and more recent Open Digital Planning projects.

If the council-led company is working in line with government policy, this could be a route to support the council members. Councils, in turn, could fund the company provided the contributions are not provided as grants.

What’s next

My next step is to find a couple of candidate projects and work through the above for real, rather in theory. Ideally, we’d use the same legal team as previously, but that would require funding. It would be worth every penny though – the team were extremely knowledgeable and good value for money, plus we’d build up even more useful knowledge.

The ultimate aim would be to produce flatpack contracts, collaboration agreements and procurement documents as needed. This would be combined with well tested collaborative and community building approaches from existing projects like LocalGov Drupal, and published as a single model that anyone can pick up and use.

Bear in mind I’m not a legal or procurement expert. I’m a product and delivery person who wants councils to collaborate more. If you decide to use any of the above, you need to legal it first.

Please let me know your thoughts. If you’d like to chat about any of the above in more detail (I have lots of it!), get in touch.