The Interface between the Public and Private SectorOpportunity Walesa case study: Ann Beynon, National Manager, BT Wales
DOING BUSINESS WITH THE ASSEMBLY
A MORGAN COLE SEMINAR, COPTHORNE HOTEL, CARDIFF 24 JANUARY 2002
As Emyr Lewis has described what we are dealing with in terms of the Assembly is an evolving institution with huge demands being made upon it from all directions.
What I would like to do is concentrate specifically on BT's experience as a major private sector employer in Wales of working with public sector agencies, how the interface with the Assembly impacted on that process and how together we succeeded in creating the Public/Private and Voluntary sector partnership that now runs a £21 million Objective 1 project called Opportunity Wales.
I won't pretend the process was easythose with whom we worked and are still working with would not thank me for suggesting it was.
Back in 1999, we were all in uncharted waters. The Assembly was only a few months old and we were trying to develop a large Objective 1 project before all the processes required had bedded down. Indeed our project went through the special fast track procedure created to handle the first batch of applications; WEFO (the Wales European Funding Office) had had little time to recruit let alone train all its staff, and we had little experience within BT of European Structural Funds. We were seeking to engage in an evolving process and probably underestimated at the time how destabilising this could be at time.
The aim of the project was and is to bring about a significant improvement in jobs and wealth created in the SME (small and medium sized enterprises) sector in Wales by using e-commerce business re-engineering techniques and guidelines developed at Cardiff University's Electronic Commerce Innovation Centre (eCIC). BT has for many years sponsored the innovative work done there by Professor Tony Davies and his team and we already had concrete examples of how his methodology had provided practical and common sense advice to small and medium sized businesses across South Wales. This work had been funded partly by BT and had involved accessing European funding.
As a company we were aware that the SME sector was important for the National Assembly. We had restructured in response to the devolution agenda and strengthened our teams in Wales and Scotland. One of the tasks we set ourselves was to understand the political an economic agenda of the new devolved institutions. It was clear from various documents such as Pathway to Prosperity, the economic policy published by Ron Davies in October 1998, when he was Secretary of Sate for Wales that SMEs and the support for indigenous industry would be key themes. It was equally obvious that Objective 1 status, which would allow the deployment of substantial EU Regional Structural Funds in the most impoverished parts of Wales, would be top of the economic agenda. It wasn't rocket science to put the two together. It did, however, require dedicating time to understanding how public policy and practical implementation in these areas was being evolved, to responding to policy documents and attending meetings where we could make a practical contribution particularly in those areas where our own business expertise and competence lay: telecommunications, electronic and digital communications and e-commerce.
Any private sector company that wishes to engage in a constructive dialogue with the public sector does need to ensure that it is up to speed on the public policy area, which it is seeking to address. I can appreciate that companies that are less well resourced than BT may find this difficultbut there are professional organisations such as the CBI, the Chambers of Commerce and the Federation of Small Businesses that can offer support and advice. Additional resource to build this capacity within the Business Partnership Council is currently being deployed thanks to a joint agreement between the Assembly and its business and social partners.
Having understood the agenda we then did what any private sector company worth its salt would dowe researched the market place.
In private sector speak: we believed we had a solid product: the eCIC methodology. The task was to confirm this belief and understand the key drivers in the market in order to use the best routes to market in order to make it a mass market product and mainstream it across the Objective 1 area.
Our focus was very clearly on the delivery of outputs and targets: jobs and take up of services.
I don't think a public sector organisation would have had this same clarity of purpose: why should it. It isn't market driven as we are.
We undertook the research with another private sector organisation, the Western Mail. We jointly commissioned NOP to look at the SME market in Wales, to analyse it, to provide us with data that would allow us to scope the task in hand. We already knew that the task we had set ourselves was daunting because DTI research showed Welsh SMEs to have been consistently bottom or next to bottom in the e-commerce regional league tables for at least three years. BT's own data substantiated this. The low activity levels we could see in terms of SME data traffic on our network confirmed that we were looking at a situation of market failure in the Objective 1 areas which only a substantial public sector intervention could rectify.
The research was enormously helpful and emphasised that for SMEs to actively engage with the project there would have to be local delivery mechanisms; high quality, independent advice; face to face support; and the SMEs would expect to see demonstrable, tangible business benefits that would have a positive effect on their bottom line. It also re-enforced the DTI research and our own data, which meant that the task we had set ourselves would not be easy.
At this stage it may be useful to explain what made BT take an interest in this sector and in the potential of Objective 1 funding in the first place. Quite simply it was because we wanted to see increased revenue for our SME channel and more extensive use being made in Wales of the substantial telecomms infrastructure in which we had invested several million pounds over the previous decade: around £100 million in total. We had invested not only our own money but also £3 million of public sector money in a previous project in rural Walesagain using European funding. Following a successful tender process, we had agreed with the WDA a network upgrade, which would improve access to high-speed networks and help lower prices. That project demonstrated, however, that supply side interventions alone do not stimulate economic activity. Companies did not rush to use the network enhancements that had been provided. We concluded that there had to be activity focused on increasing demand. Why should Welsh SMEs jump onto the information superhighway that everybody was telling them was good for them unless thy could see the direct business benefits, unless it brought them quantifiable and real cost savings or increased revenues or both. Again as a private sector company BT could identify with that view of the world. We also knew from our own experience as a company that it was hugely important and beneficial to embrace electronic communications and transactions. We were not asking Welsh SMEs to undertake a process that we hadn't undertaken ourselves.
If public sector bodies want to engage the private sector in significant projects it is important to clarify what the benefits are for the private sector in that engagement. A large private sector company can sometimes justify small-scale involvement as part of its corporate social responsibility, being a good citizen and putting something back into the community. It can never justify large-scale financial involvement purely on that basis.
But to return to the Opportunity Wales project. Having undertaken the research and having developed the kernel of an idea based around the eCIC work, we decided to share this with various audiences in order to gauge the response. One of those key audiences was the then Assembly Secretary for Economic Affairs, Rhodri Morgan, and another key audience was members of the Economic Development Committee. We organised two separate presentations of the research and of the existing SME case studies based on Tony Davies's project work in South Wales. These presentations took place at BT's Computer Software Centre in Cardiff. Before committing any further BT resource to the project we needed to be sure that we were "on message" as it were. The response we had from ALL the political parties was positive. They couldn't give us a green light obviously. But it was enough to know that they would be interested in seeing us progress the work further and that it did seem to press all the right buttons in terms of their own policy objectives.
Another important element was our engagement with one of our Trade Unions the CWU. At the Wales TUC Conference in 1999 they had proposed a motion recommending that SMEs and e-commerce should be an Objective 1 priority. We had discussed this with Jane Thomas and other Trade Union representatives and with David Jenkins, the General Secretary of the Wales TUC and had agreed to work towards this aim together.
The response of the politicians and the enthusiasm of the trade union movement gave us the confidence to allocate a specific individual to work on developing the project in addition to the resources in my own team. We had in the past seconded BT people into the Industry Division of the Assembly. It had been done as part of these individuals' personal development and also in order to again further our understanding of public policy. These individuals had come from our Computer Software Centre (which by the way employs nearly 400 hugely talented software developersthe largest BT software centre outside the SE of England) and the secondee for the Opportunity Wales project also came from the same source. Christine Lloyd is still seconded to the project as part of our match funding contribution and was indeed asked recently by the Opportunity Wales Board to become its Chief Executive.
Seconding people from the private sector into the public sector and vice versa is, I think, extremely valuable both for the individuals involved and for their respective organisations. I am still waiting for a secondee from the public sector into BTthe offer remains open if any of you here would like to take it up.
It was at this stage that the hard work started.
We decided to learn from the example of our Celtic cousins and in March 1999 despatched two people, Christine Lloyd and Owen Evans, for a few days to Dublinwhere they met government officials at a senior level in all the key ministries. The visit was facilitated by Conor O'Riordan, who was at that time the Irish Government's Consul in Wales. Had there not been devolution it is doubtful that the post of Irish Consul to Wales would have been created. He did us proud. We were impressed by the clarify of approach that we encountered and then realised that it had in fact taken them several years to achieve this streamlined and hugely effective approach to Objective 1 funding. Wales was a mere beginner. One of the many memorable comments made by the officials in Ireland was that it wasn't the money per se that had made the difference but the mechanisms that they had had to put in place to ensure that it could be spent. There had to be a common plan, which everyone bought into, and there had to be joint ownership of the implementation and a partnership approach to that implementation and the delivery.
Clearly Wales wasn't at that stage. This was before the publication of the National Economic Strategy and before the consolidation of the concept of the third/third/third partnership now enshrined in the workings of the operations of the EU Structural Funds in Wales.
We decided to take a direct approach and once again did what the private sector would expect to do which was to put together a business case. In the world in which we live that is what you do. If the business case is approved off you go, if it is rejected you learn from the experience and move on.
Engaging in a process of obtaining public sector money was not that simple.
We believed in our product we had market analysis to back it up we had a business case, which projected revenues and outputs and, which seemed to wash its face. This was not enough. Luckily we had access to people who could explain to us why.
We had ensured that we were maintaining a regular dialogue with officials in the Assembly. This was of paramount importance. They understood due process and procedures better than we could ever hope to. We were all relatively new to Objective 1 but some of the basic rules and processes of public accountability were consistent and needed to be applied.
I should explain here why it is difficult for the private sector to engage in EU Regional Structural Funding.
1. In almost all the priorities and measures of the Objective 1 programme the amount of match funding required by the private sector is low: c 12 per cent. That match funding can be obtained simply by counting any revenue generated by the project eg any fees paid by individuals or companies for services provided. The amount of public sector match funding required is around 35-40 per cent. Public sector match funding is essential. The private sector needs to identify this pubic sector match funding in advance. Basically without public sector buy-in no private sector led project can proceed.
2. Policy Guidance from the European Commission for the 2000-06 programme period proposes a greater concentration on the critical issues affecting business competitiveness, which in itself makes private sector engagement more critical. During the 1990s there was a gradual shift in balance with some limited scope for the private sector to bid. Private sector engagement has only received greater attention therefore relatively recently. In the meantime the public sector has gained expertise in this area and built a capacity to deal with these processes. The public sector is, therefore, better equipped to prepare bids, to write them up in the appropriate jargon, to know what systems to put in place and to manage the financial arrangements required by the EU. Indeed the public sector in Wales already had some, although not all, of the capacity needed to prepare submissions under the new programme.
3. Cash flow is an issue. In the past it has taken several months for EU money to be paid to projects. This can just about be managed in a public sector environment but it is difficult to cope with in a private sector scenario and equally difficult for the voluntary sector.
4. EU money cannot be paid directly to a private sector company as it may be being used to benefit that company at the expense of others thereby giving it an unfair competitive advantage. The rules that govern this, the state aid rules, are very precise and the UK Government adheres to them with zeal.
5. Because of the state aid rules all elements of an EU funded project must be tendered. It is possible, therefore, for a private sector company to provide resource, advice and funding to a project and not receive any tangible benefits in return.
Not involving the private sector is not a good idea as it can prevent access to a huge pool of talent and expertise; it can create a dislocation between the project and the market forces that have created the problem it is seeking to address; it can lead to projects that are less output driven; and to expenditure on cosmetic activities eg public realm improvements and amenity provision. This is indeed the scenario described in the Fraser Associates Report on private sector engagement in the previous pre 2000 EU Objective 2 programme in Industrial South Wales. That report, commissioned by the organisation that proceeded WEFO, WEPE, also outlines how lack of private sector involvement led to a high level of expenditure on low intensity support such as general advice, awareness raising etc, which produced limited economic impact.
It is the complexity of the engagement with the private sector, however, that leads particular report to conclude that:
"for reasons of administrative practicality, and the limited capacity in private sector representative organisations, the delivery of future European Programmes in Wales must continue to rely on a very large extent upon projects led by the public sector".
It was our experience that we did need guidance and support from the public sector in order to reach a satisfactory outcome.
We had regular discussion with the civil servants in the industry division of the Welsh Assembly and with WEFO once it was established. They got to understand our stresses and strains and we became attuned to theirs. We survived numerous crises together and got to appreciate why we had to behave in different ways and respond in different ways to issues as they arose. They had to provide the accountability check on any processes we came up with and we found it easier to think outside the box and think of innovative solutions. They understood how they could help us and did have a "how can we do this culture" not "how do we not do this".
One piece of invaluable advice they gave us was to make sure we spoke directly to all 15 local authorities in the Objective 1 area. We thought that support from the WLGA council was enough. Superficially it was but it didn't ring the necessary buy-in that genuine partnerships needs. Plus there were practical implementation issues that could only be solved at a local authority level.
We also learnt that it was impossible to talk to too many people. However many presentations we gave across Wales we always found someone we had left out.
In addition to the Assembly officials we were helped greatly by two other organisations: one a public sector body, the University of Glamorgan, and the other a publicly funded private sector body, SEWales TEC. The University of Glamorgan helped us through the labyrinth of EU project preparation and submitted the original bid on the project's behalf until we established the Limited Liability Company that now manages the project. SEWales TEC helped us identify public sector match funding for the first year of the project as again the systems that now exist were not at that stage in place.
Basically, if the Private and Public sectors had not worked together I doubt that we would have been able to create the Opportunity Wales project. The board membership of Better Business Wales holdings which operates Opportunity Wales does reflect a real and genuine partnership which includes the voluntary sector as well as the public and private.
SLIDE OF BOARD
All the partners on this board have a key role to play in the delivery of the project.
The University of Cardiff and its e-Commerce Innovation Centre is key. But the point of Objective 1 is not to fund Cardiff but the Objective 1 areas. Hence the development of satellite centres in Bangor, Llandrilo college in North Wales and Milord Haven in West Wales. The WDA has for many years been involved in initiatives to promote e-commerce and SMEs. Their involvement is essential. The Agency is currently providing invaluable advice and support to the project in European procurement procedures. The Princes Trust has a wonderful track record in supporting start up companies. They will bring that experience to bear in developing this project. The local authorities and enterprise agencies are needed because of their links with their communities which is crucial in order to deliver a local and relevant service to the customer base. HSBC is onboard because it has a substantial branch network across the Objective 1 area and had local knowledge of the SME market place. ELWa with its Lifelong Learning remit can link Opportunity Wales activity back to its own programmes for SMEs across Wales. The RNID is there not only on its own behalf but it represents all disability groups in Wales. As Wales has high levels of economic inactivity due to disability it is essential that we address this sector where ICT can be used to enable those whose disabilities may prevent them from travelling to work from their own communities or their own homes.
Opportunity Wales is a better project because it has a genuine partnership of public, private and voluntary sector driving it forward. It has a richness and a relevance that it would not have had had it been led purely by one of the three sectors on its own.
How long did it take to get this project off the ground? We started in September 1999 and received final approval in April 2001. It took us, therefore, 20 months in total. Obviously this does not include the time we took pre September 1999 to understand the public policy issues and the general aims of the Objective 1 programme.
It is early days for Opportunity Wales. The full roll out is imminent but the four pilots that have been up and running since last autumn, in Pembrokeshire; Carmarthen; the Objective 1 areas of Gwent and North Wales have already dealt with 230 customers. The target of providing individually tailored e-commerce reports to 270 companies by the end of March this year will be achieved easily.
It is revealing that we, like the Irish, are finding that the Objective 1 process requires us to look at new ways of partnership working. We must ensure that we capture not only the Opportunity Wales experience but also other examples from across Wales of genuine, constructive partnership working.
It is encouraging that the Assembly has already decided to commission further research on Public, Private and Voluntary Partnerships in order to "inform the future development of partnership working in Wales and to disseminate and promote the lessons of good practice".
That research to be undertaken by Cardiff University is expected to be completed in January 2003.
But has Wales done this before?
Do we have a track record of working in this way: of looking at a specific economic or social need and forming partnerships across all sectors to deliver solutions?
Whereas we do need to be aware of the complexities of the discussions around PFI and PPP and to engage in current discussions on their impact and relevance, we should be conscious that partnership working does have a "Made in Wales" flavour. We should look at our own history before considering foreign imports.
Many people, myself included, who were born in the mining communities of South Wales will have been born in the local cottage or miners' hospital. It is well worth looking at how those hospitals were founded and funded.
The most detailed account of such an enterprise is Gareth Jones's history of the Nevill Hall and District NHS Trust.
He describes how Tredegar Cottage Hospital was established. It was born out of a discussion with the Tredegar Medical Aid Society a Friendly Society that paid for treatment and healthcare costs for its members and which actually bought a row of cottages in Tredegar out of which they created a new Central Surgery in 1911. It was out of the Medical Aid society that the Hospital Committee grew.
Contemporary sources describe the founding group:
The new hospital was supported by funds from the Tredegar Iron and Coal Company, generous donations from Mr L D Whitehead, an ironworks owner, gifts from public and private well-wishers, and above all by the workmen mainly now working in the pits, who had in 1902 agreed to pay one half-penny per week by deduction from wages.
This half-penny a week was in addition to the 3 pence in the £ which the miners already contributed to the Medical Aid Fund. The land was gifted by Lord Tredegar.
It is worth looking at the Order of the Procession on the opening day 3 October 1904.
SLIDE OF PROCESSION
Private, public and voluntary sector or what?
I like the idea of a public procession. Perhaps we should re-instate the practice for some notable contemporary projects such as the Wales Millennium Centre. There was also civilised refreshments.
The line up for the Opening Ceremony of the Amman Valley Cottage Hospital, where I was born, is not dissimilar though it took until 4 June 1936 for that hospital to be opened after numerous delays. Again the picture is similar a local benefactor providing the building, the urban district council in this instance taking the lead, voluntary organisations such as the Women's Guild providing the linen and the ever present miners contributing from their meagre earnings and contributing also their own free time to keep the hospital running after it was opened. This was not an easy timethe Great Depression was at its height. Indeed at the opening ceremony Sir William Firth, head of the Richard Thomas Tinplate Combine, felt obliged to provide an explanation as to why the local tinplate works stood idle. James Griffith the local Member of Parliament, who was present at the opening ceremony, as was Lewis Jones MP, may well have had a different view of the world but they too had contributed from their own pockets towards the establishment of the hospital.
But to go back to Tredegar, in 1924 the Hospital management Committee was joined by a new member, Councillor Aneurin Bevan. He became its Chair in 1929. In his pamphlet "A Welsh Third Way" Peter Hain MP says:
"This is one of the very best examples in modern Welsh history of a radical third way in action and helped shaped Bevan's thinking prior to his founding of the National Health Service as Secretary of State for Health and Housing in the post-45 Labour Government."
These hospitals were created out of community partnerships, out of a common agreement in local communities of a need that had to be addressed. Despite the difficult economic climate, which had seen some of the most intense conflict between the employers and employees, practical need and a shared social goal over-rode any dogmatic political posturing.
I am not suggesting for one moment that we go back to the days of bountiful benefactors and a rather laissez-faire approach but if the public/private/voluntary sector working of those days led to the creation of the health service, is it too much to hope that our modern day grappling with a similar issue could lead to a social change that could be equally radical and of long term economic as well as social benefit to Wales.