Bournemouth Liberal Democrats

The Mouchel Saga in 39 Long, Hard, & Expensive Steps

Groupthink: "A mode of thinking that people engage in when they are deeply involved in a cohesive ingroup, when the members' strivings for unanimity override their motivation to realistically appraise alternative courses of action" - Janis (1972)

Dogmatism: The tendency to lay down principles as incontrovertibly true, without consideration of evidence or the opinions of others.

Insanity: doing the same thing over and over again and expecting different results. - Albert Einstein

Stupidity: Behaviour that shows lack of good sense or judgement

1. In April 2010 the Conservatives in Bournemouth Borough Council began a tendering process for the outsourcing of £200 million worth of local services in ICT, revenues, benefits and facilities management departments.[1]
2. Two bidders were shortlisted for the contract, Mouchel and Capita.[1]
3. Mouchel is a consulting and business services group that provides design, managerial and engineering services. Mouchel's long term contracts (typically three to seven years) range from operational management of road networks, bridges and public buildings to providing school improvement and support services in partnership with local education authorities. Mouchel provides public services to more than six million people in across the UK and has contracts for maintaining and developing approximately 800 schools, 1,200 public buildings, 19,000 hectares of public estate land, 23,000 kilometres of public roads and 4,500 bridges[2]. It was formed in a merger between Mouchel and Parkman corporations in 2003[3]
4. Discussions about the deal were held in private
5. The original plan was to save money and improve quality of service
6. The Council selected Mouchel as the council's preferred partner in June 2010[4]
7. In a scrutiny management panel hearing on 5^th July 2010 it was claimed that the deal would bring 350 jobs to the town through a Bournemouth-based Shared Services Hub which would provide services to councils across the south, however the number of redundancies caused by the deal would only be discussed in closed session.[5]
8. Mouchel was to invest £7.6 million, saving the council £1 million a year for a decade. [5]
9. When members asked the departments for their thoughts many said they could achieve just as good results themselves. Roger Ball, service director for technical services said: "Although Mouchel are experienced, intelligent people, they don't know anything we don't already know." [5]
10. Mouchel posted a pre-tax loss of £14.7million and its share price was 72 per lower than it had been one year prior[6]
11. On 1^st Novemeber 2010 doubts emerged about the business viability of the deal, it was claimed that the Conservative Council had "massaged the figures" to mask the fact that it would actually end up paying more for services provided under the Mouchel deal. [7]
12. The Council refused to disclose relevant information, this included a report by PriceWaterhouseCooper the existence of which was initially denied.[6]
13. Judith Martin, the officer whose job it was to ensure the council acted legally and who had been critical of the deal, was made redundant in a council shake-up. [6]
14. By 6^th November 2010 it became clear that Mouchel was in serious financial difficulties - its share price plunged more than 30 per cent and it was forced to shed 2,000 jobs. At that point it was not too late to pull out of the deal, but the decision was made to press ahead on the 9th. [8]
15. A report by the Association for Public Services Excellence (APSE) said that the council's own senior financial officers concluded the deal would "cost more than it has budgeted for… requiring savings in other budgets to close the affordability gap, potentially meaning cuts in front line services to pay for more expensive back services"[9]
16. Cllr Peter Charon claims "I believe that it offers the chance to dramatically improve and deliver four key services for less money, will give us the capacity to save 40 per cent of our revenue budget over the next 10 years"[8]
17. On the 9^th of November it was admitted that Council officers never looked at the financial accounts of Mouchel[10]
18. It was found that the firm, PriceWaterHouseCooper, carrying out the independent report on the issue for the council was also the auditor for the company involved in the deal. This led to conflict of interest questions, PWC declined to comment, citing client confidentiality. [11]
19. On the 10^th November the Council voted 32-12 for the Mouchel deal, Unison fought the deal and branch secretary Dave Higgins said that 88 jobs would be lost as a result. One of the councils own section 151 officers, responsible for making sure money is spent properly, broke ranks to argue it could cost more than the current arrangement. The contract was secret but certain terms were leaked out. The council can stop Mouchel being paid for work it does not do, but it cannot impose penalties.[12]
20. Mouchel's share price rose by as much as six per cent following the council's decision to enter the partnership[13]
21. Mouchel's director sought to reassure Bournemouth residents that's its operations would not be affected by a bid to finance the company's massive debts of £83 million despite RBS, Lloyds and Barclays calling in an accountancy firm to conduct an independent review. Concerns were raised that if Mouchel couldn't refinance the business could go into administration. [14]
22. Another plunge in the company's share price attracted takeover bids less than a week after taking control of four services at Bournemouth Council [15]
23. After the spending cuts announced by the coalition government, of a 15.2% reduction in budget, for Bournemouth Council. Concerns were expressed by Cllr Claire Smith, leader of the Liberal Democrats, that the Mouchel deal would make it more difficult to save money stating that: "Being in charge of our own destiny would give us more flexibility than this long-term deal allows"[16]
24. In January 2011 Mouchel negotiated an extension to its debts, under the agreement it was provided £170 million worth of loans up to 31^st of March 2014[17]
25. In late February 2011 Mouchel announced that it was in "advanced discussion" with a company seeking a takeover from construction firm Constain[18]
26. In late March 2011 the Council was poised to further outsource its parking enforcement to Mouchel [19]
27. Meanwhile the company's financial situation forced Mouchel's Bournemouth patnership boss Tony Williams to sate at a business meeting that "We're not going bust" He also said that two or three more departments could be taken over by Mouchel all while the ailing company was in advanced talks with another potential buyer, Interserve.[20]
28. In October 2011 Mouchel was hit by fresh controversy after its CEO was forced to quit in the wake of a £4.3 million accounting error, its share price which was around 130p per share plunged again to as low as 15.5p[21]
29. Just days after the scandal Council Cabinet ministers gave the green light to transferring more departments to Mouchel. UNISON called the move horrendous.[22]
30. On the 13^th October Chief accountant for the Council Stephen Parker was suspended and escorted from the town hall after speaking out against the new deals in an email sent to all councillors, he told members he had been unable to communicate his concerns as part of the report before cabinet, many of his colleagues were so outraged by the move that they followed him from the building giving him a round of applause as he left. In it Parker told councillors "The cabinet report does not provide an adequate assessment of risks or deliver an independent and robust evaluation of the two options considered". He said the council had failed to consider options that would have provided "a more balanced financial and risk-assessed contract" [23]
31. The savings proposed in the medium-term financial plan have been reduced by £42 million over four years[24]
32. The total cash spent by the council on the outsourced services is now £3 million greater than the pre-contract budget.[24]
33. Meanwhile Mouchel announced the appointment of a new boss, Grant Rumbles. [23]
34. UNISON began considering paying for its own investigation into the outsourcing deal with Mouchel [25]
35. On the 19^th October a study found that only 1 in 4 public sector managers believed that outsourcing led to improved services [26]
36. On the 20^th October it was revealed that Mouchel's debt had risen to £87 million, the company agreed to sell its rail business to an Australian rival in a mover to cut its debt while it was in crisis talks with banks. Conservative Councillor John Beesley told the Echo he had "confidence in the ability of Mouchel to deliver on its contract with us."[27]
37. On the 26^th October the leader of Suffolk County Council warned as the Bournemouth Council continued to battle opposition to the Mouchel outsourcing deal that outsourcing " simply did not work"[28]
38. On the 27^th October it was revealed that the financial position of Mouchel was being expressed well before Bournemouth Borough Council outsourced 4 of its departments to the company. Cllr Ron Whittaker sent an E-mail at the beginning of November 2010 stating that the company appeared to be in "dire straits"
39. Finally on the 2^nd November 2011 UNISON demanded to see the paperwork on the outsourcing deal while the cabinet has green-lighted a transfer of 100 human resources staff to the troubled firm subject to a risk assessment by KPMG on December 1^st. Cllr Roger West said "We have been offered a lifeline by Unison so that quickly we can take control of our finances."[29]