Bournemouth Liberal Democrats

The Mouchel Saga: Updated Complete Overview April 2010-May 2012

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

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] Two bidders were shortlisted for the contract, Mouchel and Capita.[1] The original plan being to save money and improve quality of service.

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. It was formed by a merger between the Mouchel and Parkman corporations in 2003[2]

The Council selected Mouchel as the council's preferred partner in June 2010[3]. 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.[4] Mouchel was to invest £7.6 million, saving the council £1 million a year for a decade.[5]

When members asked the departments for their thoughts many said they could achieve similar 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] On 1^st November 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. [5]

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. [6]

After the disastrous decision to go ahead with the deal 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"[7]

On the 9^th of November it was admitted that Council officers never looked at the financial accounts of Mouchel[8] It was also revealed that PriceWaterHouseCooper the firm 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 questions of conflict of interest[9]

Unison fought the deal and branch secretary Dave Higgins stated 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 could stop Mouchel being paid for work it does not do, but it cannot impose penalties. However despite these concerns the Council voted on the 10^th November 32-12 for the Mouchel deal. [10] Mouchel's share price rose by as much as six per cent following the council's decision to enter the partnership[11]

After so much bad press both nationally and locally 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. RBS, Lloyds and Barclays however called in an accountancy firm to conduct an independent review. Concerns were raised that if Mouchel couldn't refinance the business could go into administration.[12]

Another plunge in the company's share price attracted takeover bids less than a week after the company took control of four services at the town hall[13] Mouchel posted a pre-tax loss of £14.7million and its share price was 72 per lower than it had been just one year prior[14]

The spending cuts announced by the coalition government meant a 15.2% reduction in budget for Bournemouth Council. This led to concerns expressed by Cllr Claire Smith, then 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"[15]

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[16]

In late March 2011 the Council was poised to further outsource its parking enforcement to Mouchel [17] Meanwhile the company's financial situation forced Mouchel's Bournemouth partnership boss Tony Williams to say at a business meeting "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.[18]

Mouchel resisted four attempts by firms such as Interserve, VT Group and Constain to buy it out despite offers of 260p, 164p and 135p per share. Head of Business of the Daily Telegraph commented "the possibility of there ever being a fifth offer seems the unlikeliest outcome of all."[19]

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 to as low as 15.5p[20] Just days after the scandal Council Cabinet ministers gave the green light to transferring more departments to Mouchel. UNISON called the move horrendous.[21]

On the 13^th October the 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 council's actions that they followed him from the building giving him a round of applause as he left. In the email 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" [22] He also said:

• The savings proposed in the medium-term financial plan have been reduced by £42 million over four years[23]
• The total cash spent by the council on the outsourced services is now £3 million greater than the pre-contract budget.[24]

Meanwhile Mouchel announced the appointment of a new boss, Grant Rumbles. [23]

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 move 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."[24] Six days later the leader of Suffolk County Council warned deal that outsourcing "simply did not work"[25]

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 email at the beginning of November 2010 stating that the company appeared to be in "dire straits"

On the 2^nd November 2011 UNISON demanded to see the paperwork on the outsourcing deal while the cabinet 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."[26]

On 8^th November Council leader Peter Charon met with the new Mouchel boss to seek assurances that the debt-ridden company could continue to provide council services. Cllr Charon admitted that Mouchel could get taken over or that they could suddenly go bust. Mr Rumbles had told Mr Charon that their accounts on November 30th would "put them in a different place to where we are now"

On the 10th 'Occupy Bournemouth' protesters raised concerns about the Council's outsourcing deal with Mouchel[27]

On 2^nd December 2011 Mouchel revealed a loss of almost £65 million admitting to a "disappointing year" in which turnover was down by 13%. In its results statement Mouchel pointed to its partnership with Bournemouth Council as one of the few "strategic wins" of the year. CEO Grant Grumbles warned of a tough year ahead in which jobs will be lost. In response Bournemouth council said the accounts of the firm would finally be studied by an independent analyst who would undertake a financial risk assessment. Cllr Roger West called for the assessment to be extended to look at the entire original deal.

On 13^th December 2011 Tony Williams was named the chief executive of Bournemouth Council[28]

Mouchel then took on a consultancy role on a council project to overhaul the town's parking enforcement systems. The Council had been considering privatising the civil enforcement and parking service by transferring it to Mouchel but this plan was rejected.[29]

Bournemouth was shortlisted for Council of the Year for 'outsourcing departments and relations with private partners' including Mouchel[31]

On 23^rd December Rochdale council ended a £180 million contract with Mouchel early claiming that it represented poor value for money. [32] Rochdale council leader Colin Lambert told the Echo that "in the light of our experiences, I find a deal like Bournemouth's amazing". Rochdale council discovered that it was charged £2,000 for laptops costing around £600, a £700 charge for a blue plaque was later cut to less than £100 after a furious councillor intervened, in another case the council was charged £1,500 to mark out traffic regulations and then an extra £2,000 to oversee the work. The council audited the deal and found that it could save between £2 million to £4 million a year by doing the work itself.[33]

On 31^st December 2011 it was revealed that the Council had signed deals or was about to sign deals worth £18.94million a year, more than 13% of its £142 million budget. Mouchel had recently needed a £180 million bank overdraft to avoid insolvency and was required to pay overdraft fees of 10.5%. Bournemouth Council's Unison branch secretary David Higginson said: "It's a danger to be so close to one company when it appears to be in financial turmoil."[34]

On 4^th January the risk assessment by accountants James Cowper warned a "wait and see" approach could reduce the risk to taxpayers in case the firm hits further trouble. Opposition councillors however warned that the officers' summary seemed determined to "steam roller this through" making only one positive point for the 'wait and see' option, three negative points and one that was neutral.[35]

January 7^th and concerned town hall staff packed out a council meeting that saw dozens of staff from the finance, organisational development and human resources departments transferred to Mouchel from February 1^st.[36]

On the 14^th February 2012 Cllr Beesley pledged Bournemouth residents that there would be no cuts in services for 2012/13 taking advantage of a Government grant to subsidize a freeze in Council tax however he also acknowledged that this will result in another financial gap to be plugged in the 2013/14 budget. The council also reduced the predicted savings from the Mouchel deal from £10m in 2013/14, £28m in 2014/15 and £39m in 2015/16 to £6m in 2013/14, £16m in 2014/15, £26m in 2015/16 and £27m in 2016/17.[37]

Stephen Parker, Bournemouth Council's Chief Accountant who was suspended for speaking out about the controversial Mouchel deal was reinstated. A statement by the Council affirmed that "Mr Parker made public the information contained in his email of the 11th of October with honest intent. The Council has withdrawn the suspension of Mr Parker and has informed Mouchel Limited, his new employer, of that decision"[38]

Stephen Parker resigned from Mouchel one month after being reinstated saying that "This has been a very difficult period for me personally"[39]

In March 2012 the Daily Echo called for Bournemouth Council and Mouchel to be more upfront in publishing their green targets negotiated in the partnership agreement which promised to create a 'green knowledge economy' in the town including the development of a Carbon Management Centre of Excellence. The contract was released to the Echo via a Freedom of Information Request and was heavily redacted making it hard to monitor whether Mouchel is actually hitting its green targets. The Council however admitted that the requirement to build a permanent showcase for the Carbon Management Centre of Excellence was officially dropped. The aim of this was to provide a walk-in centre enabling members of the public to see first-hand the benefits of the Carbon Management Centre.[40]

The Council further refused to divulge many targets that directly affect the public. Examples include the council tax collection target, the benefits processing target and how many transferred council staff at risk of redundancy should be retrained. The amounts of money Mouchel is supposed to invest has also been withheld. Unite Union branch secretary Dave Higgins said "How can the public know if this deal is providing value for money if we aren't told the targets set and whether they are reached?"[41]