Strategic service delivery partnerships between councils and the private sector can bring benefits, but the risks are extremely high. This is the conclusion of the Audit Commission which warns that councils should consider a partnership as one of a number of potential options to meet the challenge to increase efficiency.

Over half of councils say that they are engaged in, or considering, a service partnership in areas such as council tax collection, IT and property management. These councils expect cost savings of between 1 and 15 per cent for services delivered through a partnership.

Although most councils currently in a partnership with the private sector believe that they have got value for money, the Commission found this hard to assess objectively. What the Commission did find were examples of inadequate investment in client-side contract management, inappropriate risk allocation and poor performance management. Three of the earliest councils to adopt partnerships have terminated their agreements before their term, incurring additional costs. Even in continuing partnerships, purported benefits from economies of scale and transferred learning between sites have been slow to emerge.

The Commission examined why many partnerships have not yet generated all the expected benefits such as greater flexibility, economies of scale, innovation and risk and profit sharing. Some partnership have proved inflexible, hindering councils’ ability to respond to changing external circumstances.

Councils considering partnerships are advised to rely on guidance from the Strategic Partnering Taskforce, 4ps and other improvement organisations when developing their business cases and to ensure the costs and benefits of different delivery options are analysed and articulated. They should also invest in sufficient client-side management capacity and recognise that both adequate resources and the right mix of skills are required to identify all potential risks as early as possible.