HOOPLE, the joint venture company set up to save Herefordshire Council £33million on support services, could be split in two.
Now faced with making more than £1million in savings of its own, a future Hoople is seen as two entities – one delivering specific services directly to the council and the other delivering a range of commercial services to the market.
The council provider would be a so-called Teckal company allowing the authority arm’s-length control over a legally separate, wholly-owned company carrying out services previously been undertaken by an in-house provider.
Teckal means the council does not need to run a lengthy procurement procedure or outsource that procedure to the private sector.
Continuing to exist as a company, Hoople is likely to bid to provide some – or all – of the council’s support services. The council could retain or divest its shares in the company.
The “new” Hoople could be led by a management buyout, become an employee owned mutual/social enterprise or be put out to private market sale.
Cabinet is due to debate the options for Hoople next week with the company’s current contract with the council ending in March 2016.
Members are recommended to back the council developing a business case and implementation plan with Hoople and its board, that allows the split.
In March, the Hereford Times reported that Hoople MD Mike Dearing was standing down with the company facing more than £1m in savings.
In May, the council’s overview and scrutiny committee opened a review of service commissioning from Hoople ahead of recommendations to cabinet ahead of the contract ending.
Then, Mr Dearing warned that Hoople’s ability to influence performance and share fixed costs was limited by the council bringing services back in-house.
Hoople was set up as joint venture company in April 2011 with staff transferred over as part of a shared services project partnering the council with the county’s NHS to save £33m on back office support services.
The council owns 74.7 per cent of Hoople and Wye Valley NHS Trust 25.3 per cent.
Although the council contract with Hoople is not exclusive, the “partnership aims” for the company assume that Hoople would be the shareholders’ provider of choice for back office services.
Hoople had to achieve £11m cumulative savings for the council over 10 years. Three years into a five-year service contract with the council, a total of £4m savings have been achieved.
A total cumulative saving of £12m is forecast by the end of that contract.
The recently renegotiated service level agreement for 2014/15 has achieved a contract variation to deliver further savings in excess of £1.2 million.
Services provided to the council have been further reduced as part of an ongoing overall renegotiation of service levels.
Hoople’s annual turnover over the past three years has been around £16m, maintained in the face of contract reductions and no profit from the services provided to shareholders.
While Hoople continues to be profitable, its board has conceded that “continual changes” imposed by the council diminished the company’s confidence to recommend a dividend to date.
The changes for 2014/15 will see Hoople’s turnover reduce to around £13m and staff numbers fall to around 330.