Conflict and co-operation in local authority quasi-markets: The hybrid organisation of internal contracting under CCT

Local Government Studies

Volumn 22, Issue 4, 1996, Pages 187-209

  Vincent Jones, Peter ^a   Harries, Andrew ^a  

^a SHEFFIELD HALLAM UNIVERSITY   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0004083872     PISSN: 03003930     EISSN: None     Source Type: Journal    
DOI: 10.1080/03003939608433840     Document Type: Article

References (67)

1. K. Walsh, 'Competition for White-Collar Services in Local Government', Public Money and Management, Vol.11 (April-June 1995).
2. Most LGA 1988 services are 'internally' provided. Although DSO success measured by proportion of contracts won declined from 75 per cent in December 1991 to 59 per cent in December 1994, the proportion of contract value internally awarded was still 77 per cent - see Local Government Management Board, CCT Information Service Survey Report (London: LGMB, 1994), (published twice-yearly on the basis of a survey of all local authorities in England, Wales and Scotland conducted in January and July of each year).
3. The paper focuses on 'internal' hybrid organisation. 'External' hybrids occur where the form of institutional arrangement, in addition to being neither hierarchy nor market, is also intersectoral (that is, 'intermediate between' public and private sectors). Obvious examples are joint ventures in which the local authority shares ownership and control with a private firm. We argue elsewhere, however, that hybrid organisation may also obtain in situations where there is no common ownership, and where the parties are more completely separated: management buy-outs, in which entire parts of the authority are in effect privatised, may also satisfy the definition where the new business continues to use the same premises, workforce and facilities as existed prior to the transfer. See P. Vincent-Jones, 'Hybrid Organisation, Contractual Governance and CCT in the Provision of Local Authority Services: A Socio-Legal Evaluation', paper presented to ESRC seminar on Contracts and Competition, University of Essex, June 1996.
4. Defined activities under the Local Government Act 1988 s.2(2) are refuse collection, buildings and other cleaning, school and welfare and other catering, vehicle maintenance, and ground maintenance. Further activities included by order of the Secretary of State exercising powers under s.2(3) are sport and leisure services management (added in 1989); on-street parking, security, vehicle fleet management, housing management, legal, construction and property services (all added in 1994); and information technology, finance, and personnel (added in 1995).
5. Although the contract is not legally enforceable in internal transactions, because the DSO lacks separate legal personality, there appears to be no material difference in the role of contract in internal and external exchanges. See K. Walsh and H. Davis, Competition and Service: The Impact of the Local Government Act 1988 (London: HMSO, 1993), para. 2.31; P. Vincent-Jones and A. Harries, 'Cooperation in Local Authority CCT Transactions: Contracting In and Contracting Out Refuse Collection Services', paper presented at the Socio-Legal Studies Annual Conference, University of Leeds, March 1995.
6. Although the contract is not legally enforceable in internal transactions, because the DSO lacks separate legal personality, there appears to be no material difference in the role of contract in internal and external exchanges. See K. Walsh and H. Davis, Competition and Service: The Impact of the Local Government Act 1988 (London: HMSO, 1993), para. 2.31; P. Vincent-Jones and A. Harries, 'Cooperation in Local Authority CCT Transactions: Contracting In and Contracting Out Refuse Collection Services', paper presented at the Socio-Legal Studies Annual Conference, University of Leeds, March 1995.
7. Contract is therefore also present in hierarchical relationships; its form and function here are very different however - not being directly related to quasi-market exchange as presently defined.
8. The choice also applies to 'external' hybrids (n.3 supra). Under Part V of the Local Government and Housing Act 1989, a variety of forms of involvement in private companies is possible: the company may be controlled by the local authority (s.68), or be controlled at 'arms length' (s.68), or be subject to local authority influence (s.69), or be one in which the local authority has a minority interest (s.71). The greater the involvement of the local authority, the greater the powers of the Secretary of State in the operation of the company (s.70).
9. See for example O.E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, 1975). A growing literature, confined almost wholly to the private sector, suggests that 'hybrids' should evolve by natural selection in circumstances where they are more efficient than pure market or hierarchical organisation: franchising, vertical disaggregation, strategic partnerships, joint ventures, networks and other collaborative arrangements may all, in appropriate circumstances, help secure co-operative relations. See A. Stinchcombe, 'Contracts as Hierarchical Documents', in A. Stinchcombe and C. Heimer (eds.), Organization Theory and Project Management (Oslo: Norwegian University Press, 1985); W. Powell, 'Hybrid Organisational Arrangements: New Form or Transitional Development?', California Management Review, Vol.30 (1987), p.67; E. Schanze, 'Symbiotic Contracts: Exploring Long-term Agency Structures Between Contract and Corporation', in C. Joerges (ed.). Franchising and the Law: Theoretical and Comparative Approaches in Europe and the United States (Baden-Baden: Nomos, 1991); O.E. Williamson, 'Comparative Economic Organization: the Analysis of Discrete Structural Alternatives', Administrative Science Quarterly, Vol.36 (1991), p.269; M. Hutter and G. Teubner, 'The Parasitic Role of Hybrids', Journal of Institutional and Theoretical Economics, Vol.149 (1993), p.706; G. Thompson, J. Frances, R. Levacic and J. Mitchell (eds.), Markets, Hierarchies and Networks: The Co-ordination of Social Life (London: Sage, 1991); E. Lorenz, 'Neither Friends nor Strangers: Informal Networks of Subcontracting in French Industry', in ibid.; S. Deakin, C. Lane and F. Wilkinson, 'Trust' or Law? Towards an Integrated Theory of Contractual Relations Between Firms', Journal of Law and Society, Vol.21 (1994), p.329.
10. See for example O.E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, 1975). A growing literature, confined almost wholly to the private sector, suggests that 'hybrids' should evolve by natural selection in circumstances where they are more efficient than pure market or hierarchical organisation: franchising, vertical disaggregation, strategic partnerships, joint ventures, networks and other collaborative arrangements may all, in appropriate circumstances, help secure co-operative relations. See A. Stinchcombe, 'Contracts as Hierarchical Documents', in A. Stinchcombe and C. Heimer (eds.), Organization Theory and Project Management (Oslo: Norwegian University Press, 1985); W. Powell, 'Hybrid Organisational Arrangements: New Form or Transitional Development?', California Management Review, Vol.30 (1987), p.67; E. Schanze, 'Symbiotic Contracts: Exploring Long-term Agency Structures Between Contract and Corporation', in C. Joerges (ed.). Franchising and the Law: Theoretical and Comparative Approaches in Europe and the United States (Baden-Baden: Nomos, 1991); O.E. Williamson, 'Comparative Economic Organization: the Analysis of Discrete Structural Alternatives', Administrative Science Quarterly, Vol.36 (1991), p.269; M. Hutter and G. Teubner, 'The Parasitic Role of Hybrids', Journal of Institutional and Theoretical Economics, Vol.149 (1993), p.706; G. Thompson, J. Frances, R. Levacic and J. Mitchell (eds.), Markets, Hierarchies and Networks: The Co-ordination of Social Life (London: Sage, 1991); E. Lorenz, 'Neither Friends nor Strangers: Informal Networks of Subcontracting in French Industry', in ibid.; S. Deakin, C. Lane and F. Wilkinson, 'Trust' or Law? Towards an Integrated Theory of Contractual Relations Between Firms', Journal of Law and Society, Vol.21 (1994), p.329.
11. See for example O.E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, 1975). A growing literature, confined almost wholly to the private sector, suggests that 'hybrids' should evolve by natural selection in circumstances where they are more efficient than pure market or hierarchical organisation: franchising, vertical disaggregation, strategic partnerships, joint ventures, networks and other collaborative arrangements may all, in appropriate circumstances, help secure co-operative relations. See A. Stinchcombe, 'Contracts as Hierarchical Documents', in A. Stinchcombe and C. Heimer (eds.), Organization Theory and Project Management (Oslo: Norwegian University Press, 1985); W. Powell, 'Hybrid Organisational Arrangements: New Form or Transitional Development?', California Management Review, Vol.30 (1987), p.67; E. Schanze, 'Symbiotic Contracts: Exploring Long-term Agency Structures Between Contract and Corporation', in C. Joerges (ed.). Franchising and the Law: Theoretical and Comparative Approaches in Europe and the United States (Baden-Baden: Nomos, 1991); O.E. Williamson, 'Comparative Economic Organization: the Analysis of Discrete Structural Alternatives', Administrative Science Quarterly, Vol.36 (1991), p.269; M. Hutter and G. Teubner, 'The Parasitic Role of Hybrids', Journal of Institutional and Theoretical Economics, Vol.149 (1993), p.706; G. Thompson, J. Frances, R. Levacic and J. Mitchell (eds.), Markets, Hierarchies and Networks: The Co-ordination of Social Life (London: Sage, 1991); E. Lorenz, 'Neither Friends nor Strangers: Informal Networks of Subcontracting in French Industry', in ibid.; S. Deakin, C. Lane and F. Wilkinson, 'Trust' or Law? Towards an Integrated Theory of Contractual Relations Between Firms', Journal of Law and Society, Vol.21 (1994), p.329.
12. See for example O.E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, 1975). A growing literature, confined almost wholly to the private sector, suggests that 'hybrids' should evolve by natural selection in circumstances where they are more efficient than pure market or hierarchical organisation: franchising, vertical disaggregation, strategic partnerships, joint ventures, networks and other collaborative arrangements may all, in appropriate circumstances, help secure co-operative relations. See A. Stinchcombe, 'Contracts as Hierarchical Documents', in A. Stinchcombe and C. Heimer (eds.), Organization Theory and Project Management (Oslo: Norwegian University Press, 1985); W. Powell, 'Hybrid Organisational Arrangements: New Form or Transitional Development?', California Management Review, Vol.30 (1987), p.67; E. Schanze, 'Symbiotic Contracts: Exploring Long-term Agency Structures Between Contract and Corporation', in C. Joerges (ed.). Franchising and the Law: Theoretical and Comparative Approaches in Europe and the United States (Baden-Baden: Nomos, 1991); O.E. Williamson, 'Comparative Economic Organization: the Analysis of Discrete Structural Alternatives', Administrative Science Quarterly, Vol.36 (1991), p.269; M. Hutter and G. Teubner, 'The Parasitic Role of Hybrids', Journal of Institutional and Theoretical Economics, Vol.149 (1993), p.706; G. Thompson, J. Frances, R. Levacic and J. Mitchell (eds.), Markets, Hierarchies and Networks: The Co-ordination of Social Life (London: Sage, 1991); E. Lorenz, 'Neither Friends nor Strangers: Informal Networks of Subcontracting in French Industry', in ibid.; S. Deakin, C. Lane and F. Wilkinson, 'Trust' or Law? Towards an Integrated Theory of Contractual Relations Between Firms', Journal of Law and Society, Vol.21 (1994), p.329.
13. See for example O.E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, 1975). A growing literature, confined almost wholly to the private sector, suggests that 'hybrids' should evolve by natural selection in circumstances where they are more efficient than pure market or hierarchical organisation: franchising, vertical disaggregation, strategic partnerships, joint ventures, networks and other collaborative arrangements may all, in appropriate circumstances, help secure co-operative relations. See A. Stinchcombe, 'Contracts as Hierarchical Documents', in A. Stinchcombe and C. Heimer (eds.), Organization Theory and Project Management (Oslo: Norwegian University Press, 1985); W. Powell, 'Hybrid Organisational Arrangements: New Form or Transitional Development?', California Management Review, Vol.30 (1987), p.67; E. Schanze, 'Symbiotic Contracts: Exploring Long-term Agency Structures Between Contract and Corporation', in C. Joerges (ed.). Franchising and the Law: Theoretical and Comparative Approaches in Europe and the United States (Baden-Baden: Nomos, 1991); O.E. Williamson, 'Comparative Economic Organization: the Analysis of Discrete Structural Alternatives', Administrative Science Quarterly, Vol.36 (1991), p.269; M. Hutter and G. Teubner, 'The Parasitic Role of Hybrids', Journal of Institutional and Theoretical Economics, Vol.149 (1993), p.706; G. Thompson, J. Frances, R. Levacic and J. Mitchell (eds.), Markets, Hierarchies and Networks: The Co-ordination of Social Life (London: Sage, 1991); E. Lorenz, 'Neither Friends nor Strangers: Informal Networks of Subcontracting in French Industry', in ibid.; S. Deakin, C. Lane and F. Wilkinson, 'Trust' or Law? Towards an Integrated Theory of Contractual Relations Between Firms', Journal of Law and Society, Vol.21 (1994), p.329.
14. See for example O.E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, 1975). A growing literature, confined almost wholly to the private sector, suggests that 'hybrids' should evolve by natural selection in circumstances where they are more efficient than pure market or hierarchical organisation: franchising, vertical disaggregation, strategic partnerships, joint ventures, networks and other collaborative arrangements may all, in appropriate circumstances, help secure co-operative relations. See A. Stinchcombe, 'Contracts as Hierarchical Documents', in A. Stinchcombe and C. Heimer (eds.), Organization Theory and Project Management (Oslo: Norwegian University Press, 1985); W. Powell, 'Hybrid Organisational Arrangements: New Form or Transitional Development?', California Management Review, Vol.30 (1987), p.67; E. Schanze, 'Symbiotic Contracts: Exploring Long-term Agency Structures Between Contract and Corporation', in C. Joerges (ed.). Franchising and the Law: Theoretical and Comparative Approaches in Europe and the United States (Baden-Baden: Nomos, 1991); O.E. Williamson, 'Comparative Economic Organization: the Analysis of Discrete Structural Alternatives', Administrative Science Quarterly, Vol.36 (1991), p.269; M. Hutter and G. Teubner, 'The Parasitic Role of Hybrids', Journal of Institutional and Theoretical Economics, Vol.149 (1993), p.706; G. Thompson, J. Frances, R. Levacic and J. Mitchell (eds.), Markets, Hierarchies and Networks: The Co-ordination of Social Life (London: Sage, 1991); E. Lorenz, 'Neither Friends nor Strangers: Informal Networks of Subcontracting in French Industry', in ibid.; S. Deakin, C. Lane and F. Wilkinson, 'Trust' or Law? Towards an Integrated Theory of Contractual Relations Between Firms', Journal of Law and Society, Vol.21 (1994), p.329.
15. See for example O.E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, 1975). A growing literature, confined almost wholly to the private sector, suggests that 'hybrids' should evolve by natural selection in circumstances where they are more efficient than pure market or hierarchical organisation: franchising, vertical disaggregation, strategic partnerships, joint ventures, networks and other collaborative arrangements may all, in appropriate circumstances, help secure co-operative relations. See A. Stinchcombe, 'Contracts as Hierarchical Documents', in A. Stinchcombe and C. Heimer (eds.), Organization Theory and Project Management (Oslo: Norwegian University Press, 1985); W. Powell, 'Hybrid Organisational Arrangements: New Form or Transitional Development?', California Management Review, Vol.30 (1987), p.67; E. Schanze, 'Symbiotic Contracts: Exploring Long-term Agency Structures Between Contract and Corporation', in C. Joerges (ed.). Franchising and the Law: Theoretical and Comparative Approaches in Europe and the United States (Baden-Baden: Nomos, 1991); O.E. Williamson, 'Comparative Economic Organization: the Analysis of Discrete Structural Alternatives', Administrative Science Quarterly, Vol.36 (1991), p.269; M. Hutter and G. Teubner, 'The Parasitic Role of Hybrids', Journal of Institutional and Theoretical Economics, Vol.149 (1993), p.706; G. Thompson, J. Frances, R. Levacic and J. Mitchell (eds.), Markets, Hierarchies and Networks: The Co-ordination of Social Life (London: Sage, 1991); E. Lorenz, 'Neither Friends nor Strangers: Informal Networks of Subcontracting in French Industry', in ibid.; S. Deakin, C. Lane and F. Wilkinson, 'Trust' or Law? Towards an Integrated Theory of Contractual Relations Between Firms', Journal of Law and Society, Vol.21 (1994), p.329.
16. See for example O.E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, 1975). A growing literature, confined almost wholly to the private sector, suggests that 'hybrids' should evolve by natural selection in circumstances where they are more efficient than pure market or hierarchical organisation: franchising, vertical disaggregation, strategic partnerships, joint ventures, networks and other collaborative arrangements may all, in appropriate circumstances, help secure co-operative relations. See A. Stinchcombe, 'Contracts as Hierarchical Documents', in A. Stinchcombe and C. Heimer (eds.), Organization Theory and Project Management (Oslo: Norwegian University Press, 1985); W. Powell, 'Hybrid Organisational Arrangements: New Form or Transitional Development?', California Management Review, Vol.30 (1987), p.67; E. Schanze, 'Symbiotic Contracts: Exploring Long-term Agency Structures Between Contract and Corporation', in C. Joerges (ed.). Franchising and the Law: Theoretical and Comparative Approaches in Europe and the United States (Baden-Baden: Nomos, 1991); O.E. Williamson, 'Comparative Economic Organization: the Analysis of Discrete Structural Alternatives', Administrative Science Quarterly, Vol.36 (1991), p.269; M. Hutter and G. Teubner, 'The Parasitic Role of Hybrids', Journal of Institutional and Theoretical Economics, Vol.149 (1993), p.706; G. Thompson, J. Frances, R. Levacic and J. Mitchell (eds.), Markets, Hierarchies and Networks: The Co-ordination of Social Life (London: Sage, 1991); E. Lorenz, 'Neither Friends nor Strangers: Informal Networks of Subcontracting in French Industry', in ibid.; S. Deakin, C. Lane and F. Wilkinson, 'Trust' or Law? Towards an Integrated Theory of Contractual Relations Between Firms', Journal of Law and Society, Vol.21 (1994), p.329.
17. See for example O.E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press, 1975). A growing literature, confined almost wholly to the private sector, suggests that 'hybrids' should evolve by natural selection in circumstances where they are more efficient than pure market or hierarchical organisation: franchising, vertical disaggregation, strategic partnerships, joint ventures, networks and other collaborative arrangements may all, in appropriate circumstances, help secure co-operative relations. See A. Stinchcombe, 'Contracts as Hierarchical Documents', in A. Stinchcombe and C. Heimer (eds.), Organization Theory and Project Management (Oslo: Norwegian University Press, 1985); W. Powell, 'Hybrid Organisational Arrangements: New Form or Transitional Development?', California Management Review, Vol.30 (1987), p.67; E. Schanze, 'Symbiotic Contracts: Exploring Long-term Agency Structures Between Contract and Corporation', in C. Joerges (ed.). Franchising and the Law: Theoretical and Comparative Approaches in Europe and the United States (Baden-Baden: Nomos, 1991); O.E. Williamson, 'Comparative Economic Organization: the Analysis of Discrete Structural Alternatives', Administrative Science Quarterly, Vol.36 (1991), p.269; M. Hutter and G. Teubner, 'The Parasitic Role of Hybrids', Journal of Institutional and Theoretical Economics, Vol.149 (1993), p.706; G. Thompson, J. Frances, R. Levacic and J. Mitchell (eds.), Markets, Hierarchies and Networks: The Co-ordination of Social Life (London: Sage, 1991); E. Lorenz, 'Neither Friends nor Strangers: Informal Networks of Subcontracting in French Industry', in ibid.; S. Deakin, C. Lane and F. Wilkinson, 'Trust' or Law? Towards an Integrated Theory of Contractual Relations Between Firms', Journal of Law and Society, Vol.21 (1994), p.329.
18. S. Deakin and F. Wilkinson, 'Contracts, Cooperation and Trust: The Role of the Institutional Framework', in D. Campbell and P. Vincent-Jones (eds.), Contract and Economic Organisation: Socio-Legal Initiatives (Aldershot: Dartmouth, 1996). Whilst the high costs of managing and adjusting conflictual transactions might be outweighed by financial savings in some cases, there is likely to be a strong association between co-operation and efficiency. A high level of defaults and terminations is also likely to be culturally damaging in terms of antagonistic relations within the organisation, and to detract from the quality of the service (through interruptions, poor morale and so on) to the ultimate consumer.
19. The Secretary of State has the power to determine financial objectives under LGA 1988 s.10(2). DoE circular 19/88 requires a five per cent rate of return for all defined activities except buildings cleaning, which must break-even. Under DoE circular 12/94 (Financial Objectives Specifications 1994) the objective of break even is further specified as including 'a capital financing charge of 6 per cent of the value of fixed assets used in the provision of the service'.
20. Local Government Act 1988, s.11.
21. Walsh and Davis, op. cit., para. 2.14.
22. We shall not be considering specifically here a further aspect of hierarchy - the ultimate control exercised by central government and the state through the DoE and the Secretary of State. The past 16 years of Conservative government have seen a vast increase in the powers of the central state at the expense of local government - see M. Loughlin, 'The Restructuring of Central-Local Government Relations', in J. Jowell and D. Oliver (eds.), The Changing Constitution (Oxford: Clarendon, 1994).
23. Walsh and Davis, op. cit., para.4.7.
24. Ibid., para.4.4.
25. Ibid., para.4.3.
26. Ibid., para.2.23.
27. See P. Vincent-Jones, 'The Limits of Contractual Order in Public Sector Transacting', Legal Studies, Vol.14 (1994), p.364; ibid., 'The Limits of Near-contractual Governance: Local Authority Internal Trading under CCT', Journal of Law and Society, Vol.21 (1994), p.214.
28. See P. Vincent-Jones, 'The Limits of Contractual Order in Public Sector Transacting', Legal Studies, Vol.14 (1994), p.364; ibid., 'The Limits of Near-contractual Governance: Local Authority Internal Trading under CCT', Journal of Law and Society, Vol.21 (1994), p.214.
29. S. Macaulay, 'Non-Contractual Relations in Business: A Preliminary Study', American Sociological Review, Vol.28 (1963), p.55; H. Beale and T. Dugdale, 'Contracts Between Businessmen: Planning and the Use of Contractual Remedies', British Journal of Law and Society, Vol.2 (1975), p.45.
30. S. Macaulay, 'Non-Contractual Relations in Business: A Preliminary Study', American Sociological Review, Vol.28 (1963), p.55; H. Beale and T. Dugdale, 'Contracts Between Businessmen: Planning and the Use of Contractual Remedies', British Journal of Law and Society, Vol.2 (1975), p.45.
31. D. Campbell and D. Harris, 'Flexibility in Long-Term Contractual Relationships: The Role of Co-operation', Journal of Law and Society, Vol.20 (1993), p.166; P. Vincent-Jones, 'Contract and Business Transactions: A Socio-Legal Analysis', Journal of Law and Society, Vol.16 (1989), p.166.
32. D. Campbell and D. Harris, 'Flexibility in Long-Term Contractual Relationships: The Role of Co-operation', Journal of Law and Society, Vol.20 (1993), p.166; P. Vincent-Jones, 'Contract and Business Transactions: A Socio-Legal Analysis', Journal of Law and Society, Vol.16 (1989), p.166.
33. Ouchi, in Thompson et al., op. cit.
34. Walsh and Davis, op. cit., para.2.6.
35. Central government controls aimed at eradicating anti-competitive practices and stimulating competition have been extended following the provisions excluding 'non-commercial considerations' in the awarding of contracts under LGA 1988 s.17. See DoE circular 10/93 'Competition in the Provision of Local Authority Services'; and Local Government (Direct Service Organisations) (Competition) Regulations 1993 (SI 1993/848).
36. Walsh and Davis, op. cit., para.2.7. Walsh comments: 'Some managers claimed that savings of between 10 and 30 per cent resulted from integrating DSOs, but there was no detailed evidence that this was or was not the case.'
37. Although in theory school heads are free to opt out of local authority buildings cleaning provision, in practice most have opted in - making use of the authority's client CCT function in order to avoid the higher transaction costs of contracting independently.
38. Management Consultants' Report for Eastmet, p.7.
39. Ibid.
40. ETS was not immediately divested because of uncertainty over the legality of such a move (the full implications of the Local Government and Housing Act 1989 had yet to be worked out, and the status of management buy-outs vis-à-vis European tendering legislation was also unclear). There was also uncertainty over the financial implications in terms of taxation liabilities, and over the contractual conditions under which a privatised 'ex-internal' workforce would be employed (see Transfer of Undertakings (Protection of Employment) Regulations (TUPE) 1981 (SI 1981/1794).
41. The strategic client agency employed around 30 personnel divided into four sections: administration, cleaning and catering services (for example, school and welfare catering, other catering, and building cleaning), leisure management, and technical and environmental services (refuse collection, street cleaning, grounds maintenance and vehicle maintenance).
42. Tensions were created because the special relationship between school heads and 'their' cleaners, who had always in the past been subject to local control, was being undermined.
43. For example, a stock response was developed to meet client requests for information on rectification on improperly completed tasks. Staff were advised by ETS management to say that 'It was done yesterday' before investigating the problem.
44. For example, in other authorities we have found various methods for achieving reasonableness including joint training, 'shadow' monitoring by contractor representatives, and collaborative on-site problem-resolution.
45. Dunlop Pneumatic Tyre Co Ltd v. New Garage and Motor Co. Ltd [1915] AC 79.
46. The hybrid nature of the authority's role is well illustrated in this internal arbitration process. On the one hand, the panel is supposedly independent, hearing submissions and reaching decisions as if it were a court, and as if the 'parties' were legally separate entities. On the other hand, the panel represents the apex of the hierarchy of which client and contractor are both part, and may be expected to make decisions on the basis of administrative and policy criteria only indirectly connected with the specific issues in contention. However, faced with the threat of further internal disintegration, hierarchical considerations prevailed over quasi-market ones. ETS's use and understanding of legal arguments shows how the logic of a 'hard' quasi-market split pushed the contractor in this instance to the edges of the boundary of public sector organisation. An alternative resolution might have involved externalisation of the contractor function.
47. With external competition increasing, the authority could not afford to lose many school cleaning contracts if it wanted to maintain an internal workforce for provision of this service in future.
48. Because these core functions are general in nature, and are required for all CCT services, economies of information and expertise may be made by centralisation.
49. In a sense, therefore, the effect of LMS was analogous to a 300-fold increase in Eastmet's directorate structure. Subsequent secondary legislation [Local Government Act 1988 (Defined Activities) (Exemption) (Small Schools) Order 1992] reduced the number of client points by exempting primary schools from CCT. However, such schools have in practice invited ETS to provide their buildings cleaning, thereby avoiding the substantial transaction costs involved in employing their own contractors and drawing up new management systems.
50. Under the previous arrangement, 'specifications of adhesion' had been dictated by ESCA on a take it or leave it basis. The analogy here is with 'contracts of adhesion', which allow the party in the weaker bargaining position no choice of whether to enter into a relationship, and no say over the contract terms by which it will be governed (see, for example, T. Rakoff, 'Contracts of Adhesion: An Essay in Reconstruction', Harvard Law Review, Vol.96 (1993), p.1173. However, Eastmet's standard conditions of contract were not negotiable, remaining under the control of the strategic client unit.
51. Site supervisors are responsible for monitoring their site as directed by area supervisors, who have to ensure that all sites under their control are inspected within a six-week cycle. The results of such inspections are reported to area managers who can authorise extra inspections or training to remedy difficulties.
52. Although Westmet is a much smaller authority than Eastmet, perhaps making problems of organising for CCT less difficult, there is generally no evidence to suggest that size in itself is a key factor in explaining differences in contract management outcomes - see Walsh and Davis, op. cit.
53. Westmet internal management document, 1994, p.2.
54. This expression, which was used frequently during interviews with officers on client and contractor sides, captured the general climate of good will in the period of transition.
55. That such co-operation cannot be taken for granted is evident in the case study of Northern Metropolitan, another authority within the current research programme. Here cleaners and caretakers were more clearly separated, with caretakers protecting head teachers' interests and cleaners identifying with departmental DSO interests. Conflicts and tensions multiplied here as personal trust in previously close supervisory relations was eroded. See P. Vincent-Jones and A. Harries, 'Limits of Contract in Internal CCT Transactions: A Comparative Study of Buildings Cleaning and Refuse Collection in Northern Metropolitan', in Campbell and Vincent-Jones (eds.), op. cit.
56. The complaint could not technically be of breach of contract, since the specification only indicates a 'once a week damp wipe'.
57. Only if the problem was not resolved by such means would the client suggest a formal variation of the specification, or (prior to head teachers gaining control of their budgets under LMS) the employment of more cleaners.
58. There is some evidence that the drafting of contract specification and conditions was less complete than in Eastmet, probably due to the decision not to formally separate client and contractor functions before CCT, and the expectation that the main contract would be awarded internally.
59. Westmet buildings cleaning contract: Conditions of Contract, clause 8.1.
60. Conditions of Contract, clause 8.7.
61. The experience within Northern Metropolitan is documented in Vincent-Jones and Harries, op. cit.
62. This occurred in Northern Metropolitan, where officers with engineering contracting backgrounds were brought in to perform monitoring tasks (see ibid.).
63. Conditions of Contract, clause 8.7.
64. There have been approximately 60 formal variations per year since the contract began. Even here, however, there have been many instances of displacement of the formal variation procedure, as occurred in the case of the problem of dirty tables referred to above.
65. In one sense the experience of buildings cleaning in Westmet and the re-structured Eastmet was similar, in the trend towards schools becoming 'active clients' in the contract management process, and in the corresponding declining role of the authority service client. But important differences remain: within Eastmet, the DSO operates with a quasi-commercial ethos and enjoys substantial autonomy from the rest of the authority, whereas within Westmet service client, contractor, cleaners and end-client have remained departmentally integrated.
66. The present study provides specific support for one of the main conclusions of Walsh's research, that 'the major factors making for effective contract management were trust, problem resolution, and a proper mixture of formality and informality' (op. cit. n.5, para.9.5).
67. Local Government Act 1988 (Defined Activities) (Specified Period) (England) Regulations (SI 1995/2484).