London Met – outsourcing? or something else?

I carry with me at all times a 2009 report for Universities UK prepared by the legal firm Eversheds. Why?

On page 7 of ‘Developing future university structures’, you will find a diagram entitled ‘A model for university buyouts’.

I suggest you look at that diagram and then read the stories about London Metropolitan University’s intentions to ‘outsource’ all staff besides teaching staff and vice-chancellor.

According to a spokesperson at London Met, what was being proposed was not outsourcing as the contract out to tender was for the management of services (£74million over 5 years), while posts and staff would potentially be transferred to a subsidiary.

“If London Met decides to set up a subsidiary company, it will be 100%-owned by the university. Staff would be working for this wholly-owned subsidiary of London Met.”

This is not what normally happens in ‘outsourcing’ where in-house posts are replaced by the services provided by the independent contractor.

The investigative bureau, exaro.com, have a copy of the tender document from which they have published extracts, including the following:

“The successful tenderer may be required to become a service provider to a special-purpose vehicle created by the university, and any resulting contracts may be between the university’s service company and the chosen service provider.”

Look again at the entity marked ‘NewCo (Profit)’ on the buyout model. That is a subsidiary owned by the university but, as a company limited by shares, some non-voting shares are sold to investors in return for dividends (see the footnote).

London Met’s aim is to create a ‘shared services’ company specialising in backroom operations, which it will then market to other universities and similar organisations. (This is now a viable project given the changes to VAT pushed through by the conservatives).

‘Outsourcing’ (‘we’ve seen that before’) may be a smokescreen as it takes the first step down the route to ‘buyout’ – opening a new route for investors who want a piece of university action. They currently cannot buy a share in a company limited by guarantee. As charities, publicly funded higher education institutions cannot distribute profits. The subsidiary, as ‘special purpose vehicle’ may be designed to circumvent those impediments to private finance.