The rise of managed service providers

Small may be beautiful but large appears to be considerably cheaper, so, for hard-pressed councils big contracts with large recruiters is the order of the day. Anabel Unity Sale reports

In a world full of acronyms, the social care sector has two new ones regarding employing agency workers: MSP and MSC. MSP stands for managed service provider
and MSC for managed service contract.

Under these contracts, MSPs arrange the hire of all temporary staff for an employer, either directly or by acting as a broker for a network of preferred recruitment
agencies.

The selling point of MSPs, some of which are established large recruitment agencies, is that they can save employers the costs of contracting with multiple agencies.

MSCs have been used in other sectors, such as construction, for some time and first made an appearance in social care five years ago. In 2004, their value to the sector
increased when Sir Peter Gershon’s review of public sector efficiency led to councils identifying agency spending for savings after being set targets for savings.

However, the shortage of social workers and social care staff is well documented and some councils rely on temporary staff to keep certain services running. The latest social care workforce survey by Local Government Analysis and Research found average vacancy rates of 10.5 per cent in 2005. MSPs provided an answer to this by offering councils savings while meeting their staffing needs.

Hammersmith and Fulham Council began an MSC with Hy-Phen in March. The contract is council-wide so Hy-Phen finds candidates for all temporary posts. The contract was first applied to social services. The west London borough’s director of community services James Reilly says he was stunned to discover the differences in spending on agency staff between social services managers.

“During our mapping exercise, to our shock and horror, we discovered there were big variations in prices. Some recruitment agencies had negotiated different prices
with different managers for the same work, without the managers realising.”

Reilly says starting an MSC has stopped this, as all managers know they have to contact the same provider when they need to fill a vacancy. Another benefit is that
Hammersmith has improved the quality of information its managers have on the agency staff it employs. He says: “We know the number of agency workers, length of time
employed and the cost. In the past we had sporadic information as individual managers were dealing with different agencies.”

Another local authority with an MSC is Luton. The councilwide contract, which began three years ago, is with the organisation Carlisle. Jo Cleary, Luton’s director of housing and community living and also co-chair of the Association of Directors of Social Services’ human resources committee, emphasises councils must prioritise service quality and user safety in choosing an MSP.

However, one difficulty Luton initially faced when its contract began was convincing front-line managers that one firm could source enough high quality staff. “When this
first started we came up against managers who were very resistant, they didn’t trust it,” she says. Luton overcame this by involving managers in discussions with the MSP about what they wanted.

This negative reaction is not unique, according to Trevor Goul-Wheeker, head of Reed Health Group, a recruitment agency with a call centre and specialist team overseeing its numerous MSCs. He says problems with local authorities are most likely to occur as the contract is being implemented. “It is important to gain staff
buy-in to ensure they stay with the contract to realise the benefits.”

Although MSCs can save authorities money, there are  disadvantages. The use by some MSPs of computerised systems to match staff to jobs rather than face-to-face processes can result in poor placements, according to Susan Cranie, managing director of specialist social care agency Careplan.

She says: “MSCs are totally inflexible about social workers having transferable skills but in my experience and knowledge of social work, you can transfer skills.” Cranie adds that as more social services managers adhere to MSCs it can be harder for smaller agencies to contact them directly about candidates. “This is a tick box exercise – if the candidate fits the boxes it is OK but in social work you just can’t do that.”

So does MSCs’ growth mean the end of smaller, specialist social care agencies, as they are squeezed out of the market? Goul-Wheeker says smaller agencies still have a viable future as secondary suppliers to larger recruitment agencies running MSCs.

Local authorities respect the specialist knowledge local recruitment agencies have, says Cleary. “It is not in our interests to see the smaller agencies vanish but they also have to raise their game. If not, then what are they doing in the recruitment business in the first place?”

She adds that despite the pressure to make efficiency savings not every local authority will go down this route and will still use smaller recruiters. “The ADSS is interested in efficiency and this means managing recruitment costs better, however it is done,” she says.

The need to achieve value for taxpayers is a priority for councils in the wake of Gershon, and MSPs appear to be a way of cutting costs. However, their growth has not been universally welcomed and questions remain as to whether quality of service will be compromised as a result.

CASE STUDY: COMENSURA
Essex Council appointed MSP Comensura to take responsibility for recruiting agency staff for all of its social services teams in July 2004, and the contract began the following December. It is now worth £7m, and saved the authority £600,000 in recruitment costs in 2005-6. Comensura manages a network of 70 local recruitment agencies. Between them they supply on average 300 temporary workers a week and fill 96 per cent of the council’s placements in social care. The firm also supplies all temporary staff to Surrey Council’s children’s services directorate in an MSC which was signed in February 2004. It provides an average of 56 staff a week through 32 agencies and the contract has saved the authority £150,000 in annual recruitment costs.