Liverpool City Council's David McElhinney is frank about how the organisation was failing across the board. So it tore up the rule book and started afresh.

"We had 11 departmental ICT functions and one central one. The focus of the departments was to get one over on the central team and the aim of the centre was to screw over the individual departments as much as possible. We had a lack of consistent standards or way of operating, all the way from the desktop to disaster recovery." This is the stark verdict on what by any measure was a seriously dysfunctional local government IT operation – that of Liverpool.

The assessment comes from David McElhinney, CEO of Liverpool Direct, who sums up the organisation as it stood in 1999 in equally stringent terms. “We were failing by any number of counts – we had the country’s highest council tax and some of the poorest quality services. There was a general loss of confidence by stakeholders in us, from staff to government to citizen. We needed to change.” The organisation did – which is probably why we are getting such an honest appraisal of the background to what does by any objective view really seem to be a radical turnaround.

This is the story of Liverpool Direct, a joint venture between BT and the city, which seems to have torn up the rulebook on how local government uses IT to deliver services. It is also the story of concrete return on investment; stringent use of business cases, the use of IT as a way to save money and then figure out ways to save more money.

The story as McElhinney outlines it was one of stagnation if not internal muddle and war – sadly not a wildly unusual scenario in organisations public or private, of course. But this was in the context of a major metropolitan authority employing nearly 20,000 staff, with a turnover of £1.5 billion and charged with delivering no less than 1,350 services to the people of the city.

Chaos just could not be tolerated any longer: “We had to transform and we also needed to perform at a level we just never had before.”

Starting over

The core of the revamped council operation was a number of existing elements, he told MIS UK. The “fledgling” call centre – “Monday to Friday, 8am-6pm, the usual local government set up” – over 130 face-to-face contact centres, the council’s HR and payroll service and its “fragmented” ICT team were factored into a new structure.

A final piece of the puzzle was the council’s revenue and benefits service, as like many councils, some 50 per cent of all customer contact was on this basis. But Liverpool’s ‘revs and bens’ problem is bigger than many. “We are second to Birmingham’s in terms of volume but our issues are more complex due to the nature of many of the queries,” believes McElhinney.

In any case, in 2001 a new organisation was created, Liverpool Direct, an operation designed to deliver consistent improvement in service delivery through use of technology. The founding contract, signed in July 2001, was for £300 million over 11 years, and now some 950 staff work for the organisation, of which 910 are seconded from the council, the rest coming from BT, which owns 80 per cent of the operation.

In ICT staff terms, the organisation moved 130 of its 186 team to the new venture, the remainder opting to leave, with the technology part of Liverpool Direct expanded beyond that benchmark to 200 (including contractors). McElhinney is on post from the council as the organisation’s CEO.

He says that the point of the Liverpool Direct option is that it is not outsourcing. “Our view is that a problem outsourced is just a problem outsourced, not a problem solved. A Best Value review had already suggested outsourcing ICT but we didn’t think that was the solution. This joint venture, where we can draw on BT’s resources, supply chains and expertise but focus on the customer’s needs, we think works much better.”

The contract is structured as a Public Private Partnership. The group says it is now delivering £5m of savings to the council while operating with a £20m annual budget. This is mainly through aggressive use of e-procurement, which has cut the number of suppliers from 18,000 to 3,000. But this is just one of many ways the group is using technology, says McElhinney.

Liverpool Direct

Liverpool manages some 200,000 council tax records and 78,000 benefit cases, of which 60 per cent have a rent allowance aspect.

Prior to its overhaul the Liverpool Council revenue and benefits process was taking an average of 136 days: that has now been cut to 33. The Liverpool Direct team say this is planned to be cut to 14 days by the end of 2006 and could come down to only seven. This is mainly due to aggressive use of document management which simplifies processing and saves time by avoiding internal mail, which can take three days to get from A to B. Other current savings in this area include a 45 per cent cut in photocopying costs, a 50 per cent cut in call volumes to the call centre and a 76 per cent drop in complaints.

The council recently received a four star (excellent) review for the service under the local government Comprehensive Performance Assessment process.

Other aspects include self-service HR and employment for staff, which saves time and administration; the consolidation of 15 previously separate HR and payroll service centres into one central unit for more efficiency; the replacement of council tax payment books with smart cards to make it easier for people to pay their tax at a number of outlets; and use of kiosks and other forms of access to council data.

Technology includes Oracle and SAP, the latter a £7m project in its own right that only went live this April. “Now we have one ICT service that’s a platform for all our change, one way of doing things and that’s about being as close to the aspirations of the business as possible,” he says.

Council backlog

All good stuff. But it is the overhaul of the revenue and benefits that McElhinney singles out as the most concrete example of the success of Liverpool Direct. Again, the backdrop was not a pretty sight.

“We were effectively bottom of the country in performance,” he admits. “We had a case load of 78,000 but a backlog of 50,000. Our best ever quarter turnaround on cases was 33 days but we were averaging more like 136. Our revenue collection rate was 90 per cent – but the national average was 99 per cent.”

Another way to put the problem: “I had a building with three floors worth of documents that hadn’t been looked at.” The council says it gets no less than 5m paper documents a year, so it was a huge problem.

“Revenues and benefits and the associated documentation is generally seen as one of the most difficult areas in local government,” says McElhinney. “It can cover so many different aspects, from educational awards to blue disability badges to many other things.”

But that is no reason not to think differently, he says. “We talked to our partners in BT to get a fresh perspective and start again. Essentially, this is a simple business of taking and paying money but complicated by lots of processes and paper.”

The solution is extensive use of workflow and document management technology, delivered by local government IT specialist, Camino, using Kodak equipment plus new software.

“We have replaced two mainframes, ICL and Bull, with a Sun E10000 linked to an application server, storage area network and an optical jukebox,” says Martin Jungnitz, project manager for the revenues and benefits overhaul.

This approach has passed some dramatic milestones in terms of value for money and return on investment. But McElhinney says the message is broader than the business re-engineering of one local government application, effective as that has been. “Yes, I have lost the three floors of those paper files, as well as the other three floors where staff worked. We have sold that building now, saving us £700,000 a year on running costs and giving £4.5m directly back to the city,” says McElhinney. “But the real message here is that no matter how complex the issue, by using all the tools you have, looking at non-traditional ways of solving the problem, with the right leadership and appropriate investment, immense steps can be taken.”

At a time when the agenda is to use technology to transform local government, it seems the Liverpool experience may have much to teach us.