At the meeting of the full council on the 11th of February, City of Edinburgh Council proposed that a consultation process be set up to establish a “fair and appropriate” Direct Payment rate.
We believe that 3 simple stages need to take place in order to achieve this aim.
1. Establish the parameters
The requirements of CEC to achieve value for money is legitimate. The initial aim of the care and support tender was to achieve a 10% saving. The original specification for tender can be used to show the pre – process original hourly rate for support of £18.40
· Based on a total cost of £8,404,036 [excluding sleep overs]
· And a total of 8,785 hours per week
And using the initial aim of 10% saving, we can show a new hourly rate of in the region of £16.50 as the original target.
A further advancement of saving of between 2.5% and 5% would see a Direct Payment rate set in the region of £15.50 to £16.00
*** Edinburgh’s Care At Home arrangements have worked at a range of payments up to £16.00 per hour for a number of years. ***
2. Agree a method of Full Cost Recovery
The Scottish Executive, in the Scottish Compact, made a commitment to recognise the need for Full Cost Recovery ( FCR) where service deliverer should be able to recover all of the costs associated with that contract when entering into a contract with a public body. Both SCVO and COSLA support a move towards this arrangement. The Edinburgh Compact’s Advisory Group on Funding has looked at the usefulness of the Full Cost Recovery and recognised its appropriateness for contractual situations.
Full Cost Recovery simply means securing contractual rates for - or ‘recovering’ - all service costs, including the direct costs of projects and all overheads.
The Chartered Institute of Public Finance and Accounting has produced guidance that the total cost of a service should include an appropriate share of support services and other overheads. The share of these other costs should be charged, allocated or apportioned across users and beneficiaries of a service in accordance with the following general principles:
- Complete charging of overheads – All overheads should be charged including central functions such as senior management in line with the time associated with a specific project
- Transparency – Users must be clear about what each charge covers and be provided with sufficient information to challenge the approach being followed.
- Flexibility – The charging arrangements must be sufficiently flexible to allow charges to be made regularly enough, and to the level of detail appropriate to meeting both user’s and provider’s needs.
- Reality – Charging should aim to distribute actual costs, based on fact
- Predictability – Charges should be as predictable as possible.
We believe that the City of Edinburgh Council can use these principles to outline a way to establish a “fair and appropriate” Direct Payment rate within the parameters established in (1) above. Full Cost Recovery does not decide on appropriate levels of price and cost. That is a separate decision that is made elsewhere [see step (3)] .
To implement this would mean including establish a method for individual providers to provide sufficient level of details of how their individual hourly rate would be established.
We believe this would be under 4 broad headings such that the principles of transparency and understandability can be followed and that individual costs and items can be challenged or further explained.
1. Management
2. Direct Care
3. Administration
4. Other Overheads
A number of Full Cost Recovery tools are available in order for providers to use quickly to be able to present this information.
3. Individual Negotiations with Service Providers
The final step in this process would be for City of Edinburhg Council to meet with individual providers to discuss and settle on individual prices for their hourly rate based on the parameters agree in (1) above and using the Full Cost Recover information supplied under (2) above.
In most cases providers have indicated they would be able to bring their costs down to within a reasonable “parameter” set by the council. In one case, a voluntary sector provider may need to raise their hourly cost (currently well below the parameter) in order to achieve full cost recovery.
A period of negotiation and discussion would resolve the actual rates at this stage.
This would then form part of the report back to the City of Edinburgh Health, Social Care and Housing Committee meeting at the end of April.
posted 2ndMarch 2010
