Immediately before Christmas the government issued its detailed proposals to extend compulsory competitive tendering (CCT) to the arena of local authority legal services.Those proposals have already been the subject of considerable debate in the service working groups on which local authorities and professional bodies are represented.

Although these are proposals, they may be taken to represent the future direction for those who are currently providing in-house legal services.This is because the documentation now issued represents the last stage in a detailed consultation exercise which commenced in November 1991 with the publication of 'Competing for quality: competition in the provision of local services'.

That original consultation paper only contained a single side on legal services (paras 2.5.9 to 2.5.15), but the worked up proposals which have now been issued run to the size of a small book, and contain two separate draft statutory instruments (one making legal services a defined activity, the other relating to the phasing in of the activity) and a draft circular to replace the guidance on anti-competitive behaviour currently contained in circular DoE 10/93.It is proposed that CCT for legal services should be introduced in a phased manner.

Those authorities which are currently single tier councils (the London boroughs and the metropolitan district councils) are required to tender a percentage of their in-house work by 1 October 1995.

The remainder of authorities are being permitted a delay to take account of the current review of dual tier authorities by the Local Government Commission.The phasing proposals are contained in a draft order to be made under the powers contained in s.6(3) of the Local Government Act 1988.

The purpose of the order was outlined in a Department of the Environment press release of 15 December as follows:'...the CCT timetable should be modified so that no county or district, or their successor authorities, will be required to implement competition for the new services before reorganisation has taken place in their area, or the decision has been taken that they will remain unchanged.

New services will be introduced in a phased programme thereafter.'The phased programme envisages three potential start dates for the two tier authorities.

For those undergoing reorganisation on 1 April 1995 it will be 1 October 1996; for those undergoing reorganisation on 1 April 1996 it will be 1 October 1997; and for those undergoing reorganisation on 1 April 1997 it will be 1 October 1998.Experience with the existing services already exposed to competition indicates that the timetable will be particularly tight for the single tier authorities which are permitted no delay.

To enable contracts to be started by 1 October 1995, the tendering process will need to commence approximately 12 months earlier and therefore advertisements should start appearing in the trade press around autumn of this year.As the actual statutory instrument will not be made until the summer, this does not give the relevant authorities very long for the necessary preparatory work.

This work includes the drafting of a 'detailed specification' which defines the tasks to be accomplished and the standards of performance which are to be achieved.

This documentation is dependent on the final service definition.

It is clear, therefore, that for certain authorities most of the preparatory work will have to be undertaken on the basis of the draft definition discussed below.Although CCT was introduced for certain constructio n or maintenance work as long ago as 1980, it was not until the Local Government Act 1988 was introduced that the requirement to subject mainstream local authority services to competition became widespread.

Initially seven blue collar activities were exposed to competition (such as refuse collection and building cleaning) and then a new service, the management of sports and leisure facilities, was added by statutory instrument in 1989.Pt I of the 1988 Act lays down the framework of the CCT regime and this includes compliance with six conditions which detail how the tendering exercise which market tests the service must be conducted.

The sixth of these conditions is laid down in s.7(7) and provides that the authority should not act in an anti-competitive manner.

The purpose of the draft circular issued with the consultation documentation is to clarify exactly what the government means by anti-competitive behaviour.S.2(3) of the Act is the statutory authority for the minister to issue the order defining those activities subjected to the regime.

This is done by giving a general description (the new activity is usually added to the list of activities in s.2(2) in general terms) followed by a fuller definition which is inserted into sched 1 to the 1988 Act.In the case of the blue collar services already exposed to competition it has been the policy of most local authorities to reorganise themselves internally, so that service departments contain a client side (which arranges for the tendering of the service and oversees its performance by the successful contractor) and a contractor side (or direct service organisation) which bids for the work and, if successful, becomes the contractor.

All the work previously performed in- house is exposed to competition, subject to the retention on the client side of a limited amount of mainly supervisory work.

There are also a small number of other exemptions.However, for professional services, such as legal work, the government has recognised that there is a need to allow the retention of a much larger element of work in-house as of right.

This view reflects the three key roles identified for a legal department in the Audit Commission paper 'Competitive counsel? Using lawyers in local government' (1991).These are: ensuring propriety in council affairs; providing corporate legal advice to the council; and supplying, or buying in legal services.

The third area was considered the only suitable part for contracting-out and all the consultation papers which have been issued by the government have therefore recognised that only a proportion of service should be exposed to competition (the 'competition requirement').The general definition to be added to s.2(2) is 'legal services' and this will be fleshed out in the fuller definition within sched 1 as follows:'Legal servicesThe provision of all legal services to a defined authority falls within s.2(2) above including, but without prejudice to the generality of the foregoing, the following(a) legal advice to an authority, its elected members, its committees, sub-committees, working groups and panels;(b) legal advice and support to any department or officer of an authority and to any other person in relation to the discharge of an authority's functions;(c) legal work, including advocacy and instructing external solicitors and counsel in connection with criminal and civil litigation in all courts, tribunals and inquiries, including all preparatory and consequential work;(d) legal work in connection with contracts and agreements of all kinds including pre-contract negotiations and any subsequent legal work;(e) conveyancing of all types of property, legal work on all landlord and tenant issues and on any other property-related matters;(f) preparation of and all subsequent legal work in relation to statutory orders, notices, byelaws and management rules made under s.112 of the Civic Government (Scotland) Act 1982(a);(g) legal work required for the promotion of local Acts of Parliament;(h) legal work arising from the establishment of an authority's insurance arrangements including brokerage and handling claims by and against an authority; and(i) the procurement, monitoring and supervision of any legal service provided to an authority by any person.'The definition is very comprehensive.

It is intended to encompass fully all the legal work undertaken by a defined authority, irrespective of whether that work is currently provided within a central legal department or under more decentralised arrangements (for example, by a child care solicitor attached to the social services department) or indeed whether or not it is suitable for contracting out.

In addition, it is also wide enough to cover work currently provided by solicitors external to the authority (although this is automatically taken into account by the competition requirement only applying to in-house staff).A certain degree of confusion is introduced by the fact that the descriptions are task related, rather than being defined, for example by the qualification necessary to perform the task.

The intention seems to be that it is the nature of the job which determines whether work is caught by the description, not who is currently doing it or where it is performed.However, this can cause problems.

For example, at (c) above, preparatory work in connection with civil litigation is mentioned.

Although this is prefaced by the phrase 'legal work' it would seem to be widely enough drafted to include sending out letters demanding payment of council house rent arrears which is work which may be undertaken by a council's housing or finance department, usually without recourse to legally qualified staff.

Alternatively, the prefacing of the task by the words 'legal work' may suggest it is only where litigation work has reached the stage of the letter before action that it should fall within the description of legal services.In time, questions of detail such as that posed in the preceding paragraph should not matter.

This is because both the management of the housing function and financial services will also be exposed to competition.

However, legal services is somewhat of a trail blazer being exposed to competition in advance of the other services.

In the short term, it will therefore be left to each authority to determine precisely which services fall within the legal definition and to trust that it does not fall foul of the somewhat Draconian powers given to the secretary of state to discipline any authority acting in an anti-competitive manner.The task of determining how to package work is eased because the requirement is not for authorities to expose all of legal services to competition, only a percentage by value.

This means that every authority will be able to retain at least 55% of its legal services in-house as of right and will only need to expose the remaining 45% to competition.

This concession is combined with a de minimis threshold of £300,000 per year which means that if an authority's legal work does not exceed £300,000 per annum it will be completely exempt.The total annual cost of legal servi ces will be calculated utilising a new accounting framework (a statement of support service costs) which will also be the subject of a consultation exercise - probably commencing in early February.

This accounting framework will identify the costs of all professional services to the authority (including legal services) via a separate line in the statement and will presumably be based on the very wide functional definition outlined above.By virtue of the percentage based competition requirement, local authorities are given a considerable degree of flexibility over the manner in which they organise their legal services.

By way of example, one authority may choose to have a single legal department divided on the basis of 55% on the client side and the remaining 45% on the contractor side, the latter being exposed to competition.Those activities thought to be unsuitable for competition, such as those relating to the democratic core of the authority, could be included within the client side.

However, another authority may choose to dispense with its legal department altogether, place some work out to voluntary competition, disperse most of its legal staff into existing service departments and retain a small in-house staff (together comprising less than 55% by value) as part of a chief executive's department.The figure of 45% was only chosen after a consultant's report which was released in October.

This recommended that the percentage of 33% which was originally proposed back in November 1991 could be increased to between 50% and 60% without affecting strategic/corporate functions or recruitment and training concerns.

In that report it was stated that if a de minimis safety net of £300,000 were allowed to protect the strategic/corporate function in smaller authorities, then a single percentage in the 50% to 60% range would be suitable for competition.The government is likely to have taken into account that it is common for many authorities already to use outside lawyers for about 10% of their work, which when added to the 45% competition requirement brings the figure up to the consultant's recommended 50% to 60% range.

It is also apparent that the government now favours lesser regulations and an 'across the board' percentage was therefore determined as preferable to a range of percentages depending on the type of authority concerned.

This is also apparent in the decision not to regulate on lengths of contracts.

Instead, the government has included provisions within the draft guidance.The phasing of the introduction of legal services, combined with the de minimis threshold and the other exemptions permitted to local authorities, means that the availability of legal work to be competed for by the private sector will be significantly reduced.

Some may be disappointed with the 45% level chosen.

This may be exacerbated by the fact that the government has indicated that this is being introduced as a once and for all level and that there are no plans to increase it.Furthermore, the only work available in the immediate future will be that from larger urban based authorities, which may well be seeking a single contractor to provide a wide range of legal services, from conveyancing to contract drafting and from litigation to licensing.

The necessity for solicitors' firms to be able to provide a complete service is likely, in many cases, to rule out many smaller firms automatically.In addition, the lurking spectre of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (as amended) means that those firms actually bi dding for the work may well have to take on the existing council staff who are currently performing that work on their existing terms and conditions.CCT is therefore unlikely to provide the amount of new work which some private sector firms may have hoped for, but it is likely to lead to major changes within local government itself.

In the longer term, the introduction of competitive tendering and the use of detailed contract documentation by the client may well have longer term implications for the profession as a whole.