Delivery of STB Functions

1. This chapter considers the Prior Options other than abolition or privatisation. If the tasks discharged by STB continue to be needed (which is the general conclusion reached in Chapter 5) the Review nevertheless needs to consider whether there is scope to contract out or transfer some or all of the Board's functions.

Abolition of STB and Transfer of Functions

2. Consideration of this option can be limited to those existing public sector bodies other than STB that could undertake, either in whole or in part, the Board's current range of functions. Crucially, it must also have regard to the 1992-93 review of tourism support arrangements which resulted in major changes to the support structure then extant. That review is discussed in more detail in Chapter 2 and Annex D. As noted in Chapter 2, the Steering Group concluded that the review's rationalisation of tourism support at both national and sub-national levels had been broadly successful with no major difficulties or problems noted. The Group also took the view that the arrangements introduced by the 1992-93 review remain the most practicable and effective means of delivering support to the Scottish tourist industry and that, as such, there is little or no scope for transferring major Board functions to those other bodies considered to be the most likely alternative means of delivering such services, ie ATBs, local authorities and the Enterprise Networks. It also noted the responses to the consultation exercise which, while critical of STB's current approach on a number of issues relating to the discharge of its duties, failed to reveal a strong body of opinion in favour of the wholesale or partial transfer of functions outwith the Board. Virtually all respondents envisaged a continuing role for STB (though, in some instances, as a radically altered or even retitled organisation).

3. The overall conclusion drawn by the Steering Group is that, in view of the outcome of the 1992-93 review, its positive impact, the absence of any developments likely to undermine the continued relevance of its recommendations, and the lack of any strong pressure for change (as evidenced by the consultation exercise) there is no case for complete or partial abolition of STB and transfer of some or all of its major functions to another provider. This decision should not, however, be seen as an endorsement of the status quo. The Steering Group also recognised that the consultation exercise had revealed a number of concerns as to the way in which STB delivers its functions. The Group also concluded therefore that action is called for on a number of issues but that such changes as are necessary will centre on the refinement or improvement of the functional responsibilities and relationships introduced by the 1992-93 review. This is discussed in more detail in the following chapter.

4. The possibility of STB functions being rationalised within the wider UK context was also considered under this heading. It was noted that establishment of a single statutory body encompassing the current responsibilities of BTA, ETB, STB and WTB has been mooted on a number of occasions. The Steering Group recognised that, in principle, STB's functions could be absorbed within a single British Tourist Board. It noted, however, that such a move would not be possible without amending primary legislation. More significantly ­ and bearing in mind the advent of a Scottish Parliament ­ it would run counter to the Government's policy of retaining responsibility in Scotland and of bringing decision-making closer to those interests most directly affected. For these last-named reasons, the Steering Group rejected the possibility of STB functions being exercised by a body with pan-British responsibilities.

Contracting Out En Bloc (Contractorisation)

5. The contracting out of all Board functions under this option would not require the continued presence of STB. The Department would place and manage the contract. It would also set the strategic tasks and goals for the contractor who would otherwise be completely responsible for the operational activities designed to meet those goals. In such circumstances, STB would need to be abolished: such action would require primary legislation and would incur wind-up costs.

6. The consultation exercise revealed no strong body of opinion in favour of contractorisation. Where views were expressed, respondents clearly felt that there were no private sector bodies capable of undertaking this task. Most, if not all, respondents were however commenting from the viewpoint of the tourism industry and, in that context, this is a perfectly reasonable conclusion. Looking beyond the tourism sector, it has to be acknowledged that there are a number of organisations specialising in operational or facilities management. Any of these bodies could, at least in theory, provide such a service. Accordingly, the Steering Group acknowledged that it could not reject this particular option simply on the basis that there are no private sector bodies capable of undertaking the Board's functions.

7. Consideration was then given to whether there would be any practical value in contractorisation. In other words, would a private sector body deliver the same or better performance as that offered by STB for the same or smaller budget? The only way in which this could be conclusively tested would be for all the Board's functions to be put out to competitive tender. This would be a radical measure and a number of issues need to be borne in mind.

8. Firstly, there is at present no single provider of functions identical to those undertaken by STB and the Department would, in essence, have to create a completely new market by seeking appropriate private sector interest. There could be no guarantee that such interest would be forthcoming. Assuming interest did exist, then the involvement of the private sector on this scale would be worthwhile only if it could result in a more cost effective service and/or materially improve the quality of the current service. As stated above, the only sure measure of STB's cost effectiveness is to expose its functions to competitive tender. In order to reach a decision on whether this should be done, STB's main functions were examined to establish the scope for efficiency savings: this process is described in more detail in paragraphs 17-19. Overall, this exercise concluded that there was little scope to improve cost effectiveness. On quality of service, the evaluation of STB's performance confirmed that current standards are satisfactory and, while further improvements may be possible, there is no compelling need to pursue these by means of contractorisation.

9. Secondly, the substitution of one service provider for another, both initially and possibly at regular intervals thereafter, would pose practical problems in terms of handover and possible short-term disruption and could prove costly to implement. It might also impede the handling of long-term initiatives such as Project Ossian (which is a major IT project ­ described in paragraph 20) and Autumn Gold (which is an ongoing marketing campaign aimed at boosting visitor numbers in the autumn and subject to regular review and refinement.)

10. Other factors that might serve to make contractorisation more difficult or less desirable include:

­ range of activities ­ as noted in paragraph 18, the Steering Group identified and considered thirty-seven discrete activities undertaken by STB. Tasks undertaken by the Board are, therefore, wide-ranging and often require specialist knowledge and expertise. It is not clear whether, in practice, a contractor would be able to deliver the required level of performance across the entire spectrum of Board activity and do so in a cost effective manner;

­ possible conflict of interest ­ it follows from the preceding point that a contractor would almost inevitably need to possess specialist knowledge of the Scottish tourist industry. Real or perceived conflicts of interest might arise, however, where a contractor has links with, or makes use of, specific tourism or leisure businesses. Such a development could act to undermine STB's role and relationships with the industry since, critically, a wholly effective working partnership with the private sector must rest on the Board's position as an impartial agent owing allegiance to no particular interest or set of interests within the industry;

­ STB's role ­ as explained in Chapter 7, STB needs to develop a more strategic and forward-looking role, centring on the provision of market information and the facilitation of industry action. It is anticipated that this change in the way the Board fulfils its statutory functions will take some time to implement in full. It seems sensible, therefore, to allow this development to take place under the present arrangements with the case for contractorisation re-examined at the time of the next quinquennial review; and

­ STB's past performance ­ the Board's past performance should have a critical bearing on any decision to contract out en bloc. If evaluation of the Board's performance revealed significant weaknesses, then there would be a much stronger case for concluding that contractorisation was an appropriate or, indeed, essential response. If, on the other hand, the Board's performance was regarded as perfectly adequate with no major defects, then it would be reasonable to conclude that the case for contractorisation was less strong.

11. As indicated in Chapter 3, STB's performance is regarded as generally effective. Taking this into account along with the other factors described above ­ in particular, the examination of the scope for efficiencies ­ there is no clear evidence that contractorisation of STB's functions is desirable or would improve the quality or the cost effectiveness of the current arrangements for delivery. The Group therefore rejected this option.

Agency Status

12. STB already operates under Next Steps principles and the main issue considered here therefore was whether there is any need to bring the activities of the Board under closer Ministerial control.

13. It was noted at the outset that, in terms of overall policy towards NDPBs, the Government has publicly accepted the value of executive NDPBs and confirmed that it has no plans to change the working arrangements for those bodies which continue to serve a purpose. In terms of practical significance, moreover, the need for closer ties with Government was not an issue on which respondents to the consultation exercise sought action. It was recognised that the Board can act as a useful bridge between Government and industry and that its "arms length" status is valued by both the Board itself and its customers as a means of ensuring, in operational terms, independence of decision-making, advice and action. Some practical disadvantages were also noted. As with other options, adoption of Agency status would require STB's current position as a corporate body established by statute to be terminated and this would require primary legislation. It would also have the effect of increasing the headline number and cost of running The Scottish Office.

14. Given the lack of support for this option and the practical disadvantages likely to be encountered if it were adopted, the Steering Group concluded that there is no particular advantage to be had in conferring Agency status on STB. The Group therefore rejected this option.

Continuation of STB as a NDPB

15. As noted in Chapter 4, a decision to approve STB's continuation as an NDPB depends on the verdicts reached in relation to the preceding options. As the Steering Group took the view that none of these other choices was appropriate, it further concluded that STB should continue to function as a corporate body established by Act of Parliament.

Market Testing of Individual Board Functions

16. Having decided that STB should continue as a NDPB, the Steering Group then considered whether any of the Board's individual functions could be carried out by the private sector.

17. The Group's first step was to consider the extent to which STB already contracts out its activities. Table 6.1 is an estimate of the amount spent in purchasing services from outwith the Board. It reveals that, in 1997-98, approximately 60% of the Board's programme costs were spent in this way. The Group noted that this figure represented an extensive use of contractors and was fully in line with Government policy on the development of high quality public services in partnership with the private sector. It was also noted that this relatively high level of expenditure would have the practical effect of reducing the scope for further contracting out. Nevertheless, the Group decided to review the Board's activities in detail.

Table 6.1: Budgetary Summary and Estimate of Services Contracted Out ­ 1997/98

18. Board activities were considered at the sub-divisional level. Thirty-seven discrete activities were identified and examined. These were as follows:

STB Division	Activity
UK Marketing	Strategy and Management
	UK Consumer Advertising Campaigns
	UK Direct Marketing
	UK Consumer Promotions, Trade Liaison and Consultation
	UK Consumer Exhibitions
	UK Brochure Production and Photography
International Marketing	Strategy and Management
	Consumer Campaigns in Prime and Secondary Markets
	Liaison with Overseas Travel Trade
	Overseas Publications/Internet
Scottish Convention Bureau	Strategy and Management
	Business Tourism Activity in England
	International Business Tourism Activity
	Publications/Internet/IT and Enquiry Service
	Exhibitions and Events
Visitor Services	Strategy and Management
	Information Services
	ATB Grants and Support
	Quality Assurance
Planning & Development	Strategy and Management
	Strategy and Policy for the Industry and STB
	STB Planning and Evaluation
	Industry Support
	Industry Monitoring
	Product Development
Press and PR	Strategy and Management
	Consumer PR ­ Press Trips
	Consumer PR ­ Support, Joint Schemes and Campaigns
	Corporate PR
	Corporate Events
Finance and Administration	Strategy and Management
	Financial Control and Management
	Corporate IT
	Administration
Human Resources	Strategy and Management
	Training and Development
	Recruitment

19. The Group tested each item against a number of agreed criteria. These were:

­as a first step, the identification of those activities which are essential to the achievement of the Board's key objectives, ie its core tasks, and those which are supplemental or incidental to the achievement of those objectives, ie its non-core tasks. The Group recognised that the definition of what constitutes a core or non-core task must also extend to consideration of whether the current arrangements for service delivery offer best value for money. Critically, therefore, it also had to decide whether there were any reasons why STB staff should be responsible for carrying out each activity;

­the value of the activity in terms of gross and net costs (and levels of staffing);

­the extent to which the activity was already contracted out;

­the availability of market provision; and

­the level of contract management costs likely to be incurred if the activity was contracted out in full.

20. Taking account of the above criteria, the Group's conclusion is that, in most cases, there is no further scope for market testing. A small number of activities were, however, identified by the Group as worthy of comment or as candidates for further consideration or action. These were as follows.

Scottish Convention Bureau

The Bureau is the Board's business tourism arm which is concerned with the development of specific segments of that market. While the Group accepted that business tourism was a significant and valuable element of the Scottish tourist industry and that there was a case for some form of public support, there were reservations about the current scale of such support, the means by which it is delivered, and the distribution of resources between the English and overseas markets. The Group noted that most Area Tourist Boards now operate business tourism departments and that Scotland's major conference centres are also active in the marketplace. Moreover, the Group sought assurance that UK companies seeking a conference location could not, through direct liaison with the larger private operators in this market, reach correctly informed locational decisions without assistance. On the basis of the information available to it, however, the Group was unable to reach definite conclusions on these issues. It therefore recommends that further consideration be given to the Board's arrangements for business tourism as part of the second stage of the Review with further analysis, conclusions and, as necessary, recommendations contained in the report on that stage. This further exercise will involve Scottish Convention Bureau personnel together with industry and ATB representatives. (This recommendation does not extend to the Bureau's exhibition and events function which is a distinct and separate support activity operated on a pan-Board basis and which is commented on in the following paragraph.)

Scottish Convention Bureau ­ Exhibitions and Events

A unit within the Bureau manages STB's exhibitions and events programme in the UK and overseas. The actual delivery of these activities is already extensively contracted out to external operators. The unit's role is to plan, commission and monitor the work of these contractors and act as a link with the Board's trade partners where joint action is being undertaken. The Steering Group accepted that this role is best discharged by specialist staff within STB. As part of this exercise, however, STB took the opportunity to review the unit's likely future workload and concluded that staffing levels within the unit should be reduced from 4 to 2 or 3 full-time staff. Action has been taken by STB to implement this decision. The Steering Group endorses the Board's action.

Visitor Services ­ Information Services

This function provides information to potential visitors to Scotland through a unit based in the Board's Edinburgh office and through its London Travel Centre. The STB and ATBs (via their 160 Tourist Information Centres) service over 12 million enquiries per annum. STB has recently completed (outwith the Review) a study into the information services currently provided by itself and ATBs. The study has demonstrated that STB and ATBs generate in excess of 2 million telephone calls per annum but that a high level of these ­ perhaps as many as 25% ­ remain unresolved. STB and its ATB partners accept that this is an unsatisfactory situation and options are now being looked at for the future delivery of this service. The Steering Group concluded that the future operational delivery of this function need not necessarily be undertaken by the Board itself. The Group recommends therefore that STB should bear this particular option in mind and formally notify the Department of its final decision in this matter.

The Board is also leading a major IT initiative ­ Project Ossian ­ which will support and promote tourism in Scotland and which has the potential to change the way in which Scotland is marketed and the way in which information and services are provided to visitors. It will for example provide an on-line booking system for accommodation and events and also serve as a source of management information. The implications are industry-wide and will involve ATBs, the local enterprise networks, tourism operators and visitors themselves. It should be in place by the year 2000. Again, the operational delivery of the system need not necessarily lie with STB and the Board plans to consider contracting out as an option. The Steering Group endorses this proposed approach and recommends that the Board formally notify the Department of its final decision in this matter.

Visitor Services ­ Quality Assurance

This function covers the oversight and delivery of a series of classification and grading schemes covering the Scottish tourist industry and primarily its accommodation sector. The Steering Group acknowledged the role played by such schemes in stimulating qualitative improvement and, in so doing, enhancing the industry's performance. It endorsed STB's continuing involvement in this area of activity but noted the existence of action taken elsewhere ­ principally, in Wales and the Republic of Ireland ­ to contract out the operational delivery of quality assurance schemes. It considered whether circumstances in Scotland were such as to justify retention of this particular aspect of scheme management and concluded that they did not. The Group therefore recommends that steps are taken to market test or contract out the operational delivery of STB's quality assurance programme and that such action is completed by 31 March 1999. As with the precedents noted elsewhere, STB would retain strategic direction of this function.

Planning and Development ­ Industry Monitoring

This function relates to the monitoring of the Scottish tourist industry's performance through a series of surveys. With one exception, these surveys are undertaken by contractors with STB's involvement normally limited to management of the contracts and the analysis and dissemination of results. The only survey currently run on an in-house basis is the Board's Visitor Attractions Survey. Consideration will be given to contracting out this survey during 1998. The Group endorses this proposed approach and recommends that the Board formally notifies the Department of its final decision in this matter.

Press and PR ­ Press Trips

This function relates to the organisation and management of visits to Scotland by UK and overseas journalists with a view to generating favourable media coverage. The Group agreed that, while there might be scope to market test some aspects of this activity, present prospects were uncertain and further action need not be taken as part of the Review. It also agreed, however, that STB should keep this matter under regular review and recommends that the Board formally notifies the Department of its conclusions.

Press and PR ­ Corporate Events

This function relates to the organisation and management of a small number of corporate events, principally the Board's Thistle Awards ceremony and its annual industry conference. Although management of these events has been undertaken effectively on an in-house basis, STB recognises that there is considerable scope for contracting out this function and has taken the decision to pursue this particular option. An external contract has therefore been awarded in connection with the management of the Thistle Awards event and consideration is being given to contracting out the Board's industry conference. The Steering Group endorses this course of action and recommends that the Board formally notifies the Department of its final decision in this matter.

Finance and Administration ­ Financial Control and Management

This function involves the operation of STB's financial management systems. While the Steering Group agreed that there appeared to be no further scope for contracting out, it was felt that action should be taken to benchmark finance functions. The Group noted from the Finance and Administration Division's current business plan that one of its objectives is to improve quality standards and to measure these standards by benchmarking with other Divisions of the Board and private and public sector bodies. The Group endorses this proposal and recommends that STB expedites action on this exercise so as to ensure that, at the latest, results become available during the second stage of the Review. The Group also recommends that, as part of the second stage of the Review, consideration is given to the wider and more regular use of benchmarking by the Board