Public audit takes shape in DA Partnership?

GARETH DAVIES is confident in the chances of DA Partnership, an employee-owned enterprise spun out of the Audit Commission.

"I'm not contemplating not winning," he confided, and has no Plan B if the fledgling mutual fails to win public audits in the upcoming tender process.

Davies (pictured) has been given a leave of absence from the commission, where he headed up the audit team. This responsibility, coupled with 24 years' sector experience, made him "right for the job". "I feel strongly that this is a valuable opportunity, and that the commission's audit practice should not be broken up."

The need for total independence means Davies' costs and those of a fellow commission employee are being met by an un-named partner. When the pair returns to the public audit body in mid-December, it will not be to the office where bids are evaluated.

The mystery partner is key in this process, stumping up the finances to launch a fully-fledged firm. "Finder a backer was really the acid test," said Davies. Although the mutual will be majority-owned by employees, the partner will take a cut of the spoils.

All will be revealed next week, with Davies promising more information on partner, funding and administrative issues "once they have been finalised".

What we do know is that the enterprise will be set up along the lines of John Lewis, where an employee benefit trust holds most of the shares. DA Partnership will have a board with a majority of non-executive directors and a few executive directors, of which Davies "will probably be one".

Being a mutual should help the brand, Davies said, as it will be "attractive to our core market".

But will it be attractive to staff? A poll in March showed almost 90% of Audit Commission employees were keen to join the mutual, and enthusiasm apparently remains high.

Creating a fully-fledged company from nothing is challenging, but the way commission contracts will transfer to firms is key. Audits and their auditors will move as a package, meaning that if DA Partnership wins a contract, it automatically takes on the requisite staff.

The same cannot be said for executives or administrators, and Davies admitted this is one of the major challenges facing the mutual. "The question is, when can people be released from the commission?" Balancing finances with the requirements of a new outfit will be tricky, but also applies to other firms that won't necessarily have teams in place to take on major, regional contracts.

Contract winners will be announced at the end of February 2012, and DA Partnership will have until the end of October to become fully operational.

Rising from the ashes of the Audit Commission is the mutual's blessing and its curse. On the one hand, clients might be eager to protect strong working relationships and confident in the abilities of commission staff. On the other hand, a completely new enterprise might prove a daunting prospect for risk-averse local authorities.

DA Partnership will have to compete on price and quality, and must win a large enough proportion of contracts to make it viable. Around 70% of the commission's work is out to tender, but new rules mean just 40% can be won by a single firm.

Of this reduced pool, how much can the mutual wrest from larger, more established rivals? Davies doesn't know, but he's prepared to struggle every step of the way.