18 January 2008
Local authorities should not 'be seduced' into doing deals with the private sector unless they have the necessary expertise to achieve value for money, the Audit Commission has warned.
The public spending watchdog says that before councils sign large-scale and complex contracts, they must make sufficient resources available to manage them and ensure that they have the necessary in-house expertise.
If these essentials are not put in place at the start of public-private partnerships, unclear service objectives and poor performance management can be the result, according to the commission. Contract flexibility to respond to changing circumstances is another vital ingredient for success.
The commission's January 17 report, For better, for worse, concludes that some authorities 'rely unduly on the language or spirit of partnership, believing erroneously that contractors will pursue shared goals without incentives to do so'.
It also concludes that many contracts have 'failed to live up to expectations', with predicted cost savings and service improvements never materialising.
The report, which says more than half of all councils have entered or are poised to enter PPPs, examines 14 partnerships worth £2.6bn and covering activities such as council tax collection, property management and IT services. Three of these have been terminated because the failures were so severe.
Commission chair Michael O'Higgins urged authorities to ensure they knew what they were getting into. 'Complex, long-term partnerships with the private sector can succeed, but they're far from easy. All partnerships are risky. Even within the private sector, two out of every three fail. Our report highlights the opportunities, but also the challenges, of partnerships,' he said.
'Local authorities should not be seduced by the warm language of partnerships. Robust option appraisal before being committed, designing flexibility into the arrangements and strong contract management from the start, are the vital ingredients for success.'