Recent public sector outsourcing scandals have prompted a government review. It needs to go much further than currently envisaged, and question many of the assumptions surrounding contracting
Senior executives have resigned - and now the Cabinet Office is undertaking a review of all UK public sector service contracts involving Serco and G4S - following recent scandals and some very serious allegations which are now the subject of Serious Fraud Office and other investigations. This review is being led by the government’s chief procurement officer, Bill Crothers.
He is already reported as saying that there has been poor contract management in a lot of areas. He is also reported as stating that government departments get the suppliers that they deserve. This repeats many of the findings of a report by the Institute for Government earlier this summer – Making public service markets work.
Whilst there is certainly much truth in the accusation that many government departments and some other parts of the wider public sector are weak in terms of procurement and contract management skills, we need to acknowledge that there are wider issues at stake here.
It would be wrong, for example, to assume that all the problems with the high profile Serco and G4S public service contracts are the fault of poor procurement and public sector contract management. And it would wrong to simply assume that there would have been no such problems if there had been better client management. Equally it would be both naïve and prejudiced to assume that the public sector client had no responsibility for what has happened.
The reality is that as yet, we just do not have all the evidence but much has already been published that will cause many to question those involved (providers and clients) and the underlying outsourcing model.
We do, however, know that there have been other allegations and, indeed, actual instances of false returns being made by other contractors. We also know that there have been some spectacular performance failures across a range of public sector outsourcing contracts over the last few years. And of course, there have also been some major service failures within directly managed public services.
Meanwhile, the government seems intent on outsourcing more and more public services, as do so some (but by no means all) local authorities. Many politicians, advisors and public sector executives are seeking to push outsourcing beyond ‘back office’ support, IT and related administrative services into the core of the NHS, education and other complex personal services (social care having led the way with some very mixed results).
Given this mixed and confused picture, I wonder if it might not be prudent for government and the wider public sector to pause and consider the outcome of these various cases and investigations before proceeding with major outsourcing procurements, especially in unchartered areas such as probation and rehabilitation services.
I would suggest that the current review of contracts, public procurement, contract management capacity and capability should be accompanied by a much more strategic and fundamental review to address wider matters. These would include issues in respect of public service outsourcing such as how to ensure:
- accountability of providers, clients and the continuing accountability of the public sector and politicians
- transparency including the application of the Freedom of Information Act
- service user and wider public involvement in strategic commissioning and public procurement processes and all aspects of related decision making, including initial ‘make or buy’ decisions
- social and public value as well as value for money and public service
- opportunities for social enterprises, staff and user-led mutuals, voluntary and community sector organisations and SMEs; and to explore how such organisations can deliver public services through collaborative arrangements with the public sector and not only via competitive procurement processes
- the most advantageous application possible of the proposed new EU procurement regulations to secure public policy goals and social value
- decent employment conditions and terms for staff delivering outsourced services
- methodology to determine the appropriate risk transfer between and management by both clients and providers given that in practice, most risk cannot be moved away from the public sector
- the means to take into account a provider’s previous track record, including wider ethical and performance issues, its remuneration, and tax policies and practices
- an opportunity to consider providers’ proposed business models and their potential implications for service quality and sustainability as part of a procurement process, and have some ‘control’ over any significant changes to either a provider’s business model and/or ownership post-contract award (think Southern Cross)
Such a review could also consider the impact and effectiveness of public service outsourcing over the last few decades, and whether it is more or less appropriate in certain sectors and specific services; and the wider macro-economic and social impact of this policy and practice. The latter would require some complex economic and social research and analysis but given the political desire to extend the volume and scope of public service outsourcing, it could provide the long-absent evidence base.
Some testing of public opinion on outsourcing public services to the business and social sectors would also be very timely, and help inform public policy and management.
Over the next few years, public expenditure is going to be very constrained, with more cuts across many parts of the public sector and many services. There is a real danger that politicians and public sector managers will turn to very crude price driven public procurement and outsourcing in the hope of making the available money go further, and in so doing will undermine service quality and public confidence.
The government and other political parties have to be bold and consider the broader issues now, rather than assuming that everything will be alright if only the public sector client function was stronger. I suggest that this is the time for some fundamental questions about both practice and principle of traditional public service outsourcing.
