Government outsourcing guidance calls for risk clarity

22 Feb 19

Government outsourcing guidelines have been released aimed at making the public sector a “more attractive client” to private suppliers.  

The government’s ‘Outsourcing Playbook’ advised contracts make clear from the outset which organisation bears the most risk – be it the private or public sector, and that the risk is allocated to “the party best able to manage it”. The organisation that takes on the most risk would vary depending on each outsourcing project.

The playbook, published by the Cabinet Office on Wednesday, said: “Inappropriate risk allocation has been a perennial concern of suppliers looking to do business with government and a more considered approach will make us a more attractive client to do business with.

“Proposals for risk allocation should be subject to extensive scrutiny prior to going to market. Formal engagement should include the sharing of risk registers with prospective suppliers,” the document said.

The guidance also includes a requirement that for first-time outsourced services a pilot must be run first “in recognition of the inherent uncertainty of first-generation outsourcing”.

Decisions on whether value is more likely through outsourcing or in house provision - ‘make versus buy’ decisions - must be made “early in the preparation and planning stage”, under the new guidelines.

The guidance is further evidence of the government’s commitment to outsourcing as a model, as stated by Cabinet Office minister David Lidington in June 2018. 

Oliver Dowden, parliamentary secretary at the Cabinet Office, said: “Outsourcing can deliver significant benefits, including value for money and more innovative public services. Our new measures will improve how the government works with industry and provide better public services for people across the country.

“I can today provide reassurance that the playbook makes explicit that, when designing contracts, departments must seek to mitigate, reduce and then allocate risk to the party best able to manage it.”

Jon Lewis, chief executive of Capita, said: “These new ways of working will place a stronger focus on establishing partnerships based on mutual trust and a joint focus on positive outcomes. This is fundamental to the successful procurement and delivery of public-sector contracts.”

Measures in the playbook:

  • Requirement for pilots – enabling the government to learn from experience and deliver better public services
  • Risk allocation – to ensure contracts are set up for success from the outset
  • Key Performance Indicators – KPIs from every new outsourcing contract will be made publicly available
  • Resolution plans (living wills) – for the rare event of the supplier’s corporate failure
  • Publication of pipelines – departments will be required to regularly publish their upcoming requirements, to help suppliers plan ahead
  • ‘Make versus buy’ versus buy decisions – to identify when it is best to deliver public services in house or when there is benefit to drawing on the expertise of the private sector. 

Read PF’s investigation into the slowdown in local government outsourcing.

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