Public confidence in partnerships between the public and private sector has been shaken recently.
High profile failings like the collapse of Carillion have exposed flaws in the business models of some companies which deliver public services, but extract rather than create value.
With austerity as a backdrop driving the need for cost-cutting, contracting with the private sector may have been viewed as the “cheaper” option.
But the public sector - via the taxpayer - ultimately picks up the costs for failed contracts further down the line.
In the local government sector, there is evidence that shifts are underway in partnerships with private providers.
New research published today by NLGN finds evidence of a declining appetite for outsourcing amongst councils.
Our survey of leaders and chief executives found that only 15% said they intend to outsource more over the next two years. Thirty-nine per cent say they will outsource less and 46% indicate no change.
But these findings don’t equate to a diminishing role for the private sector in public provision per se.
They are reflective of a wider trend in which many councils are seeking more control over service arrangements, driven by funding and demand pressures.
New and innovative forms of partnership are emerging, such as increasing numbers of joint ventures for housing delivery.
The lines between public and private are blurring somewhat as councils seek ways of becoming more ‘commercial’ themselves in order to be financially self-sufficient – for example by setting up trading companies or investing in capital assets to generate revenue savings.
The nuances of this evolving and complex landscape of partnerships are lost in an increasingly polarised national political debate which can be broadly characterised as ‘in-house versus outsourcing’.
On the one hand, the Labour Party is adopting an increasingly rigid position on taking everything back in house.
This assumes an increasing role for the state as direct provider and appears to have a blind spot for the increasingly diverse provision led by the voluntary and community sector.
On the other hand, the Conservative Government seems content to take a ‘business as usual’ approach to a continued faith in outsourcing public contracts.
This stance involves simply reacting to crises ad hoc rather than getting out ahead with a reformed system that would prevent them emerging in the first place.
Neither view fully addresses the core challenge at the heart of public services: rising demand.
‘While the private sector may bring expertise, skills and commercial acumen to a project, a confident public sector needs to exercise clear accountability, use procurement creatively to drive social impact and encourage transparency of the public pound wherever it flows.’
Fuelled by demographic changes, increasing complexity and shifting public expectations, public services themselves need to adapt – with or without budget cuts.
They need to become increasingly capable of preventing problems happening in the first place – shifting away from crisis management mode and intervening earlier.
This means finding new ways of working which give frontline staff more autonomy, fostering deeper collaboration between services, and putting people themselves at the heart of approaches.
In this context, the future for partnerships between the public and private sector needs to be built on the overriding imperative to drive deep social impact with public spend.
Our research identifies that at their worst, partnerships between the public and private sector assume a transactional mode that can be territorial, process-driven and take a narrow view of contracts.
This can involve being overly rigid in adhering to the bottom line, with the dynamic between partners being one of risk-avoidance and passing the buck.
What is increasingly required of partnerships is a greater sense of shared endeavour and long-term value creation, based on recognition of each partner’s innate roles.
While the private sector may bring expertise, skills and commercial acumen to a project, a confident public sector needs to exercise clear accountability, use procurement creatively to drive social impact and encourage transparency of the public pound wherever it flows.
Our report sets out a range of measures to achieve this.
An accountability code of conduct should govern private sector practice, and open-book accounting should be implemented for large contracts over £1 million.
Data capture should be much more effective and generate usable information about return on investment from different companies and projects.
This would deepen the public sector’s insight when making decisions over who to contract with and how.
Most importantly, partnerships between the public and private sector need to involve a third party at their core: people themselves.
There is scope for a more active role of the public in the design of local projects and oversight throughout.
The Områdeløft urban regeneration projects in Copenhagen, funded by a combination of municipal and private finance, demonstrate how this could work in practice.
Residents contribute to the planning stage; through regular steering groups throughout implementation; and explicitly in an anchoring stage after project completion to ensure sustainability beyond the life of the contract.
This long-term approach, which puts people at its core, is worth considering across the range of different partnership models that are evolving.
Public or private, in-house or outsourced: ultimately wherever the public pound is spent needs to be accountable to, and generate real value for, people themselves.
Only through a determined strategy of opening up ‘closed door’ practices and involving the public in meaningful ways will public trust be rebuilt, and partnerships be fit for the future.
From Transactions to changemaking: rethinking partnerships between the public and private sectors is published by NLGN and available here.
