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John Tizard: A responsible government would pause and review outsourcing – and ideally stop it

Thursday June 28th, 2018

Only a matter of a few months after the collapse of Carillion and the resultant mayhem and following a sleuth of public service outsourcing failure, the Cabinet Office Minister, David Lidington, has announced that the Government will press ahead with more outsourcing.

John Tizard

John Tizard

This is another example of government ignoring evidence and indeed not even trying to review what evidence there is.

The Minister stated that public services “can be provided more efficiently at lower cost and at better value” by involving the private sector. He also stated that the benefits of “outsourcing are clear”. Where is his evidence?

I challenge Mr Lidington to produce the evidence to back up these assertions.

I would also like to hear him explain how he is confident that the Government and wider public sector can be successful outsourcing clients, given the NAO report on the Government’s handling of Carillion as a public service contractor. This report was one of many that has raised some very serious questions about the ability of the public sector to let and manage complex procurements successfully.

After decades of public service outsourcing and even with the expansion of outsourcing into service areas such as education and the NHS, welfare benefit assessments and much more, there has been no systematic review of the policy and its impact.

It would have been more reassuring and better government had the Minister announced such a review rather than apparently signalling an intention to unleash more outsourcing.

The Government and the entire public sector has scant basic data and information on fundamental issues such as the volume and value of public sector outsourcing, the market share of suppliers (and there are a few very dominant companies) and their performance –let alone the financial benefits, if any, of outsourcing or its economic cost.

The Treasury Green book requires public bodies to take the wider impact into account when they consider outsourcing – e.g. reduced staff pay or reductions in staffing numbers will have a cost to local economies and to other government departments.  Yet it is rare for such considerations to be taken into account when outsourcing.

Therefore, it would have been much more prudent for Mr Lidington had announced that the Government was going to pause further outsourcing and that he was calling on local government, the NHS and other public sector bodies to do the same pending a comprehensive review.

Such a review could consider the long-term economic, social and financial costs and benefits of public service outsourcing; identify where it has worked and where it has not, and why this is the case; analyse the supply market; gain a robust understanding of risk management and risk to the public sector of outsourcing especially when contractors fail; consider the impact on public accountability; and much more.

In my view there is a need for a new set of regulations to protect the public interest and for a new regulator. This regulator could set up a central database on all significant contracts and contractors, and ensure that the new social value measures announced by Mr Lidington and other public interest issues are taken into account when the public sector contracts. If the Government were to set the default option as publicly managed services, which I believe it should do, the regulator could test that a proper holistic public interest assessment has been undertaken before any new procurement commences,

Pressing ahead with more outsourcing on a whim based on assertions and ideology is neither sound nor prudent government.

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