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John Tizard: Wales can lead the way and move on from outsourcing public services

Monday February 25th, 2019

This article is based on a report which I co-authored with Dr Megan Mathias for the Wales Centre for Public Policy on public service stewardship and moving beyond contracting. The report was published earlier this month. It can be found at https://www.wcpp.org.uk/commentary/beyond-contracting-public-service-stewardship-to-maximise-public-value/.

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John Tizard

The public sector in Wales spends over £6bn per year on the procurement of services, works and goods. No one knows the breakdown in terms of broad expenditure category (services, works and goods), how much is spent with suppliers within Wales or beyond, or how much with the voluntary community, social enterprise or corporate sectors.

Traditionally there has been much less outsourcing and contracting of public services in Wales than in England. However, it is important to know what is spent on what; but, as in the wider UK, there is a lack of data and basic information on how this expenditure is actually spent, on what, with whom and to what end.

The report makes the case for establishing a ‘Domesday Book’ to record data and information on all significant public service contracts in Wales – and ideally for this Domesday Book to be linked to a similar one in England. Government may respect national boundaries, but contractors work across them, so any analysis and data for Wales should be linked to that in England.

I have co-written a report for the TUC on the case for such a Domesday Book and how it could be used – A Domesday Book for public service contracts – better data, better value for money: https://www.tuc.org.uk/sites/default/files/Domesday%20Book%20for%20public%20service%20contracts.pdf

In Beyond contracting: public service stewardship to maximise public value the case is made for the Welsh Government establishing a national policy framework and regulation to define which services might be considered for outsourcing and which should not be. There is a strong case for setting the default model as in-house provision of public services and requiring that public bodies have to justify and prove that there is a public interest in not managing the services in-house.

The Government of Wales can show leadership in this approach ahead of the UK Government and the Scottish Government.

These are political choices, and through their stewardship of public services political bodies at national and local levels should adopt strategic ‘make or buy’ criteria to inform judgements on delivery models.

Given that there is so much less outsourcing and contracting of public services – in absolute and proportional terms – in Wales this would not be a difficult decision and would reflect the political priorities of the Welsh Government. It could trailblaze.

Recognising that there is likely to be some outsourcing even with the default being set as in-house provision, the report further argues that if public bodies decide that they wish to outsource then they should be required to consult stakeholders; set out their objectives so they can be held accountable for performance after contracts are let; be transparent and require their contractors to be so; and adopt procurement policies and contract terms that ensure the contract and contractor act in the public interest. They also must ensure that they have the necessary professional capacity and commercial nous to be effective clients – for the reality is that many failures in outsourcing are caused by poor procurement and contract management. Finally, they should adopt policies and practices which are proportional to both the potential risks and the size and complexity of the services.

Given that there are a number of outsourced contracts in existence, some of which will have many years to run to their conclusion, the report recommends that these should be systematically reviewed by public bodies. Where there is a public interest in so doing, they could be renegotiated or even terminated. It is important that public bodies adopt criteria for undertaking such reviews. These criteria would include the remaining length of the contract, the cost of termination or renegotiation, the capacity to take the service back in-house, and current performance. Such reviews would require significant commercial skills and it is proposed that these should be organised on a national or regional basis within Wales.

Wales is in a better place than England to develop a more sophisticated approach to public services, one which goes beyond contracting out and outsourcing and sets the default as in-house provision. This approach should be embedded in the political stewardship of public services with a clear objective to maximise public value. I am confident that the appetite to pursue such an approach is strong in Wales, and that procurement officials are ready to respond to political leadership.

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