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Public service outsourcing transparency must be more than skin deep

Tuesday November 4th, 2014

The Government is considering introducing new transparency rules for major public sector contracts for the delivery of public services. This is most welcome and long overdue.

It follows National Audit Office (NAO) reports and comments from the Public Accounts Committee and trade unions as well as many commentators and organisations interested in both public accountability and effective public services. Indeed, even the CBI has proposed some limited extension of disclosure and transparency, including placing requirements on businesses that are contracted by government.

The tide is turning. The Government-led review of the transparency of public service contracting offers a real opportunity to introduce some fundamental reforms. It would therefore be deeply unfortunate if the Government compromised too much, too soon.

Any new regulations (and I would argue that there is a need for statutory regulation, not simply a voluntary code), will need to be drafted by those who understand the nature of public service outsourcing, outsourcers’ business and finance models, and the principles of public sector accountability and the standards for public life. The latter should apply to key personnel from outsourcers from ‘all’ sectors (and, for the sake of clarity, I specifically include here the voluntary and community sectors) if they are responsible for, or can significantly influence the nature of publicly funded public services. There should be no two-tier differentiation between outsourcers and their key personnel in the public, business, social, voluntary and community sectors if they are managing critical public services and public money.

Any transparency and disclosure should start with the public sector client. They should be required to publish and consult on the business case for any planned outsourcing long before they commence a procurement process. They should also disclose any pre-procurement relationships with potential bidders. Such dialogue is vitally important and should be encouraged. If disclosed at the time it happens. I recognise that this could be problematic, but such information must be in the public domain by the time that the business case for outsourcing is published.

Similarly, there is a case for disclosing post-contract award relationships and meetings between outsourcers and representatives from a public sector client body but again, in ways which do not hinder effective service delivery and development or good contract management.

In terms of the obligations on outsourcers, I believe that there should be a simple principle that always applies: ‘if in receipt of public money to deliver public services and/or make a significant impact on the quality of life of citizens, outsourcers will be transparent and subject to full scrutiny by politicians, inspectorates and auditors such as the NAO and other external inspectorates and regulators.’

That said, I am not suggesting bureaucracy gone mad. The application of this principle should be enshrined in regulations and contracts in ways that are always ‘proportionate’ to the monetary value or political and/or service sensitivity of the contracts and the service involved. They should neither be overly bureaucratic nor discriminate against SMEs, social enterprise or voluntary and community sector outsourcers.

In addition, there may be a case to suspend the publication of some information close to the start of a new procurement process but, again, this exemption must not be over-used deliberately to obfuscate.

In my view, it is reasonable that such regulations should, taking account of the caveats noted above re proportionality, place the following requirements on outsourcers and/or their public sector client to:

·    publish all contracts or joint venture legal agreements except in the most extraordinary circumstances such as national security and even then, these contracts should be available to the relevant Parliamentary committees and the NAO
·    publish audited and verified statements on contractor’s operational and financial performance, with access to relevant information, systems and personnel for the NAO, internal public sector auditors and their external auditors
·    adopt standardised accounting procedures and practices including annual independent audit for ‘open book’ accounting and more generally for public service contracts
·    disclose all financial flows between and within contracts and joint venture companies – so as to capture internal trading that outsourcing companies practice for support such as IT, consultancy and support services
·    publish the provider’s business plans
·    publish details of supply chains and supply chain management, risk transfer and payments
·    ensure visibility of the ownership and company structures of all bidders and contractors
·    publish employment, remuneration and tax policies and practices of all outsourcers
·    publish clear and regular reporting on the contract’s added social value
·    require outsourcers to submit themselves to political scrutiny processes
·    ensure the Freedom of Information Act is being applied to all outsourcers and public sector commissioning, procurement and contract management
·    publish details of the contract and, where appropriate, the contractor’s supply chains, monitoring and management processes; and their interventions, especially if these might lead to financial penalties and/or contract variations (and to report on such penalties and variations)
·    disclose details of relationships between outsourcers and decision makers/influencers in the public body
·    publish regular reports on the costs of procurement, including the use of external advisors, and contract management for individual contracts

I recognise that there are times and occasions when confidentiality will be required and/or when disclosure may need to be restricted to defined public sector bodies, inspectorates and auditors to protect national security, commercial confidentiality during procurement processes, intellectual rights (though if the public sector is paying for these, they should be open to the public after a certain period of time after their introduction) and wider public interest considerations.

There is the added issue of proportionality and the need to avoid placing undue bureaucratic burdens on small suppliers – regulations should never be applied in such manner that they block new entrants to the market. The measures that I am advocating ‘must’ be proportionate, and some consultation will be essential between the public sector and the provider community, especially smaller businesses, social enterprises, and voluntary and community organisations. However, the default position should always be openness and there should be appeal processes available when disclosure is denied.

The case for transparency to underpin accountable and public service efficiency is overwhelming and growing almost daily.  It is to be hoped that that Government will seize the opportunity to introduce radical and practical measures, which will help to restore public confidence in the public sector’s stewardship of public service and public expenditure.

John Tizard
Online: www.johntizard.com
Twitter: @johntizard
Linked In: John Tizard

Gov Opps’ training partner, PASS (Procurement Advice & Support Service) runs training events for both the public and private sector. These include the New EU Directives, Ensuring Compliance with the New Tender Process and an Introduction to Public Procurement. Click here for more info: http://www.passprocurement.com/what-we-do/training/

1 Comment

  1. Helen Mackenzie

    Very interesting points you raise here and if you think you need a code then fair enough.  What I find a bit troubling about this whole debate is it starts from the assumption that everyone in public procurement is trying to do things behind closed doors and transparency is a thing to be avoided.
    As we’re getting better at the whole process of public procurement up here north of the border in Scotland, the best practice steps you’ve outlined above are falling in to place.  We’ve done this through a clear path to improvement (the procurement capability assessment) and supportive regulation and legislation, the pinnacle being the Procurement Reform (Scotland) Act 2014.
    I would suggest that it will be through a combined process of transforming the way we think about and do procurement coupled with some statutory regulation that the utopian transparency you seek will emerge.
    The constant lambasting of public procurement in the media and blogasphere is not the way to insprire a community of practitioners to improve.  Let’s start covering all the good things we’re doing and turn ourselves outward to the great things we have and will achieve.

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