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A public service outsourcing enquiry would serve the public interest

Thursday January 7th, 2016

It is seemingly inevitable that the Government and many public bodies will press still further ahead with public service outsourcing in 2016. And whilst the political rhetoric will continue to promote a greater role for small and medium-sized enterprises (SMEs), charities, the voluntary and community sector, co-operatives and social enterprises – the reality is that most procurement policy will almost certainly be aimed at big companies, with major business sector corporates likely to be the beneficiaries of this outsourcing trend.

John Tizard

John Tizard

The Government is also committed to the biggest sell-off and privatisation ever of public assets, although this is quite different from outsourcing, which involves public sector organisations competitively contracting with external providers to run and manage public services in return for payment.  It is important to distinguish between the two.

Also, and much too frequently, successive governments and commentators have conflated ‘public service reform’ with public service outsourcing. Again, these are very different concepts though, of course, outsourcing may – in the right circumstances – be a means of securing reform.

It is fascinating also to note that, over the last few decades, successive governments have never adopted a consistent narrative as to their reasons for promoting or favouring outsourcing. The arguments in favour of outsourcing have ranged from a means of adding capacity to addressing underperformance to cost cutting to offering service users choice. This lack of consistency has been confusing and served to obfuscate accountability, including the public’s ability to decide whether or not outsourcing has been successful or effective.

Nevertheless, outsourcing has continued to expand in terms of values of contracts, the range of services and the various public sector bodies involved. Onwards, ever onwards, without any (or at least, little) questioning or material analysis of the impact.

In fact, the public sector has a very mixed track record in public service outsourcing, and in particular, too often misunderstands how to manage the risks associated with such practice. For a start, the public sector cannot transfer or outsource its accountability, and usually it cannot transfer the ultimate risks associated with core public services such as health or transport services. These services have to be sustained, even when providers collapse and/or fail as was the case with parts of the London Underground services.

I have argued for some time that there should be an enquiry into the efficacy and impact of public service outsourcing. I believe that such an enquiry should ideally be established by the Government. However, if the Government is not willing to do so, there is no reason why opposition political parties and others should not take the initiative.

Having recently read Julian Le Vay’s excellent book – Competition for Prisons – Public or Private (Policy Press 2016), I am even more convinced that evidence-based analysis is required. Le Vay was a former Finance Director for HM Prison Service and then worked for two companies providing criminal justice services under contract to the Government.  He produces some fascinating insights and a range of evidence but even he cannot answer every question, even for his own service. He has identified some advantages and some disadvantages but, more significantly, notes the lack of hard, evidence-based analysis of the impact of outsourcing. His work raises many of the issues that, in my view, a wider enquiry needs to address and attempt to find answers to.

Such an enquiry should take evidence from all stakeholders (including public sector political and executive leaders, staff and their trade unions, service users, the public, voluntary and community sector organisations) that represent service users and providers from every sector. It should also ideally look at international policy and practice.

An enquiry’s remit should be to investigate the short and long term impact of public service outsourcing including:

  • impact on service quality and outcomes
  • key lessons to be learned (good and bad) from outsourcing in other countries
  • the ability or inability to flex and evolve services to meet new demands and financial targets
  • impact on costs to public sector procuring bodies (including the net cost, taking into account procurement and contract management costs)
  • democratic accountability and transparency issues
  • the opportunities and disbenefits for staff involved
  • a holistic assessment of the economic and social impact on local communities and public expenditure (e.g. the impact of reduced employee numbers and/or income, effects on local suppliers, etc.) – and an associated set of questions about how social value is being defined and measured for these contracts
  • the implications for providers in public service supply chains
  • the realisation of pre-contract stated objectives
  • the state of supplier markets (and the impact of the dominance of major corporates as the NAO has already identified and whether this can be avoided)
  • the opportunities and impact on the wider supplier communities including public sector trading companies, charities, large businesses, SMEs, social enterprises, etc.
  • how, if there is to be outsourcing, the public sector can ‘manage’ and ‘develop’ supply markets, and if it can do so in ways that meet social objectives
  • clarity with regard to ‘best practice’

I propose that an enquiry should also consider the conditions when public service outsourcing has seemingly worked well and when it has seemingly been less successful. This would include the political conditions, the state and quality of procurement practice, the impact on different types of services (is outsourcing more relevant or less inappropriate for different types of services?), the benefits of using different types of providers and the advantages and disadvantages of different forms of contract including payment by results.

An enquiry that is well supported by evidence and analysis could recommend when and how to use public service outsourcing, and when and how not to do so, and it could make a major contribution to contemporary public policy and practice debate and development. It is long overdue and I very much hope that 2016 could be the year to launch such an enquiry rather than it being the year of ever more outsourcing without the necessary evidence base.

Given current Government policy and approach, I am not optimistic that we will see a Cabinet Office or Treasury enquiry. So, will another political party, foundation or organisation step forward to take up the initiative? The public interest will be well served if they do.


John Tizard

Twitter: @johntizard
Linked In: John Tizard

Gov Opps’ training partner, PASS (Procurement Advice Support Service) runs relevant procurement training events for the public and private sector. To view the brand new schedule of events, click HERE.




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