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It is absolutely imperative to avoid ‘lowest price shopping’ when procuring public services

Thursday June 4th, 2015

The new Conservative Government is pressing ahead with a programme of austerity, including ‘significant’ public expenditure cuts, for at least the next few years. Indeed, the ‘emergency’ budget on 8 July is now expected to herald further ‘in-year’ cuts for 2015/16.

Across the public sector, senior leaders (political and executive) are inevitably wondering how they can possibly balance their budgets, while maintaining statutory services and meeting their legal responsibilities, let alone their moral responsibilities to their fellow citizens. The next few months and indeed the next few years are going to be beyond ‘challenging’.

John Tizard

John Tizard

Even so, public sector leaders must remain calm and strategically focused in their thinking. They should think about the medium and long term, and not just the present. They have little choice but to be ready to seek new ways of working, to do fewer and perhaps different things, and in different ways.

At the same time, they must also assess the long term impact of any short and longer term financial decisions, and do this in a holistic manner which addresses social, economic and environmental impacts, and the potential implications for their own and other public sector organisations. There is no public benefit in creating longer term problems for which there is unlikely to be any money available and which can do irrevocable harm to people, communities, the economy or the environment.

Such considerations must always be applied when a public body is considering outsourcing its services to the business, social or charity sectors. Given the financial drivers for change and cost-cutting, there will be increasing pressure and temptation for public sector leaders to use competitive tendering processes to seek lower costs. Indeed, there is already evidence of some organisations reaching for the Compulsory Competitive Tendering (CCT) guidebook, and a real fear is that this ‘Book of the Dead’ could tempt them to seek short term price-based contracts, with little regard to quality, and almost no regard to the wider social, economic and environmental impact. Such temptation has to be resisted and the CCT guidebook should be left in the archives – only to be read as a practice guide as ‘how not to behave’.

Buying ‘cheap and cheapest’ usually results in: poorer quality; less focus on service users and their needs/care; fewer personalised services; adverse changes to staff terms and conditions; shoddy working practices and conditions; and job losses. Lower pay and job losses will, for example, result in: reduced spending power in the local economy; higher welfare payments (unless these too are reduced or abandoned); and diminished staff morale and motivation, which usually impacts badly on service users and service quality. Outsourcing that reduces or eliminates local expenditure on goods and supplies will similarly have a negative impact on the local economy.

Progressive public sector organisations have increasingly, over the last few years, been aligning their public procurement (especially of services) with their wider policy goals. They have, for example, required suppliers and contractors to pay the Living Wage and/or to source their supplies ethically. The prospect of further deep budget cuts must not be allowed to undermine this trend, and indeed should be a reason to amplify and accelerate it.

It is vital that politicians and public sector executives continue to adopt procurement policies and practices that secure social and public value. They must not conflate ‘value’ with ‘buying at the lowest price’ – though, of course, a low price if accompanied by ethical and sustainable employment/environmental practices and high quality outcomes, will always be desirable.

The pressures and hard choices that politicians at a local authority level and executive leaders across the public sector will have to make over the next five years, as a result of the decisions of politicians in Whitehall and Westminster, will be extremely tough and often very painful. No one envies those faced with such decisions; but even so, there is no excuse for poor and ill-considered practice, even in these conditions.

There will be potential ‘bargain basement’ providers from all sectors offering ill-thought through, unrealistic and yet tempting propositions to address spending pressures, while promising to sustain or even increase outcomes. Good leaders will want to be wary (if it sounds too good to be true, then it probably is) and be ready and willing to resist such offers.

They will wish to test all options available to them against well-defined criteria, based on values and principles and which, hopefully, will have been subject to comprehensive consultation with, and involvement by, stakeholders and citizens. And they will wish to take a longer term and more holistic view as described previously in this piece.

Above all, it is vital that further austerity and public expenditure cuts do not result in more ‘bargain basement’ public service procurement. Public services are far too important to become ‘bucket shop commodities ’.

 

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

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