THE BLOG

The Political Parties Should Commit To An Enquiry Into Public Service Outsourcing

25/04/2017 13:00 BST | Updated 25/04/2017 13:00 BST

It is both interesting and encouraging that senior politicians have already spoken about public sector outsourcing and contracting in the first week of the 2017 General Election.

Jeremy Corbyn has committed to using public procurement to drive up standards of employment, ensure trade union membership for employees and timely payments to suppliers especially smaller companies, and one assumes also voluntary and commumity sector service providers.

Public sector procurement should be divorced from wider political, social, economic and environmental objectives.

It would be good if the political parties or some of them were to commit to strengthening the Social Value Act and requiring all public procuring bodies to ensure wider considerations than price and service standards - vital important as these are.

Given the history of public service outsourcing over the last several decades under Labour and Conservative Government and local authorities, this general election provides an opportunity for political manifestos to commit either a pause in outsourcing pending an evidence based review of what has gone before.

Over the last few decades governments have never adopted a consistent narrative as to the reason to promote why they have favoured outsourcing - the arguments 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 obfuscates accountability including the public's ability to decide whether or not the outsourcing has been successful.

Never-the-less outsourcing has expanded in terms of values of contracts, the range of services involved and the various public sector bodies involved with very little official questioning of the impact and its efficacy.

The public sector has a very mixed track record of public service outsourcing successfully and in particular too often misunderstands how to manage the risks associated with such practice. 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. There have been some spectacle failures.

There should be an enquiry into the efficacy and impact of public service outsourcing. Such an enquiry should ideally be established by the next Government within weeks of the election.

In my opinion the brief for such an enquiry or review should be simple yet comprehensive. It should take evidence from all stakeholders including the 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 ideally look at international policy and practice.

The brief should investigate the short and long term impact of public service outsourcing including

  • impact on service quality and sustainability
  • the ability or inability to flex and evolve services to meet new demands and financial targets
  • a realistic assessment of risk transfer and risk management
  • impact on costs to the public sector procurer (including the net cost taking into account procurement and contract management costs)
  • democratic accountability and transparency issues
  • the impact on staff involved, their terms and conditions, security of employment, training and promotion opportunities, and their ability to organise through trade unions
  • a holistic assessment of the economic impact on local communities and public expenditure (e.g. the impact of reduced employee numbers and/or income; and effects on local suppliers, etc.)
  • the implications for providers and staff in public service supply chains
  • whether pre-contract stated objectives have been met what has been the political accountability in respect of these
  • the state of supplier markets (and the dominance of major corporates as the NAO has already identified; are some now 'too big to fail' and can markets be more competitive?
  • the opportunities and impact on the wider supplier communities including public sector trading companies, charities, large businesses, SMEs, social enterprises, etc.

I would propose that, using hard evidence and the views of users, staff and the public, the enquiry should consider the conditions when public service outsourcing has seemingly worked well and when it has 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 - see below), the benefits of using different types of providers and the advantages and disadvantaged of different forms of contract including payment by results.

For example is traditional outsourcing appropriate for the NHS especially clinical and related services, education including schools, custodial and policing services? And what should the policy criteria applied for making such decisions other than an ideological commitment to market based solutions and a preference for the business sector over all others.

Such an enquiry should also consider how public ownership, control and accountability can be secured through models other than direct state ownership and management - for example the role of co-operatives (user, staff and combinations of the two), voluntary and community organisations, social enterprises and more.

In addition this proposed enquiry should consider if services are contracted out how

  • accountability and transparency of operational and financial performance can be achieved including standardised 'open book accountability' and
  • service users and staff (and unions) can be involved in every stage of the procurement including the 'make or buy' decision and monitoring and reviewing performance of contracts
  • employment terms and conditions can be protected with training assured
  • trade union rights can be protected
  • SMEs, social enterprises and the voluntary and community sector can be part of the process in ways that deliver social value and make commercial sense for providers
  • the public can be assured of real long term holistic value for money
  • setting pay ratios and remuneration ratios within suppliers
  • profit capping
  • and more!

Such an enquiry is long overdue. At this election bold political leaders could stop the advance of public service outsourcing and garner the evidence before advancing further or even going into reverse.

Let's hope that one or more of the political parties will step up and make the commitment.