Less public money – is outsourcing part of the answer?
As politicians and public sector managers face up to the certainty of less growth and, in most service areas, real cuts in public expenditure, one question that will be asked is whether outsourcing is the answer.
There is no simple "yes" or "no" response.
Under the right conditions and with the right safeguards, outsourcing could be the answer; but so could publicly managed service delivery or delivery through partnerships between public sector agencies. What is required is the best solution for transforming outcomes and maximising efficiency for a particular service or services.
If outsourcing is simply used to cut costs, there may be problems. Experience and evidence shows that outsourcing driven by the sole objective of securing the lowest price does not usually produce sustainable results. "Bargain basement shopping" all too often means purchasing sub-standard goods and services.
There is a risk that over the next few years there will be a return to some aspects of the compulsory competitive tendering introduced by the Thatcher government.
Whilst no one is advocating centrally imposed compulsion at the moment, the danger is that in pursuit of the lowest price service quality, industrial relations and workforce conditions will deteriorate, creating adversarial relations between public sector clients and contractors.
Such an approach would be detrimental to the public sector, private and third sector providers and, more importantly, to service users and their communities.
If outsourcing to the business and third sectors is to be part of a positive response to the impending public expenditure crisis it will require boldness from the providers and their public sector clients. More of the old models of procurement and contracting will not be appropriate.
Public sector managers and politicians should be seeking service transformation to radically improve public service productivity; to redesign services to achieve better outcomes for less cost in ways that respond to user choice and need; and to secure sustainability. These objectives will be best realised through strategic commissioning processes – including strategic commissioning for place based on a joint approach across local public agencies.
Strategic commissioning and decommissioning focused on securing outcomes agreed with communities and, where appropriate, individual service users as well as staff, should be neutral about who provides as long as high quality affordable services are secured.
To deliver public services, providers from all sectors will have to demonstrate:
• proposals to transform service outcomes and productivity and a proven ability to deliver
• good employment practices, including commitments to consultation and involvement in decision making, and personal development of employees
• a willingness and ability to listen to service users and to adapt delivery to meet their choices and needs
• a flexible approach to contracting to allow for changes in volumes and outputs to reflect the needs of clients
• a willingness to negotiate arrangements to address affordability issues for their public sector clients
• an ability to work with consortia of public sector agencies representing the client
• a willingness to contract to deliver either outcomes or outputs which are on the pathway to securing community outcomes
• a willingness to contribute to the strategic commissioning process
a long term commitment to public service delivery and not short term profit maximisation
• new ways of partnering between sectors; transparency of performance; effective governance; and a recognition of the need for public accountability comparable with that expected in the public sector
Increasingly, a range of public services will be "purchased" by the client using public money allocated on a needs basis and/or by neighbourhoods and communities.
This will require providers – public, business and third sector – to bear demand risk and to "market" to many buyers and not just a single public sector client.
"Retail" business models will have to replace "wholesale" ones. This is not traditional outsourcing. This approach will not apply to all public services and for many there will continue to be some collective provision – commissioned and delivered in-house or in partnership with other public agencies, or procured from the public, business or third sectors.
The needs and requirements of the public, as citizens in communities and as individual service users, demand more sophisticated approaches to public service delivery than simple price-driven procurement or short term profit maximisation.
The challenges of the next five years or more provide an opportunity for transforming not only public services but the way in which the business, public and third sectors are involved in their design and delivery.
John Tizard is director of the centre for public service partnerships at the University of Birmingham
From Bubb's Blog
From Whitehall Watch
