How often do we hear the complaint that public services contracted from the business or third sectors don’t pass muster and that the quality is not what was expected or hoped for?
It’s ironic really, given that so often the procuring body and its procurement team will have celebrated their “achievement” of a low contract price for these services.
The reality is that unless you are very clever and often actually just lucky, buying the cheapest does not mean getting the best deal. A personal domestic example would be going to the market and buying a shirt for a few pounds rather than paying a higher price to a reliable retailer. After a few times in the washing machine the cheap shirt begins to fray, eventually falling apart and having to be replaced while the “better buy” shirt continues to be wearable for much, much longer.
The same principles apply to public services. We must avoid poor procurement and the seduction of a “cheap” price with no guarantee of sustained quality.
The legacy of Compulsory Competitive Tendering (CCT) still dominates too much of contemporary public procurement more than a decade after its demise. Price is still too dominant within tender evaluations and in the mindset of procurement officers and politicians, especially in local authorities. In addition, the media are too prone to challenge and criticise a public procurement that has not resulted in awarding the contract to the bidder offering the lowest price. This has to stop.
The Social Value Act requires public bodies to take into account the social impact of contracts. As I have argued previously, this important Act has to be about changing culture and behaviour and not simply producing more rules and guidance for bureaucrats to follow.
However, even without the fresh impetus of the new Social Value Act, the best and the most successful public sector bodies (and there are many examples of excellent public service procurements) have already demonstrated the importance of maximising public value when contracting.
This requires a very particular set of attitudes and skills for politicians, senior managers and procurement teams, including:
- a clear rationale for a contracting solution rather than an “in-house” or public sector partnership model
- clarity on the outcomes required from the contracted services
- clarity of the wider social and economic goals being sought
- a comprehensive review of all the service options rather than an automatic rush to outsourcing or contracting to the business or third sectors and, if the approach is to be contracting, a clear case for the decision, on what terms and with what kind of organisation
- knowledge of the market
- an understanding of what can be purchased in a competitive market with the available resources
- a clear appreciation of what investment will be required in the service and how this will be financed by the client and/or provider
- an understanding of the commercial, financial and value drivers of potential bidders from the public, business and third sectors – and through this, an understanding of what will happen to service quality if employers are expected to cut staff conditions and/or squeeze their profit margins
- comprehensive understanding of the current service costs including overheads and re-investment requirements
- the political will to set clear objectives for any procurement exercise and the resolution to resist the temptation of being seduced by price at the expense of quality and to resist political and media criticism
- an appreciation of the implications for service quality and staff terms and conditions which are correlated with service quality and sustainability of different bids and their prices
- a bid evaluation process that involves staff and service user representatives
- bid selection criteria that address quality, investment for change, employee issues, willingness of the bidders to be transparent, their values, social impact and price, with appropriate balances between these criteria
This list is not exhaustive and every public body should adopt what is right for them, but there are some core approaches which should be sacrosanct.
Unfortunately, I hear increasing anecdotal evidence that local authorities and other public bodies, faced with very challenging budget pressures, are tending to dust down the CCT “how to” book and make the grave error of becoming over-obsessed with cheapness rather than with social and service quality. This has to stop or we shall come to regret it very quickly when there is even less money available to repair the damage without yet more service cuts. If the deal you are offered looks too good to be true then it probably is!