Beyond contracting: public service stewardship to maximise public value

In this blog, John Tizard, co-author of our latest report Beyond contracting: public service stewardship to maximise public value, introduces some key issues and arguments. This is part of our series on public procurement – find out more here.

The public sector in Wales spends over £6bn per year on the procurement of services, works and goods. No one knows the breakdown in terms of broad expenditure category (services, works and goods), how much is spent with suppliers within Wales or beyond, or how much with the voluntary community, social enterprise or corporate sectors.

This lack of data and basic information is not unique to Wales. The same applies in England, though the value of the expenditure is much bigger both in absolute terms and as a proportion to total public expenditure. Traditionally there has been much less outsourcing and contracting of public services in Wales than in England.  Never-the-less there is some contracting of public services in Wales.

It would be in the public interest to know more about what is spent on contracted public services, which services are involved, how they perform and who the contractors are.  As the collapse of Carillion last year demonstrated, government and the wider public sector can easily be exposed to potential failures of major contractors and in particular those with significant market share.

In the report Beyond contracting: public service stewardship to maximise public value for the Wales Centre for Public Policy, Megan Mathias and I have explored the contracting landscape in Wales, comparing it to the UK context; focusing on public services rather than goods or works contracts such as construction projects. We have proposed measures that could be taken by the Welsh Government, local authorities, the NHS, police and other public bodies to better manage risk, maximise public value and ensure accountability.

In the report, we have made the case for establishing a ‘Domesday Book’ to record data and information on all significant public service contracts in Wales – and ideally for this ‘Domesday Book’ to be linked to a similar one in England. Government may respect national boundaries, but contractors work across them, so any analysis and data for Wales should be linked to that in England. I have co-written a report for the TUC on the case for such a Domesday Book and how it could be used.

We also argue for a wider political stewardship of public services, and for this stewardship to be focused on maximising public value and the public interest. Decisions about the nature of and expenditure on public services need to include not only value for money but also wider social, economic and environmental factors.  The stewardship of public services must address the sustainability of services, their outputs and outcomes, and effectiveness, efficiency and equity, and the quality of employment for those delivering the services. A further consideration should be the externalities created by public services and their form of delivery. For example, if services are outsourced and the result is fewer jobs or jobs being exported to other places, or lower wages and salaries and/or poorer terms and conditions for the workforce – there will inevitably be knock on consequences for local economies, the Department for Work and Pensions, the NHS and other public sector bodies. We argue that when considering any contracting out of services, all public sector bodies should assess the impact holistically and also take a long-term view.

In this report we make the case for the Welsh Government establishing a national policy framework and regulation to define which services might be considered for outsourcing and which should not be. There is a strong case for setting the default model as in-house provision of public services, and requiring that public bodies justify and have to prove that there is a public interest in not managing the services in-house.

These are political choices and through their stewardship of public services, political bodies at national and local level should adopt strategic “make or buy “criteria to inform judgements on delivery models.

If public bodies decide that they wish to outsource then they should be required to consult stakeholders; set out their objectives so they can be held accountable for performance after contracts are let; be transparent and require their contractors to be so; and adopt procurement policies and contract terms that ensure the contract and contractor act in the public interest. They also must ensure that they have the necessary professional capacity and commercial nous to be effective clients – for the reality is that many failures in outsourcing are caused by poor procurement and contract management. Finally, they should adopt policies and practices which are proportional to both the potential risks and the size and complexity of the services.

Wales is in a better place than England to develop a more sophisticated approach to public services, which goes beyond contracting out and outsourcing and sets the default as in-house provision. This approach should be embedded in the political stewardship of public services with a clear objective to maximise public value.