Carillion shows us why public service providers must act ethically

The Committee for Standards in Public Life recently suggested public service providers meet the same ethical standards expected of the public sector itself. Specifically, it recommends that:

All public service providers must, at the point of commissioning, agree to the commissioning bodies’ Statement of Intent on the ethical behaviour expected of the board, employees and subcontractors in delivery of any contract

And:

All public service providers must, at the point of commissioning, publish a corollary Statement of Providers’ Intent providing their plan for embedding a culture of high ethical standards in their service delivery approach during the life of the contract.

The report is timely given the Carillion saga and the wider debate on the efficacy of public sector outsourcing and the questions being asked about its value. Its recommendations should be taken seriously.

The committee rightly stresses that all providers, from whatever sector (business, charity, co-operative or social enterprise), should require their staff to comply at all times with the Nolan Principles.

It also calls on government to extend the Freedom of Information Act to providers of publicly procured and funded public services. This is long overdue. It is vital that the act covers not only providers but all aspects of the public sector’s commissioning, procurement and contract management. ‘Commercial in confidence’ should never be an excuse for hiding information about the public sector’s decision making and use of resources, any more than providers’ performance. Such information should be readily available to the public, and transparency is essential if both procuring public bodies and providers are to be properly held to account.

Meanwhile, the recent joint report of the House of Commons business and work and pensions select committees on Carillion also reinforces the need for all public service providers especially outsourcing companies to act ethically and have excellent governance.

While I endorse the CSPL recommendations, I would go further and mandate that for all public service contracts over a threshold value (possibly the current EU procurement threshold):

• contracts are published
• quarterly or monthly operational and financial performance is published and independently audited every year
• any contract variations and/or renegotiations are published immediately
• the business case for any public service outsourcing contract is published and subject to consultation in advance of the procurement process
• providers be required to publish details of senior executive remuneration and tax policies and practice; and of their ownership structures (with any changes automatically published with immediate effect)
• providers be required to make public their approach to ethical leadership, performance management, induction and ongoing professional training on ethical issues
• the NAO and relevant inspectorates should have access to providers’ internal information and data
• whistleblowing procedures are in place to ensure access to and responses from providers, public sector procurers and external inspectorate
• bidders can demonstrate exemplar governance

Any outsourcing provider failing to comply with ethical standards should not be awarded public contracts and any existing contracts should be terminated.

The broader CSPL proposals in respect of ethical standards in public procurement and outsourcing, whilst very welcome, are not new. Successive governments have failed to address what are fundamental matters for the efficacy of outsourcing, any public confidence in it and for democratic accountability.

In my view, the CSPL should also specifically address the ethics of relationships between senior public officials and politicians (at both national and local level) and public service businesses. I am not suggesting that there is ‘corruption’, but relationships that are too ‘cosy’ can and will over time dampen objectivity. And even where relationships are consistent with the Nolan principles and other ethical standards, they must also be seen to be such; there should be no opportunity for suspicion of impropriety.

The public service outsourcing companies and the major accountancy and consultancy firms actively seek to influence and shape government policy, and to develop relations with current and potential public sector clients. This is understandable, but there must always be transparency.

A stronger set of regulations and agreed best practice is needed to protect the public interest in respect of the ‘revolving door’ syndrome whereby senior staff move between these companies and the public sector (or vice versa), or are seconded into public sector roles (and vice versa). Again, these activities can be mutually beneficial for the public and business sectors but there must be no opportunity for suspicion let alone actual abuse of such practices.

Consideration should also be given as to how this will affect charities and other non-business sector providers. Many charities provide advocacy and help shape policy, as well as contract with (or are in receipt of grants from) the public sector. There is a strong case for them being treated in a different way from large businesses.

The CSPL proposals, while modest, would place serious and additional demands on an already under-resourced public sector. Significant cultural change within the public sector and across providers would be required.

Nevertheless, these CSPL reforms should be implemented without delay. Carillion shows us why.