Revelations about the non-emergency NHS 111 service raise yet more questions about public service contracting. It’s time to open up the whole outsourcing process to closer scrutiny
Recent reports, revelations and failures in the procurement and management of contracted public services have raised many questions.
From MoJ tagging to GP service contracts to NHS 111 – to prisons, to proposals for the probation services, to local authorities taking services back in-house – the questions have been getting more frequent and the questioning louder.
I addressed some of these issues in my recent PF blog. Since then there have been further stories and reports which have intensified the questions and the need for some urgent answers.
Some of the questions have rightly and understandably been about the effectiveness of an over-reliance on outsourcing to reform – or simply just deliver -public services. There is a tendency for politicians and senior public sector executives to almost come to see the outsourcing model as their default.
This is a serious mistake. There are some very good reasons why such lazy and/or ideological thinking should be challenged and abandoned. Recent events have also reignited the questions about transparency and accountability.
Public services, which are funded through public expenditure and which have a major impact on the lives of citizens and communities, should be subject to the Freedom of Information Act and wider transparency legislation. This transparency should apply to the contracting body as well as to the provider.
When a public body is considering outsourcing or some other form of ‘partnership’ with the business or social sectors it should be required to publish the ‘business case’ and policy argument on which the decision is based. Such publication should be pre-procurement and not sometime after the decision has been enacted. Of course, in order to ensure effective competitive procurement there will need to be some careful consideration as to the totality of the disclosure but the assumption should always be full transparency.
Local authority scrutiny committees and parliamentary select committees should have the right and the resources to examine these business cases prior to their enactment. Interested parties and experts should have the opportunity to make presentations and to challenge the basis of proposed decisions.
When significant public services are being contracted to businesses or others it is essential that the provider’s performance is published in a timely fashion and in ways that the public can understand. Such performance reports should include financial, operational and all other information which is relevant to the specific service and contract. In order that the public can have full confidence in the contractual arrangements and in public agencies’ procurement and client management capability, these performance reports need to be independently audited, with publication of the audit reports.
When public bodies are contracting they need to ensure that they understand the business model(s) being deployed by their contractor. They need to know the ownership structure, accountabilities and controls within the provider and any parent or sister company. They should require contractors to inform them of any changes to these arrangements and seek their approval when any change could have a significant impact on the contractual relationship and/or service.
For public service markets which are based on widespread procurers and spot contracting such as for social care, government should ensure that regulators like CQC have the necessary powers and resources to act in a similar fashion to a procuring public sector body, in respect of business models and ownership. Indeed there may need to be more and wider regulation across other services and markets if government is going to press on with more outsourcing.
Regulators and public sector procurers have to be able to understand the financial flows between and within providers and their wider organisations. It is common for providers to declare a margin on a contract that does not include the ‘margin’ resulting from internal company recharges and/or onward selling of additional services. Payment policy and incentives for managers and staff should also be declared as these can influence behaviours that impact on contract and operational performance. Again these need to be publicly disclosed and verified with the implications clearly explained.
If the public sector is going to continue major outsourcing and there may be very good reasons not to do so, it is essential that the procurement processes and systems are improved, as a recent Institute for Government report has identified. However, the fundamental issue is a not simply about the quality and capability of public sector procurement. It is about the political choices that local and central government and the wider public sector make and plan to make.
Procuring the cheapest bid is usually not the best approach. Procuring from organisations without the right ethics, ethos and capability is also a major mistake. In many cases even a procurement approach is a mistake as there are many other and potentially better ways to improve service quality, productivity and sustainability as well as securing social value, and addressing wider public interests.
Politicians and officials must be accountable for their decisions. They are responsible when a contracted service fails as much as when an ‘in-house’ service fails. They cannot abdicate or transfer this risk. They need to be very confident that they have the necessary processes and capacity to procure and manage contract effectively. They need to understand the consequences of their decision.
They have to hold providers to account and be accountable for doing this. This accountability will only be possible when there is comprehensive transparency about the procurement, contracting, contract performance and contractor. The public should demand this whilst questioning the efficacy of ever greater political pressure to outsource their public services.