The Government and parts of the wider public sector, including local authorities of all political persuasions, seem determined to press ahead with more and more outsourcing of public services.
They wish to extend the scope of outsourcing into areas such as child protection, clinical health services, elements of policing and much more as well as to further extend it in service areas where it has already been widely applied. And this in spite of both a lack of evidence of what works and when it works, and without questioning its relevance at a time of uncertainty and austerity.
Although local authorities, the NHS, central government and the wider public sector have been outsourcing services for decades, there is surprisingly little evidence of the impact of this policy and practice. There has also been little serious analysis of the reasons why outsourcing has been pursued or under what conditions and/or for what types of services it been most/least effective.
Yes – there is some ‘limited’ academic research and some usefully informative reports from the NAO and Audit Commission on some elements and examples of public service outsourcing. However, hard data/evidence is scarce, leaving the debate to much anecdote and assertion from proponents and opponents alike.
When public agencies have outsourced in the past, they have given varying reasons; and it has not been unknown for an outsourcing agency to change its stated reasons and/or to give what may even be several contrary different reasons!
That said, the primary arguments for outsourcing public services have included:
• a short-term need to enhance capacity
• a challenge to orthodoxy and existing practices
• pressures to drive up productivity and drive down cost
• more choice for collective groups and individual service users
• a need for capital investment when public sector borrowing is restricted
• a need to achieve economies of scale
• access to specialist expertise
• a party-political ideological commitment to a smaller state; a straight preference for the business sector over the public sector; and sometimes, a greater role for the charitable and social sectors
However, the reality is that there are few examples of these organisations testing the effectiveness of outsourcing projects against their original stated reasons for outsourcing. This is lazy at best, and at worst it is a deliberate attempt to obfuscate accountability.
Any public sector body considering outsourcing should explain why and consult on the business case for doing so ‘in advance’. Such consultation should involve service users, the wider community, staff and their trade unions, potential suppliers and the local voluntary and community sector.
Rather than a rush to further and deeper outsourcing, whatever the reason for doing it, I believe there needs to be an independent, evidence-based enquiry into the efficacy, effectiveness and relevance of public service outsourcing.
Such an enquiry should, among other matters, address the following issues:
· the financial and operational results (including a holistic cost-benefit analysis) and an examination of the net public value of outsourcing in different services and financial environments and through its various models
· the role, opportunities and limitations of the market and competition in public service delivery and innovation, examining any differences between services and/or areas of the public sector
· building on recent NAO studies, consider how competitive in fact the supply ‘markets’ actually are
· how much service users are involved in every aspect of the process, from pre-procurement to service monitoring
· the implications for staff
· the implications of different ownership models of providers and the benefits/downsides of working with the charity and social sectors compared to the business sector
· accountability and transparency
· public confidence in outsourcing scenarios
· the opportunities and costs of both contract terminations and major change
· the nature of probity and lobbying in respect of public service outsourcing, including the relationship between politicians, senior public officials (and those recently retired) and providers
· examples of ‘best practice’ and indeed of abject failure; and the lessons from both, of which there are many
· what lessons can be learned from both international and private business sector outsourcing and supply chain management experience and expertise
Such an enquiry should involve all stakeholders, including the voluntary sector, staff and trade unions. It is urgently needed and I urge (though I fear, in vain) that government push the pause button on further major outsourcing until such an enquiry has concluded and delivered its findings.
There is, of course, another set of reasons why the public sector might well push the pause button on traditional outsourcing, and many organisations are already doing this.
These include questions relating to the issues identified above in respect of the proposed enquiry and in addition:
· if savings and service change are required immediately (as many budget conditions demand), a long and expensive procurement exercise is not appropriate, prudent or sensible
· unless a very flexible contractual arrangement can be struck with a supplier (which is not easy and can lead to high contract pricing), why would a public body wish to lock itself and its budget into a long-term contract in a period of significant uncertainty
· there is a growing interest in working with social sector bodies, including staff- and user-led co-operatives, social enterprises, charities and the voluntary and community sector; and often traditional procurement and contract practices exclude or seriously limit their ability to compete and deliver innovative services
· a popular and political concern about the efficacy and ethics of the business sector, even if this does not apply to all public service contractors
· the recent high-profile examples of service failure and even fraud by outsourcing companies
· examples of where risk has firmly remained with the public sector when the provider has evidently failed
· where there is evidence – factual or anecdotal – it is very mixed
· the lack or paucity of procurement and client management capacity/competency across parts of the public sector
· a recognition that public sector-led/driven solutions can improve productivity and quality as well as reduce costs – although this requires both skills and, more importantly, confident leadership
· a desire to work in different ways with the business sector and to harness its expertise and capital where and when appropriate
· the pursuit of social value as much as pecuniary value
Given these issues and reasons for caution, and given the lack of hard, factual evidence of the efficacy and effectiveness of public service outsourcing, my strong advice to government and the wider public sector is not to rush into more and more traditional outsourcing.