Outsourcing: Time for reform

Outsourcing public sector work to the private sector has become commonplace – from waste collection and catering to probation services and construction work, it’s the new norm for public sector service delivery. In fact the Government now spends £292 billion on procuring goods, works and services from external suppliers, a 160% increase since 1987. That’s not to say that outsourcing isn’t without its challenges but calls from Labour to re-nationalise these services isn’t the answer.

Outsourcing services and construction work can have substantial benefits, helping deliver higher quality services whilst providing economic benefits for the wider community. Whether this is through, local Small-Medium Enterprise (SME) engagement or the creation of apprenticeships and training opportunities, it can help secure value for money from the public purse.

Last year, the issues surrounding Carillion and Interserve (and how they entered liquidation and administration respectively) brought to light many of the issues public sector outsourcing faces.

However, our research, After Carillion – The Future of Outsourcing, shows that the public still see the benefits of the model, but do not want to see taxpayers having to bear the brunt of the risks associated with large scale construction projects. Twice as many of our respondents thought that competition between private firms for public sector contracts, “if properly handled, drives up quality and drives down price”. It’s the ‘if properly handled’ bit that’s crucial here.

This means taking into consideration more than just cost and thinking about the wider benefits that will allow our communities to grow and prosper.

The Institute for Government report released this month, Government outsourcing, what has worked and what needs reform, reiterates that focusing too much on the lowest price, without also assessing quality when selecting bids, results in a race to the bottom and often doesn’t result in the cost-saving and efficient delivery the public sector is seeking. The Institute for Government put forward a series of recommendations to ensure that the Cabinet Office’s Outsourcing Playbook is put into practice. These practical recommendations focus on resourcing, staff capability, commercial skills and improved scrutiny and accountability. All of these are essential to the smooth running and effective completion of contracts and projects.

The lessons learned from the past few years, have taught us that we must do more to better protect our supply chain. SMEs are vulnerable, and the services they provide are vital. Procurement teams need to know exactly what they are buying and assess both the quality and value for money that bids offer when making decisions. It is critical that all risks are understood from the outset and then intelligently mitigated throughout, using the effective management of contracts. One thing is certain, outsourcing isn’t on its way out.