Improving the status quo: Next steps for outsourcing
In 2016 the Business Services Association (BSA) commissioned a report from Professor Gary Sturgess on the sustainability of public service markets. This review charted the considerable pressures that had built up on the market over the last decade. It also predicted the current situation, one where we are seeing services being brought back in house, companies struggling and contracts with no bidders.
Since the Sturgess Review, the BSA has been calling for a major reboot of the market. We need to restore the trust lost between government, suppliers and the public. Government has too often used outsourcing to contract out problems rather than to bring in expertise and new ways of thinking. This focus on the problem rather than the solution has meant onerous risk transfer has become the single biggest barrier that suppliers face when partnering with government. It doesn’t matter whether it is a small charity or a FTSE 100 company, if they take on risk they can’t manage, the consequences for all parties can be severe. The supply side has had to take its fair share of responsibility. Some companies took on contracts they couldn’t deliver at costs they couldn’t sustain. But the government is the dominant force here, setting the rules, awarding contracts and monitoring performance.
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The Outsourcing Playbook is a good start to reforming the adversarial culture that has emerged and the Cabinet Office has been proactive in recent years in professionalising government procurement. But fundamental problems remain. We are still seeing onerous terms and conditions in contracts, such as unlimited liabilities. This is because while the Cabinet Office has the power to introduce reform, it does not have the same authority to enforce it across Whitehall. We need more radical thinking about constitutional powers so we can get past this.
We also recommend that a body should be created which can arbitrate independently if a bidder wants to challenge a procurement decision. Too much taxpayer time and money is spent on existing legal procedures. This new process should be authoritative, transparent, inexpensive and swift. BSA members would be prepared to support this arrangement, only resorting to legal action where truly necessary. Brexit may provide the opportunity we need to amend contract award resolution procedures and introduce concepts such as binding arbitration.
The outsourcing sector has been through a challenging time, but there is determination on all sides to improve the status quo. The goal should be services which fuse together best practice from public, private and voluntary sector partners in the interests of the users.