Comment Blog 1 April, 2019

One in Carillion? Next steps to improve outsourcing 

Outsourcing is at a unique moment. The Cabinet Office has recently published a new Outsourcing Playbook to improve the practice at central government level. Despite this, criticism continues. This week, the Labour Party announced its intention to ban outsourcing services for vulnerable people under state protection, such as patients, prisoners, and benefit claimants, whilst a trade union has declared war on outsourcing after losing a court hearing over employment rights of outsourced workers.

Reform’s latest report on public sector outsourcing finds the private and third sector are to be playing a fundamental role in the delivery of public services, receiving a third of total public expenditure (equal to £284 billion per year). And whilst the Government have made improvements with the new Playbook to the way it outsources, it needs to go further to prevent further errors in the future. This, however, should not include black or white policies such as banning outsourcing for certain services.

The key question should be: will a service be provided better in-house or not? The report found that current guidance could cause commissioners to outsource services that would be provided better in-house, and that commissioners themselves could be biased when deciding whether to outsource or not. To combat this the paper urges for more technical guidance across contracting authorities to platform better, more effective outsourcing decisions.

The next step should be to upskill those who are purchasing goods and services from external providers. Research found mistakes in service delivery when external providers were involved were the result of a lack of skills held by contracting authorities.  The report recommends a two-pronged approach, the first being to provide digital, cost-efficient training for commissioners. The second, a grant to the Commissioning Academy of £50,000 to further the programme's reach and build on what has already been a successful programme.

Enabling service commissioners to better implement social value is another key recommendation of the report. ‘Social Value’ or considering wider social benefits from public services reconceives of the way contracting authorities consider ‘value for money’. Crucially, it moves the focus towards value rather than price – something that industry and charities have repeatedly claimed to be degrading services and the outsourcing system. The report has found commissioners were currently struggling to use social value when evaluating contractors’ bid. Next steps need to be ensuring commissioners have the tools to quantify wider social benefits in contracts.

In light of recent high-profile outsourcing failures, from the collapse of Carillion to the mistakes made by an outsourced cancer screening service, it is unsurprising outsourcing continues to receive criticisms from the public and the opposition. However, it remains important that the system continues where it works and is fixed where it needs fixing. Reform’s new report argues for an independent review of current regulations of the outsourcing system, to ensure policy platforms best practice when it comes to outsourcing.