Comment Blog 3 May, 2019

Preparing to Procure: Closing the skills gap in outsourcing

In a political climate where nationalisation is one of the key battle lines of Left vs Right politics, it seems the debate on outsourcing has been overlooking practical concerns - most notably, how to train and skill commissioners to purchase goods and services from external providers. This is a shame, considering Reform’s most recent report found that increasing training opportunities and boosting skills at both local and national level could significantly improve outsourcing.

Reform research found improving skills and expertise for building contracts could prevent future mistakes. In extreme cases, mistakes in Private Finance Initiatives (PFI) contacts led to the government paying vastly more than it would have up front. Costs were incurred because authorities used standardised contracts without termination clauses. This locked-in departments to pay providers over years irrespective of the services’ standards or quality. In hindsight, had government had better expertise to write and adapt contracts, these costs could have been avoided.

Similarly, the most recent internal review of outsourcing by the Cabinet Office found a lack of skills was the “main reason” behind failures around risk management in government. This is consistent with the inquiry into Carillion that concluded the government’s attempt to transfer too much risk to the company was partly responsible for its collapse. This suggests that better skills and expertise in government could also have averted Carillion’s collapse.

Despite the need for skills, Reform’s report found a significant lack of training opportunities in government for contracting out services. Whilst central government offers expertise to the civil service through the Government Commercial Function, the Commissioning Academy is the primary training programme for civil servants and local government commissioners to learn best practice when it comes to procurement and contract management.  And even though research has shown it to have a “real, tangible impact” on commissioning, it has itself been outsourced and receives no central funding. The Academy is now run by the Public Service Transformation Academy (PSTA), an independent not-for-profit enterprise, that currently makes a loss of roughly £20,000 per year and has over £70,000 of debt.

The lack of prefunded training opportunities is at risk of causing a local-national divide where central government departments can afford to pay the fees of the Academy whilst smaller local authorities cannot. The focus—in terms of policy and resources—on central government could cause long-term damage to local government commissioning, where procurement has traditionally played an important role in providing services.

With almost a third (£284 billion) of total government expenditure going on external providers, it is of great importance that government, at a local and national level, have the right skills to contract-out high quality services at value for money. Reform has recommended a £50,000 grant for the PTSA to improve in-house skills for purchasing services from external providers. And whilst the discussion on skills may not be getting the most airtime, it is one of the most important when thinking of how to improve the way government purchases services.