Publication Machinery of government 18 January, 2017

Faulty by design. The state of public-service commissioning

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How public services are commissioned underpins their success in healthcare, criminal justice, employment services and beyond. In theory, designing contracts for services delivered by third-party providers stokes competition for service delivery, driving down prices and incentivising expert providers to deliver the best services to meet users’ needs.

Government is relatively new to this approach. Before the 1980s, commissioners rarely procured services from outside the public sector – with the notable exception of general practitioners. In the last three decades, the split between the purchaser (government) and provider of services has accelerated. Today, virtually every part of the public sector benefits from market mechanisms.

This extension of commissioning responsibilities has resulted in frequent changes to the commissioning framework. The most recent of which have aimed to deliver integrated services that address the complex needs of service users in the most effective way – in many instances through devolving power to local commissioners to design services to meet the different needs of local populations. Major recent reforms include the creation of Clinical Commissioning Groups in 2012 to commission secondary healthcare. The same year, Police and Crime Commissioners were introduced to be held accountable to local areas for tackling crime. More recently, government has devolved health, social-care, welfare, skills and elements of the criminal-justice budgets to Greater Manchester.

The purpose of this paper is to evaluate the success of current approaches to commissioning. To do so, interviews with 29 experts, from government, providers and third-parties, were conducted, alongside a literature review and evaluation of the publicly available data. Attention is paid to complex human services, in which there is a purchaser-provider split – in health and social care, criminal justice, housing and homelessness, and employment services. Where these services affect other areas of policy, the paper widens its focus. The aim is to outline a case for change, for commissioners to learn from past actions when approaching commissioning in the future. This is a critical step for future success, and will pave the way for Reform to set out a vision for a new commissioning framework in subsequent analysis.

This report reveals that commissioning bodies are not delivering value for money in three key areas.

Commissioners are failing to focus on outcomes that matter to service users. Service success is measured by output (such as the number of hip operations delivered) and inputs (the cost of each operation) rather than outcomes (sense of wellbeing). Commissioners feel they do not possess the skills to design outcomes-based contracts and a risk-averse attitude to failure is a barrier to commissioning for more abstract goals.

Fragmented commissioning bodies stand in the way of integrated services that meet users’ needs most effectively. Ambiguity of responsibility for designing services leads to gaps in delivery. In other instances, services are duplicated, with HM Treasury putting the cost of similar interventions being delivered at £100 billion in 2010. Prevention is undermined where commissioners are not responsible for the failure to stop issues – such as illness or crime - occurring.

Devolution of commissioning to local areas is not happening in practice, with a one-size-fits all approach creating a postcode lottery across in healthcare, welfare-to-work and probation services. The UK remains one of the most centralised advanced economies. Whitehall commands dictate spending in areas such as healthcare, despite local commissioning bodies being designed to deliver locally tailored care. This is undermining the transformation and integration of public services. Other central aims create perverse incentives, with central targets dictating the actions of frontline professionals.

The Government’s aims of commissioning integrated, locally tailored services that meet the outcomes of service users are laudable. The current commissioning model is failing to achieve all three however, to the detriment of service users and taxpayers alike. Recognising this is the first step to designing a new commissioning framework capable of delivering services that meet the complex needs of users, wherever they may live.

Watch the interview about the report here: