Please procure responsibly: the state of public service commissioning
This report provides an overview of public service commissioning in England.
By examining the complex systems used by central government and local councils to procure public services, the report explains how public services are delivered and by who. It identifies several key areas where weak or underperforming elements in the commissioning cycle have led to failings in the procurement of public services and suggests potential solutions to some of these challenges.
The procurement context
Public services can either be delivered in-house or purchased from external providers in the private or third sector. Roughly a third of all public service expenditure goes on outsourcing, equalling some £284 billion per year. Whilst much of this spending results in efficient and effective public services, prominent outsourcing failures have emphasised that more can be done to improve public procurement and ensure high quality, value-for-money services in the long-term. A successful procurement process should rely on multiple factors, including good “make or buy” decisions, a focus on social value, and effective purchasing, contract design, and monitoring, if services are outsourced.
Upskilling contracting authorities
More resources need to be invested in training to ensure that all contracting authorities have the necessary skills to commission and procure services effectively. Moreover, too many resources are invested in the contracting-out phase of the procurement cycle at the expense of contract management. The use of cost-efficient digital training schemes and an expansion of institutions could help ensure a universal professionalisation of public procurement.
Accountability and transparency
Risk and accountability are still things that suffer from clarity of process. Accountability is particularly fragmented and opaque within the procurement cycle. Lessons could be learnt from the financial sector, where statements of responsibility and responsibility maps are working towards ensuring transparent and clear mechanisms of accountability. There is a significant lack of opportunity for public scrutiny and audit of public service contracts resultant.
Assessing the landscape
The next stage for government is to conduct a large-scale and comprehensive review of public procurement, to identify precisely where resources need to be directed in the future to improve the system. Whether this is in regulation, skills and training, or transparency is unsure, but a review would enable government to improve and build upon current efforts like the Outsourcing Playbook in the future.
Recommendation 1: The Cabinet Office should create a ‘make or buy’ flowchart for all commissioning teams when deciding whether to provide a service in-house or not. Extra guidance should be included for considering whether the nature of the service ‘naturally lends itself to outsourcing’ (e.g. does demand fluctuate a lot? Is its performance highly dependent on other services?).
Recommendation 2: The Department for Digital, Culture, Media and Sports should produce a national guidance framework and toolkit for public service commissioners and providers explaining how to identify and quantify Social Value in public service contracts.
Recommendation 3: The Public Service Transformation Academy should receive a block grant of £50,000 per year from the Cabinet Office to fund their work. This should be spent partly on improving the regional hubs and providing a more consistent network for local authorities and Small- and Medium-sized Enterprises and Voluntary, Community, and Social Enterprises.
Recommendation 4: In partnership with the Public Service Transformation Academy and Government Commercial Function, the Cabinet Office should take steps to introduce a national training framework for public service commissioners who contract over the Official Journal of the European Union financial thresholds for public service contracts. This should be a digital course, free at the point of access for financial and commercial staff within the civil service and local authorities, and funded from the levy on public service contracts.
Recommendation 5: The Government Commercial Function should expand its role to include an advisory service for public service commissioners. This could be modelled on the Association for Public Service Excellence forum model and be provided through a partnership with the Public Service Transformation Academy’s regional hubs.
Recommendation 6: All government departments that commission public services should adopt a ‘statement of responsibility’ regime and responsibility maps, modelled on the Financial Conduct Authority’s example that ensure all managers along the supply chain are aware of what their responsibilities are and what they are accountable for in the case of failure.
Recommendation 7: The Cabinet Office should issue updated guidance on additional requirements for those central government departments, wider public sector organisations, and prime contractors working on government contracts (Contracting Authorities) required to publish contract awards on Contracts Finder. At a minimum the contract award should include: details about the provider (such as annual turnover, company size, and number of government contracts awarded in the past 12 months); details about the contract (including three key performance indicators, the agreed payment model, and the exit terms for both parties); and the decision-making behind the contract award (including the added value brought to the contract by the provider).
Recommendation 8: To protect commercial interests and fair competition, redaction or non-publication of contract awards may be permitted but a case must be presented to the Cabinet Office within a reasonable period of time after the contract is agreed.
Recommendation 9: The Cabinet Office should regularly publish online in an accessible manner a list of those Contracting Authorities who have been found to fail to meet their obligations regarding the publication of tenders and contract awards on Contracts Finder. This should be separate to the Public Procurement Review Service results publications. A three-strike system should result in repeat offenders being added to a public “black-list” for non-compliance.
Recommendation 10: Government should review the regulatory landscape of public service markets which should involve considering a new regulator, that would look to support or take on some of the responsibilities of the Competition and Markets Authority and the National Audit Office, when it comes to public services. This would be funded by a levy on all types of providers scaled according to affordability. Its responsibilities could include: ensuring social value standards are maintained by all providers from across the sectors; the standard collection and audit of contracts; ensuring a healthy amount of competition and supplier diversity; the independent arbitration of contract disputes; and long-term market strategies.