Issues

Openness in outsourcing

<KENOX S630  / Samsung S630> UK contractors are facing demands for more transparency after some examples of poor performance.

Government departments need to ensure that private sector partners are transparent about their work of and take a long-term perspective on savings, according to two critical reports from UK National Audit Office. The reputation of outsourcing in Britain was damaged by overcharging in electronic monitoring contracts by G4S and Serco and criticism of Atos’ disability tests.

Last November’s National Audit Office reports on the role of major contractors in delivering public services acknowledged the importance of contracting but highlighted three issues that deserve greater public scrutiny:

1. how public service markets operate;

2. whether contractors’ profits reflect a fair return; and

3. how citizens know that contractors are delivering services to the high standards expected.

It needs to be clear that public service contracts are sufficiently competitive and also whether the rise of a few major contractors is in the public interest. Understanding contractors’ profits is important in ensuring value for money but transparency was limited.

Large companies with “sprawling structures” may be paying lip service to the concept of control and needed to roll out the right culture and control environment across their group. This required transparency over contractors’ performance and the use of contractual entitlement to information, audit and inspection, backed up by financial penalties.

The Cabinet Office and Ministry of Justice were commended for their strong response after the electronic monitoring contract investigation. The Cabinet Office was also asserting the Government’s position with contractors in a way that has gained greater value for money and indicated that underperformance would not be tolerated. However, the department was focused on short-term savings and risked missing out on achieving longer-term value for money outcomes which could be achieved through innovation and investment.

In July, Cabinet Office Minister Frances Maude reiterated that new models of delivery were a key part of UK public sector reform, especially the 100 small mutual companies ‘spun out’ of the public sector since 2010.

“We are looking beyond the old binary choice of monolithic monopolistic state provision or full-blooded commercial outsourcing and embracing a new range of models which can happily co-exist in the space that lies in between,” he stated.

MyCSP – a mutual joint venture – administer the Civil Service pension scheme. A 25 per cent share of the organisation is owned by employees, the Government retains 35 per cent and the remaining 40 per cent is held by private sector partner Equiniti. MyCSP increased its turnover by 31 per cent in its second year of trading alongside a

15 per cent rise in productivity. “A large part of this success is down to its staff,” the Minister said. “They’ve had a voice on the board and a hand on the tiller, helping to steer this new business through its early years … and they share in that success, taking home a second year dividend of around £2,000 each.”

Maude also noted that many public sector staff were “latent entrepreneurs”. In one case in Swindon, nurses have innovated by labelling each item of stock with its unit price as this helps them to understand the cost of treatment. Every pound saved could be put straight back into patient care.

“Mutuals work because staff can see how things can be done better and are empowered to go ahead and do it, without getting bogged down in bureaucratic treacle,” he said. “They can see the results of their actions directly, taking pride in successes and responsibility for failures.”

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