Private sector partnerships
Ibec’s report on reforming public services calls for the State to consider how services can be provided more efficiently by the private and third sectors. The framework has been largely adopted as government policy.
With the prospect of smaller government and significantly reduced budgets well into the future, Ibec wants to see much more debate taking place around the role of the private and third sectors in delivering public services.
‘Delivering world-class public services’ was published in February 2013 as Ibec’s main policy paper on this aspect of reform. It firstly calls for early action right across the Public Service in identifying suitable areas for external service delivery.
Public bodies should be encouraged to select services that could be provided more effectively and efficiently by working with industry and/or the third sector. This would take the debate beyond the traditional “core versus non-core” discourse in which external providers are limited to back office services. Instead, any area or function for which outcomes and outputs can be specified can be considered.
Compared to most other OECD countries, Ireland has a relatively low level of external service delivery. New Zealand, Canada, Finland and Sweden involved private sector partners in major reform programmes after facing economic crises. Northern Ireland has also made more progress than the State in this regard.
Ireland can also share its limited expertise in external service delivery more widely across the State’s departments and agencies. The paper also answered common myths about the process (see eolas issue 13, pages 70-72) and affirmed that it is not akin to privatisation.
The other misconceptions include fears of job losses, loss of control and rising costs. The report comments that external delivery is “unlikely to generate significant public controversy because, if handled well, the public using the services should not notice [that] things are changing behind the scenes.”
Proposals
Ibec’s policy recommendations mainly focus on improving processes – initially over the course of the Public Sector Reform Plan up to 2016. However, as explained, this is viewed as a long-term change in the shape of the State following a direction that has been taken by similar countries.
The framework differentiates between outsourcing, shared services with outsourced elements, new services, and short-term or seasonal services – and avoids a one-size-fits-all approach. Successful examples of external service delivery should be championed across government. The full cost of direct service provision should be benchmarked across all departments and agencies and good practice in Northern Ireland examined. This should also lead into a discussion about how certain services could be delivered on an all-island or cross-border basis.
Early action to tackle administrative issues – e.g. compliance with Transfer of Undertakings Regulations – is suggested alongside amendments to VAT and public procurement policy, which would avoid potential cost distortions and achieve better value for money.
The focus must be on outcomes “not outputs” to ensure that all public services deliver consistent value for the user. An upskilling programme would strengthen the commercial and delivery skills of Public Service employees. The success of the strategy, in Ibec’s view, also depends on “clear and consistent leadership” from ministerial level right down to individual public servants.
Several recommendations were included in the Public Service Reform Plan e.g. upskilling, a commitment to tackle barriers, benefits-driven external delivery plans for all departments. Business cases for the external delivery of debt management and medical assessment would also be drawn up. The Government is prepared to consider employee mutuals and joint ventures “once thorough business cases confirm their value” and would consider social enterprises as partners for these projects.
Models
The Government also needed to consider the full range of models for external service delivery and decide “what may be appropriate for a specific service based on desired outcomes.” Five models are outlined:
1. insourcing maximises control over outcomes but often results in lower efficiency gains;
2. co-sourcing allows for the joint provision of services by staff in the public body and an external provider;
3. outsourcing allows an external provider to perform the service in exchange for a fee;
4. joint ventures are partnerships arranged by the public and private sectors where the risks and benefits are shared;
5. mutuals involve giving employees the power to re-design services and a degree of ownership over the organisation.
Four common financial models are identified: cost-plus (actual cost plus an agreed profit margin), fixed price, pay-as-you-go, and user-pays (as happens in toll roads). Other potential mechanisms include social impact bonds, payment for results on capital improvements, and the sale and leaseback of public offices and properties.
Case study: JobPath
Following on from the report, Ibec welcomed the Department of Social Protection’s decision to adopt a payment-by-results model for the JobPath programme in December. The programme aims to help long-term unemployed people into work.
External partners are contracted to provide new and additional capacity over and above the existing services provided by government to move people into work. These may include help with job searches, job matching, advice on employment, careers, training, education and CVs, referrals to work experience providers, and recruitment services for employers.
This approach was proposed by the non-profit Centre for Economic and Social Inclusion think tank, based in London. Ibec commented that “an outcomes-based approach to JobPath opens up an innovative financing option because there will be a significant transfer of risk to the external contractors where payment is based on performance.” Providers are paid on the basis of outcomes – set down by the State – rather than effort expended.
Next steps: Social impact
An innovative project – being rolled out up to 2016 – aims to provide long-term stable homes for 136 homeless families in the Dublin region. The Government is seeking private sector investment partners who will invest in this positive ‘social impact’. Partners will help householders settle into their new accommodation, integrate into the local community and continue their tenancies. The project is being managed by the Clann Credo social investment fund and, if successful, will mean that private emergency accommodation will no longer be needed for the city’s homeless people.
