The Outsourcers’ Dilemma 2: Re-nationalisation?

I shared some thoughts in my last blog about some of the events and decisions that have resulted in very public outsourcing failures, and what could be done to avert future failure. I’ve always been uncomfortable with the “public versus private” debate around outsourcing services. It has always seemed to me that sharing capability would inevitably result in better public services.

Re-nationalisation is gathering pace following the announcement that the East Coast Mainline and the Probation Service are both returning, wholly or partly, to state control. I fear this marks a direction of travel that repeats a cycle of average-to-poor public service provision given the inevitable disruption that occurs in periods of change. There seems to be a lack of imagination, and little learning from history in looking for solutions to the very real problems that critical public services are under. The only answers in critical service delivery seem to be rooted in the binary “public or private” approach. Is this really the best we can do?

A few years ago, much was made of mutuals as a way forward; the Civil Service Pension (CSP) scheme company called My CSP became the first mutualised government service in an innovative structure which moved Civil Service Pensions from an outsourced service to a mutualised service, bringing in an expert private sector partner. It had some teething troubles but is now an established partnership. There have been some innovative joint venture public/private partnerships supporting procurement, commissioning and supply chain in health, and in shared back office services. These examples are primarily administrative services – but is there learning from these successful alternative models for delivering front line, citizen-facing services in a collaborative or “co-sourced” way? Some will contend it has been attempted and failed – for example, some prospective mutuals entered the first Transforming Rehabilitation competition, but only one succeeded, but these different ways of bringing public and private capability together need time and space to flourish.

I’ve been looking for evidence of sustained success in outsourcing critical public services to try to understand what has worked. In doing so, I have found a large body of analysis, reporting and research into the subject. The 2012 Institute for Government report “Commissioning for Success – How to Avoid the Pitfalls of Open Public Services” (remember that – open public services?); the 2013 Public Accounts Committee report “Contracting out Public Services to the Private Sector”; the 2015 TUC / New Economics Foundation report “Outsourcing Public Services”.

There is a lot of common sense in these reports that could help us towards building collaborative better public services – affordably and sustainably. The TUC recommends starting with a “public interest case” to determine the appropriateness of what is outsourced. This seems to me to have merit, although the arbitration of public interest would need careful and independent consideration. The PAC reports the continuing lack of the “right” commercial and financial skills in government to manage contracts. One of many incisive comments from their 2014 report reads “they (departments) regard contract management as an exercise in catching people out, rather than working closely with contractors to improve the quality of services”. Not enough progress has been made in achieving a step change in commercial and financial skills across government and it remains a barrier to progress, with notable exceptions in some departments.

Is re-nationalisation the answer to “failing” outsourced services? What do we do when the public sector fails too? In justice services, Birmingham Prison was removed from G4S back to the public sector – but Nottingham, Wormwood Scrubs and Liverpool were all under public sector control when they had worryingly poor inspections. What are our choices for failing public services, delivered by the public sector? Does re-nationalisation pass the “affordable and sustainable” tests? It may – but isn’t it time we pulled some of the public/private barriers down and worked out some better ways of delivering together?

The Outsourcers’ Dilemma 1

I make no apologies for writing about outsourcing – having, until the end of 2019, been part of the Interserve Group for 7 years.  Emotions run high when outsourcing and public services are discussed.  I know only too well having led the Interserve team that bid, won and operated just under a quarter of the privatized probation service.  Was it a good thing or a bad thing? Taking what I know of the experience of being at the centre of one of the most politically and socially contentious outsourcing decisions of the last 15 years, and having no lobbying or political axe to grind, I would make a few observations.

To outsource a service, it’s pretty important to know what you want to achieve.  Sounds obvious, but time and time again we have seen outsourcing used as a tool to try to cut costs, to fast track a policy implementation, to get rid of a problem – often done in the name of “encouraging innovation” or “bringing together the best of the public and private sectors”.  This is mere rhetoric if not accompanied by setting out clearly and in some detail both what the commissioner or policy-maker want to achieve but also acknowledging and accepting the risks entailed in the proposals.

Where the dilemma sits is in the nature of outsourcing public services.  Our politicians want their policies implemented.  They formulate those policies on the basis of what they promised to do tempered by a judgement on how the public will receive the detail.  This leads to a series of compromises when the practicalities of deciding what should, could and can be achieved is worked through.

This results in a series of compromises that have frequently proven to be unsatisfactory – for government, for the outsource providers, for the employees moved between public and private sector (and increasingly being moved back again) but most of all for the recipients of the service – we the public.

The big outsourcing companies aren’t the enemy – the ones I know want to do a good job, want to treat their employees properly, want to pay their taxes and want to contribute to the health of the economy.  But the era of big, long term contracts is surely over.  It is no longer a model that works for anything other than the most commoditized of services where investment reduces transaction costs and provides value.  For complex public services, a more collaborative and fluid approach is needed.  Neither the public nor the private sector have the resources or knowledge to run these services in isolation but stand a better chance of improving the outcomes if they genuinely bring together their shared experiences.

Next time – how can real collaboration work – and has anyone actually done it?