News

15.01.19

Rethinking public-private partnerships

Source: PSE Dec/Jan 2019

Trinley Walker, senior policy researcher at the New Local Government Network (NLGN) considers some different ways of approaching the relationships between the public and private sectors.

The private sector’s role in the delivery of public services is never far away from the political debate. The current Labour Party leadership has made clear its intention to wrestle back many contracts for public services currently delivered by the private sector; its seemingly intrinsic hostility to outsourcing propelled by the fallout from the collapse of Carillion.

On the other hand, the Conservative government seems content with a ‘business as usual’ approach with regard to the private sector’s role, with an increase in overall government spending on outsourcing observable in recent years.

Carillion’s demise was spectacular. A rapacious business model that hoovered-up new contracts while running on wafer-thin margins was bound to come unstuck. Criticism of the company, its approach, and government’s lack of oversight of the looming crisis is entirely justified.

But to what extent are the ramifications of the Carillion debacle filtering down to the local level and influencing procurement decisions across local authorities? This question was part of the NLGN’s recent report, ‘From Transactions to Changemaking: rethinking partnerships between the public and private sectors,’ which set out a blueprint for a new way of working between the public and private sectors.

Our research found evidence of a declining appetite for outsourcing in local government. In a survey sent in June to local government leaders, chief executives, and mayors, we asked about their plans to outsource over the next two years, in comparison with patterns from the previous five years. Over twice as many respondents stated that they would outsource less rather than more over the coming years – 39% to 15%, while 46% of respondents indicated no intention to change their approach.

This evidence would suggest that there are barriers to successful and productive outsourcing that local authorities are grappling with, causing decision-makers to think twice about partnering with the private sector. There is a danger that, should the status quo persist, the future relationship between the public and the private sectors will become increasingly fraught, hampered by declining public trust and ever more reactive to crises that will inevitably emerge.

Yet within the context of rising demand for services and increased complexity, leaders across local government are increasingly exploring diverse forms of partnership. Our research found that councils are instigating partnerships such as joint ventures, for example, which offer more equitable terms of engagement. Partnerships are evolving, even if the political narrative has failed to grapple with the current drivers affecting the public service delivery landscape.

Where partnerships had failed, our research found that a transactional approach often lay underneath the presenting issues. We identified five core challenges that were observable in poor partnerships: territorialism with a siloed mentality; process-driven practice and rigidity; closed-door modes of working with weak transparency and accountability; and linearity – in that partnerships could tend towards a centralised approach that fails to account for complexity and lack of long-term social commitment to place. 

In response to the challenges identified, ‘From Transactions to Changemaking’ set out five corresponding principles to drive good practice:

  • Collaboration: An integrated approach between partners that tackles risk as a shared endeavour, rather than attempting to parcel it off between one another. Examples of collaboration within partnerships between the public and private sector include proactive relationship management and consortium bids;
  • Creativity: As embodied through a problem-solving approach that does not rigidly follow process as a matter of course. Rather, creative thinking and the encouragement of diverse approaches should be encouraged;
  • Adaptability: This can be achieved through dividing contracts into discrete phases, or the introduction of break clauses. Changeable and complex service delivery environments must be accounted for by partnerships;
  • Accountability: Partnerships must ensure that the highest levels of transparency and accountability are embedded into their practice, in contrast to the ‘closed-door’ culture that set root in partnerships that led to poor outcomes. Both public- and private-sector bodies must demonstrate how they are providing value to places and communities. Data disclosure measures and open-book accounting are two ways in which greater transparency can be achieved;
  • Place-based: The broader implications of a partnership on the place and communities it affects most must feature within the practice of partnerships. Understanding of the interdependencies involved in decision-making must be built into practice. Genuine social impact must also be driven within partnerships – beyond the form of ‘tick-box’ exercise culture we sometimes see in the application of the Social Value Act.

To their credit, central government has recently made a series of announcements that signal it is beginning to take heed of the chorus of voices arguing for reform. A set of pilots have been launched in which private-sector clients delivering public services will develop a ‘living will’ – a guarantee that the public sector provider will not be left totally adrift in the event of insolvency.

The Cabinet Office has also recently signalled intent to promote smaller contracts for the delivery of public services, and place greater emphasis on improved usage of the Social Value Act.

These steps are positive, but there is a broader shift in culture and relationships that needs to occur for partnerships to truly embody the principles that the report sets out.

A number of strategic recommendations were set out in our report in order to create a system shift in the national framework to incentivise the five principles in practice.

Recommendations were addressed to the public sector, central government, and the private sector. The need for the public sector to drive social impact through partnerships is key – our research found that the Social Value Act can, at times, be weakly applied in a ‘tick-box’ manner. Social impact objectives need to be measurable, made public, and based on public consultation.

Government needs to act to improve transparency on private-sector contracts; the report recommends a substantive review is undertaken to identify the steps needed to achieve this.

The private sector also needs to play its part to provide greater accountability to the public and must bring much more information pertaining to partnerships into the public domain. 

Public trust and wider value creation must be core to the focus of partnerships. The recommendations set out in our report would catalyse this change.

Top image: Joe Giddens via PA Wire

 

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