Latest Public Sector News

01.07.15

Government should know more about cost of outsourced public services

The government should know more about how much outsourced public services actually cost the companies who deliver them and how much profit they are making, according to a new National Audit Office report.

The NAO has called for government to negotiate greater access to, and make better use of, open book accounting data. An NAO survey found that the information is currently available in only 31% of contracts.

Based on public and private sector case studies, the NAO has identified five approaches to collecting and using information on suppliers:

  • ensuring price complies with the contract;
  • making better informed commercial decisions;
  • assuring processes;
  • maintaining control of risk; and
  • achieving step-change innovation.

The NAO goes on to recommend that every major contract have a strategy for the collection and use of information and that every government department have a policy on when it will use open-book accounting. According to the NAO’s survey, only 23% of government organisations already have such a policy.

The report suggests that the Cabinet Office set up a taskforce to establish a common standard for open-book data, since suppliers complain that government currently asks for data in a variety of different formats. It also recommends that the Cabinet Office develop better guidance for interpreting suppliers’ costs and profits.

Amyas Morse, head of the NAO, said: “Contract management is not a desk job. We are reminded of this in all the best practice and the worst failures we see.

“For government to be accountable for contracted out public services; for it to understand its suppliers; for it to exercise oversight; and for it to promote value for money, it requires its contract managers to take a ‘hands-on’ approach and to go and see for themselves what their suppliers are doing.”

Tell us what you think – have your say below or email opininon@publicsectorexecutive.com

Comments

Peter   02/07/2015 at 08:38

It's not just financial cost that matters. When an outsourced supplier goes bust or has a business interruption then the public sector 'still' has to pick up the pieces (despite having reduced capability and capacity due to being cut). In the case of commissioned care providers, I strongly suspect that many have woeful plans for looking after their 'customers' in an emergency and simply rely on the emergency services and local authorities to bail them out. Outsourcing is fine but as long as the public agencies retain the statutory duties then the more unscrupulous providers will simply take the money when times are good and run when they aren't. IMHO the current approach to the provision of public services based on financial cost alone is a disaster waiting to happen.

Alan   03/07/2015 at 13:00

Government Departments must retain an intelligent customer capability to monitor service, discuss improvements, let future contracts and provide a focus for a 'recovery' plan

Mary   03/07/2015 at 20:59

Peter I suggest you don't 'suspect' what commissioned care providers do; I think you should find out before making unfounded allegations. As a nurse and responsible care provider who works with large numbers of my independent colleagues/peers, I resent your comment. I suggest that if you were aware of the funding mechanisms, which are often (in my area) considerably BELOW the actual cost, and that the public sector believes it is acceptable to charge extra to the person in the next bed (a form of unregulated and unmonitored 'taxation'), or to fail to consider the 'rental' element of the care fee, leaving providers unable to reinvest in the buildings, business or staff, then I think we can see who is bailing out whom!

Peter   07/07/2015 at 06:51

Mary, I welcome your response because it confirms my own view that the model is wrong. If care provision is being funded inconsistently (by your own admission) and private care providers cannot therefore make a profit, there will surely come a time when some - the unscrupulous few - will simply abandon their customers and staff. I believe we have a moral obligation to look after those most vulnerable not based on their ability to pay. To that end, I would rather spend public money on ensuring a surplus of nurses, doctors and careworkers. My concern is (genuinely) that as a society we are focussing too much on driving down costs without having spare capacity to cope with emergencies. I shudder to think what would happen if we ever experience serious disruption. Many professionals like yourself would step up to the plate no doubt but there will be those that don't and I fear that there is no capacity or cability left in the public sector to fill the gaps. If that happens, who will look after those that cannot pay?

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