01.08.14
Ethical standards for private sector deliverers of public services
Source: Public Sector Executive Aug/Sept 2014
A new report by the Committee on Standards in Public Life says ethical standards should be incorporated into contractual and monitoring arrangements for private companies and third sector bodies delivering outsourced services. PSE spoke to committee member Sheila Drew Smith OBE, a former economic adviser at the Treasury and former partner with PwC’s predecessor firms.
The Committee on Standards in Public Life promotes the ‘Seven Principles of Public Life’, as first set out by Lord Nolan in 1995.
But with the increasing changes in the way public services are delivered, with outsourcing, open procurement and privatisation all more common, it was time for it to clarify the matter of ethical standards for providers of public services – no matter what sector the provider itself comes from.
On June 17, the Committee published ‘Ethical standards for the providers of public services’, which specifies that ethical standards must be formalised into contracts for public service delivery – because this is what the public expects.
A growing sector
Roughly a third of all public spending is delivered by private companies – about £187bn, according to the National Audit Office, of which £84bn is spent by local government, £40bn by central government, £50bn by the NHS and the rest by devolved and arm’s-length parts of the public sector.
The CBI says the public services sector accounts for 7.2% of GDP and employs 5.4 million people – and its growth is accelerating.
We asked Committee on Standards in Public Life member Sheila Drew Smith whether the public was aware of the scale of this sector, and she said people might be “surprised” to hear that so many public services are privately-delivered. She said: “There has been an ongoing process of external contractors and providers delivering public services over the last 15 to 20 years.”
‘Fragmented, piecemeal and inconsistent’
The report does not mince its words: the understanding and application of ethical standards across government are “fragmented, piecemeal and inconsistent”. Too many assumptions are made, with not enough formalised commitment and contractual specifics.
This was based on interviews and surveys involving senior figures across government departments.
It adds: “Reliance for assuring ethical standards was also placed on providers meeting legal and regulatory obligations such as those directed at anti-bribery or corruption. Whilst necessary we do not consider this is sufficient assurance and is not a substitute for ethical consideration.”
PSE suggested it was disappointing to see that attitude still prevailing.
Drew Smith said: “I think you use a good word there; it is disappointing. Of course legal requirements are essential and they are necessary – but they are not sufficient.
“People do need to think about how services are delivered and the public were very clear about that. They weren’t at all concerned about the ‘who’ – whether public or private – but it was ‘how’ it was done, and I think the concerns there were the possible disappointment.
“Generally, the public don’t have a choice as to who provides a service: that is at the core of a lot of this. But they do expect that the Seven Principles are upheld and they do expect fairness and they do expect honesty. They want scrutiny and accountability.”
Making ethical awareness a professional requirement
One particular recommendation aimed at public sector commissioners is that ethical awareness is made a specific professional commercial capability requirement for those commissioning, procuring or managing contracts.
How big a change would that be, we asked. Drew Smith said: “It is very much an ongoing process. We met partners and people who were members of CIPS (The Chartered Institute of Purchasing and Supply) who had gone through quite extensive training. It is developing an ethical training module and some of them have already gone down that route.”
Other parts of the public sector “are less well-developed”, she said. “That is perhaps inevitable, given that ‘contracting out’ is relatively new for some people.”
But when it comes to ensuring ethical standards are upheld, responsibility falls both on the commissioner of the service and its provider.
“It is two-way traffic,” she said. “One commissioner stakeholder was quoted in the report as saying: ‘Having those ethical principles articulated clearly states the premise, the context within what you want things doing, but also provides a very clear remit to take action should things falls short.’
“In a non-technical and non-contractual sense, that rather neatly summarises it; the commissioner has to think quite explicitly about ethical issues and how they might be developed within the contract, and the people who are delivering public services in the private sector or in the voluntary sector have to think of ways of incorporating that within their own business model.”
A framework of leadership and governance
Codes of conduct in themselves are necessary but not sufficient as far as ethical standards are concerned. Indeed one code of conduct referenced in the Committee’s report was developed by the National Council for Voluntary Organisations (NCVO) with Serco – but Serco itself appears in three of the four examples quoted in the report of “poor standards by third party providers in public services”. These are the Cornwall out-of-hours GP service; electronic monitoring contracts; and provision of accommodation for asylum seekers.
Codes have to be set within a framework of very clear leadership and governance, in both the public and private sector, Drew Smith told us. “They have to be supported by individual behaviours and processes, working with what may be quite a large range of processes already in place – whether that is in terms of whistleblowing for the complaints processes, or any other part of the piece. I think also, it is what the public expect in terms of scrutiny and accountability.”
The Committee was not just guessing when it comes to public expectations; as part of its research, it commissioned Ipsos MORI to research public and stakeholder views on the ethical standards that providers of publicly funded services should conform to, and how closely they relate to the Seven Principles of Public Life (see box out).
It concluded: “On the basis of our research, we can be confident that the public expected that the same ethical standards should be confirmed and upheld by any organisation providing public services irrespective of the nature of the organisation providing the service. ‘How’ the service is delivered is as important to them as ‘what’ is delivered.
“The public want personalisation and a user-led definition of quality. The public are however realistic and acknowledge the need for proportionality and the implications for cost.
They recognise that good outcomes as defined in the contract will not necessarily conform to high ethical standards. So, as the Ipsos MORI research clearly revealed, they also want closer and more effective scrutiny of all providers regardless of sector, to ensure those delivering services are held to account if they do not meet user expectations.”
Hiding behind the wrong rules
Some purveyors of poor practice hide behind EU procurement rules and directives, as if taking account of ethical standards was somehow against some kind of spirit of pure competition envisioned by those.
That, of course, is a complete misreading, we suggested to Drew Smith.
She said: “I think that is right. It was never anticipated that the EU requirements would preclude a consideration of ethical issues and behaviours by would-be contractors.
“This is about increasing the professionalism required of people who are designing and developing and letting contracts, and subsequently monitoring them. There are similar aspects with health and safety – people can hide behind it unnecessarily.
“But public service contracts are in many ways allowing and encouraging permitting innovation.
“There must be a common set of standards, and that is where we think the ethical principles mesh very neatly.”
Drew Smith concluded: “We do understand that many of the bodies who provide public services not only adopt but have adapted the principles to fit their particular needs, and interpret it via their codes and in the guidebooks to their own staff.
“That is an area where we would encourage further work.”
The Seven Principles of Public Life
The Seven Principles of Public Life apply to anyone who works as a public office-holder. This includes all those who are elected or appointed to public office, nationally and locally, and all people appointed to work in the civil service, local government, the police, courts and probation services, non-departmental public bodies, and in the health, education, social and care services. All public office-holders are both servants of the public and stewards of public resources. The Principles also have application to all those in other sectors delivering public services.
SELFLESSNESS
Holders of public office should act solely in terms of the public interest.
INTEGRITY
Holders of public office must avoid placing themselves under any obligation to people or organisations that might try inappropriately to influence them in their work. They should not act or take decisions in order to gain financial or other material benefits for themselves, their family, or their friends. They must declare and resolve any interests and relationships.
OBJECTIVITY
Holders of public office must act and take decisions impartially, fairly and on merit, using the best evidence and without discrimination or bias.
ACCOUNTABILITY
Holders of public office are accountable to the public for their decisions and actions and must submit themselves to the scrutiny necessary to ensure this.
OPENNESS
Holders of public office should act and take decisions in an open and transparent manner. Information should not be withheld from the public unless there are clear and lawful reasons for so doing.
HONESTY
Holders of public office should be truthful.
LEADERSHIP
Holders of public office should exhibit these principles in their own behaviour. They should actively promote and robustly support the principles and be willing to challenge poor behaviour wherever it occurs.
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