Public Sector Focus

14.04.16

It isn’t a simple case of black and white

Source: PSE - April/ May 16

Chris Halward, director of professional development at the National Outsourcing Association (NOA), discusses the delicate balance of whether to outsource public services or not.

In 2013 the National Audit Office estimated that the public sector, as a whole, spent £187bn with private sector providers, with over £80bn spent by local government. 

Since then, as we’ve continued to see pressures on local authority budgets, it seems that, despite outsourcing sometimes having a negative public perception, the growing use of private providers is set to continue. 

In fact, as reported on page 42, five district councils recently joined together to procure back-office services from Capita and Vinci, costing approximately £170m. The nine-year contracts are estimated to deliver £50m savings for the local authorities. 

Chris Halward, director of professional development at the NOA, told PSE: “Despite the public perception of outsourcing, which is not always good, it is something that government have used extensively.” 

Par for doing more with less 

He added that, as budgets are getting tighter for the public sector, there is a sense within government that outsourcing has been seen as “par for the solution of trying to do more with less”, but said that “it isn’t always going to be the right thing to do”. 

Recently it was announced that the Cabinet Office was to undertake a review of all current Atos contracts with central government with an annual spend over £10m. The review was made following recommendations from a Public Accounts Committee (PAC) report into Atos’ role as a contracted supplier in the General Practice Extraction Service (GPES) IT system. The system was designed to allow NHS organisations to extract data from GP computer systems, but started five years later than planned, went over budget and only provides services to two of the eight organisations signed-up as users. 

Halward said: “There is some evidence that some in central government seem to be concerned with the bigger IT outsourcing arrangements that have been taken in the past. 

“There is this sense that we may be able to create internal capability, but there is a considerable capability in that third-party community.” 

Commissioning bodies 

He added that as far as local government is concerned, there are some good examples where councils have taken the opportunity to become commissioning bodies as opposed to delivery bodies. 

“Northamptonshire County Council is a great example of an organisation that has decided if it can re-invent itself as a commissioning organisation then it can reduce its costs significantly – without seeing the quality or quantity of serviced being reduced unduly,” said Halward. 

Black and white narrative 

Discussing the public sector in general, Halward suggested there is a narrative: everything is either black or white. 

“What that turns into is people say outsourcing is great to do, let’s all do outsourcing,” he said. “Then, of course, we have a couple of examples where it doesn’t go according to plan when managing complex activities and the narrative changes to let’s not do any outsourcing. It is a bad idea, let’s do it all in-house. 

“Unfortunately, the world is not black and white. Sometimes outsourcing is exactly the right thing to do, and at other times it isn’t.” 

Halward told PSE that in order for the public sector to avoid outsourcing pitfalls it needs to make sure there is “clarity of vision” before entering contracts. 

“Have a very clear vision of what you are trying to achieve, and what the outcomes are you want to achieve,” he said. 

“I think outcomes is quite an important word, but once you have established that you need to look to try to work with suppliers in a sort of collaborative way and need to be exploring a two-way transparent relationship. Outsourcing all comes down to relationships.”

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