Don't expect suppliers to innovate for you, public sector told

19 May 2011

19 May 2011 | Lindsay Clark

The UK government should not rely on external suppliers as a source of innovation, a think tank has recommended.

The Work Foundation has found that with the first cuts to public spending – relative to GDP – since 1947 on the cards, simply transferring services to private sector suppliers will not provide the necessary innovation to improve in productivity. Instead public sector workers should examine how the private sector enacts transformation and change and use this as a model to improve effectiveness.

The research group said the public sector is spending £243 billion a year on procurement, which has major implications for the wider economy. Innovation will be necessary to meet the challenge of declining resources and increasing demands on public service from an aging population.

Lead author Charles Levy said: “Public sector innovation has the potential to radically improve value for money at a time of growing demand. In spite of this, there has been very little research into how public services invest in and support innovation. Putting services out to tender avoids the issue, and with rapid, swingeing cuts now being made across the board, there is a real danger that innovation will be cut along with spending. This would be counterproductive for both public services and the wider UK economy.”

The report, Making the most of public services, argued that a narrow focus on cuts and the “outsourcing” of innovation to the private sector risks neglecting the potential of the public sector itself.

It forecasts significant changes in the nature of procurement practices as the coalition government opens up more public services to private competition, as proposed in a white paper earlier this year.

“Change on this scale will demand careful management, and more often than not, additional resources to aid transition. Unfortunately these changes may be being implemented
at a time of considerable public sector upheaval,” it said.

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