Less than transparent

Will Green is news editor of Supply Management
7 April 2014

10 April 2014 | Will Green

Transparency would appear to be the buzzword of the moment. Across the public sector, it is being cited as the way to improve services and get better value for taxpayers.

Within the space of a week the issue was placed firmly on the table, starting with a call from the CBI for more openness in government contracts with private companies providing public services, as it launched its new Public Services Network.

This was followed shortly by the publication of a report into the very same issue by Public Accounts Committee (PAC).

Perhaps surprisingly, both bodies agree on a number of key points. First, that Freedom of Information Act provisions should be included in contracts, second, that there should be open-book accounting, and third, the National Audit Office should be able to scrutinise contracts.

The motivations of the CBI and the PAC may differ, however. The CBI is fighting a rearguard action following the high-profile G4S and Serco contract failures around offender tagging and prisoner transport. There is a lot at stake. The public sector spends £187 billion on goods and services with third parties each year. Around half of that goes on contracted out services. There is a battle on to restore public trust in the private sector.

Ruby McGregor-Smith, chief executive officer of Mitie and chair of the CBI’s public services board, says her company would be happy to be subject to FOI, which currently only applies to the public sector. “I don’t have a problem with it. As long as my clients are happy we are very relaxed about it,” she says.

While it appears the private sector is “very relaxed” about greater openness, and even championing it, the same cannot be said for the public sector, judging from comments by PAC chairman Margaret Hodge. She is adamant resistance to increased transparency is coming from government, not firms. “All too often it’s the government that hides behind commercial confidentiality because they don’t want the service to be analysed too closely,” 
she says.

This is refuted by the Cabinet Office, which says it is “reforming Whitehall” and has secured £176 million of compensation over contract problems with the likes of G4S and Serco. A spokesman said: “We’ve published all large contracts in a single place and want to build on our world-leading transparency record.”

Other public sector players deny they are the stumbling block.

Julie Welsh, head of procurement and business support at Renfrewshire Council, said her organisation is “as open as possible”.

Of suppliers she says: “I think they are a fickle bunch. They are keen on more openness when it relates to their competitors’ commercially sensitive information; not so keen on sharing their own.

“The private sector would be concerned if we started sharing their commercial information with their competitors and others, but there is a risk that public sector organisations hide behind the ‘commercially sensitive’ argument.”

Susan Johnson, who as chief executive at County Durham and Darlington Fire and Rescue Service oversees a budget of more then £30 million, said: “If you saw the lengths and breadths we go to, to put everything out in the public domain, what we are doing, what we’re spending, what we’re delivering... We do public contracts. We bring members of the public to citizens panels to see what we’re spending. We don’t shy away from the public.”

John Watts, interim director of procurement and e-commerce at Barts Health NHS Trust, says transparency around spending was a “win-win”. “We’re very transparent,” he says. “All of our data is pulled together across about 16 participating trusts, so it’s not a problem to us. In fact we’d like to be more transparent. I would say there’s probably a minority of trusts who don’t want to play ball, either because they think they’re getting a better deal or some crazy reason. For me, either I have a very good price and I can show that, or it’s an opportunity. It’s a win-win.”

John Warrington, deputy director for procurement policy and research at the Department of Health, says suppliers in the health sector “don’t like” transparency. “I was really interested in what the CBI said about transparency and how they were backing it,” he says. “It’s great to hear. The problem we’ve got in the medical world is the big suppliers – they don’t like it. Their whole business model is built around selling to clinicians. It’s about that relationship. If you start exposing varying prices and different prices being paid it calls into question, in their mind, the relationship between them and who they see as the customer, which is the clinician.”

Warrington says openess is the way forward, and they have just inserted transparency clauses into standard contract NHS terms 
and conditions.

“Only a month or so ago one of those companies asked a trust in the Suffolk area to sign a non-disclosure agreement; they wouldn’t disclose the price they had just agreed on a range of products for seven years,” he says. “That just can’t go on.”

However, it’s not just suppliers who aren’t keen on openness. “Buyers have been resistant to it,” he says. “There has been an element of protectionism within the procurement world. There has not been much of a culture of sharing, but in the last year I have seen 
that shift.

“Procurement people are probably doing the best they can in their trust. They have been told they’ve got the best deal so they think they’re doing a good job. When the trust is still in financial trouble where do they go next? They have to start looking outwards and sharing more.”

Johnson says the message from government is that any public service can be provided by the private sector. But she says firms sometimes resist competition from new social enterprises and throw money at lawyers to mount legal challenges when they miss out on tenders. “How willing is the private sector to accept new delivery entities where [new entrants] actually know the service better than someone in the private sector?” she asks.

“I think sometimes there is a view that anything the public sector does can be done by the private sector. That is the narrative coming out of government at the moment which I think needs to be moderated.”

The NHS data dilemma

Transparency is the key to reforming procurement in the NHS, but this will mean transforming the way data is collected and breaking a historic relationship between suppliers and clinicians.

John Warrington at the Department of Health says 
the sector faces huge challenges around data.

“A lot of trusts don’t have good sound procurement data. So the first thing we ask is have they got the data to be transparent with? In trusts we know just 30 per cent of spend is with purchase orders. It’s ridiculously low. We can get data on how much a trust spends with a supplier but we can’t line item detail and pricing detail in any consistent way.”

Warrington says in response they are going to select a different basket of 25 goods every quarter and ask trusts how much they pay for each item, so comparisons can be made.

He says transparency will shine a light on relationships between suppliers and clinicians that hinder progress. “I know one company alone that has £600 million of stock sitting on NHS shelves, consignment stock, because they know at the end of day they have to have it there for that surgeon,” says Warrington. “They are almost on the surgeon’s shoulder saying, ‘Here you are, put this one in’.

“The starting point is transparency. Transparency 
is the thing that’s going to open that discussion up. Despite what the CBI says, 
that industry doesn’t like it.”

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