The Carillion crisis has thrust outsourcing back into the spotlight ©PA Images
The Carillion crisis has thrust outsourcing back into the spotlight ©PA Images

How to ensure public sector outsourcing works

1 March 2018

Contract planning and a “spirit of cooperation” are the two major planks to successful public sector outsourcing, the head of IRIS Consulting has said.

Speaking at the eWorld Procurement conference in London yesterday, John Harvey, managing director of IRIS Consulting, shared the lessons he learned from his career supporting government outsourcing projects, including a review into local government (LG) outsourcing conducted for the Department for Work and Pensions.

Here are the four main pitfalls LGs need to watch for when contracting a service:

1. A blame culture

Services are often outsourced because they are failing or need improvement, said Harvey. But that doesn't mean outsourcing is always welcomed by the in-house public sector providers. This initial resentment can lead to the creation of a blame culture when problems do happen, with in-house teams quick to say, “We told you that this would happen”. Contractors are also quick to blame the client for problems, often saying they had not been told the full scope of a contract or the problems within a service they were taking over.

2. Underestimating the scope

Both clients and contractors often underestimate the volume or cost of work. Harvey said he has seen contracts that were underfunded right from the start. “The amount of remuneration in it for the contractor was insufficient to cover the costs they were incurring,” he said. Poor pre-market engagement is one of the causes. LG buyers also sometimes underestimate how much work they need to put into scoping out the service being contracted.

The solution is to take your time over contract planning and risk assessments. “Those that had taken the greatest amount of effort and time to scope it out and plan ahead tended to have a smoother transition, and a better delivery down the line,” said Harvey. When writing out your contract, it is also important to have service level agreements in place that are “reasonable and accepted by both sides”.

3. Handover

The need for a smooth handover might seem obvious, but Harvey said he has seen LG in-house teams sometimes deliberately make the takeover harder for a new contractor. “We were given horror stories about how on the last day of the local authority providing a service all the files were just dumped down the lift shaft,” said Harvey. In his time as a consultant, Harvey said he has seen deliberate attempts on the part of individuals within LGs to “scupper or make difficult life for the contractors down the line”.

One of the most important indications a contract will be successful, and also one of the least tangible, is “the spirit of cooperation and partnership” between the LG and the contractor. “It’s not something you can just switch on, it has to be brought up mutually over time.”

4. Maintaining ownership

LGs need to maintain ownership of a contract after it has been outsourced and realise they are still ultimately responsible for the quality of provision. “We sometimes found where things had gone wrong the attitude amongst councils was, ‘We’ve got rid of that service now, it’s passed over to the private sector so it’s not our fault if things go wrong’.

“They had to be reminded often that it was still a public service. At the end of the day the local authority as a client was still responsible for the quality of the service being delivered.”

Conversely some of the best results came from LGs that had a continuing commitment to providing a service. “They didn’t just wash their hands of the service once it had been outsourced but kept in touch with what was going on,” said Harvey.

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