Posts Tagged ‘procurement’

This government couldn’t outsource a booze-up in a brewery

15/03/2011, 10:00:14 AM

by Dan Cooke

If the Tory-Lib Dem administration has one big, transformative vision, it is that government should do less itself – and enable others to do more. Even in accepting that public goods cannot be delivered by the unfettered market, the government contends that they will only ever be delivered shoddily by the unmediated state. So it proposes a more modest role for itself as funder, procurer and regulator of services, with delivery transferred as far as possible to the private or charitable sectors.

Apparently unafraid of taking this vision to its extreme, David Cameron argued last month that there should be a:

“presumption – backed up by new rights for public service users and a new system of independent adjudication – that public services should be open to a range of providers competing to offer a better service”.

Acknowledging a couple of caveats about the judiciary and the security services – an encouraging sign of at least a few seconds brainstorming before opening his mouth – the prime minister promised that a full white paper setting out more detail would follow within a fortnight. However, four weeks later it is yet to materialise.

Leaving aside the fundamental questions about whether profit-making businesses should be running core public services, it is clear that any material shift in the direction proposed by Cameron would require an enormous practical change in the operation and required skills of government. Much of a civil service built on a tradition of management and direction would need to convert into procurement and contracting functions.

The procurement of high value, long-term and complex services is a difficult and risky business. It requires the buyer to engage with contractual counterparties in a way that adequately weighs – among other things – value, incentives, risk transfer, compensation rights and change management. Achieving successful outcomes by these metrics is a task that regularly defeats the teams of specialised and well-paid analysts and lawyers who run big-ticket procurement in our major private companies. And this is hardly surprising. Contracting is a zero sum game where one party’s protection from risk is the other’s assumption of risk – whether in relation to time slippage or cost overruns, change in demand, adjustments in scope or any of the other infinite uncertainties the future may bring.

In the past, under all parties, the record of government in navigating these shark- infested waters has been woeful. PFI was sold as a way of transferring long-term operating risk to contractors in a way that outweighed the additional costs of private sector borrowing compared to public debt. And, yes, it also took liabilities off the government’s balance sheet. However, the reality was public lock-in to exorbitant rental payments and the transfer of exclusive rights to provide lucrative services from car-parking to Christmas trees. The story with government purchasing of IT services has been no more encouraging and the procurement travails of the ministry of defence require no repeating.

If we add to the mix the challenges of maintaining transparency and accountability if the scope of contracting out of core services is increased, then it is clear that the risks of failure are even greater. The government’s first significant effort, with the expansion of private involvement in health planned under the NHS bill, is far from encouraging. Identifying conflicts of interest among bidders would be high on the list of concerns for a private sector procurement manager, but Andrew Lansley and his team simply forgot to think about the issue until others pointed it out.

So are ministers now thinking deep thoughts about how to manage the necessary transformation in contracting capacity? Is the civil service being primed to become expert in sophisticated procurement?

Well, they did fly in Philip Green from Switzerland to review the government buying process. He generated headlines with examples of inconsistent pricing for paper and phones. And some more with the dubious advice that government should save cash by paying its suppliers late: “there is no reason why the thinking in the public sector needs to be any different from the private sector”.

But this is no more commercial wisdom than could be gleaned from watching half a series of Only Fools and Horses. Great if the government wants to organise a car boot sale. But a pitiful start to recalibrating the public sector to achieve acceptable outcomes from the mass outsourcing of services so glibly proposed.

Once again, it is clear that our current leaders – in their own eyes, born to rule but, in reality, not trained to run a whelk-stall – simply do not grasp the complexity of governing. Private companies which contract out a fraction of their own activities have a “chief procurement officer” on the board. But this government, which boasts of an open door to competition in services, just has a “cheap promises officer” in No.10.

So here’s a prediction: when they do publish the delayed white paper it will be followed by at least one more on the same topic for every year of the government’s term. But none of them will describe how the presumption of competition promised by Cameron will actually work. In short, none of them will be worth the paper they are written on. And the government will probably still be paying over the odds for the paper.

Dan Cooke is a Labour activist and lawyer.

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