John Tizard: Councillors must be contract aware – outsourcing is political

Posted: June 4, 2018 - 12:10 pm

Most local authorities of all political persuasions currently outsource some of their services to the private sector. Some outsource more than others. Increasingly, authorities are bringing outsourced services back in-house – ‘in-sourcing’ as it is called.  Such in-sourcing is being pursued by council leaders from all the major parties.

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John Tizard

There are many reasons why local authorities are questioning the efficacy of outsourcing. These include

  • a lack of evidence that it produces the desired outcomes
  • the many examples of failure including but not exclusively the Carillion fiasco
  • the transaction costs of procurement and contract management
  • a paucity of in-house capacity to undertake procurement and contract management
  • the inflexibility, especially service and financial inflexibility, of long-term contracts
  • a lack of truly competitive suppliers for many critical services
  • a desire for greater democratic control and accountability
  • public opinion questioning the role of business and profits being made, especially from core personal services

There are many other reasons and each local authority will have its own.

Ultimately, the decision to outsource or to deliver services in-house or perhaps through a partnership with the voluntary and community sector or through shared service arrangements with other public bodies, is a political one.

This means that council leaders, cabinet members, members of scrutiny committees and indeed all councillors need to play a role. They need to know what questions to ask; what is possible – legally and operationally; what services are currently outsourced; and what the local authority’s policies and practices are, and the capacity and quality of their procurement teams.

To support councillors with these and related issues David Walker and I have produced a toolkit for councillors – ‘Out of Contract’. It has been published by the New Economics Foundation, or NEF. It can be found at http://neweconomics.org/2018/05/out-of-contract/?header=Latest

The toolkit addresses issues such as how to

  • have detailed information and data on every contract available and published
  • review these contracts with a view to renegotiating or bringing back in-house
  • review policy, set the default option as being in-house provision and align procurement policy and practice with wider political objectives
  • ensure that procurement, contracting and contract / contractor performance are subject to councillor scrutiny, transparency and accountability
  • in-source and bring outsourced services back in-house

and if there is to be any outsourcing, to

  • involve stakeholders in the decision-making process and formally consult on the business case prior to procurement
  • ensure that the public interest and public value are secured
  • contract with ethical companies
  • protect staff interests and ensure decent employment terms and conditions
  • partner with the voluntary and community sector – usually avoiding competitive tendering and using grants where appropriate

There is a need for national regulation and guidance on all these matters and more widely in respect of outsourcing, but local government can do much to change the landscape without having to wait for central government. Indeed, local government can show the way for central government and others in the public sector to follow.

The NEF councillors’ toolkit hopefully will stimulate political debate and enable councillors including council leaders – and council officers too – to have the confidence to move on from the New Public Management and associated political and technical cultures of believing that markets, competition and outsourcing to the private sector should be the norm. Or that such approaches always lead to better public services, for blatantly they do not.

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