Reform outsourcing – don't ban it, think tank says

Commercial skills still lacking in some departments, Reform report finds


By David Blackman

28 Mar 2019

The government should not ban outsourcing but must reform the way it contracts out services and address a lack of commercial skills among the civil servants that commission them, the think tank Reform has said.

Government should conduct a "large-scale, independent and comprehensive" review of public procurement and introduce a national training framework for civil service commissioners, Reform said in a report published today, which identifies a number of weaknesses in the procurement and oversight of government contractors.

The report found that although the commercial skills of civil servants in big central government departments have improved in recent years, smaller departments have not seen the same improvements.


"We have seen some improvements in commercial capability in the civil service in recent years but are concerned that the expertise and guidance is not being effectively shared more widely, both across government and the wider public sector," the report said.

"Government departments are still not learning from each other’s mistakes and sharing their own across government to avoid them happening again."

The think tank said the Cabinet Office should work to address the "procurement skills gap" that had emerged between departments by working with the Government Commercial Function and the Public Sector Transformation Academy to develop a national training scheme for civil servants. Training should be free at the point of access for financial and commercial staff in the civil service and funded from a scaled levy on public service contracts, it said.

The use of "cost-efficient" digital training schemes and an expansion of institutions like the transformation academy could result in a "universal professionalisation" of public procurement, it added.

The report also warned that a concentration of resources in the contracting-out phase of the procurement cycle, at the expense of contract management, has led to an "imbalanced" procurement cycle and a "lack of effective monitoring for outsourced services".

It said "weak spots" in the oversight of the £284bn-a-year public service market showed there may be a need for an independent regulator for outsourced services. Such a watchdog could provide guidance for commissioners and service providers and promote the interests of service users by by acting as an intermediary between government and its contractors, it added.

But before taking steps to establish a regulator, the report said, "it is crucial that we first understand exactly what the issues are and address those questions which can only be answered by a review." This would enable departments to determine "precisely" where to direct resources to improve outsourcing, according to the report.

The proposed review should look at outsourcing rules could be reformed to improve transparency and ensure social value is better considered when deciding contracts, the report said. It should look at areas such as the independent arbitration of contract disputes, greater standardisation in the collection and auditing of contracts, and ensuring a "healthy" level of competition and supplier diversity, it said.

The report found existing guidance is causing some services to be outsourced when they might be better produced in-house. It added that the outsourcing process can be "opaque", with requirements to make only basic information about contracts public. It suggested that all public service contracts should instead be made available on an open-access database. 

Other recommendations in the report included improving data collection and evaluation, which it said would enable "outcomes-based commissioning", where commissioners only pay for a service if a specific objective has been achieved.

It also said government should select contracts based on their wider social benefits, known as "social value", such as boosting local employment

Joshua Pritchard, co-author of the report, said: “The way government buys services can be improved, but banning outsourcing would be throwing the baby out with the bath water.” The Labour Party has pledged to ban outsourcing if it forms the next government.

Meg Hillier, chair of parliament's Public Accounts Committee, wrote in a foreword to the report that PAC had a ‘"longstanding concern" about the ability of the civil service to draw up and manage contracts.

"In the civil service commercial capability tends to be concentrated within the Cabinet Office," she said.

"We have seen some improvements in commercial capability in the civil service in recent years but are concerned that the expertise and guidance is not being effectively shared more widely, both across government and the wider public sector."

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