Mark Whitehead 15 October 2018

Public-private commissioning: a question of trust

The recent report by the New Local Government Network found a dwindling appetite for outsourcing at a time when many are rethinking the relationship between the public and private sectors.

Only 15% of local government leaders are planning to outsource more in the next two years, it found, while 39% said they would outsource less. Clearly the outsourcing boom, as LocalGov recently commented, has run out of steam.

A string of episodes highlights some of the problems: there was the collapse of Carillion, the giant construction company many local authorities and other public sector bodies had put their faith in. There was a massive fraud involving an outsourced operation at Barnet, while crisis-hit Northamptonshire County Council admitted making 'mistakes' with PFI deals.

The NLGN says in its report, From Transactions to Changemaking: Rethinking partnerships between the public and private sectors, that councils are ‘seeking greater control over service delivery arrangements’.

There is a need to reform how public-private partnerships work, the network's study concludes, to make sure they are less 'transactional' and more geared towards delivering genuine 'social impact' for public spending.

The NLGN says the main political parties are trapped in ideological silos. It's the old 'private sector good, public sector bad' (or the other way round) problem, and there is no doubt prejudices about the relative merits of the two sectors still exist. The Tories' record shows they would prefer most things to be run by commercial companies, while Labour appears to think nationalising services will automatically lead to their improvement.

The truth, clearly, is somewhere in between. The key to cost-effective public sector provision is not a question of who runs it. It is in asking clear and relevant questions about the nature of the service concerned and making sure that whoever is charged with managing it – whether an in-house team or outside contractor – is properly monitored and scrutinised.

NLGN warns against a 'preoccupation with contract management', meaning too much of a focus on the precise terms of the contract, setting out in detail what the commissioner expects to be delivered and what the supplier agrees to provide.

Long the topic of discussion in the procurement community, most would agree it depends on the goods or service concerned. Complex services are likely to require a high level of trust and joint creative thinking to ensure both sides are happy with the outcome. But when it comes to buying stationery, it is less a question of trust and more about exactly what you want and how much you agree to pay for it.

Taken all together, the NLGN says its recommendations could lead to a fundamental cultural shift towards 'changemaking partnerships'.

This involves a problem-solving partnership approach between the public body and the outside contractor, higher levels of transparency and accountability and greater involvement of councillors and the community.

Public and private sectors can work extremely successfully together, and often do. But as several recent episodes have shown, it can go wrong, leaving councils and communities to sort out the mess and pick up the bill.

The partnership approach could make a big difference in some areas of local government procurement, as long as the different characters and objectives of the two sides – public sector buyer and private sector outsourced suppler – are fully understood.

The fact is that a council is a different creature to a private company. Councils are essentially democratically-run organisations with the public good at their heart – even though on both counts they are often tested in practice.

Commercial companies, on the other hand, are organisations whose primary purpose is to make money. This does not mean they cannot help councils achieve their public-spirited objectives. But it does mean they will only do so if they can make a profit out of it. Companies are answerable primarily to their shareholders, not the community, and are in competition with other companies for business in the public sector. They want to know what they are expected to do and how much they will be paid.

Public sector commissioners must be astute and knowledgeable professionals, able to operate on equal terms with their counterparts in private sector companies. They must recognise the realities of the commercial world – and be on their guard.

The NLGN advocates greater trust as part of its partnership approach and this is quite right in many situations. In a partnership involving complex services and large amounts of money, rather a large amount of trust is required between the two sides. But get it wrong and the outcome could be disastrous.

Councils should be creative and try to foster creative partnerships as NLGN advocates. But in the cut-throat commercial world they should be careful not to take too much on trust.

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