More research is needed to ensure the use of private and third sector suppliers for public services delivers the desired results, says John Tizard
The publication, a few weeks ago, of the public services industry review – undertaken by Dr DeAnne Julius for the Department of Business, Enterprise and Regulatory Reform – and the recent public administration select committee’s report on the third sector’s contribution to public service delivery highlight the need for more systematic research and analysis.
The Julius review identifies the significant growth over the last decade in public sector contracting service delivery to both business and third sector organisations.
It estimates that the public spend on such activities is around £79bn a year, and that the business and third sectors between them employ 1.2m people engaged in public service delivery for the state – civil, local and central government, and the NHS.
This makes the public services industry in the Julius review a very significant part of the domestic economy and, potentially, a major export revenue earner.
However, the inability to distinguish between the third and business sectors or indeed break these sectors down into social enterprise, large and small-scale voluntary organisations or multi-national companies and SMEs is a weakness. These sectors are different, and their contribution to public service delivery is and should be different. The political and popular views of their engagement in service delivery will be different too.
In macro-economic terms, the absolute size of the sectors is not highly relevant, since most of the expenditure generated comes from public expenditure sources, and most, if not all, of the 1.2m jobs will have transferred from the public sector, or have been created using public money.
The more interesting and relevant sets of questions that now need to be asked and answered, based on evidence, are:
l does the business sector improve productivity, reduce costs, and enhance quality when public services are contracted to it, compared with directly, publicly managed services?
l in what circumstances are improvements in service quality and cost, and productivity most likely to occur – and when not?
l does contestability and competition drive up performance across the sectors and, if so, how?
l how can these impacts be measured and compared with public sector directly managed services in what will be dynamic and changing conditions in all sectors?
l when might contracting services to the business sector be unsuccessful and/or detrimental to the public good and why?
l which procurement models and contractual, partnership or joint venture relationships are most effective, in what circumstances and why?
l what externalities are created by such contracting – impact on the workforce, local economy, public accountability and so on?
l what contribution can business providers make to co-production, greater personalisation and user/locality involvement in service delivery?
l how important are the quality of the commissioning and procurement processes?
A similar set of questions can and should be asked in respect of the third sector. In addition, there is an urgent need to find ways to measure the social added value which, it is often claimed, the sector contributes over and above service outcomes.
Ideally, there would be a consensual view on the definition of added social value and the methodology for measuring it.
A further set of questions then arise as to when and how a public sector agency should, in the course of its commissioning processes, decide whether to ‘make or buy’ a service. And if it decides to buy, which sector should it buy from and on what terms?
When is it sensible or politically acceptable to consider buying a service genuinely in the spirit of ‘competitive neutrality’ between the sectors? There are, anecdotally, many examples of third sector organisations reaching some groups of people in ways that others cannot.
There are also examples of community anchors and other voluntary groups demonstrating their ability to build community capacity and involvement. More evidence of the value, impact and reasons for these achievements would be beneficial in enabling more evidenced-based decision-making.
The growth in third and business sector delivery of publicly funded public services is expected to continue, and all the major political parties at central and local level are committed to more pluralism and a greater application of competition between suppliers – be they public, third or business sectors.
Government does not have a duty to support the growth of the public services industry, but it may choose to engage it when it can make a positive contribution. This requires a commitment to market management and this, in turn, requires dialogue between commissioners and suppliers, and active interventions by the public sector.
In the case of the third sector, it requires support to build capacity.
In the case of the business sector, government has to ensure that the market is commercially attractive, relative to other domestic and international markets, but not at the expense of public value and proper commissioning decisions.
Many arguments are made to support the application of competition and plurality of supply. These include the claim that it extends the opportunity to expand choice and personalisation of services for users; creates additional capacity of supply; and drives quality up and price down through competitive pressures.
Others argue that a well-resourced public sector can achieve the benefits ascribed to the use of competition. All sides in the debate produce case studies to support their assertions.
The case for more evidence-based contributions to the political debate and practice development is overwhelming. Such evidence should draw on the UK and international experience. And such research and analysis requires access to prime and unfettered data.
It also needs to forecast future trends and identify new models for commissioning, procurement and service delivery – based on the public, third and business sectors, and collaboration between them – which focus on securing outcomes and outputs that service users, citizens and communities seek and can afford.
Such a contribution, which does not have to delay policy development and service reform, would make a more sustained impact on the quality of public services than the appointment of senior officials with a remit to drive through more competition of supply, as if the answer was simply more of the same. It might be, or it might not be – we need to answer this question.
The Government, local government, trade unions, business and third sector providers and academics have an interest in working together to produce and objectively analyse the evidence to provide answers, so that we can all enjoy excellent public services delivered effectively and efficiently.
John Tizard is director for the Centre for Public Service Partnerships
The Julius review identifies the significant growth over the last decade in public sector contracting service delivery to both business and third sector organisations.
It estimates that the public spend on such activities is around £79bn a year, and that the business and third sectors between them employ 1.2m people engaged in public service delivery for the state – civil, local and central government, and the NHS.
This makes the public services industry in the Julius review a very significant part of the domestic economy and, potentially, a major export revenue earner.
However, the inability to distinguish between the third and business sectors or indeed break these sectors down into social enterprise, large and small-scale voluntary organisations or multi-national companies and SMEs is a weakness. These sectors are different, and their contribution to public service delivery is and should be different. The political and popular views of their engagement in service delivery will be different too.
In macro-economic terms, the absolute size of the sectors is not highly relevant, since most of the expenditure generated comes from public expenditure sources, and most, if not all, of the 1.2m jobs will have transferred from the public sector, or have been created using public money.
The more interesting and relevant sets of questions that now need to be asked and answered, based on evidence, are:
l does the business sector improve productivity, reduce costs, and enhance quality when public services are contracted to it, compared with directly, publicly managed services?
l in what circumstances are improvements in service quality and cost, and productivity most likely to occur – and when not?
l does contestability and competition drive up performance across the sectors and, if so, how?
l how can these impacts be measured and compared with public sector directly managed services in what will be dynamic and changing conditions in all sectors?
l when might contracting services to the business sector be unsuccessful and/or detrimental to the public good and why?
l which procurement models and contractual, partnership or joint venture relationships are most effective, in what circumstances and why?
l what externalities are created by such contracting – impact on the workforce, local economy, public accountability and so on?
l what contribution can business providers make to co-production, greater personalisation and user/locality involvement in service delivery?
l how important are the quality of the commissioning and procurement processes?
A similar set of questions can and should be asked in respect of the third sector. In addition, there is an urgent need to find ways to measure the social added value which, it is often claimed, the sector contributes over and above service outcomes.
Ideally, there would be a consensual view on the definition of added social value and the methodology for measuring it.
A further set of questions then arise as to when and how a public sector agency should, in the course of its commissioning processes, decide whether to ‘make or buy’ a service. And if it decides to buy, which sector should it buy from and on what terms?
When is it sensible or politically acceptable to consider buying a service genuinely in the spirit of ‘competitive neutrality’ between the sectors? There are, anecdotally, many examples of third sector organisations reaching some groups of people in ways that others cannot.
There are also examples of community anchors and other voluntary groups demonstrating their ability to build community capacity and involvement. More evidence of the value, impact and reasons for these achievements would be beneficial in enabling more evidenced-based decision-making.
The growth in third and business sector delivery of publicly funded public services is expected to continue, and all the major political parties at central and local level are committed to more pluralism and a greater application of competition between suppliers – be they public, third or business sectors.
Government does not have a duty to support the growth of the public services industry, but it may choose to engage it when it can make a positive contribution. This requires a commitment to market management and this, in turn, requires dialogue between commissioners and suppliers, and active interventions by the public sector.
In the case of the third sector, it requires support to build capacity.
In the case of the business sector, government has to ensure that the market is commercially attractive, relative to other domestic and international markets, but not at the expense of public value and proper commissioning decisions.
Many arguments are made to support the application of competition and plurality of supply. These include the claim that it extends the opportunity to expand choice and personalisation of services for users; creates additional capacity of supply; and drives quality up and price down through competitive pressures.
Others argue that a well-resourced public sector can achieve the benefits ascribed to the use of competition. All sides in the debate produce case studies to support their assertions.
The case for more evidence-based contributions to the political debate and practice development is overwhelming. Such evidence should draw on the UK and international experience. And such research and analysis requires access to prime and unfettered data.
It also needs to forecast future trends and identify new models for commissioning, procurement and service delivery – based on the public, third and business sectors, and collaboration between them – which focus on securing outcomes and outputs that service users, citizens and communities seek and can afford.
Such a contribution, which does not have to delay policy development and service reform, would make a more sustained impact on the quality of public services than the appointment of senior officials with a remit to drive through more competition of supply, as if the answer was simply more of the same. It might be, or it might not be – we need to answer this question.
The Government, local government, trade unions, business and third sector providers and academics have an interest in working together to produce and objectively analyse the evidence to provide answers, so that we can all enjoy excellent public services delivered effectively and efficiently.
John Tizard is director for the Centre for Public Service Partnerships
