The public spending crisis means difficult decisions will need to be taken about whether to provide some services at all, rather than simply salami-slicing them. John Tizard looks at the next big buzzword – decommissioning
Public expenditure growth – or seriously significant growth – will cease from 2011. This is the consensual view of the overwhelming majority of commentators.
In many parts of the public sector, and for many services, this is already very much the reality. Politicians and public sector managers have to recalibrate their approach to public service commissioning and delivery.
This is a major challenge for many, especially those who have only experienced growth during the tenure of their senior appointments.
There is a widely-shared recognition that financial shortfalls and the consequential necessary ‘savings’ will not be addressed by the traditional managerial activities of salami-slicing, holding vacancies, or delaying expenditure on maintenance. These and similar tactical approaches will be insufficient.
Local government, the NHS and other public sector agencies are developing and implementing creative and increasingly-effective strategic commissioning programmes. And many are moving towards ‘strategic commissioning for place’ and aligning commissioning across local agencies.
This is one means of securing value for money and maximising local outcomes to make the best use of scarce resources. The process should continue and, indeed, there is a very strong case for localities and local strategic partnerships to accelerate this kind of action.
However, it is likely that many, if not all, public agencies will need to consider how they will stop delivering some services, or fundamentally change the quality and delivery models of other services.
There is little evidence that local agencies have adopted strategic partnership approaches to making difficult decommissioning decisions. Decommissioning will be service, service-user, and financially-led. Politics is about the language of priorities, and new priorities often require ending or reshaping current programmes.
It is essential that local strategic partnerships are involved in any decision to decommission a service by any agency, in order to ensure that the consequences for other agencies are understood and taken into account.
There may also be opportunities to consider how collaboration and shared services might mitigate the impact of a proposed decommissioning.
As with strategic commissioning, the starting point for any consideration of decommissioning should begin with the needs and aspirations of service-users, citizens and communities. This requires an informed and objective dialogue with stakeholders, who need to be aware of the community’s strategic objectives and have access to information from effective management-information systems – what is the service designed to achieve? How effective is it? How much does it cost, and what are the opportunities for greater efficiency rather than closure? Who uses the service, and what are the users’ views on its contribution to their wellbeing?
Alternative options need to be described and be the subject of an informed consultation with key stakeholders, including service-users, staff, partner organisations and taxpayers. Support for those affected should always be factored into the decision and the financial equation.
Many public services have been contracted to business and third sector organisations. This means that the flexibility to find savings or to decommission services might be restricted. Long-term contracts may involve compensation to the provider, if volumes of service are significantly reduced, or if it is decided to terminate the service altogether.
Decommissioning might directly affect contracted services, or may affect them indirectly, as would be the case for a back-office support service which may need to be reduced, if the services they supported were themselves reduced. Most outsourcing, strategic partnership and PFI contracts will be long term. If the public sector client wants to downsize the provider’s activities, the latter will expect compensation.
Typically, this would be payment for forfeited profits and any additional costs, such as redundancy payments. Legal entitlements will be clearly set out in the contract.
Many businesses and some third sector organisations will enforce the contract terms. This will severely constrain the options available to the public sector client.
However, some providers from the business and third sectors will be mindful of their commitment to partnership with their public sector client and, more significantly perhaps, their long-term commitment to the public sector market.
These organisations might consider adopting a pragmatic approach, which could include sharing some of the risk of the downsizing with their client. If these businesses are publicly quoted, there could be some interesting explaining to do to shareholders!
If the public sector seeks to re-negotiate a number of long-term contracts in this way, then there is a risk that business and third sector confidence in the market might be adversely affected.
This could lead to a smaller supply side than that required by the public sector to ensure competitive markets.
There is an opportunity for the public services industry, the third sector and public sector client representative bodies to use the next two years to produce guidance for all parties on how to draft future contracts which allow for annual efficiency targets – many do already, incentives for all parties to secure and sustain efficiency, and adopt some form of shared risk for down-sizing that is not unduly detrimental to the commercial interests of providers.
This will not address current contractual arrangements, which may have to be dealt with on a case-by-case basis.
The debate should start now. It is in the interests of all parties that it does.
Decommissioning will always be a feature of a dynamic public sector. Changing demand, technology and citizen aspirations will also result in changes to public service profiles and expenditure.
The forecast public expenditure trends suggest that there may have to be more decommissioning in the next few years than has been the case for decades.
John Tizard is director of the Centre for Public Service Partnerships, University of Birmingham
In many parts of the public sector, and for many services, this is already very much the reality. Politicians and public sector managers have to recalibrate their approach to public service commissioning and delivery.
This is a major challenge for many, especially those who have only experienced growth during the tenure of their senior appointments.
There is a widely-shared recognition that financial shortfalls and the consequential necessary ‘savings’ will not be addressed by the traditional managerial activities of salami-slicing, holding vacancies, or delaying expenditure on maintenance. These and similar tactical approaches will be insufficient.
Local government, the NHS and other public sector agencies are developing and implementing creative and increasingly-effective strategic commissioning programmes. And many are moving towards ‘strategic commissioning for place’ and aligning commissioning across local agencies.
This is one means of securing value for money and maximising local outcomes to make the best use of scarce resources. The process should continue and, indeed, there is a very strong case for localities and local strategic partnerships to accelerate this kind of action.
However, it is likely that many, if not all, public agencies will need to consider how they will stop delivering some services, or fundamentally change the quality and delivery models of other services.
There is little evidence that local agencies have adopted strategic partnership approaches to making difficult decommissioning decisions. Decommissioning will be service, service-user, and financially-led. Politics is about the language of priorities, and new priorities often require ending or reshaping current programmes.
It is essential that local strategic partnerships are involved in any decision to decommission a service by any agency, in order to ensure that the consequences for other agencies are understood and taken into account.
There may also be opportunities to consider how collaboration and shared services might mitigate the impact of a proposed decommissioning.
As with strategic commissioning, the starting point for any consideration of decommissioning should begin with the needs and aspirations of service-users, citizens and communities. This requires an informed and objective dialogue with stakeholders, who need to be aware of the community’s strategic objectives and have access to information from effective management-information systems – what is the service designed to achieve? How effective is it? How much does it cost, and what are the opportunities for greater efficiency rather than closure? Who uses the service, and what are the users’ views on its contribution to their wellbeing?
Alternative options need to be described and be the subject of an informed consultation with key stakeholders, including service-users, staff, partner organisations and taxpayers. Support for those affected should always be factored into the decision and the financial equation.
Many public services have been contracted to business and third sector organisations. This means that the flexibility to find savings or to decommission services might be restricted. Long-term contracts may involve compensation to the provider, if volumes of service are significantly reduced, or if it is decided to terminate the service altogether.
Decommissioning might directly affect contracted services, or may affect them indirectly, as would be the case for a back-office support service which may need to be reduced, if the services they supported were themselves reduced. Most outsourcing, strategic partnership and PFI contracts will be long term. If the public sector client wants to downsize the provider’s activities, the latter will expect compensation.
Typically, this would be payment for forfeited profits and any additional costs, such as redundancy payments. Legal entitlements will be clearly set out in the contract.
Many businesses and some third sector organisations will enforce the contract terms. This will severely constrain the options available to the public sector client.
However, some providers from the business and third sectors will be mindful of their commitment to partnership with their public sector client and, more significantly perhaps, their long-term commitment to the public sector market.
These organisations might consider adopting a pragmatic approach, which could include sharing some of the risk of the downsizing with their client. If these businesses are publicly quoted, there could be some interesting explaining to do to shareholders!
If the public sector seeks to re-negotiate a number of long-term contracts in this way, then there is a risk that business and third sector confidence in the market might be adversely affected.
This could lead to a smaller supply side than that required by the public sector to ensure competitive markets.
There is an opportunity for the public services industry, the third sector and public sector client representative bodies to use the next two years to produce guidance for all parties on how to draft future contracts which allow for annual efficiency targets – many do already, incentives for all parties to secure and sustain efficiency, and adopt some form of shared risk for down-sizing that is not unduly detrimental to the commercial interests of providers.
This will not address current contractual arrangements, which may have to be dealt with on a case-by-case basis.
The debate should start now. It is in the interests of all parties that it does.
Decommissioning will always be a feature of a dynamic public sector. Changing demand, technology and citizen aspirations will also result in changes to public service profiles and expenditure.
The forecast public expenditure trends suggest that there may have to be more decommissioning in the next few years than has been the case for decades.
John Tizard is director of the Centre for Public Service Partnerships, University of Birmingham
