Cabinet Office needs better ‘make or buy’ procurement guidance

Profile picture for user ddpreez By Derek du Preez March 31, 2019
Summary:
Think Tank Reform has issued a number of recommendations for Whitehall to improve its outsourcing and procurement practices, including better guidance on ‘make or buy’ decisions.

Image of someone signing a contract
Despite creating a framework for government buyers to consider when making outsourcing decisions as part of a newly released ‘Playbook’, the Cabinet Office could do better and should introduce more guidance on whether services should be delivered in-house or contracted out to a third party.

This is the view of think tank Reform, which has released a new ‘State of Public Service Commissioning’ report. The report has a number of recommendations for the public sector to consider when making outsourcing decisions, but the ‘make or buy’ guidance should be front of mind for those involved with procurement.

The Cabinet Office’s recently released Outsourcing Playbook aims to help ensure that government gets more projects right from the start and is more prepared when things go wrong, following decades of high profile outsourcing failings. The most recent of which was the collapse of Carillion, which managed a huge variety of public sector contracts and ended up costing the taxpayer an estimated £148 million.

Approximately £248 billion a year is spent on outsourcing in the public sector, and so there is a need to ensure that failings are minimal and that outsourcing decisions are being made for the right reasons.

The Reform report highlights that whilst the government has indicated that its austerity policies will soon come to an end, there is a risk that more money flowing into services won’t necessarily equate to better outcomes for citizens, if things are badly managed.

Make or buy

When the Cabinet Office released its Outsourcing Playbook, it did include some ‘make or buy’ guidance for those involved in procurement. However, Reform believes that more could be done and better guidance and tools should be included.

For example, it notes that “the language used at each stage of the decision-making process (in the Playbook) assumes that the service will be outsourced”. It adds that it does not “clearly provide an option to make in-house if key considerations cannot be met”. For example, at one point the Playbook guidance tools ask whether a supplier has adequate contingency plans in place in the contract, which only typically happens once a commissioner has decided to buy and therefore should not be part of the ‘make or buy’ decision-making process.

Reform has created an alternative ‘make or buy’ orders that could be used by a commissioner to “ensure that they make well-informed ‘make or buy’ decisions”. Part of this is a list of ten questions that commissioners should consider before outsourcing a contract. These include (although are not limited to):

  • Is it difficult to measure the value added by the provider?
  • Are service outcomes highly dependent on the performance of other services?
  • Is the service characterised by high demand uncertainty?
  • Is there an existing supply of high-quality providers?
  • Does the government have the organisational capability to design and monitor the use of contractual mechanisms?

Other recommendations

The Reform report didn’t just focus on the ‘make or buy’ decision making process, but also included a number of other recommendations that the government should consider to improve outsourcing. For example:

  • The Department for Digital, Culture, Media and Sport should produce a national guidance framework and toolkit for public service commissioners and providers explaining how to identify and quantify Social Value in public service contracts.
  • A £50,000 a year grant should be provided by the Cabinet Office to the Public Service Transformation Academy, which should partly spend the money on providing a more consistent network for local authorities and SMEs.
  • The Cabinet Office should introduce a national training framework for public service commissioners, which should be a digital course and free at the point of access.
  • The Government Commercial Function should expand its role to include an advisory service for public service commissioners.
  • All government departments that commission public services should adopt a ‘statement of responsibility’ regime and responsibility maps to ensure that all managers along the supply chain are aware of what their responsibilities are and what they are accountable for in the case of failure.
  • The Cabinet Office should regularly public online a list of Contracting Authorities that have been found to fail to meet their obligations regarding the publication of tenders and contract awards on Contracts Finder. A three strike system should result in repeat offenders being added to a public “black-list” for non-compliance.
  • A new regulator should be considered, that would look to support or take on some of the responsibilities of the Competition and Markets Authority and the National Audit Office. It responsibilities could include, ensuring social value standards are maintained, the standard collection and audit of contracts, ensuring a healthy amount of competition and supplier diversity.

My take

We’ve been writing about outsourcing failings for years and if one thing is clear, more certainly can be done. Capability within Whitehall is improving, but it needs to continue on the current trajectory. Half the reason services are outsourced is that buyers don’t have the skills internally to provide the service themselves. Equally, service design needs to focus on outcomes and work from the user inwards, not from the Department or buyer needs outwards. I like Reform’s recommendations. Over to the Cabinet Office to see if they’re taken seriously…