Cabinet Office publishes ‘Outsourcing Playbook’ - 11 new policies to help government get outsourcing right

Profile picture for user ddpreez By Derek du Preez February 20, 2019
Summary:
Whitehall has a chequered past when it comes to the success of outsourcing contracts. The recent fall of Carillion has forced the government to focus its outsourcing efforts.

Contract
Cabinet Office Minister Oliver Dowden has this week launched a ‘Outsourcing Playbook’ for government, which outlines 11 new policies that aim to improve the success of outsourced projects to suppliers.

The Playbook aims to help ensure that government gets right more projects from the start and is more prepared when things go wrong.

The recent collapse of Carillion, which managed a huge variety of public sector contracts and ended up costing the taxpayer an estimated £148 million.

The influential Public Accounts Committee also recently highlighted how little has changed with regards to government procurement and said months ago that any ‘Playbook’ produced by the Cabinet Office should include mandatory requirements.

Commenting on the publication of the new Playbook, Cabinet Office Minister Oliver Dowden said:

“Outsourcing can deliver significant benefits, including value for money and more innovative public services. Our new measures will improve how the government works with industry and provide better public services for people across the country.

“I can today provide reassurance that the Playbook makes explicit that, when designing contracts, departments must seek to mitigate, reduce and then allocate risks to the party best able to manage it.

“A more considered approach to risk allocation will make us a smarter, more attractive client to do business with.”

The new policies

The Outsourcing Playbook is fundamentally centred around 11 new policies for the public sector to follow (it’s worth noting that it was produced in cooperation with outsourcing giant, Capita). These include:

  • Publication of commercial pipelines - All central government departments will be expected to publish their commercial pipelines. It is hoped that this will help suppliers to understand the government’s long-term demand for services and prepare themselves to respond to contract opportunities.
  • Market Health and Capability Assessments - All outsourcing projects will conduct an assessment of the ‘health and capability’ of the market early on during the preparation and planning stage.
  • Project Validation Reviews (PVR) - Up until now, only government major projects required a PVR assurance review. Now all complex outsourcing projects will be required to go through this ‘policy to delivery gateway’. It essentially brings together cross-government expertise at the early stages of the project to help assure deliverability, affordability and value for money.
  • Make versus Buy Assessment - Central government departments must conduct a thorough make vs buy assessment before deciding to outsource a service.
  • Should-cost Modelling - In an attempt to help protect government from ‘low bid bias’, where the cheapest option submitted is chosen, all complex outsourcing projects will produce a ‘should cost model’ as part of the make or buy decision process.
  • Requirements for Pilots - Where a service is being outsourced for the first time, there is now a presumption that a pilot should be run. The Cabinet Office states that piloting a service delivery model is the best way to understand the environment, constraints, requirements, risks and opportunities. It hopes that pilots can also help inform the drafting of technical specifications.
  • KPIs - New outsourcing projects should include performance measures that are relevant and proportionate to the size and complexity of the contract. Three KPIs from every new outsourcing contract will be made publicly available. It is hoped that getting this right will form the foundation of smarter contracts that are designed to incentivise delivery of the things that matter and provide clarity to the public about how the service is working for them.
  • Risk Allocation - Proposals for risk allocation will be subject to greater consideration and scrutiny to ensure it incentivises the desired behaviours or outcomes.
  • Assessing the Economic and Financial Standing of Suppliers - All outsourcing projects will comply with a minimum standard when assessing the risk of a supplier going out of business during the life of a contract. Consistently applying a minimum standard of testing will hopefully provide a better understanding of financial risk.
  • Resolution Planning - There will now be a requirement for suppliers of critical public service contracts to provide resolution planning information. The Cabinet Office notes that although major insolvencies are infrequent, this change should help to ensure government is prepared for any risk to the continuity of critical public services posed by the insolvency of critical suppliers.

My take

Outsourcing has been problematic in Whitehall for a long time. And it’s not just about the potential failure of a firm, or the outsourcing of a contract to a supplier that doesn’t yet have any ferries (ahem). Outsourcing has long stripped Whitehall of the necessary skills it needs to deliver effective services and has delayed (or put a stop to) the introduction of innovation. What’s good about this Playbook is that it forces some necessary expertise on the buy-side of the equation, which has been lacking in the past. It adopts a cross-government approach to helping ensure that if a service is outsourced, it has the best chance of getting it right. My concern still lies in it gives a route for departments to offload responsibility to a select few suppliers. If you look at what some of the most innovative departments are doing - for example, DVLA or DWP - I’m not sure their approach is what you’d consider traditional outsourcing. Much of the skill, expertise and delivery is maintained in house, whilst making use of suppliers for the delivery of standardised services and pockets of innovation. However, if outsourcing is to continue, at least we now have a Playbook. How it’s going to be monitored and enforced, and how heavy-handed the Cabinet Office is going to be, remains to be seen.