It doesn’t seem that long ago that it was near-compulsory for anyone in government talking about public sector IT to denounce the two Os - outsourcing and Oligopoly.
Those days are now well-and-truly behind us, as Minister for the Cabinet Office David Lidington made quite clear yesterday in a speech to think tank Reform.
The aspect of his speech that’s grabbed the headlines in the mainstream media is the planned requirement to ensure that contractors can prove their social value credentials in the future. That’s all good and well, but the aspect that caught our eye was his unashamed promotion of the goodness of outsourcing.
This is something of a reversal to say the least. In recent years, the party line has been that outsourcing over the decades has resulted in a number of high profile and hugely expensive failures, delivered by a handful of mega-corps which moved from one disaster onto signing up for another, all the while draining the public sector of vital in-house skills.
Recent years have seen scandals and controversies around the likes of Atos, Serco and G4S, while the collapse of Carillion earlier this year emphasised the dependency of government on outsourcing just to keep the lights on. It’s a dependency that’s costing around £200 billion a year - and if Liddington to be taken at his word, that’s likely to a number that rises, although he insisted that the UK Government isn’t hooked on outsourcing:
The UK does not, despite what some might say, outsource disproportionately more than other countries. The UK actually spends less on outsourcing than other European countries such as Germany, Sweden and the Netherlands.
In the Netherlands, for example, 60% of public organisations outsource IT services and public authorities are looking to outsource traffic management systems to keep Dutch roads flowing. And in Sweden, a country with some of the highest educational standards in the world, half of higher schools are free schools and privately owned.
It is also worth noting that outsourcing is standard practice within the private sector itself. When I worked for British Petroleum and Rio Tinto back in the 1980s, things like production of the company’s internal magazine and IT and a lot of computing arrangements were all done in-house. But now, in those as in so many other private sector companies, huge amounts of work are outsourced to other specialist contractors.
The sales pitch
If anyone was in any doubt about how back in favour outsourcing is, Lidington set out to do a sales pitch for the “the benefits”, which he said are clear, but need to be restated. And who better to restate them on behalf of the private sector than the Chancellor of the Duchy of Lancaster:
Outsourcing delivers economies of scale that mean services can be provided more efficiently, at lower cost and at better value for the taxpayers...research commissioned by the previous government has shown that outsourcing delivers savings of some 20 to 30%, compared with bringing services in-house.
By “previous government”, presumably he’s referring to the last Labour government rather than the Tory/Liberal Coalition? If so, he’s relying on research that’s coming up for a decade old, although it’s difficult to tell as he failed to cite a more detailed source.
As for all those ministers and civil servants who’ve been moaning for years that mass outsourcing has robbed government of the in-house skills it so desperately needs, fear not, as Lidington has an explanation:
The private sector brings a range of specialist skills, world-class expertise and deeper knowledge to bear on what can be complex issues. Different government projects require different skill sets - be it IT or construction; health assessments or prison management. Those skill sets are only made possible through the mechanism of choice within a free, competitive market.
Actually they could have been made possible were it not for the fact that successive administrations - Tory and Labour - hadn’t spent a couple of decades failing to invest in training and handing over their IT resources to U.S. services firms and systems integrators. Hush, says Liddington:
While government has considerable resources at its disposal, it cannot do everything by itself. It needs the dynamism and innovation that only a healthy, diverse marketplace of suppliers can provide.
It might be thought that the collapse of Carillion would be enough to pause for thought about fostering dependency on private sector providers only, but even that fails to deter Liddington’s cheerleading for the outsourcing industry:
These critics of outsourcing are swift to use events like the collapse of Carillion to declare that no public service should ever harness the skills of hard-working businesses up and down this country to provide IT services or help run our hospitals. Our starting point is to recognise that we need to get outsourcing right from the start.
Ah - simple then. Because after all, the public sector is not littered with examples of badly-scoped, poorly-procured, appallingly managed ‘big ticket’ outsourcing deals...oh, hang on a minute…:-(
This time it’ll be different
But Lidington reckons that this time Government will get it right. Here he has a checklist of ‘to do’ items that, if they were enacted and enforced - and that’s a very, very important if - then there would certainly be improvements. For example,on the back of Carillion, there’s a need for proper contingency plans in case a supplier fails:
We will now require all key suppliers to develop what are known as ‘living wills’, which will enable contingency plans to be rapidly put into place, while ensuring services are still delivered. Second, it is important that we maximise the number of alternative suppliers and encourage new providers, in the event that a supplier does fail. We will therefore take the lead by requiring government departments to follow for the first time a ‘playbook’ of guidelines, rules and principles that will encourage new entrants to the market and build mixed markets of suppliers.
At present what happens when projects go wrong is that suppliers are dragged before the Public Accounts Committee, given a tough time by some MPs, declarations are made that ‘lessons have been learned’ and the supplier can then move on to sign up for its next multi-million deal.
No more, declares Lidington:
We need to make sure that suppliers can be held to account by the public for their performance. Starting with our most important contracts, we will increase transparency by requiring a number of key performance indicators to be published - such as response rates, on-time delivery and customer feedback - so that taxpayers can monitor outcomes, and track how their money is being spent.
Part of that is going to mean having civil servants who understand what it is that they’re signing up for:
It is clear that in order to outsource effectively, the Government needs the necessary skills and expertise to do so. We will therefore ensure that all 30,000 contract managers across the Civil Service can receive the high quality training they need to undertake the proper management of contracts and suppliers.
Such training might also encourage the civil servants to break away from the Usual Suspects of the Oligopoly and expand the supplier footprint. Lidington does concede there’s a need for “a more diverse marketplace”, explaining:
It is clear that competition for contracts has often favoured large suppliers, with too narrow a focus on value for money. But we want to see public services delivered with values at their heart, where the wider social benefits matter and are recognised. And that means government doing more to create and nurture vibrant, healthy, innovative, competitive and diverse marketplaces of suppliers, a marketplace that includes and encourages small businesses, mutuals, charities, co-operatives and social enterprises.
Which is where the headline-pleasing “social value” angle comes in:
We will extend the requirement of the Social Value Act in central government to ensure that all major procurements explicitly evaluate social value, where appropriate, rather than just consider it.
We will also require all departments in central government to regularly report on the social impact of new procurements, and we will train all 4,000 of the government’s commercial buyers how to take account of social value and procure successfully from social enterprises.
By doing so, we will ensure that contracts are awarded on the basis of more than only value for money – important though that is - but a company’s values too, so that their actions in society are rightly recognised and rewarded.
Ok, I’m taking a very cynical view of all this, but over the past 28 years of covering government computing in the UK, I’ve seen outsourcing hailed as the greatest thing ever, only to be followed by a period when it’s the worst thing in the world - rinse and repeat, rinse and repeat.
The glory days of Francis Maude in charge of the Cabinet Office arguably saw a time when the Oligopoly-bashing went too far. But anyone who sat through PAC hearings on the NHS National IT Programme and saw civil servants and outsourcing providers alike betting off criticism of wasting billions of pounds of taxpayers money, would be tempted to join in.
There should be a situation where outsourcing in the public sector can be managed appropriately and used to complement in-house service delivery and policy-making.
The problem is that such a balance demands in-house skills - and we outsourced all of them!
But it’s all too clear from Liddington’s evangelical endorsement of outsourcing yesterday that it’s back in favour at the top of government. The Oligopoly just had to play a waiting game and normal service would be resumed. Well, promises have been made that things are going to be different from now on. Let’s see…