Procurement transformation in the public sector

Written by Colin Marrs on 2 April 2014 in Opinion
Opinion

Pedro Paulo says a suite of recommendations by MPs could help improve procurement by local authorities, but only if properly managed.

The main point of interest in the Public Accounts Committee’s (PAC) recently published 47th report, Contracting out Public Services to the Private Sector, is just how little tolerance there should be for poor management of the procurement or outsourcing function.

Though critical of the Government, the findings and suggestions of the report were received positively by Francis Maude MP, the minister responsible for the Efficiency and Reform Group.

When a report criticising actions and standards in an area a minister has responsibility for is published and then praised by that minister, it’s certainly one to take note of.

The current situation sees a bias towards larger corporations. The “big four” of Atos, G4S, Serco and Capita were all interviewed by the PAC for the report and were also cited to illustrate major failings in oversight, delivery and management.

Under the unreformed system, Maude admitted that smaller suppliers were excluded but, with the efforts to split gigantic, generalised contracts into smaller, more specialised projects suited to smaller companies, the government has now made clear efforts to improve the situation.

This ties in with Maude’s recognition that “often the most competitive provider can be a new, dynamic, innovative supplier.”

With the drive to reduce spending in all available areas, this innovation and competition is, of course, of utmost importance.

The PAC has recommended five key areas for improvement in the way the public sector, at a national and local level, manage its suppliers.

These areas are transparency, contract management and delivery, competition, capability and public service standards.

The recommendations set out under each point for the improvement of the service are well thought out and to be welcomed by anyone working in the procurement sector on either the buying or selling side.

Of course the details need to be properly managed to see any credible impact.

Mandating the use of open-book accounting for contracts above an agreed level of expenditure is a good idea, but setting that level too high will again exclude SMEs with smaller contracts and, if the aim is to include more of these in public sector supplying, the cumulative effect will be, again, a lack of accountability for large portions of public funds.

 If properly adopted, the moves will mark a strong and positive shift towards greater accountability to the public of both the managers and the contractors, as well as a reinforced commitment towards supporting smaller businesses.

While the finer points are being debated, it’s important to recognise the role that outsourcing and procurement from the private sector has in the public sector.

Properly managed, it can deliver cost savings, provide uniquely adapted services to separate localities, and enable new services to be introduced without great cost.

Using smaller businesses can also give the public sector more flexibility in managing a contract that is no longer making the savings or delivering the efficiencies originally sought.

Regardless of the type of business used in outsourcing, be it small and specialised or large and multi-functional, without adequate oversight on the buy side any gains realised can quickly become overshadowed by loosened threads of management.

The PAC report has 23 recommendations on reforming the current system which largely follow two wide themes: make public sector contractors more accountable to the public; and include small businesses.

The benefits of introducing greater accountability and openness into the outsourcing of public services are clear.

Mainly, the greater oversight of contracted services would avoid a repeat of the situation where Serco and G4S charged the government for services not rendered, not satisfactorily completed or simply not possible.

With more open-book accounting when dealing with these private contractors, government auditors (and therefore the public) can engage in a high degree of spend analysis, ensuring value for money and the avoidance of fraud.

The contracts will be easier to manage as services and deliverables will be more defined and not hidden through opaque accounting and reporting.

Greater visibility into public spending will also enable, at a local level, those with budgetary control to see exactly where spending is needed and where it is in oversupply and adjust accordingly.

The report seeks changes to the way companies are answerable to the Comptroller and the Audit office, as well as changes to the Freedom of Information system to ensure that companies have less opportunities to hide inefficient process through claims of commercial confidentiality.

The second theme, supporting smaller businesses, is one which should strike a chord on all sides of the political spectrum.

The development of bespoke services is more likely with small businesses.

This is a quality noted by the PAC when it says “the innovation which could be generated by a wider group of suppliers is not available to the government” when it relies on monolithic suppliers.

Another perceived benefit of the public sector engaging with SMEs over larger suppliers is that, with smaller supply chains and less aggregation of resources, there may be a knock-on effect with a greater number of other businesses, as suppliers and the SME ecosystem will be supported.

Overall, if the recommendations in the PAC report are implemented, we could see an almost unrecognisable public outsourcing system emerge from the smallest, local level to national contracts.

With proper management of contractors, better reporting, and an increased amity towards smaller businesses, an industry with a shabby, flabby appearance can be transformed into the lean, confident sector it has the potential to be. 

Pedro Paulo, is chief executive of ICT service provider Gatewit

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