The report from the House of Commons Work and Pensions Select Committee on the operation of the outsourced PIP and ESA assessments is yet another significant blow public service outsourcing. Though in reality, these blows are being inflicted not by the Select Committee but by poor contractual arrangements, poor contractor performance and, as in the case of Carillion, poor contractor governance and resilience.
The litany of failure and other reasons to question public service outsourcing grows by the day. It includes the G4S fiasco at the Olympics, PIP and ESA assessments, the collapse of Carillion, company profit warnings and many more examples or poor performance and contractor behaviours; and there have been some awful public sector client performance too. This mounting evidence should send a very clear and loud message to government and the wider public sector. This message is “push the pause button on any future outsourcing at least until there has been a comprehensive review to understand the impact of this policy and practice, whether it works better for some services and in certain conditions and what the alternative models of public service might be”.
In a recently published report for the Smith Institute – ‘Out of Contract: time to move on from the ‘love-in’ with outsourcing and PFI’ – David Walker and I argue for such a pause and review.
We go further and argue that there needs to be a complete resetting of mindsets and policy with the presumption being that all public services will be managed and owned ‘in-house’ by the public sector unless there are exceptional circumstances when provision ideally by charities, mutuals, co-operatives and social enterprises and in some cases by the private sector may offer better public value. There will always be some outsourcing but surely not on the present scale and only when it meets a public interest test. Such a test should be undertaken against published criteria in a transparent manner and with the involvement of all stakeholders especially service users and staff. In other words any public body should have to justify why it is outsourcing and why this will best maximise public value.
There will often be a strong case for charities and community organisations to partner rather than contract with the public sector – usually local government, the NHS and police – to deliver niche and community bespoke services. This is not traditional outsourcing. Usually partnership and even grant funding may be preferable to competitive tendering and with contracts based on those designed for major private sector businesses.
New regulations to promote the public interest are required if services are outsourced to the private sector. Such regulations should address many factors including contractor governance, ethics, employment practices, remuneration ratios and tax practice. The Freedom of Information Act should apply to contractors and public sector client activity. Contracting bodies should be required to build these into contracts, and to consult on the business case and expected objectives of any outsourcing in advance of any proposed procurement.
When a public body is considering contracting a service it should have all the available facts to hand to make this decision and guide its actions. It needs to understand the experience of others, the state of the supply market, and the performance of contractors. This is not possible currently because there is no central data base of outsourcing contracts. In ‘Out of Contract’ we argue for what we have entitled a ‘Domesday Book’ of all significant public service contracts from across Whitehall, local government, the NHS, the police and more widely. Until there is such a ‘Domesday Book’ no one knows the extent, value or impact of contemporary public service outsourcing. This is a major omission.
There are signs of change in attitude and approach with examples of local authorities of all political persuasions taking outsourced services back ‘in-house’. The DWP Select Committee is calling for PIP and ESA assessments to be undertaken within the Department. And Labour has committed to ending the ‘love-in’ with public service outsourcing if it comes into office.
Every significant contract should be reviewed over a reasonable period of time and decisions taken on whether to renegotiate, terminate or ‘in-source’ back ‘in-house’ at the end of the contract term. These reviews are urgently required and should be encouraged, if not mandated.
The tragic personal experience of too many people being assessed by the outsourced PIP and ESA assessment services should be the call for outsourcing itself to be assessed leading to a paradigm shift to the default being publicly managed and publicly owned public services.