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Russell Webster

Russell Webster

Criminal Justice & substance misuse expert and author of this blog.

Making public service markets work

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The Institute of Government recently published a fascinating report on how government is currently failing to ensure that the third of public services currently delivered by independent providers offer a good service. This is the first of a short series of posts on the report's findings. Railways, Tagging of offenders, Housing for asylum seekers, Olympics Security - what do these four have in common? They've all been the subject of recent major investigations...

The Institute for Government recently published (18 July 2013) a fascinating report on how government is currently failing to ensure that the third of public services currently delivered by independent providers offer a good service. This is the first of a short series of posts on the report’s findings.

Railways, Tagging of offenders, Housing for asylum seekers, Olympics Security

What do these four have in common?

They’ve all been the subject of recent major investigations into the way services were either commissioned or delivered because they have also managed to waste a substantial amount of public money.

They feature in the introduction to the Institute for Government report whose lead author is Tom Gash (well worth a follow on Twitter: @TGCrime).

The report analyses government’s approach to outsourcing in general before focusing in on four case studies:

  1. The Work Programme
  2. Secondary Education (Academies)
  3. Care for older people
  4. Probation Services

I want to use this post to look at the report’s overarching conclusions before looking at the Probation and Work Programme case studies in separate posts – outsourcing in both these areas is, of course, characterised by its reliance on payment by results.

Critical success factors for public service markets

The report starts by identifying the key factors for public service markets to drive improvements:

  • Users and commissioners need to be engaged and informed in service design
  • Funding levels need to be appropriate.
  • New providers must be given a chance to prove their worth – and grow.
  • Incentives should drive the desired provider behaviours and poorly performing providers should be able to exit the market without excessive disruption to service users.

It then concludes that these criteria are rarely being met.

 

IfG report

 

Identifying the problems

The report identifies four key reasons why these success criteria are not being met.

  1. They found that there were often barriers to service users making an informed choice about which provider to select (education and social care).
  2. They discovered “gaming” – particularly creaming and parking  (in all four case studies).
  3. They identified government reluctance to call to account under-performing providers – often for fear of disruption to service (Work Programme).
  4. They often found funding imbalances with providers competing on an uneven playing field (e.g. schools in different authorities but with overlapping catchment areas receiving significantly different levels of funding per student).

Lack of joined up commissioning

The Institute for Government also found that the lack of coordinated commissioning is a substantial, albeit well-known, problem.

A number of large providers now deliver a wide range of services commissioned by separate government departments in particular areas of the country. This situation allows these providers to achieve economies of scale and undercut competitors, making their services attractive to commissioners. However it also threatens to undermine levels of competition,leaving government vulnerable to price increases across a range of services in future.

In addition to a lack of cross-departmental co-ordination, the report found that individual departments were also poor at setting up new commissioning systems.

For example, the Work Programme was launched before the IT system it relied on was completed (the same is true for the Drug Recovery PbR Pilots).

The report is extensive, forensic in its analysis and well worth a read in full. It provides a series of recommendations for government to improve the way that it both commissions services and ensures appropriate oversight.

The recommendations focus on ensuring that accountability for outsourced services is both much clearer and appropriate and that the agency having oversight responsibility has the competence and capacity to fulfill that role.

The Institute for Government also pushes for a much greater degree of market stewardship which ensure that the market is not restricted to a small number of multi-nationals and that the interaction of different outsourcing decisions is routinely analysed – in advance of competitions.

Finally, the report calls for much more transparency in the whole outsourcing arena with all providers of public services required to publish details of:

  • the funding they receive from government
  • their performance against contractual obligations
  • the suppliers to whom they subcontract services, the value of these contracts and, where practical, their performance
  • user satisfaction levels (where available).

I found particularly useful a matrix that the Institute for Government developed to help assess the likely problems with outsourcing in different policy areas:

 

IfG RAG assessment

 

 

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