Two years on from the collapse of Carillion, the government risks seeing another outsourcing supplier collapse if it does not get behind the reforms put forward after the company’s liquidation, a think tank is warning
A report by the Institute for Government (IfG) says the government has not consistently taken up the Cabinet Office’s new guidelines on the way outsourcing contracts are designed, awarded and managed.
A year after the government published its Outsourcing Playbook containing the reforms to the way it outsources services, the IfG report is intended to provide a stocktake of whether changes have been implemented.
Since Carillion, the Cabinet Office has trained 8,000 officials on how to implement its guidelines and has won support from major suppliers.
The report states: ‘Overall, there are encouraging signs of progress. But improvements in key areas are patchy, and the reforms remain a long way from being fully embedded.
‘The government will need to provide further political support and investment if continued problems with outsourced contracts are to be avoided.’
The think tank says the Cabinet Office has done well to establish the new guidance in Whitehall and roll out training, at a time when the civil service has been under substantial pressure.
The department has improved its relationship with big suppliers, the reforms have wide support from industry and there is some evidence that the guidance is being used directly to change poor behaviour by departments.
Efforts to improve outsourcing have also been bolstered by the success of a longer-term initiative to bring in commercial expertise from outside government.
However, the IfG says several departments regularly ignore guidelines around publication of commercial ‘pipelines’, about how risk is allocated between government and suppliers, and how bids for contracts are selected.
Many have not updated their internal policies, meaning that the government is still signing risky contracts which may well collapse.
The IfG found little evidence of improvements to the way government assesses risk and balances cost and quality, while scrutiny of departmental plans is not yet rigorous enough, meaning good practice is still dependent on individual ministers and senior officials.
It also points out the guidelines do not apply to local government and public bodies, including the NHS, despite those organisations being responsible for over £100bn of procurement spending.
The Playbook’s guidance applies to all outsourced services, however some aspects, such as the requirement to conduct ‘should cost models’, only applies to ‘complex’ projects or those over the value of £10m, the IfG highlighted.
It said training and support appears to have focused on larger or more complex contracts – and it is unclear to what extent the principles are being applied to other contracts. Training so far has also focused mostly on those in commercial roles, but the Cabinet Office plans to discuss the reforms more widely, including with policy, legal and operational officials.
The Playbook established a presumption that there would be a pilot whenever a service is outsourced for the first time. However, views vary on what constitutes a pilot and the level of burden deemed acceptable.
For example, several charities and private companies argued that the Ministry of Justice’s (MoJ) plan to bring the management of offenders back in-house while continuing to outsource some interventions, such as drug and alcohol services, had not been properly piloted.
However, the MoJ said that the operating model in Wales had served as a pilot for the introduction of the revised operating model in England, and that ‘prolonged engagement with the market had led to a detailed and considered approach’ being taken to ensure the lessons had been learnt from previous outsourcing.
The report calls on the government to name a Cabinet Office minister who is responsible for improvements in outsourcing, and says there should be funding for the Cabinet Office to support and scrutinise contracting by departments.
Contracting training should be extended to local government, the NHS, and other public bodies, and the IfG also says the statutory powers recommended for the new Audit, Reporting and Governance Authority recommended by the Kingman review should be implemented.
These include the ability to force changes in company accounts rather than applying to court to do so, which it argues would make it more transparent when major suppliers were in difficulties.
