Good sourcing and the smarter state

13 July 2016

“What energises many markets are new insurgent companies, who break monopolies and bring in new ways of doing things. […] Reform – whether be it breaking state monopolies, bringing in new providers, or allowing new ways of doing things – can cut the costs of these failures both economically and socially, and they help to advance the progressive causes of spreading opportunity and enhancing social mobility that I care so much about”.

David Cameron, My vision for a smarter state, 2015

This is Prime Minister David Cameron’s vision for the so-called ‘Smarter State’. Almost a year on, this new report by Reform presents a stark reminder of how difficult government systems still make it to achieve the above ambition. This is not because of the lack of commissioning intent or ambition, but more because the procurement and commercial side of government operates within a contracting paradigm which is no longer fit for purpose.

The two significant large-scale outsourcings of public-service contracts of the last administration – the Work Programme and Transforming Rehabilitation – simply failed to unlock the capacity that exists across sectors, across the country.

I doubt strongly that those who commissioned these programmes were content with the outcome of the competition(s), which resulted in the usual suspects picking up the largest proportion of the work. These providers, driven by shareholder value, are by their very nature risk averse. They rarely invest in genuine innovation and are unlikely to deliver the fundamental and sustainable transformation of outcomes that the programmes were designed to achieve.

Certainly in the case of Transforming Rehabilitation the typical model appears to be a classic ‘lift-and-shift’ approach underpinned by strong programme management capability designed to deliver efficiencies. This approach, which might on the surface appear to save the Exchequer money, will fail to deliver the aspirations set out in the Prime Minister’s speech. Making efficiencies to bloated bureaucratic systems is easy. Delivering sustainable changes to the way we do things requires genuine new thinking.

If we want transformation of delivery, if we want to deliver sustainable improvements in life chances, if we want to ensure entrepreneurial players can operate in these emerging markets, then much more needs to be done.

In order to create the conditions that would allow a range of providers with imaginative and transformative solutions to enter the market, government procurement must move away from its warped fixation with the size of balance sheet and simplistic notions of risk transfer. Instead it must start to develop concepts of co-production, risk share and even support with cash flow. This is not to argue against sensible concepts such as payment by results or appropriate accountability frameworks – these are welcome but must be underpinned by innovative procurement.

To support these ideas, Catch22, along with Interserve and Big Society Capital, has developed a concept called the Public Services Lab. It is designed to develop the capacity of the voluntary, community and social sector to bring together commissioners and their procurement teams to build competence and confidence in their ability to build creative solutions. It will even go so far as to imagine what a social-credit rating might look like – to provide the right level of assurance that the ability to deliver exists outside the usual outsourcing suspects.

It’s not too late for the Work and Health Programme. We can still make this right. We just need to start applying the principles I’ve just set out. I’m calling these ‘good-sourcing’.

Chris Wright is Chief Executive at Catch22.

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