Private delivery of public services

Posted on
A recent article in national press stated that, according to a study of contracts published in the Office Journal of the EU, there are £4 billion worth of Government tenders in the pipeline.

This came a few days after an event hosted by this firm's Insolvency and Recovery Group that posed the question of whether the future of public services in the UK was through private provision (whether through a franchise model or some other form of outsourcing) and if so, whether sufficient thought had been given to managing the risks of that and the consequences of business failure.

I was asked to provide my thoughts at that event in relation to the health and care sector. Of course, a very large part of the heath and care services in this country are delivered through private and third sector providers. Some services are delivered through specific contracts with an arm of Government (PCTs, local authorities) by private and third sector providers – for example some intermediate care, drug rehabilitation, day centres. Perhaps the most commonly used of all health and care services, primary medical care, is delivered by GPs under contract to (currently) PCTs. Other services are purchased by the Government (again through local state bodies) from private and third sector providers alongside the same services delivered by the same private and third sector providers for fee paying residents; elderly care being the one that most readily springs to mind.

As a nation, currently, we seem to be in something of a quandary about this private delivery of public services. On the one hand we know that the state is not able to deliver all of these services unaided but on the other we are appalled when a private provider of such services stumbles or even falls over. One of the most talked about in recent times in the health and care field was, of course, Southern Cross, and it is impossible to go to a health and care sector conference without it being mentioned at some stage. The most recent topic is the failing of G4S in relation to the Olympic security contract.

So is it a risk outsourcing so many of our public services to private and third sector bodies? There are always risks in entering into arrangements with suppliers, whether you are the Government or you are running a small business. There is currently a large chain of DIY stores unable to provide a full range of nails and screws due, according to notices in the shops, to an issue with a supplier.

There is no perfect solution but some due diligence on your proposed supplier, taking references, and, where possible, knowing that you can put a back-up plan in place in the event of complete meltdown are all sensible precautions. It's also a good idea not to put all your proverbial eggs into one basket. Whilst becoming a significant customer of a supplier may give you some commercial muscle with them, it will need to be weighed against the risks of them stumbling or falling over. If you are almost entirely reliant on them then your own business may well suffer in the process. I am not saying that big is bad. There are many very successful, very good, very big businesses. It is the extent to which you choose to be reliant on them that matters.

As any good manager will tell you, outsourcing a service does not mean you can then assume everything will go according to plan. A robust contract (and that doesn't mean completely one-sided as it is almost impossible to get supplier buy-in on that basis) and good contract management go a long way to mitigating risks.

So, if £4 billion worth of public services is to be delivered by private and third sector providers, perhaps the main question for all arms of Government is whether they are setting up sensible contracts and have enough good quality contract managers to keep things on the straight and narrow.