Confidence-in-Commercial: Using Contracts To Boost Trust in Public Service Markets

Recently, Cabinet Office Minister Francis Maude, committed to trialing and adopting a set of standardised transparency provisions to be included in government outsourcing contracts, drawing on recommendations from the Institute for Government. We are delighted to publish this from Chris Wajzer, Researcher at independent think tank the Institute for Government, where he leads work on transparency in government contracting.

The recommendations come after a difficult couple of years for public sector outsourcing in the UK. While both in-house and outsourced services have enjoyed their share of successes and failures, recent high-profile problems with specific outsourcing arrangements appear to have undermined public confidence in outsourced service provision. They have also brought into question the government’s ability to manage these contracts.

According to a recent Survation poll, only a fifth (21%) of the public trust private companies to which government contracts have been outsourced, and more than a third (37%) distrust them. There is also little trust in government’s ability to manage outsourcing contracts. Some 60% think the government fails to regulate outsourcing companies adequately.

This wariness has emerged at a time when outsourcing has become increasingly central to the provision of public services in the UK. In 2013, the National Audit Office estimated that across the public sector, £187 billion is spent on goods and services from third parties. Private and voluntary sector organisations are now very large suppliers of government services, particularly in health, care of older people, employment and probation. And most government agencies now outsource some of their IT and HR support.

One reason for low levels of confidence is that there is little public information on how well these contracts are performing. Finding information about the quality of service being provided and how much money suppliers are receiving is difficult. The government publishes very variable amounts and types of information in relation to different services, and often fails to provide information which the public might see as essential.

This makes it difficult to tell whether media stories about specific contracts fairly represent the performance of suppliers, let alone the effectiveness of outsourced provision as a whole. The media focus on naming and shaming specific providers makes for an unhealthy debate about the potential value and benefits that outsourced service provision can bring. It also detracts from the more important goal of generating a proper understanding of the relative success and failure of different providers and the government departments commissioning their services.

Increasing transparency has the potential to reverse this state of affairs and re-establish confidence in public service markets. Indeed, the business and voluntary sector alike have welcomed calls for more transparency, recognising that high levels of trust are crucial to operating effectively in public sector markets. But what is the best path for greater transparency in practice? One route that is frequently suggested is to extend the Freedom of Information regime to cover private and voluntary sector organisations delivering taxpayer-funded public services. Another approach is to build transparency requirements into the contract itself to encourage regular release of information about contract performance to the public.

In November last year, the Institute for Government convened a taskforce to explore the latter of these options in more detail. Specifically, the taskforce set out to draft a set of standardised transparency provisions that would commit government and public service providers to publish information on contract performance to the public. Last week, the Institute set out its recommendations, based on the advice of this taskforce, in its Enhancing Transparency in Public Service Contracts report, which was published to coincide with Francis Maude’s commitment to trial and adopt a version of the recommended provisions.

This commitment marks an important step towards helping to make government contracts more open and accountable to the public. If these provisions are adopted, suppliers of taxpayer-funded programmes will be required to publish information about contracted services – such as the fees charged to government and top-level performance indicators – and details of major subcontracting arrangements.

Maude has said that one of his aims has been to be make Freedom of Information redundant by proactively releasing information to the public. But in our view, both methods of releasing information are required: winning trust will demand both the mechanisms to ‘push’ information out to the public on a regular basis, and those to ‘pull’ information in when more detailed, fine-grained and specific data is required. The Institute’s recommendations are intended to complement existing transparency measures already in use in government contracts including freedom of information clauses.

By all indications, increased transparency of contract performance will continue no matter what the outcome of May’s election. The next step now is for the provider community to get behind this initiative and work with government to implement the provisions. From our work with the taskforce we know that some providers have legitimate concerns. They will have to weigh any risks they see as associated with adopting the clause against the potential benefits of transparency to the public.  And if suppliers are going to provide information on contract performance for public consumption then there will need to be an obligation on government to publish that information in a fair and accurate way.

For providers, showing their commitment to transparency by actively encouraging adoption of the clause could be an easy win, putting the pressure back on government to make increased transparency a workable reality.

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