“Outsource the whole d**n lot”; today Suffolk, tomorrow the world

Suffolk County Council announced last week that they were looking to (potentially) outsource all the services the council provides.  How will they do this?  Is there a model in what Essex did late last year; a very innovative procurement where a contract was awarded to IBM (through an OJEU process) that enabled Essex to get IBM to provide any service they felt like passing over to them. (How is that going?  Anyone know?)

No offence to Suffolk, but it doesn't normally impinge too much on the national consciousness.  But this seems to me to have a potential importance way beyond provision of library services in Ipswich or social care to the OAPs of Southwold.  There's been a fair bit of coverage about the political philosophy underpinning this; and an excellent article from Libby Purves in the Times today, unfortunately behind the firewall, in which she shows that she understands procurement and contract management pretty well!

"Outsourcing is not just a matter of listening to sales pitches and low quotes, shrugging off direct blame and putting on your CV that you saved heaps of money. It is about setting up watertight contracts, so you’re not shackled for months or years to a bad provider; about enforcing penalty clauses and being able to break off a commercial relationship sharply when it doesn’t deliver. It means strong supervision and having an alternative provider in mind for when you pull the plug."

Give that lady a CIPS Honorary Fellowship, people at Easton!

But I'm interested in the hard financial and operational practicality of the idea.  First of all, the Council is talking in terms of 30% cost saving. Now, if we assume that an outsourced service provider will want to make a decent profit - let's say 10% - that means the provider will have to run the service for 63.6% of the cost of the council.  (63.6% + 6.4% profit = 70% cost to council = 30% saving).

If they really can do that, it will be pretty strong proof that the private sector operating model really is, for whatever reasons, far superior to the public sector.  And that may help lead the way for a similar model to be applied across not just other local authorities, but across many other areas of Government.  ( Most of HMRC would seem to be a really obvious operation to outsource - I don't quite know why that hasn't been proposed yet?)

If Suffolk fail, and services are slashed, or Private Eye discover dodgy delaings, or the providers appear incompetent, then this will be ammunition to Labour and by the next election there will be cries of "the Coalition - and their acolytes in Councils - are only interested in providing huge profits to their mates in private sector provider companies".

The messy area (which is actually my best guess as to the likely outcome) is that the private sector can provide the services more efficiently overall; but not by 30%.  In some areas, costs may be virtually identical; in fact, many services are already outsourced.  My experience with a few councils suggests that, where there is currently mixed provision of services, care or childrens' homes can be more cost effective in the private sector in some places; in others, the public sector will be better.  It probably comes down to the quality of management rather than any structural drivers.  In some spend areas, the private sector may be able to demonstrate a 10% saving; in others it may be 20 or even 30%.  But 30% overall?  I don't think so.

In which case outsourcing may offer decent value, yet fail to live up to these high expectations.  And of course, if Suffolk need to save 30% and don't outsource, you can be sure that services will be cut severely anyway.

So I hope Suffolk are ready for some serious national scrutiny.  And they need to let and manage these contracts very well... but that's for another day I think.

Voices (2)

  1. Rob:

    This whole topic (of “Suffolk outsourcing everything”) was covered on TV recently (on Newsnight) and, to be honest, many councils have already outsourced a considerable amount of their services – Social Care is the area that they are most reluctant to outsource, fully that is – there’s a big difference (in the minds of Council Members) between ‘policy’ (applying the rules, and filtering users into the system) and ‘delivery’ (care services: dom/home care, care homes etc). The rollout of ‘Commissioning’ within LG has also shaped thinking. But, on the whole, across the range of mid-to-back office services, councils have outsourced much. However, they need to transform their approach to outsourcing. There is still much duplication across council supply chains – and much duplication within the councils themselves in setting them up!

    A few interesting links below…

    http://conservativehome.blogs.com/localgovernment/2009/12/essex-outsource-services-to-ibm-to-follow-canadian-model.html

    http://news.bbc.co.uk/1/hi/england/somerset/8529397.stm

    http://www.computerweekly.com/blogs/tony_collins/2008/07/tv-film-on-ibm-council-deal-a.html

Discuss this:

Your email address will not be published. Required fields are marked *