'After Carillion and Learndirect, should we rethink outsourcing?'

The cases of Carillion and Learndirect have raised big questions about outsourcing. Now is the time for a major public debate, writes Stephen Evans

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There has undoubtedly been a trend towards greater use of the private sector to deliver public services over recent decades. And this is a huge field, so huge we don’t really know how big, covering everything from construction and management of roads and hospitals, to delivery of specialist employment services, apprenticeships and learning.

Here I focus on the delivery of learning, skills and employment services. The arguments used in favour of contracting out vary, depending on the service involved. They often hinge on claims around value for money – that contracted-out suppliers can reduce costs overall, improve efficiency and achieve better outcomes for the taxpayer.

This is, in turn, based on a view that the profit motive (for private sector firms, though, of course, many services are delivered by the voluntary sector) and risk transfer will give providers sufficient incentive to deliver more efficiently.

'Profit privatised, risk nationalised'

On the flip side, if an organisation becomes too big to fail, it can seem like profit has been privatised and risk nationalised.

Arguments are also sometimes made that private and voluntary sector providers are better managers, can innovate more quickly and know their local communities better.

A greater diversity of provision, it is argued, can lead to better outcomes for people. In practice, it may not feel like that if the real customer too often seems to be the commissioner rather than the public.

So here are four lessons that I think are important as the debate moves from the particular cases to the general implications.

1. The ultimate purpose of public services is to serve the public

This might sound obvious, and it certainly should be. But it’s easy to lose sight of this in a complicated debate about commissioning, delivery, risk and performance.

Whether services are delivered in-house or contracted, the ultimate test is whether they deliver outcomes for the public. For example, this should include the job and pay prospects of people who complete apprenticeships.

These outcomes should be underpinned by clear service standards: for example, what support will I receive? How and when will I receive it? Will it be right for me?

2. Government should have a clear vision, and civil servants the right skills

I’ve argued previously that some of the challenges with recent Education and Skills Funding Agency procurements have come from a lack of vision for the provider base the government wants.

Does it want to encourage a small number of larger providers or a greater diversity of provision? Within this, how does it see the role of different types of providers (colleges, independent providers, voluntary and community organisations)?

Does it want a market of the "tried and trusted" or new providers? Making decisions without a clear vision is like deciding which way to turn without knowing where you want to get to – you’ll definitely end up somewhere…

Similarly, delivery of services and the commissioning of them require two different sets of skills. So we need to make sure both commissioners and deliverers have the skills they need. You wouldn’t drive a car without taking driving lessons. And departments should learn more from each other’s experience. Some things are too complicated to write a perfect contract for, and some things are too important to reduce to a contract.

3. There is no right and wrong model

There are examples of good and bad service delivery in both the public and private sectors. Ultimately, different services require different solutions, and either way you need to get the objectives, commissioning, procurement, and delivery model right. A knee-jerk reaction either way won’t help. So back to points one and two…

4. We need a fundamental review

Specific failures need to be investigated. But we must also grasp the real opportunity to think about our approach to the design, commissioning and delivery of services. This means looking across policy areas, but also across central and local government. We need public services that work for people, and must consider how risks accumulate both for suppliers when we try to reform everything at once and for government risking becoming too reliant on a small number of large organisations.

There are some specific factors for both Carillion and Learndirect – for example, it’s pretty obvious to most people that sponsoring a Formula 1 team is not a good use of taxpayers' money (this is my early entry for understatement of the year).

But it’s also time for a more general debate – about the sort of public services we want, how to commission and/or deliver them, and how to ensure outcomes for people and value for money for taxpayers are prioritised and safeguarded. That debate’s only just begun.

Stephen Evans is the chief executive of the Learning and Work Institute

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