The Case for Insourcing Public Contracts
For many years the narrative of public service delivery has been dominated by big policy ideas of big government; often a narrative driven by the holy grail of high-quality but cost-effective public services. From treasury management strategies to zero based budgeting through to compulsory competitive tendering and best value.
A further dominant force of that narrative was New Public Management and in spite of some laudable aims within that context, such as performance measurement and management to drive better quality public services, too often the prescribed outcome was to outsource or marketise public contracts. By mimicking market mechanisms public services, it was assumed, could be delivered more effectively and more cheaply.
What is now clear is that the over-simplification of public service delivery into commodified units, capable of being delivered by the market, has led to increasing market failure.
The past 18 months have borne witness to the collapse of the outsourcing giants Carillion and Interserve. Add in to the mix Capita’s controversy-hit relationship with the NHS and the major renationalisation of the probation sector just five years after the introduction of a large-scale programme of privatisation, and it is easy to see why more and more UK public service providers are bringing their contracts back ‘in-house’.
APSE’s latest report – Rebuilding Capacity: The case for insourcing public contracts - finds that over three quarters of councils have or are planning to insource services, with 64% citing greater efficiency through insourcing and near to 60% doing so to improve quality.
Rather than being a passive reaction to contract failures, bringing contracts back in-house is increasingly viewed as a proactive response to the public policy pressures facing local councils, not least the ongoing impact of austerity. As budgets are reduced and public policies changed, the inflexibility and inefficiencies of outsourced contracts are increasingly exposed. Unlike the straitjacket nature of many outsourcing contracts, insourcing allows the public provider to exercise more effective resource allocation and maximise its limited resources.
Complete with case studies in success from across the UK - Nottingham City Council, London Borough of Islington, Liverpool City Council, Halton Council, Stoke on Trent City Council and Highland Council – the report finds that insourcing is not confined to any one particular service area; nor is it confined to any ideological or party-political allegiance. It is increasingly viewed as a pragmatic means to address service improvement, service efficiency and to recalibrate local services to local needs.
Controlling one's own resources in a local area; shaping services to meet local needs and aligning services to the strategic needs of the local authority, including its own financial management, environmental endeavours or social justice outcomes are all best facilitated by having the ability to pull the levers, determining how, and in what way, local services are delivered. Insourcing can provide this certainty to local councils in otherwise turbulent and uncertain times.
“When the facts change, I change my mind.” John Maynard Keynes’s famous quote has never been more relevant in today’s debate on public service provision. Increasingly, people across the UK are recognising there are serious limits to the prevailing “private sector good/ public sector bad” approach to awarding public contracts, and are realising that insourcing is a flexible, cost-effective and innovative alternative to delivering excellence in local public services.
By Mo Baines, APSE Head of Communication and Coordination, and author of Rebuilding Capacity: The case for insourcing contracts.