 |
| Outsourcing -- We may save costs but can we increase social value? |
Last week we talked about off shoring - the practice of taking whole production elements overseas to seek a critical competitive cost advantage. This is now slowly being reversed amid concerns about quality of products, transport costs, remoteness from end markets and problems with linking production and product\service innovation. The handmaiden of off shoring is outsourcing -- but the one does not necessarily always need to go with the other although this has often been the case.
Outsourcing a part of your business to a provider seems to be very seductive - especially when the process, is dull, repetitive and high volume and does not really form a core part of your business operations. Things like, invoicing, payroll, IT provision, cloud computing,cash collection, legal advice and HR advice seem to be prime candidates for this. The Government's 2011 Open Public Services White Paper seemed to envisage a diverse public sector service delivery landscape,however the picture in reality appears to be different. Outsourcing straight forward unit based services like invoicing and packaged advice for specific issues is relatively easy. Outsourcing complex multi-dimensional services like for example social care, health management, prisoner welfare and the resolution of issues with troubled families is much more difficult and challenging.
Indeed, when such complex services are outsourced, is there now an argument to say that the traditional contract based relationship needs to transform itself into one of a much more partner based delivery where difficult challenges need to be jointly addressed and it does not become just a cost minimisation stand off. In these circumstances both the supplier and the commissioner need to get inside each others heads to share a common approach because if that is not the case then nit picking and sniping could well be the order of the day. There does need to be a coming together - even a common "karma" to make things work properly. If that does not happen, then even the tightest written contracts and the meanest specifications are no real defence against a supplier or commissioner who wants to catch out the other party in a contractual game of poker.
Public sector commissioners who write the contract specifications for specific unit based contracts like for example grass cutting or school meals face a more straight forward task than those who need to try and specify how an adult care service might look like or how an NHS health promotion service might be delivered, These 2 latter services will need to be assessed not only on the basis of how much direct costs are saved by going for them but also how subsequent choices by commissioners will impact on society as a whole. The Public Services - Social Value Act 2012 - Now places a duty on on local authorities to consider the wider social and environmental effects of their contracts and also the effects of these on their local economies. The traditional outsourcing model - when applied to complex multi faceted services can prove to be inflexible and a significant long term financial commitment - It is time hungry in terms of officer and member time for consideration and any savings are often overstated at the outset.
Some would argue it would be better for the authority to re-engineer its services itself however in may instances,authorities simply do not have the ability and the will to do this properly. There is a trend for certain authorities to go for in-sourcing -- bringing back services which have often been poorly delivered by the external contractor and the risks of continuing with such existing arrangements have proved to be just a step too far for these authorities. Many of these instances of bringing services back have resulted from occurrences where the external contractor underestimated the cost and complexity of delivering the services within the contract period and to the required specification. The commissioner of these services was probably not blameless as well in terms of writing poor ill defined contract specifications and practising very poor contract monitoring and follow up procedures. In-sourcing needs to be handled with extreme care as the returning service will be unable to go back to the way it operated before it was outsourced, whatever the failures of the incumbent contractor may have been.It is highly likely that such an in sourced service will need to change anyway once it is back in-house and that might mean working with new partners and having a focus on increasing social value.
Oscar Wilde described a cynic as, " A person who knows the price of everything but the value of nothing," and so it is with contract prices and social value. Outsourcing organisations can increase efficiency and save costs -- but can they increase social value and are they even trying to measure and assess their own social impact in these areas? My direct experience, albeit from a traditional outsourcing exercise, is that the new provider puts in a very keen price for delivering the service, but then later on, looks for loopholes he can exploit and then puts in claims for variation orders etc. Not exactly in the spirit of closer collaborative working and hands across the sea etc. but nevertheless something I have had bitter experience of. This "price driven" contracting model in the words of the Partnership adviser - John Tizard is alive and well and probably in an authority near you. According to Mr Tizard, "Anyone can buy cheap but can they source increased value?"
Is the supplier who puts in a keen price but delivers little or no social value - in terms of his impact on the local economy, better than the supplier who puts in a higher price but significantly increases local social value? We must go for the latter and not the former but there are some caveats here.
Public service commissioners need to include transparent measures of increased social value in their service specifications whilst potential service suppliers need to include in their contract bids - creative and imaginative ways of ensuring that increased measures of social value are attained and that there is a real social value improvement delivered for the area in question whose impact can be measured in the light of the contract specification. These potential suppliers must be committed to a reasonable return and also ti increasing social value as well. This will involve a change of heart by some potential suppliers.
Yes - people might argue that these elements are challenging and difficult to achieve and measure - but they must be attempted if we are serious about high quality future public services delivered from a diversified supplier base. We need to move away from simple price squeezing on services to a position where the charity and private sectors can increase public value and make service efficiencies as well. I do not believe that these aims are necessarily incompatible and this certainly is not mission impossible.
There has to be a dual commitment from the public service commissioners and also the potential public service providers be they public, private, charity or third sector partners ( or indeed a mixture of all of these); to the aims of;
1. Increasing the efficiency of the service in question.
2. Ensuring that the social value of the area is maximised by landing on a service supplier who will be most likely to achieve the social value aims.
Social value must be transformed from an esoteric concept into a practical measure so we can all be confident of where we are heading. This will take time but the journey will be well worth it.
We cannot just focus on cheap services which may turn out to be inappropriate for ourselves and our local areas - in the medium to long term.
Cheap and nasty commissioned services - no
Efficient and valuable services -- yes.
These measures will need to provide value for both service users and taxpayers - We need to move further down the road in these areas as soon as we can.
No comments:
Post a Comment