The new outsourcing landscape

By Heather Jameson | 24 September 2019

Gone are the days when councils made a simple choice between in-house provision or outsourced services. The collapse of Carillion has raised questions over whether private providers are the solution or the problem when it comes to service delivery while council priorities have also shifted.

‘The easy savings are gone and it’s getting tougher’ was the opening gambit at The MJ/Serco round table on local government partnering with the private sector. Since the start of austerity, the local authority outsourcing market has been turbulent, first being seen as a solution to cost savings, then being seen at times as more of a cost.

Some of the country’s top council chief executives were around the table at The MJ/Serco debate and it was apparent that for them the landscape of outsourcing is changing rapidly. It has been many years since there has been the straightforward question of in-house versus outsourced services, but now local authorities are facing more layers of complexity than ever when it comes to working with private firms – and they are even sometimes in competition now that local government is entering the market with its own ventures.

Austerity, culture, politics and rising social issues are all playing a part, sitting alongside the need for private sector firms to make a reasonable return. The need to manage budgets, loss of control and the need for contractual flexibility requires both public and private organisations to rethink their partnerships, be agile and be innovative.

At the same time there will always be a need for external provision. In a recent The MJ/Serco survey of local authority executives, access to skills, technology and investment were among the key reasons for engaging private sector partners. As one chief executive commented: ‘The long-term large-scale outsourcing days are gone. People want pragmatic and flexible models of delivery. But that doesn’t mean there is no appetite for working with the private sector.’

The external provider is expected now to engage, rather than be simply a supplier. Outsourcing for its own sake is outmoded, and instead local authorities want place-making. They want to work with their communities to provide services, rather than just outsource functions to a corporate entity and they want to support the local economy with their expenditure and help build those communities.

We heard of one local authority round the table that made a decision to increase local purchasing from 25% to 75%. Financially, it is not the best move, but supporting the local economy is as much of a priority as cost-cutting. Another authority is experimenting with ‘micro services’. The chief executive explained: ‘We have procured our home care locally. We have invested in ethical care and eliminated 15-minute visits. We are tapped into a local market of people who are working in care.’

It would not work everywhere, but it is just one example of the innovative approaches being trialled in an attempt to make services sustainable, efficient, effective and local. It is not just straightforward transactional services like waste services, street cleaning or IT contracts. Local government is increasingly focusing its efforts on attempting to reduce costs while trying to solve deep-seated social problems. That will require all the combined might of the public, private and community sectors working together and private providers will need to work in new ways to support their public sector partners. Both sides will have to change their operational models and their cultures to get the best out of their joint working and they will need to learn to understand each other better.

This is a two-way process, with the private provider needing to understand the wider requirements of its client and the council understanding the pressures on a commercial supplier. ‘We need to understand what you need in the private sector, what you need to be a viable business,’ one participant suggested.

‘Flexibility is high on the list of what we want to achieve. In order to stay in the game you have got to get closer to us.’

Then there is the political landscape. When it comes to the current UK political agenda, it is a minefield and one that the private sector can in some instances fail to fully understand. One chief from a Labour-led authority explained that its politicians aspire to be able to provide everything in-house but it is not always the best option economically. It is not however just a case of Labour insourcing versus Conservative outsourcing. There is a complexity to the current political landscape, with Brexit on one end of the scale and Corbynism at the other and an actively interested public on both sides, that even the politically savvy local government chiefs struggle to understand.

‘The penny is starting to drop for some of us,’ one commented. Does the private sector appreciate this changing political landscape? One chief asked: ‘Do companies have political analysts?’ And there is an added warning about the often puzzling political landscape: ‘Never confuse logic with politics.’

The learning is also on the local authority side. Some of the participants admitted they have not been good clients to their private sector partners in the past and not just because they have been trying to drive down costs. One chief admitted to ‘adding and adding and adding’ new bits to existing contracts without stopping for a strategic review. Another said they had expected too much.

The public remain indifferent to who provides the service and expects the same standard, whether public or private. Externalised frontline workers, everything from care workers to street sweepers, operate in a different culture in the private sector, but they are still expected to have the same public sector ethos as those still working in-house.

We are, we hear, no longer an economy of different sectors. We are all in a ‘service industry’. But how does local government start to create new contracts in partnership when it faces contractors in ‘binary mode’, stuck in a rut of the same old service solutions? It comes back, again, to the idea that local authorities and the private sector firms providing their services need to learn to understand each other better.

Nor is it just the fault of the private sector. One of the participants suggested they had dealt with a failing contract where that understanding was missing: ‘Our business and their business were going in different directions. Instead of having a serious conversation it became acrimonious.’

Finally, with the rise of commercialism, local authorities themselves have come into the market. That too brings a further complexity. Ultimately, we are at the start of the disruption and both public and private sectors will need to decide how to reframe the relationship. As one chief said: ‘Everyone wants to push the door open [on new ways of working] but we don’t know how to make the first step.’

Comment from Cliff Graham, citizen services at Serco, on the discussion

Serco recognises the changing public/private partnering landscape. Continued financial pressures, the need to address complex social challenges, localism and continued political uncertainty have all contributed to local authorities seeking to retain greater control of their budgets and resources. These factors have contributed to a significant reduction in long-term, multi-services contracts. There have been some notable successes with these arrangements, as well as less successful ventures. What is clear is that the low-hanging ‘transformation’ fruit has been harvested, and that a new form of partnership working is required.

Serco welcomes the consistent message from local authority chief executives in remaining supportive of continued engagement with those private sector organisations who can align with their strategic aims. Serco remains fully committed to our local authority clients, but recognise that our ‘offer’ needs to be relevant and cost effective. Place-making forms part of our current thinking where resources may be deployed to deliver multiple services (eg environmental and regulatory services) in a specific community where proximity allows a deeper understanding of the specific needs of a community. Serco also believes that private sector partners can support local authorities in engaging communities, within communities. In our environmental services partnership with Sandwell MBC, we have developed and support a community of litter pickers who are making a real difference to the attractiveness of streets and open spaces for local citizens. We also plan to proactively engage citizens in promoting recycling in Windsor & Maidenhead RLBC.

Serco is keen to engage with local authority partners to ‘co-create’ the next generation of public/private ways of working, and the supporting contractual arrangements. Serco’s local government partnerships team has engaged ExperienceLab, a customer experience and service design team within Serco, to develop new approaches in service delivery via citizen-centred design where we have directly engaged the public in better understanding how they wish to engage with local authorities. This insight has already provided new ideas in place-making and how citizens may be mobilised to support the council and local community, supporting local authorities in commercial ventures, joining up care and health pathways and developing a programme of assistive technologies and associated support services.

Flexibility in contracting arrangements is understood and is a key facet of future public/private partnerships. Such flexibility could include the local authority retaining the ability to re-direct partner’s resources to planned or emergency requirements, and joint, annual service plans where the focus of resources can be shifted to council priority activities, and the associated performance outcomes tailored accordingly. Serco recognises the need to re-think partnerships, be agile and innovative in developing the future of public /private partnerships. We look forward to developing these ideas and our proposed new ways of working with our clients.

Round table attendees

Helen Briggs - Chief executive, Rutland CC

Sean Harriss - Chief executive, Harrow LBC

John Metcalfe - Chief executive, Isle of Wight Council

Paul Najsarek - Chief executive, Ealing LBC

Robin Porter - Chief executive, Luton BC

Robin Tuddenham - Chief executive, Calderdale MBC

Lyn Carpenter - Chief executive, Thurrock Council

Sandy Hopkins - Chief executive, Southampton City Council

David Sidaway - City director, Stoke-on-Trent City Council

Will Tuckley - Chief executive, Tower Hamlets LBC

Trevor Holden - Chief executive, South Norfolk and Broadland DCs

Alison Knight - Executive director, neighbourhoods, Sandwell MBC

Helen Bailey - Chief executive, Sutton LBC

Michael Burton - Editorial director, The MJ (chair)

Heather Jameson - Editor, The MJ

Cliff Graham - Business development director, citizens services, Serco

Nigel Tilley - Business development director (customer services), Serco

Kristine Pitts - Principal consultant, ExperienceLab (Serco)

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