Over the past five or six years, however, problems have emerged in the UK public service economy, particularly in the commissioning of complex services. A number of high-profile contracts have been cancelled and companies are on notice because of under-performance. Some major contracts are known to be losing money.
A quick survey of the financial returns of five of the largest public service providers reveals that only one has made a commercial return over the past five years. There have been repeated profit warnings, significant revisions of the forward order book, and a sudden increase in the turnover of senior executives. Major international providers are withdrawing from the UK market; companies are no-bidding important opportunities.
There has been a noticeable decline of trust on both sides - questions have been raised about the competence and the integrity of major providers, and suppliers are deeply concerned about the 'race to the bottom' that has been provoked by low-price tenders and the aggressive approach taken by some customers to risk transfer and performance management.
This report was commissioned by the Business Services Association to explore these problems, why they have emerged, and what is necessary to ensure that the market for public services is politically and commercially sustainable.
It is based on interviews with 78 executives from public service companies, political advisers, civil servants and union officials, as well as a close reading of government reports on procurement and contract management over the past two and a half decades.