The primary responsibility for the political and commercial sustainability of the public service economy lies with government. This is government's supply chain, and if because of the way in which the system is designed and individual suppliers are managed, core public services are compromised and government's brand is damaged, that is ultimately government's fault. Of course, providers must be intimately involved in this process, but there is little that they can do if government does not take the lead.
It is acknowledged that the Chief Commercial Officer has recently begun to address some of the market settings which have contributed to the decline in sustainability. However, many of the issues identified in this report date back several decades, and it is unclear whether the initiatives introduced over the past 12 months will be sufficient to resolve them. If government wants to ensure the survival and development of a diverse public service economy, then it will need to undertake reform of a much more fundamental kind.
Recommendations Government must formally acknowledge at the highest level that the procurement and contract management tools appropriate for buying 'paperclips' - highly commoditised, easily specified goods and services - are not appropriate for commissioning complex support services and front-line human services. Policymakers must distinguish between those markets that have developed to the point where they are capable of commoditisation, and those where the complexity of or uncertainty about the services in question and/or a general lack of understanding or expertise on the supply side requires a less transactional approach. If the market for complex public services is to survive and mature, it is essential that government work with industry to rebuild personal, organisational and institutional trust. With this in mind, government should consider a separation of its responsibilities as market steward from its role as customer. To begin the process of trust-building, government and industry leaders might be brought together to concentrate on resetting market conditions in just one or two sectors. These would serve as small-scale experiments for exploring different ways of resolving the problems, and by focusing on only one or two sectors at once, senior executives on both sides could be involved. If such a process were to succeed, it will require careful design and management. Public officials must recognise that, for a time at least, companies may be induced to act against their medium- to long-term interests in competitive tendering. Concerns about profitability and corporate brand will not necessarily act as a brake in aggressive price-based procurements. This is one of those issues where the private sector has very little to contribute - it is government's responsibility to understand the reasons why procurements so often favour the lowest price over value-for-money, and to introduce systems and processes to compensate for the bias. Consideration should be given to reinvigorating the discipline of commissioning within central government. Done well, commissioning can be a powerful instrument in challenging the optimism bias and systemic self-deception which often characterises complex projects and procurements. This is not to say that there will always need to be a separate commissioning agency, but it is fundamental that there is a distinct function (and hopefully, a recognised discipline). Consideration should be given to the establishment of a centre of excellence for the study of applied public service contracting, and the design and operation of public service markets. This would work best if it was funded jointly by government and industry, and there was a clear commitment to the centre's independence and longevity. The objective should be to undertake detailed research into real-world markets, contracts and procurements, extracting the lessons without laying blame. For such an institution to work, it would need to enjoy the absolute trust of both government and industry. If government is serious about improving capability in market design and stewardship, and in commissioning, procurement and contract management, it must give serious attention to the study and teaching of these distinct disciplines. There are precedents. The Major Projects Leadership Academy, based at the Said Business School at the University of Oxford, has quickly acquired a reputation for excellence. The US Defence Acquisition University is another possible model. |