private delivery of public services
article by Mary Chant, partner, Corporate department
A recent article in national press stated that, according to a
study of contracts published in the Office Journal of the EU, there
are £4 billion worth of Government tenders in the pipeline. This
came a few days after an event hosted by this firm's Insolvency and
Recovery Group that posed the question of whether the future of
public services in the UK was through private provision (whether
through a franchise model or some other form of outsourcing) and if
so, whether sufficient thought had been given to managing the risks
of that and the consequences of business failure.
I was asked to provide my thoughts at that event in relation to
the health and care sector. Of course, a very large part of the
heath and care services in this country are delivered through
private and third sector providers. Some services are delivered
through specific contracts with an arm of Government (PCTs, local
authorities) by private and third sector providers – for example
some intermediate care, drug rehabilitation, day centres. Perhaps
the most commonly used of all health and care services, primary
medical care, is delivered by GPs under contract to (currently)
PCTs. Other services are purchased by the Government (again through
local state bodies) from private and third sector providers
alongside the same services delivered by the same private and third
sector providers for fee paying residents; elderly care being the
one that most readily springs to mind.
As a nation, currently, we seem to be in something of a quandary
about this private delivery of public services. On the one hand we
know that the state is not able to deliver all of these services
unaided but on the other we are appalled when a private provider of
such services stumbles or even falls over. One of the most talked
about in recent times in the health and care field was, of course,
Southern Cross, and it is impossible to go to a health and care
sector conference without it being mentioned at some stage. The
most recent topic is the failing of G4S in relation to the Olympic
security contract.
So is it a risk outsourcing so many of our public services to
private and third sector bodies? There are always risks in entering
into arrangements with suppliers, whether you are the Government or
you are running a small business. There is currently a large chain
of DIY stores unable to provide a full range of nails and screws
due, according to notices in the shops, to an issue with a
supplier.
There is no perfect solution but some due diligence on your
proposed supplier, taking references, and, where possible, knowing
that you can put a back-up plan in place in the event of complete
meltdown are all sensible precautions. It's also a good idea not to
put all your proverbial eggs into one basket. Whilst becoming a
significant customer of a supplier may give you some commercial
muscle with them, it will need to be weighed against the risks of
them stumbling or falling over. If you are almost entirely reliant
on them then your own business may well suffer in the process. I am
not saying that big is bad. There are many very successful, very
good, very big businesses. It is the extent to which you choose to
be reliant on them that matters.
As any good manager will tell you, outsourcing a service does
not mean you can then assume everything will go according to plan.
A robust contract (and that doesn't mean completely one-sided as it
is almost impossible to get supplier buy-in on that basis) and good
contract management go a long way to mitigating risks.
So, if £4 billion worth of public services is to be delivered by
private and third sector providers, perhaps the main question for
all arms of Government is whether they are setting up sensible
contracts and have enough good quality contract managers to keep
things on the straight and narrow.
