Declining appetite for outsourcing in local government – time to rethink partnerships between the public and private sectors

New research reveals a declining appetite for outsourcing in local government, amidst call for a rethink in partnerships between the public and private sectors.

A survey of council leaderships finds only 15 per cent say they intend to outsource more over the next two years. 39 per cent say they will outsource less over the next two years, while 46 per cent indicate no change from current levels.

Financial and demand pressures, combined with recent high-profile failures like the collapse of Carillion, mean the public sector in general is increasingly seeking more influence over partnerships, according to a new report by NLGN.

NLGN calls for reforms to boost oversight of private sector; empower the public sector to drive long term value through partnerships; and ultimately boost public confidence over future partnerships.

Local government’s appetite for outsourcing to the private sector is declining, according to a new survey featured in ‘From Transactions to Changemaking: Rethinking partnerships between the public and private sectors’, the latest report from New Local Government Network (NLGN).

The survey of local government leaders, chief executives and mayors asked about their plans to outsource over the next two years. A significant minority indicated that they would outsource less (39 per cent), while nearly half indicated no change (46 per cent). Only 15 per cent indicated that they would outsource more.

This dwindling confidence in outsourcing suggests that councils are seeking greater control over service delivery arrangements, driven by funding and demand pressures. Evidence also shows that councils are increasingly exploring new, innovative forms of partnerships such as trading companies and joint ventures. Meanwhile government departmental spend on outsourcing is still growing, although the backlash after high profile failures such as Carillion’s collapse has dented public confidence in partnership arrangements.

NLGN’s report argues that the picture is more mixed than the simplistic “outsourcing versus in-house” debate that is emerging between the Conservative Government and the Labour Party. The study concludes that there is a need to reform how partnerships work in practice to make sure they are less transactional and more geared towards delivering genuine social impact for public spending.

The report also calls on Government to recognise that partnerships with the private sector are not a solution to funding reductions as a “cheap option”. In fact, cuts to the public sector have undermined the capacity and expertise available to drive value through partnerships.

Offering a blueprint for a new approach to partnerships between the public and the private sector, the report outlines a package of measures including:

Increasing the public oversight of the private sector through a new accountability code of conduct as well as a social responsibility accreditation system for all contracts over £200,000 and open book accounting on large contracts over £1 million.

Boosting the ability of the public sector to drive long term value through partnerships by replacing Social Value with a stronger measure of social impact. For example, public sector commissioning bodies should be able to enforce payment of the living wage through all contracts, or the public sector will pick up the costs of low pay elsewhere in the system.

A new Government-backed review into improving transparency over private sector contracts for public services, to ensure data on cost, quality and performance is openly available.

Taken together, the reforms NLGN proposes will strengthen public sector oversight, ensure contracts with the private sector create long term value, and most importantly, will serve to boost public confidence in future partnership arrangements.

On launching the report, Adam Lent, Director of the New Local Government Network, said:

“Our findings show that the public sector is already rethinking its relationship to the private sector. But the current national political debate is missing the point. The Conservative Government takes a business as usual approach to outsourcing, while the Labour Party advocates taking everything back in house. Our research finds that it is not a question of more or fewer partnerships, but establishing better ones. With new measures to boost oversight, make contract performance more transparent and to enhance the social return on public investment, partnerships will be fit for purpose for today’s challenges.”

Simon Goacher, partner and head of local government at national law firm Weightmans added:

“If enacted, the report’s recommendations should help local government generate greater value from private sector partnerships and make the measurement of their social impact simpler. However, we should remember the onus isn’t just on Whitehall to deliver this change.

“The blueprint outlined by The NLGN here should encourage local government to build on existing good practice in the commissioning of public service already observed by many councils. Avoiding transactional, cost driven procurement is a great first step. But this should be accompanied by a change of thinking that pins down exactly what’s needed to make a contract a success from the outset.

“This means taking the time to canvas the opinions of key stakeholders within the community and incorporating their measures of success into a bespoke, transparent procurement process.”

NLGN’s research was conducted in partnership with ENGIE, Jacobs and Weightmans.

Notes to editors

For further information, please contact Molly Jarritt, External Affairs Officer at NLGN, on 07714448036 or mjarritt@newlocal.org.uk.
This research has been conducted by NLGN in partnership with ENGIE, Jacobs and Weightmans.
The survey was conducted as part of NLGN’s Leadership Index, which was carried out from 7th June to 2nd July 2018. 191 council leaders, chief executives and mayors completed the survey, which translates to a 25 per cent response rate. Survey responses were received from all UK regions apart from Northern Ireland. The results in the figure below reflect responses to the following question: Overall, compared to the level of outsourcing your council has overseen during the last five years, do you think that you will outsource more or less over the next two years?

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