A new approach to outsourcing and procurement

Cllr Gavin Edwards, Chair of Overview and Scrutiny at Southwark Council, discusses new approaches to council outsourcing and procurement. 

Over the last 10 years Southwark Council has been forced to deal with a number of outsourcing failures. Contracts with the private sector which were supposed to improve services and provide savings, ended up doing the reverse. Housing repairs, the call centre and revenue and benefits have all underperformed.

This is a huge issue.  Southwark Council’s register of contracts with external organisations shows 220 different contracts for goods and services.  That accounts for a total contract value of £2.6 billion.  A huge range of services, from the building of new schools to employment support services to homecare for vulnerable residents, are procured by the council.

Scrutiny councillors have just published a wide ranging report which recommends big changes to the way the council approaches commissioning. The report calls for decisions made about who delivers services take more account of the risks of going to the market. Proposals include introducing an in-house “preferred provider” policy, a target for creating local jobs and apprenticeships with council spending and greater protection for the workforce

We took evidence from the local voluntary sector and business community, council procurement officers and trade unions.

The report concludes that commissioning services across needs to be more transparent, subject to greater democratic control and more engaged with what service users want. We also need to take more advantage of our spending power to promote equality and fairness.

We’ve made 20 recommendations in all, but I’ve highlighted five of these below

1.  In-house as “preferred provider”

Due to the risks associated with outsourcing large-scale services to the private sector, the report calls on the Cabinet to introduce a policy of in-house as the “preferred provider”, similar to the NHS preferred provider policy operated when Andy Burnham was Health Secretary.  This would not mean that Southwark would cease to outsource services.  Instead it would mean that the possible benefits of outsourcing, where it was considered appropriate, would need to be properly investigated and evidenced

2.  Openness and transparency for contracts

Procurement is often shrouded in unnecessary secrecy.  To counter this all contracts signed by Southwark Council with external contractors should be published in full online with a link from the contracts register.  In those exceptions where commercial confidentiality is considered an issue, partial redaction could be used.

3.  “Gateway zero” reports for all large scale commissioning processes

In Southwark, and many other councils, a ‘Gateway 1’ report is a document which sets a procurement strategy. If you see a Gateway 1 report, you know a decision has been made to outsource a service. To ensure a decision to change the way a service is delivered is made with appropriate input from Cabinet, elected members, staff , service users and residents we recommend a new standard report, prior to Gateway 1.  This would need to make the case for the preferred mode of delivery – in-house, private sector, CVS sector, shared service etc.  A ‘Gateway zero’ report would ensure that the broad methods by which a service is to be delivered (e.g. single provider/framework of providers etc.) could be discussed before a particular approach becomes hard to unpick.

4.  Lower Contract thresholds
In other London boroughs the thresholds for officers to be able to approve procurement decisions are often lower and Cabinet Members formally sign-off more decisions.  The report recommends lowering the threshold levels to improve oversight of this spending.

5.  Using the Public Services (Social Value) Act 2012 – Jobs and apprentices

More should be done to encourage social benefits derived from our procurement activity. The draft report recommends setting targets for the number of apprenticeships and the number of jobs created by each £1 million of our procurement spending.

You can see a wider summary of the recommendations here and the full report here. The report is due to go to Southwark’s Cabinet in February 2015.

Photo Credit: murray9000 via Compfight cc

    1. Nigel Rose says:

      I think this is an excellent beginning and I hope Southwark build on it. As you rightly emphasise outsourcing is not an end in itself and the constant pressure to put out contracts has not led to better or cheaper services. Instead it has often led to more fragmented and less reliable services. Whole value considered over a long period, nurturing and encouraging the development of good quality service providers together with stability are far morel likely to produce outcomes than “tender and hope” procurement processes. you are absolutely right to focus on political control. Commissioning and procurement are profoundly political processes that too few councillors, in my experience, understand.

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