Open policy requires open research – the CBI’s report on outsourcing public services doesn’t meet this standardPosted: October 1, 2012
Last week the CBI published research that claimed that government could save billions by outsourcing more public services to private business. Ironically for a report titled ‘Open Access’, the main problem with the report is not its argument but its lack of transparency. For such an important issue as the future of public services and who delivers them, we aren’t given enough opportunities to judge for ourselves whether the report’s claims stand up to scrutiny. Open policy requires a much greater openness about the data and analysis used to support such conclusions – otherwise it’s just a press release.
The CBI’s Open Access report claims that “opening up public service delivery to independent providers” (that is, outsourcing public services) could achieve savings of £22.6 billion “or more”. For such a big claim, the research has a fairly simple methodology. The researchers (Oxford Economics) looked at 20 different service areas to determine the average cost savings from greater efficiency and productivity from outsourcing (a figure of at least 11 per cent, within a range of 10-20 per cent); applying the same calculations across the estimated £278 billion of public services which the CBI believes could be fully ‘opened up’ produces potential savings from outsourcing of £22.6 billion.
Trade unions have criticised the report for a ‘lack of evidence’ (for example, Unison) and for not taking into account any of the transactional costs associated with outsourcing including procurement, tendering and contract management, let alone when private providers fail to deliver. The Local Government Association called the report’s calculations “ludicrous” for effectively double-counting savings from services which have already been outsourced. Other commentators have identified specific flaws in the research (for example, for fundamentally misunderstanding who already provides what in the housing sector).
Beyond this, it’s also important to note that efficiency is not the same as effectiveness, which is to say, cheaper does not always represent real value for money. This is especially the case when it comes to public services where there are often broader considerations to be made regarding ‘public value‘ – encompassing not only benefit to the individual service users but also to communities and society as a whole.
For example, it’s unfortunate that the CBI’s report promotes the Work Programme as a model of good practice, both because of the identified risk of fraud in the programme, but also because of the significant concerns about the programme’s impact on charities. As the NCVO has argued: “The Work Programme continues to pose major issues for charities particularly around managing cash flow and taking on risk and very large contracts prevent smaller and more specialist organisations from playing their full part. More seriously it’s clear that the payment structures used continue to threaten the viability of contracts.” However ‘efficiently’ it achieves its objectives, if a programme undermines the diversity of provision including from smaller charities, can it really be regarded as generating better ‘value’ for society?
Further, while the report recognises the widely shared public concerns about outsourcing public services, it also effectively makes these problems that government needs to solve – as if government is to blame for them: “The Government must take important steps to ensure the public retains confidence in the opening up of public services by becoming a more effective market manager and ensuring that the best, most effective providers from all sectors have the opportunity to manage our public services. Providers too must work with the government to address the public’s concerns about value for money, accountability and service failure.” Certainly government has the ultimate responsibility to ensure that public money is spent responsibly, for example that providers are properly audited. But if they are to be given millions or billions of pounds of public money, private providers also need to do more to prove their worth and reliability, such that they can be trusted to provide public services (something not helped by last week’s further revelations about the G4S Olympics debacle). Of course, one way to avoid such problems would be not to outsource more public services – but this is a view that the CBI regards as “dogmatic”.
However, the main problem with the CBI’s report is that we can’t properly determine the accuracy or veracity of the research for ourselves. It seems particularly questionable to assume that the same level of savings can be achieved uniformly across different areas of public services, and yet to quote from the research: “If an average 11% of productivity improvements is achievable across just £24.5bn out of the £666bn annual public sector expenditure on services in the UK, then similar levels of savings must be possible: not just in the un-open proportion of the markets researched but in the unopened proportion of the estimated £278bn of public services spending which could practicably be more opened up to independent provision.” [emphasis added]
Unfortunately, it’s not possible for us to investigate this much further. The problem is the methodology – or rather its lack of openness. As acknowledged in the report: “There is as yet little published information on the scope and performance of services delivered by independent providers.” The average saving figure used in the report is based on “existing research, and information from public bodies and providers” – including crucially from a survey of CBI members. The CBI has produced a nicely presented summary of the analysis by Oxford Economics; the actual analysis (which is a bit more difficult to find) is pretty opaque, especially when it comes to this survey of CBI members. One phrase that keeps popping up in the original Oxford Economics analysis is: “The degree of potential cost savings that could be achieved through outsourcing these services is estimated from responses to the CBI member survey.” In other words, the most critical figure in the research, the basis of the argument made in the report, comes from what the CBI’s own members claim – a claim we are unable to judge for ourselves because we are provided with no further information about it (for example, how many of the CBI’s members responded, what size were these providers, what specific types of services they provide, etc). For an argument in favour of open public services, this represents a remarkably closed approach to evidence.
As the CBI’s report notes, we are in the middle of the biggest wave of government outsourcing since the 1980s, with more than £4 billion in tenders being negotiated in 2012 alone in services ranging from prisons and police to defence and health. Given this, we need much more robust and reliable research about the benefits and the problems that outsourcing more public services would produce – before we outsource these services (perhaps irreversibly). The research commissioned by the CBI may or may not be a useful contribution to this analysis; the problem is that because of the report’s own lack of transparency, it’s very difficult for us to know.
In posts over the past few weeks we’ve looked at the Government’s ‘open public services’ agenda, in particular the outsourcing of public services, and how this threatens to undermine another Government initiative, for ‘open policy making.’ Open policy also involves outsourcing policy – but this risks repeating some of the problems with outsourcing public services, especially reducing accountability.
We like open policy. We think that policy development has been too closed, to a too narrow set of participants, for too long. We agree with the Government that Whitehall hasn’t got a monopoly on policy expertise, and we support its recent announcement of a “presumption in favour of open policy making, with policy developed on the basis of the widest possible engagement with external experts and those who will have the task of delivering the policy.” In earlier posts we’ve suggested ways in which Government can make open policy a reality.
However, we’re less sure about that part of the plan to “Pilot contestable policy making by establishing a centrally-held match fund which can be used by Ministers to commission external policy development (for example, by academics and think tanks).” If this marks a significant change in how policy is developed (which we have to presume it does), then like outsourcing in public services it raises important issues of transparency, accountability and trust. Just as outsourcing has in some instances undermined the publicness of public services (for example, their accountability to the public), so it could threaten the publicness of public policy by undermining the extent to which it is made in the public interest.
Given our recent focus here on outsourcing, consider this: policy on public services could now be outsourced to organisations that favour more outsourcing of public services. This is more than likely given that so many think tanks are part of the ‘Whitehall consensus‘ in favour of outsourcing. Will think tanks that consistently argue for more outsourcing be commissioned to develop policy that leads to more outsourcing – or will they be automatically disqualified from conducting such work? How about think tanks whose sources of funding are less than transparent – wouldn’t it undermine trust in policy if they were commissioned by government without the public knowing what other interests might influence their research? How would this increase the accountability and transparency of policy-making, at a time when the public’s faith in political institutions is in such marked decline?
We noted in the previous post how some think tanks have argued that lobbies that benefit from increases in government spending should be ignored because of their (self-) interest. The same think tanks have also argued that government should stop funding charities to lobby it for more public spending on their ‘pet issues.’ Logically, the same should hold true for open policy – that government should avoid the risk of underwriting the mutually beneficial relationship between outsourcing companies and those think tanks that take sponsorship from them.
In apparent recognition of these issues, the Government’s plan includes the commitment to “clear contracts – setting out criteria to ensure that the policy being developed is done so in the best public interest, and that it does not favour any bias of the provider.” This appears to accept that some providers will be biased, but that a contract will ensure that this bias doesn’t inform their work – something which is either surely naive or disingenuous. If government wants to ‘build on evidence of what works’ in social policy (another of the themes in its reform plan), wouldn’t it better to commission researchers who don’t have such a tendency to bias, and who instead have a track record of neutral, evidence-based analysis?
Moreover, how does commissioning Westminster and Whitehall-centric think tanks – which are by definition already insiders – help to bring more ‘external expertise’ to policy? If government wants to hear ideas from think tanks, then it already can, and without spending a single additional penny of public money (an efficiency of which Francis Maude would surely approve). For the moment however, this part of the open policy agenda risks policy being developed by the same old insiders, only with less transparency and accountability than it is at present.
It is perhaps indicative then that the first commission under open policy risks further politicising policy development, and that it is being conducted in the traditional closed way. The Cabinet Office is commissioning research into changing the balance between the permanent (and in principle, neutral) civil service and introducing a larger politically appointed element, as in France and the US. Likely candidates for the research have been reported to include usual suspects such as Reform and the Institute for Government, but both have now apparently turned down the chance to bid for the work due to a desire to maintain their “independence.” To some, this might demonstrate that the system is self-correcting – that think tanks recognise the need to maintain their integrity as well – but it also suggests that the concerns expressed here are real ones.
The problem isn’t so much that government has a “virtual monopoly on policy development” (to quote from the Government’s civil service reform plan) – in one sense that’s the definition of government, and anyway it isn’t true. Think tanks, academics, charities and campaigners all develop and propose new policy, and in this sense there’s more than enough ‘contestability’ in policymaking already. The problem is conscious or unconscious collusion among insiders about contentious aspects of public policy without the public also being allowed to participate.
What’s really missing, to quote from the Government’s own proposals, is how to “enable policy to reflect the real-world experiences of citizens and harness public engagement with the policy making process.” That’s not something you’re going to get from Reform or the Institute for Government, or in all likelihood whatever organisation does get commissioned by the Government. It requires a different way of thinking about policy, who can participate in it, and how – something we’re considering in our ‘manifesto’ project, and we’d welcome your thoughts.
Olympics over (at least until the Paralympics start), we can get back to where we were – wondering how G4S cocked up so badly providing security for the Games, and what it might mean for outsourcing and social policy. The Olympics have provided a stark contrast between the performance of companies like G4S and the thousands of volunteers and public sector workers who made the Games happen – something to remember when it comes to who we trust to deliver public services.
The biggest cheer at the closing ceremony was undoubtedly for the volunteers. An astonishing four million people applied to be volunteer ‘Games Makers‘, and 70,000 were chosen. Spectators’ and tourists’ experience of their help and hospitality seems to have been almost universally positive (volunteers’ own stories seem to have been equally good).
Then there’s the behind-the-scenes public sector workers – the planners, highways staff, events and civil emergency teams, social workers and others who supported the Games, often on top of their regular responsibilities. Comments on the Daily Telegraph’s site might regularly refer to public sector workers as “parasites” and “scum”, but when it comes to delivering for the nation it seems that the public sector still has its uses and some forms of ‘public investment’ are okay.
This is not private sector-bashing; many businesses and sponsors also made the Games happen. The National Lottery also played a crucial role in the Games’ success, through its investment into hosting the Games themselves, as well as into the success of Team GB’s athletes. But the G4S experience shouldn’t be forgotten. It points to at least three important issues in outsourcing.
The first is about trust. On our behalf, the Government trusted G4S to deliver and the company failed. Thankfully there were no major security incidents, thanks to the thousands of public sector workers in the form of the police and army who stepped into the breach at the last minute. What we need to know now is whether this failure relates specifically to G4S or not. If G4S is a particularly poorly managed company that can’t be trusted, its performance in delivering so many other contracts also needs to be reviewed. Alternatively, if as G4S and others have seemed to suggest, the Government made major mistakes in how it commissioned and oversaw its contract, then the issue is much broader – it’s about whether outsourcing at this scale can ever be trusted.
The second is about openness. G4S’s clumsy and surely counter-productive ‘donation’ of £2.5 million to the armed forces shouldn’t succeed in obscuring these issues, rather it raises more questions. We will only find out the answers if we can see the contract that G4S was given, and in particular how the company will ever be held accountable. How many security staff did G4S (2011 revenues of £7.52 billion) actually deliver? What penalty clauses are there for its non-delivery? How much will it paid for what it did manage to do – and how much will it (properly) recompense the public sector for the additional costs that it (we) had to cover?
The third is about what we value and what motivates us. Some commentators (and ministers) have claimed that the Games reflected the Big Society. The Games Makers in particular demonstrated that people are prepared to volunteer in huge numbers. This doesn’t mean we can deliver public services on the backs of volunteers, but it does suggest there is a vast and often neglected commitment that could be harnessed to improve society. Even The Economist magazine (a consistent advocate of outsourcing) noted last week that volunteering has gone up during the recession – not because of the Big Society but because people care about their local services and communities and so are more motivated to ‘save’ them when their budgets are being cut. Danny Boyle’s opening ceremony (also largely a volunteer army) might have been “multicultural crap” to reactionary misanthropes, but the reason it moved the rest of us is that it reminded us of social achievements driven by a commitment to collective good rather than private benefit.
How many of the Games Makers would have turned up if their job was to save G4S’s neck? The latter might not have offered much pay, but the former weren’t offered anything – beyond the opportunity to be part of something that matters, to make a contribution to a national moment. The Big Society (by whatever name you want to call it) won’t happen if people feel they are being asked to take the place of public services that they’ve already paid for, especially if large outsourcing companies are getting paid at the same time. Perhaps it wasn’t coincidence that while we were distracted by the Olympics, it was ‘leaked’ that the Government is set to give the contract to manage the National Citizen Service to Serco (2011 revenues of £4.64 billion). Put to one side the question of why volunteering – something that charities do all the time – requires a for-profit outsourcing company to manage it. The G4S fiasco suggests we should make sure the penalty clause is so strong – and so transparent – that we won’t have to rely on Serco’s sense of ‘charity’ if and when it fails to deliver.
In this recent series of posts we’ve been exploring the tensions between two competing Government agendas – open public services and open policy making. In this post we examine these tensions in more detail, using a flagship Government policy – the Work Programme to tackle long-term worklessness.
The Work Programme is regarded by Government and others as a model of outsourcing that should be replicated in other areas of public services. The Economist magazine has predicted that £58 billion of public services will be outsourced by 2015 as part of the Government’s agenda for ‘open public services’, on top of the £82 billion already outsourced (according to Oxford Economics). Much of the comment surrounding the Work Programme has focused on what it means for the future of outsourcing – but what does it also suggest about the potential for open policymaking?
The Work Programme is a £5 billion initiative that has been heralded as the most radical attempt by UK government to address long-term worklessness. It is based on the principle that government will get out-of-the-way and will financially reward providers who perform. The Government has argued that delivery of this programme should be outsourced rather than delivered in-house, because this will drive innovation and significantly improve performance compared to previous programmes such as Flexible New Deal. Responsibility for both delivery and risk has been transferred to large generally private prime contractors who are largely paid on results, that is the number of people entering into work and keeping their job for up to two years.
However, one of the striking things about the Work Programme, given its size and remit, is the lack of publicly available performance data. This seems to run counter to what the Government has said about the importance of open data, transparency and now open policy. For example, the Government’s Open Public Services White Paper states that ‘Provides of public services from all sectors will need to publish information on performance and user satisfaction’ – yet the same emphasis isn’t always apparent when it comes to this flagship Government programme.
Effective transparent scrutiny of the Work Programme is difficult because providers are not able to share data about what is working and what isn’t. They are required to sign comprehensive contracts, which prevent them from sharing performance data unless it is already in the public domain. Provides face serious consequences if they flout these rules especially if they generate ‘adverse publicity’ for the programme. Nonetheless, some data have trickled out, and the first analysis of performance was released by the Department for Work and Pensions earlier in the summer. This followed a data set released by trade body ERSA in May. ERSA and the Department estimate that one in four people are going into work after being attached to the programme for six months.
The Government has argued that there are complications in releasing timely data about the Work Programme, both because it is new and because there are customers coming onto the programme all of the time, which can distort the overall impression regarding its performance. The Minister responsible, Chris Graying, in evidence to the Work and Pensions Select Committee in March this year argued that his Department is publishing data about the Work Programme in accordance with Office of National Statistics guidelines covering both what, when and how statistics are published. However, a careful reading of his evidence might suggest that the ONS rules don’t actually prevent DWP from releasing Work Programme performance data – in other words, that the Department has more room for maneuver than the Minister appears to suggest. We’d be happy to be corrected on this interpretation – if someone from DWP or indeed ONS wants or is allowed to get in touch.
What is certainly true is that it is still very difficult, a year into the Work Programme, to build an accurate picture of whether the policy is in any way on course to deliver against its original objectives. This vacuum of information is creating a lot of unease about the policy. It has been left to the likes of the National Audit Office and the Social Market Foundation to fill the gap – much to the chagrin of the Government. A report from the NAO earlier this year stated that the Government’s assumptions about the Work Programme were over-ambitious, and that only 26% of job seekers would secure work compared to the Department’s target of 40%.
Given the scale of investment in this programme, both political and financial, it is unsurprising that there is so much interest in this policy – and so many demands for more openness and transparency. There are legitimate questions to be answered as to whether the Work Programme is working in the way it was intended. A number of charities have pulled out of the programme whilst others have gone bust because of the financial constraints of the payment by results model used in the programme. St Mungo’s, a well-respected charity is the latest example to pull out after failing to receive any referrals. The NCVO has also raised a number of concerns from their members about how the programme is being implemented. Given this level of public interest and concern, lack of transparency becomes counter-productive – rather than reducing possibly inaccurate comment and analysis, it only serves to increase it.
The Work Programme points to a real tension between the Government’s open policy and open public services agendas. The Government wants to create a vibrant and efficient market of providers for outsourced public services. It also says it wants the performance of providers to be transparent and open to public scrutiny. But if other, equally important areas of provision such as reducing re-offending, public health, skills, and drug and alcohol recovery employ the Work Programme model, this suggests that open policy in public services will be severely limited, and that the public will know less than they should about what their money is funding and what the results are.
In the previous post, we started to consider whether outsourcing public services is incompatible with open policymaking. In this post, we look at the size of the public services industry and ask whether ‘economies of scale’ also means ‘too big to influence’.
If you’re a critic of outsourcing, G4S has made it easy for you recently. The company’s Olympic security fiasco underlines everything you believe: that superlarge private outsourcing companies like G4S are largely unaccountable, sometimes unreliable, and – given that they profit from providing public services – fundamentally unethical. To its proponents (and sometime apologists), the public services outsourcing industry promotes greater efficiency, effectiveness and innovation, and as the public scrutiny now on G4S illustrates, they are doubly accountable – to society as well as shareholders.
Our focus here is slightly different. Guerilla Policy is a proposal for a radical openness in how public policy is created, in particular that the people who use and provide public services should have a much greater role in proposing, researching, developing, implementing and reviewing the policy that impacts directly on their services and their lives. In an age of social networks and social media, we think this is entirely possible – if the will exists to make it a reality. We’re encouraged that the Government now seems to be thinking the same way. As part of its recent civil service reform plan, it has committed itself to ‘open policymaking’. Government says it believes that policymaking is often drawn from a too narrow range of views and is not designed for implementation. Instead, it wants to improve policy advice by creating opportunities for a wider range of views and expertise to inform its development.
But as we started to suggest in the previous post, in reality the open policy agenda might be marginalised as a result of the Government’s (perhaps stronger) attachment to so-called ‘open public services’ – the challenge to the ‘presumption’ that the state should deliver public services rather than the voluntary or private sector (promoted through various policies such as mutually-owned providers, the expansion of personal budgets beyond social care, the use of payment by results to reduce re-offending, and the Community Right to Challenge enacted through the Localism Act 2011).
Outsourcing has increased significantly in scale since the 1980s, but the bulk of public services are still provided ‘in-house’. The expansion of outsourcing has been uneven, with a much greater amount of external commissioning having taken place in waste services, transport, prisons, welfare to work and ‘back office’ services such as IT, HR and facilities management. In contrast, the penetration of private sector providers into policing, education and probation services has – up until now – been limited. The historical trend however is clear and seemingly unceasing, whichever party is in power.
When it presents its vision for open public services, the Government tends to highlight the smaller charitable providers that have developed progressive, innovative, ‘people-centred’ services and approaches. It doesn’t tend to showcase the likes of Serco, Capita or Ingeus Deloitte. And yet these, more than any other providers, represent the reality of public service outsourcing today. In recent years, charities and voluntary sector organisations have seen a growth in income from contracts and fees from the public sector (to £12.8 billion per year, according to the NCVO), at the same time as grants have stagnated. However, this is still a relatively small proportion of the £82 billion in total spent on outsourcing by the public sector (according to Oxford Economics), and a smaller proportion still of total public sector procurement (of goods and services of all kinds) of £196 billion (all figures 2009/10). The Economist estimates that this £82 billion figure will increase to £140 billion by 2015.
What has been more dramatic is the growth of a small group of very large providers who have the scale to absorb the costs and risks associated with delivery of many contracts. Welfare to work is a case in point; the Work Programme is a £5 billion programme which is wholly outsourced to a group of large private sector ‘prime contractors’, with only one voluntary sector provider, CDG, delivering as a prime. A4e is a good example of a company that has emerged from nowhere in the 1990s to have an annual turnover of £215 million. The vast majority of its income comes from contracts to deliver welfare to work, skills, advice and probation services.
The increased reliance of government on this small group of increasingly powerful providers is well-illustrated by the G4S fiasco. And if such providers are ‘too big to fail’ – as the need for what is effectively another public sector bailout suggests (this time by police forces and the army) – then what does this suggest for the ability of ordinary people to influence such providers under open policy? If government struggles to hold such providers to account during the delivery (and indeed non-delivery) of contracts, how likely is it that we will be able to influence the way they deliver services, let alone the policies under which they provide them? The critics and proponents of outsourcing might be right to contest issues of transparency, accountability, efficiency and effectiveness when it comes to outsourcing. But as policy insiders themselves, these commentators also ignore the question that the scale of these providers poses for open policy: why should companies the size of G4S – the largest private security company and third largest private sector employer in the world – care what we think?