Outsourcing and the pursuit of shared goals

There was a good article in the Guardian yesterday about how public sector spending cuts mean boom times for outsourcing companies such as Serco.  

The much-accepted logic is that outsourcing saves money.  Yet the Audit Commission has suggested that councils may be overstating the savings that come from outsourcing.  More importantly, from my point of view, is this:

[The Audit Commission] said that it had found evidence of councils having difficulty with managing the complexity of contracts and assessing performance.  "Some councils have relied unduly on the spirit of partnership, believing that contractors would pursue shared goals without incentives to do so," it added.  

We've all seen examples (not just in the public sector) of business relationships where the language of partnership has been spoken, but the reality has been far less collaborative. You could also suggest that the belief  that contractors would pursue shared goals - without explicit agreement on how that would be done - is pretty naive.  And, ultimately, poor use of public money.

I think there are opportunities to do things better here - and there's a clear role for social enterprises.  I'm working on a local authority project at the moment where, when we drew up the tender documents, we agreed clear social objectives that we wanted to see achieved.  Then, with the people who have won the contract, we have agreed how achievement of those objectives will be monitored.  Progress on achievement will form the basis of the contract-management meetings.  

The alternative would have been a dry, outputs-based process which loses any sense of the real change that you wanted to achieve through tendering out the service in the first place.  Instead, by making it clear that we want to achieve certain things, then working together to agree exactly how that will be done, we should have a better chance of achieving what we want to achieve (and of course, manage the relationship with the contractor).

I'm not making big promises about how much we'll achieve, because social impact reporting can be hard work, and it's the first time we've done this.  This is why I go to Social Impact Camp - to try to work with other people on this issue.    But for me the clever thing here is that we've integrated social impact reporting into a process that was happening anyway - the contract management process.  So it's more work, but it's added on to (and could eventually replace) something that was happening anyway.  

Is that an incentive to pursue shared goals?  I think you could say it is.  It's certainly making it explicit that we want to see certain things achieved - and it should also give clear direction to the people delivering the contract.  In itself it won't  make the contract a success, but it at least gives us a framework for judging success - and for trying to improve things in the future.  

Comments

[Julia]

Hi Rob,
I don't know much about local government/ social enterprise partnerships, and it always sounds to me that there should be, as you say in your blog, an opportunity here. From what I can work out, however, the main issue seems to be the size of the contracts... for the few social enterprises I know that have the capacity to deal with the councils (in a procurement sense), the contract would still make up such a huge proportion of their revenues as to represent a business risk. I would be really interested to hear about any partnerships that have worked, and what it was that made them successful... or am I wrong and is it possible for small social enterprises to work with the councils?
Best,
Julia