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Reform outsourcing, don’t ban it, says think tank

Government needs private firms and charities to deliver public services but should improve the rules for outsourcing, says the Reform think tank.

A new report by the think tank calls for more training for civil servants dealing with private companies and charities and contracts which deliver wider social outcomes.   

The think tank is calling for a review of the regulations that govern outsourcing but opposes the idea of banning private and third sector involvement.  

The Government currently spends £284 billion annually buying services from the third and private sectors, which is a third of its budget.

So far governments have improved the commercial skills of civil servants in the big central government departments, creating a skills gap with smaller departments and local authorities. The report recommends extra funding to bolster training for local government and a new online training platform.  

The think tank believes that government should select contracts based on their wider social benefits, known as ‘social value’, such as boosting local employment. The report argues that government should review outsourcing rules to ensure social value is better considered in deciding contracts and improve transparency.

Better data and guidance would allow service providers to quantify and compare the potential social value of different contracts. The report found that commissioners are currently “freestyling” when trying to do this. The building of HM Prison Berwyn is a good example of social value. The contractors committed to employ 50 per cent local tradesman and spend over £50 million with local SMEs.

Dr Joshua Pritchard, report co-author, said: “The way Government buys services can be improved but banning outsourcing would be throwing the baby out with the bath water.”  

The report also found:

  • Current guidance is causing some services to be purchased which may be better produced in-house.
  • Outsourcing can be opaque, with only basic information about contracts needing to be publicly available. The report suggests making all public service contracts available on an open access data base. 
  • “Statements of responsibility” would improve outsourcing i.e. measures to make sure that civil servants are aware of their responsibilities and what they are accountable for in case of failure.
  • Better data collection and evaluation would enable ‘outcomes-based commissioning’ where commissioners only pay for a service if a specific objective has been achieved. 

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