Local authorities have been urged to develop more sophisticated relationships with contractors to ensure that they benefit from any savings and improvements made in outsourced council services.
An analysis of local authority commissioning by the New Local Government Network and the CBI concluded that councils, businesses and charities needed to talk to each other earlier and more openly. They should stop focusing only on procurement details and consider contracts based on agreed results rather than on detailed service specifications.
The report said negotiations between councils and independent providers of public services often became ‘stuck’ on issues such as procurement rules and the skills of the two sides. This held them back from exploring the more innovative partnerships needed in today’s world to manage growing demand amid spending cuts.
If town halls adopted a more sophisticated commissioning approach, exploring issues with providers before the formal procurement of services, it would create the possibility for savings. Providers in the private sector are often unaware of the wider context in which local government operates, and so are slow to invest in innovation.
To change this, providers and commissioners must work together to devise local solutions to problems long before the formal procurement process has begun. Such early involvement would allow possible suppliers to bring more creative – and efficient – solutions to light, the Commissioning Dialogues report stated.
For example, the report highlighted good practice in commissioning at Staffordshire County Council.
The authority had an established approach to outsourcing, with contracts often heavily prescribed. But it is now moving towards a contract focused on outcomes for its waste disposal services. This will be based on three objectives: all waste is disposed of with nothing sent to landfill, at a set cost. How this is done will be for the provider to decide, and this will encourage innovation.
There is an increasing ‘crucial distinction’ between the service outputs, such as when waste is collected, and the authority’s aim in the contract, such as minimising the amount of waste sent to landfill. Councils should allow for the provider to come up with the details of how to deliver the set aim, and be prepared to transfer this risk.
NLGN director Simon Parker said that a healthy and competitive market was vital for the future of local government, but warned that on present trends ‘we risk getting stuck in the old rut of incremental savings and adversarial relationships’.
He added: ‘Local government and its partners must work together to create a new generation of innovative contracts. Councils need to be more open about their emerging needs, while business must be prepared to invest in innovation and share risk more imaginatively.’
Mathew Fell, the CBI’s director of competitive markets, said that only limited savings would be made if councils continued to focus only on procurement processes.
‘If providers understand more about a local council’s wider objectives, they can propose innovative, cross-cutting ways to meet them based on real business capabilities,’ he added.
