PLC Public Sector reports:
The government’s Mutuals Taskforce, led by Professor Julian Le Grand, has published a report outlining its recommended actions for increasing the roll out of public sector mutuals and making them “a mainstream option for public service delivery”. The recommendations cover a wide range of areas including how information can be made more readily available, obtaining more funding and taking steps to improve the commercial attraction of investing in a public service mutual.
However, one of the most problematic issues for those trying to deliver a public sector mutual has been the public procurement regime, and the report makes several recommendations as to how the taskforce considers these problems can be overcome.
The public procurement proposals
Guidance on Part B procurements: the report suggests that the Cabinet Office should develop “clear and transparent” standardised procedures for the procurement of Part B services. Commissioners should also be encouraged to take a more flexible approach and to feel more comfortable in letting contracts to mutuals for terms long enough to allow for investment costs to be paid off and improvements in service delivery to be fully realised (five years is suggested).
In a similar way to many of the government’s approaches to public procurement, this represents something of a mixed message with more standardisation and more flexibility being encouraged at the same time. Putting that conflict to one side, the sentiment is certainly sensible and the encouragement to government to provide “myth busting guides” to ensure that public procurement is not ruled by an unnecessarily risk-averse approach certainly sounds like a positive move.
Assessing financial standing and experience: the report calls on the government to reinforce its message that suppliers should not be ruled out of a procurement process on financial grounds “unless there is clear evidence that the supplier’s financial position places public money or services at unacceptable risk”. The report also calls on commissioners to design procurement processes that can take advantage of experience gained by those participating in mutuals when they were part of the public sector.
These are two ways that the government could highlight the greater freedoms available in procuring sub-threshold or Part B services. However, it is important that messages do not get confused and applied to regulated procurements where, for example, to promote experience at award stage could, if not done correctly, have Lianakis implications. The government’s response to the first failure of a public service mutual and the problems this may cause will also be interesting. Will the approach be that this is acceptable collateral damage or will the commissioning authority be criticised for failing to protect public funds?
Making more use of the mystery shopper scheme: the taskforce applauds the steps that the government’s mystery shopper scheme has taken in allowing a forum for suppliers to highlight bad procurement practice. However, the taskforce feels that the scheme could be put to better use if it also acted as a place where commissioners could go to seek advice on designing procurement processes to address inherent problems.
Public Services (Social Value) Act 2012: the report notes that once this Act is in force, authorities will need to consider how what is being procured might improve the economic, social and environmental well-being of their areas. The taskforce considers that there is an opportunity for government to provide information and examples of how involving mutuals in public service delivery may assist authorities with meeting this duty.
Negotiating the revisions to the public procurement regime: the taskforce asks that the government seeks the following from the ongoing negotiations over reforms to the public procurement regime at EU level:
- A temporary exclusion for contracts let to mutuals, to allow mutuals to become established before being subject to full and open competition.
- That the proposed new “innovation partnership” procurement procedure is developed in such a way as to promote the opportunities of mutuals to be involved in innovative public service delivery.
- That any changes to Part B services continue to allow for flexibility and that the proposed codification of the Teckal exception still provides a potential route for a staged public sector staff spin out.
All of these proposals are sound, however, the chances of the government getting the temporary exclusion recommended may not be particularly high.
One issue where more guidance would be beneficial is on whether contracting authorities are obliged to advertise contracts for Part B services, which many of the services run by mutuals will be. Contracting authorities are often reluctant to take a calculated risk on there not being cross-border interest in a contract and may err on the side of caution by carrying out a procurement process when it is not legally required and there may be little advantage in doing so. For more information, see Ask the team, How do I decide if I have to competitively tender a Part B services contract?
Gathering momentum
It is clear that the mutuals movement is gathering momentum, the government pipeline of public service mutuals grows ever longer and shortly we will see the launch of the right to challenge, which is likely to increase diversity in public service delivery.
Whether or not this report has the answers to allow this momentum to translate into large scale public service reform remains to be seen. However it seems clear that the task force is at least asking the right questions and identifying the right issues that will need to be addressed if this is to happen.