can local government become more commercial whilst retaining a public service ethos?


By Martin Pilkington, leading expert on outsourcing contracts with joint venture structures in the public and private sectors

The old Chinese curse says, ‘may you live in interesting times’. Faced with the ever more complex challenges of growing budget cuts, societal pressures, accelerated change and conflicting priorities, local government certainly must feel there is a hex upon them.

The Government wants to see local government increasing public-public and public-private partnerships and reducing expenditure – whilst at the same time improving service levels. Increasingly there is pressure to adopt more commercial thinking into the provision of public services to help with developing partnerships and to achieve these goals.

MyCSP, Surrey Health and other flagship organisations are pursuing different models of service provision and recent high profile tendering failures have highlighted the need for more commercial skills across the public sector, such as within the civil service and central government.

Success in mixing public and private enterprise has been varied. A number of high profile joint venture structures in local government such as Liverpool Direct, South West One and Service Birmingham have been the subject of press comment and scrutiny. Large scale outsourcing approaches have recently faltered in a number of authorities. Outsourcing has its merits but it is difficult for any organisation, public or private to accept that things could have been done better and that in some cases exploring insourcing versus outsourcing, as the Association for Public Service Excellence (APSE) recommends, could deliver a better and more flexible result.

There is no panacea or ‘one size fits all’. Each local authority faces a mix of social, geographic and demographic challenges that affect their ‘patch’.

So, who are you going to call when you need assistance with complex commercial deal structures and service provision delivery models to cut costs and raise standards?

Consultants tend to be a popular but expensive recourse and they get involved in assisting local government with outsourcing and transformational activities. Their interest and involvement tends to reduce once a deal has been signed and the real work begins to deliver long term value.

Ultimately whether a local authority chooses none, some, or all of a commissioning approach, in the end the ‘buck stops here’ sign will always be on the desk of the Chief Executive, the elected members and their senior executive management.

It is vital that existing executives and elected members are able to understand the commercial thinking of their private sector partners.  The talent is there already, the experience of running the services is there also. What is needed is insight into commercial thinking and the commercial approach used by the private sector in such activities as spin offs, outsourcing and partnerships. Understanding the commercial thinking helps the local government team to focus on the key issues at each stage of the negotiations.

Further processes and skills help: a thorough options appraisal, productive competitive dialogue, developing effective benchmarking and creating a proactive and efficient retained organisation that is an intelligent client for the duration of the contract are key to successful outcomes.

The development of a more commercial local government can be achieved without compromising its public service values. Organisations need to transition to more commercial but progressive thinking whilst retaining the public sector ethos. A hard balance but it can – and must - be done.