26 June 2018
The collapse of Carillion was a lesson in the dangers of short-termism in public contracts. It’s therefore vital the right lessons are learned as partnerships between the public and private sectors are vital for the UK’s future prosperity and competitiveness.
A new public sector procurement report from the CBI and law firm Browne Jacobson highlights three areas where closer cooperation between government and industry can lead to improvements in public service quality and delivery, with a greater role for SMEs. The report’s findings echo a speech made by Cabinet Office Minister David Lidington at the Reform think tank on Monday, where he set out the importance of working with industry to improve public service delivery.
The report, Partnering for Prosperity, includes a survey of 253 companies involved in the delivery of public services and infrastructure. More than half of respondents said cost was the driving factor in awarding government contracts, highlighting the need for the creation of long-term partnerships rather than short-term cost savings, the report says.
Greater consistency in embedding good commercial practices right across the public sector would help to augment the good progress made at the heart of government by the Crown Commercial Service, the report adds.
And combating complexity is also key to removing barriers to entry for SMEs. Latest figures for 2015/16 show that SMEs benefitted from £5.6 billion in central government direct spending – an improvement of around 20% compared with 2011/12 when the figure was £4.5 billion. Major upfront costs reduce competition and make bidding for contracts unattractive for SMEs. The report found 28% of respondents thought public contracts were more accessible to SMEs since 2015.
Removing cost and complexity will allow providers to invest more in innovative products and services that can make a real difference, for example using AI to improve prevention in healthcare, saving people’s lives and taxpayers’ money.
The new report coincides with the first meeting of the CBI’s new Public Sector Partners Council, bringing together senior figures from across industry and government to address these issues. John Manzoni, Chief Executive of the Civil Service and Permanent Secretary at the Cabinet Office, will be attending.
Introducing the report, Carolyn Fairbairn, CBI Director-General, said:
“Partnerships between the public and private sectors play a vital role in providing prosperity across all UK regions and nations. The vast majority are successful, delivering jobs, supporting innovation, and providing Britain with a competitive advantage.
“For this success to continue, these partnerships must evolve to meet the challenges of the 21st century. So the government should work with its suppliers to focus more on long-term value rather than just short-term costs.
“In the aftermath of Carillion’s collapse, it’s essential for industry and government to learn the right lessons so public services and people’s jobs are protected.
“That means relying on evidence from industry on how to improve public service quality and delivery while getting best value for taxpayers.
“Business makes a significant contribution to improving people’s lives by supporting frontline services, future-proofing our transport system and meeting our energy needs.
“By working better together, industry and government can help restore the public trust in public sector partnerships with the private sector and make them work better for all concerned.”
Peter Ware, Head of the Government & Infrastructure Team at Browne Jacobson, added:
“This report provides an invaluable insight into the challenges faced in ensuring we have procurement processes and practices which allow public services to be developed and delivered in the most efficient and effective way possible.
“The current financial challenges that the public sector faces means that the synergy between the public, private and third sector has never been more important.
“There are many excellent examples of effective partnerships working throughout government but we need to ensure that these become the norm and the recommendations outlined in this report will be a significant step in the right direction.”
The CBI/Browne Jacobson report has three recommendations:
- Government and industry must work together to address a culture of short-termism in the public marketplace, through boosting industry engagement and shifting their approach to cost and risk.
- Government should drive greater adoption of central commercial guidance, such as through greater usage of a “comply or explain” regime across the wider public sector.
- Government should seize the opportunity of the UK’s departure from the EU to reduce complexity associated to the public procurement regulations, especially for SMEs.