In what is a challenging sector—especially following recent revelations over “secretive” government-awarded post-Brexit contracts—the UK Government recently issued new guidance on outsourcing aimed at improving government procurement and delivering better public service. Released on February 20, 2019, the “Outsourcing Playbook” targets improvements in how government works with industry and delivers better public services, but there are lessons to be learned for the private sector, as well.
The new policies announced in the Outsourcing Playbook include changes to how government allocates risk between itself and its suppliers to ensure contracts are set up for success and the best possible service is provided. The government is also taking steps to improve the design of outsourcing projects from their inception. New complex contracts will be piloted with the private sector before rolling out fully, enabling the government to learn from experience and deliver better public service.
The measures in the Outsourcing Playbook include:
- Publication of Pipelines – To help suppliers plan ahead, departments will be required to regularly publish their upcoming requirements.
- Market Health and Capability Assessments – to identify potential limitations in the market and consider actions to increase competition and improve market health
- Project Validation Reviews – PVRs will be required for all complex outsourcing projects to help assure deliverability, affordability and value for money.
- Make versus Buy Decisions – to identify when it is best to deliver public services in-house or when there is benefit to drawing on the expertise of the private sector
- Should‑Cost Modelling – “Should Cost Models” will be required as part of the make or buy decision process to improve the understanding of costs associated with different service delivery models.
- Requirement for Pilots – enabling the government to learn from experience and deliver better public services
- Key Performance Indicators – KPIs from every new outsourcing contract will be made publicly available.
- Risk Allocation – to ensure contracts are set up for success from the outset
- Pricing and Payment Mechanisms – to ensure the desired behaviours or outcomes incentivised
- Assessing the Economic and Financial Standing of Suppliers – to consistently apply a minimum standard of testing to understand financial risk
- Resolution Plans (Living Wills) – for the rare event of the supplier’s corporate failure
With the continued uncertainty over Brexit and the cost to UK taxpayers of the 2018 collapse of British outsourcer Carillion—the latter which exposed government outsourcing flaws still fresh in the mind—it remains a question whether the new Outsourcing Playbook will rehabilitate the public’s trust in government and its suppliers. However, the Outsourcing Playbook is a must read for outsourcing providers to the UK government, and it also serves to reinforce the pressure in the private sector to ensure that outsourcing projects are structured correctly from the outset. The themes of KPIs and resolution planning are not new to other industries, particularly the financial services sector, but it will be interesting to see whether an embrace of the use of pilots extends beyond government outsourcing projects.