Government Outsourcing

Wednesday 20th February 2019 Written Statements

[The Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office (Mr David Lidington)]

Following Carillion’s liquidation in January 2018, the Government response ensured continuity of key public services. However, there has been increased scrutiny on the benefits and risks associated with the use of the private sector to deliver public services. In the light of this, we have been reviewing our outsourcing processes and considering lessons learned.

The review concluded that outsourcing, done well, can deliver significant benefits. It delivers economies of scale that mean services can be provided more efficiently, at lower cost and at better value for the taxpayer. Open and fair competition within free markets encourages creativity and innovation, meaning fresh perspectives and new solutions can be applied to existing policy challenges.

However, it also highlighted that we need to take steps to improve public service outcomes from outsourcing, increase our resilience to supplier failure and rebuild public trust in outsourcing. Today, I am pleased to announce that we have published new guidance for officials that will help Government to work smarter with industry, set up contracts for success and build a more diverse supplier base. These are:

Outsourcing playbook and associated guidance—This will allow Departments to make good outsourcing decisions, achieve value for money when outsourcing, and is aimed at everyone involved in the outsourcing of a public service.

Supplier code of conduct—We have reviewed and updated the supplier code of conduct to ensure that it not only set out the behaviours taxpayers expect of central Government’s suppliers but includes what suppliers should expect of Government.

Guidance on corporate financial distress which suggests practical steps to take where contract managers have concerns over a supplier’s financial health.

The principles of the outsourcing playbook will apply to all Government outsourcing with a particular focus on complex first generation projects and subsequent generations where the service is being delivered in a different or novel way. The 11 key policies published today in the playbook will ensure that the Government get more projects right from the start. It will promote a diverse and healthy marketplace—and we will have “living wills” in the unlikely event of things going wrong.

In order to ensure that we take into account the wider social benefits to be derived from Government contracts, we are extending the requirements of the social value Act in central Government so that all major procurements will explicitly evaluate social value, where appropriate, rather than just consider it.

The Public Accounts Committee recommended that we review our approach to managing current strategic supplier risk. The revised approach will see the introduction of a new memorandum of understanding between the Cabinet Office and strategic suppliers that reflects a more mature relationship with industry, and provides greater flexibility in how government manages situations.

In order to build the capability within Departments to outsource effectively and manage outsourced contracts, we are undertaking a programme to accredit and train 30,000 contract managers across the civil service by the end of 2021.

Taken together, the measures in this reform package is key to delivering value for money for taxpayers when services are outsourced, strengthening our resilience to supplier failure and rebuilding public trust in outsourcing.

A copy of the outsourcing playbook, financial distress guidance and supplier code of conduct have been placed in the libraries of both Houses.

[HCWS1345]