Back to the future?

Does the Open Public Services White Paper herald a return to compulsory tendering? asks Judith Barnes.

Open Public Services or Compulsory Tendering? That seems to be the key question emerging from the Open Public Services White Paper published by the Government on 11 July 2011. It may only be a question of emphasis for some, but that seems to be one of the few new messages coming out from the government’s long awaited White Paper.

So what does the White Paper contain? The Coalition’s commitments include the drive towards providing good public services with less cash and state "The old, centralised approach to public service delivery is broken" as total public spending increased by 57% in real terms from 1997/08 to 2010/11, but outcomes have remained static for the most disadvantaged in society. Educational attainment in particular has fallen whilst health inequalities continue to widen with people living in the poorest neighbourhoods on average dying seven years earlier than those from the richest neighbourhoods.

The White Paper sets out five principles of open public services and these are:

  • Choice, where service users are given direct control over their choice of provider, though where that is not possible elected representatives are given more choice about who provides services and how;
  • Decentralisation and devolution to the lowest appropriate level;
  • Diversity of supply/supplier to increase competition and drive up service quality;
  • Fair access to services to improve outcomes for those most reliant on public services, who are often those most in need; and
  • Accountability so that public services are held to account by citizens and their elected representatives - ‘waste and inertia are no longer tolerable’. There is also a recognition of the need to harness the power of new technology to transform public services (have you developed any AP? How far have you utilised cloud computing? Do you use social networks etc?).

Although the Government states it has no single ideological presumption that only one sector should run services and that high quality services can be provided by the public sector, the voluntary and community sector or the private sector (and vice versa poor services can occur in any sector), competition can be ‘very effective’ even within one sector and schools and voluntary sector providers in social care and private sector highways maintenance providers are cited as examples.

The Coalition Government’s approach is to split services into three categories:

  • Individual services giving ‘power to the people’ who use them (yes the White Paper does use that expression);
  • Neighbourhood services where power is devolved to town, parish and community councils or other appropriate fora; or
  • Commissioned services, creating an open framework for those services that cannot be devolved ‘such as tax collection, prisons, emergency healthcare or welfare to work’.

Many of the reforms in the Localism Bill will support neighbourhood service delivery by introducing measures such as:

  • The community right to buy/transfer;
  • Community right to challenge - a duty for the authority to consider (not necessarily agree) to pursue alternative provisions - where they do, because there are economic, social or environmental benefits, then there must be a procurement;
  • Neighbourhood planning;
  • Referenda on spending and to veto excessive council tax rises;
  • Other initiatives such as the community right to build etc.

Individual services are already developing in many areas where for example adult social care authorities are offering personal budgets to individuals to purchase their own care.

So what might neighbourhood services look like? The aim would be to transfer community services to neighbourhood/communities, following consultation on a national framework for local schemes of delegation. Many authorities are already considering devolving functions to parish, town and community councils to manage buildings, deliver libraries and other functions in neighbourhood areas through existing powers to delegate under Sections 101 and 102 Local Government Act 1972. So what is different here? The Government will potentially provide money through community budget to help neighbourhood councils take greater control over local services. They will also consult on neighbourhood councils taking greater control of local public realm, leisure opportunities and community activity, which could include: street improvement, parking and traffic restrictions, local libraries, local museums and arts, sports, local parks and leisure facilities, non liquor licensing of premises, minor bye-laws, lower level anti social behaviour and community grants.

These measures would be strengthened by the so called ‘democratic decentralisation’ with the creation of police and crime commissioners, elected mayors and health and wellbeing boards, amongst other functions.

We have to wait until page 29 (of 57 pages (what has happened to the brevity we expected from White Papers) to get to the third category of commissioned services. Here the Government’s aim is to "switch the default from one where the state provides the service itself to one where the state commissions from a diverse range of providers". There will be some exceptions, for example in relation to national security, the judiciary, core policing, intelligence services and the military. However, there may still be support, specialist and back office functions where diversity of supply is still appropriate in these services.

The new arrangements will require a purchaser/provider split to encourage innovation and diversity of provision and providers. The government sees the benefits of this approach as encouraging new, innovative providers to compete, allowing payment by results and/or incentives for supporting particular social groups to be built into contracts and enables a disaggregation of services into specialist functions. Perhaps these last comments were pre-empted by the comments of Margaret Hodge, Public Accounts Committee Chair at the CIPFA Conference stating that fragmentation of service delivery means that it is difficult to demonstrate value for money.

Hidden in paragraph 5.4 is the requirement to introduce an ‘open commissioning’ policy in a number of specific services, after consulting on areas where it should be introduced. ‘In those areas, commissioners should: consult on and be challenged by potential providers from all sectors on the future shape of service; seek and fully consider a minimum of three providers, from whichever sector, when they contract for services; and transparently link payment to results’.

The government says that open commissioning and payment by results are critical to open public services so that providers are free to innovate and eliminate waste and to get good value for money for taxpayers, so that mediocrity is not tolerated nor paying when services are of poor quality.

The paper goes on to suggest that support for better commissioning and innovation in public services may require robust accreditation of what works, so there will be further consultation on how to establish bodies that can mirror the work of the National Institute for Health and Clinical Excellence in the health service.

Innovation needs to be celebrated and an annual prize will be recognised by the Prime Minister and Deputy Prime Minister for the top ten public sector bodies demonstrating the most innovative ways to deliver high quality and more responsive public services!

One positive comment for local authorities is recognised on page 30 where open commissioning is said to be much better established in local authorities than in central government. "The wider public sector has much to learn from local authorities successes in commissioning, for example in adult social care and highways services."

The Government believes that the starting point for good local commissioning is public engagement and accountability so that the public’s priorities should drive the type of services commissioned.

The Government says that it will consult with local authorities and the wider public sector about how to go further in opening up locally commissioned services in:

  • Customer contact;
  • Planning;
  • Property and facilities management;
  • Back-office transactional services;
  • Family support;
  • Support for local looked-after children;
  • Trading standards and environmental services; and
  • Housing management.

It is not clear what services may be caught by some of these expressions, for example, how wide is ‘back-office transactional services’ and would it encompass legal, financial, HR and many other services?

In addition the Government would welcome views on the potential to extend commissioning to other national services including:

  • Court and Tribunal administration;
  • Payment processing;
  • Prevention, detection and investigation of fraud;
  • Debt management and enforcement services;
  • Identity - related services;
  • Land and property information services;
  • Customer contact services;
  • Back- office functions for prosecutors; and
  • Immigration and visa administration.

The paper goes on to say that decentralisation can be achieved by giving local authorities more power including police and crime commissioners, so it will consult with local bodies providers and other key stakeholders about the potential to decentralise commissioning power in a range of services where there is a clear case for improving value for money, including:

  • Natural environment support;
  • Public transport support;
  • Skills; and
  • Services for families with multiple problems.

One wonders whether the inclusion of public transport support is linked to the desire of the new Local Enterprise Partnerships to stake a claim to this area of public service provision (although it is likely that additional legislation would be required to facilitate any delegation or devolution of power to such bodies, since the new general power of competence will explicitly prevent the delegation of functions to third party organisations where no other power exists). Where local areas come forward with credible proposals to do things differently, the government will seriously consider them - so Total Place is not dead and there is a commitment to broaden the community budget pilots.

In order to backup the new commissioning approach, increased transparency is required from public authorities, building upon government requirements to publish spending over £500 for local authorities (or £25k for central government) online on a monthly basis. On 11 February the contract finder system was launched for all central government contracts over £10k and the aim is to extend the use of the system across the public sector. The Government wishes to create a public data corporation to ‘provide an unprecedented level of easily accessible public information’. Government departments will produce business plans with unit cost indicators and other information and update them monthly. The Government has given a commitment to improving the quality and accuracy of data and is taking steps to create a single data list, making the point that a number of data collections for local government has reduced by 40 for 2011/12.

A range of measures will be introduced to ensure accountability including the potential for independent review by audit and inspection bodies, independent champions, such as the TaxPayers’ Alliance, a range of so called ‘armchair auditors’, Health and Well Being Boards and existing measures such as the Public Accounts Committee of Parliament and Overview and Scrutiny Committees in local government. Diversity of provision would be ensured through additional measures to complain, for example with the possible right of appeal, where a provider feels unfairly precluded from a commissioning process along side new rights to complain to regulators and the Ombudsman.

Some interesting points to ensure diversity of provision include the Government’s wish to build upon existing ‘semi-autonomous’ providers such as arms length management organisations, academies, leisure trusts, public corporations and other bodies with a view to supporting wider access to capital, as well as the creation of mutual and social enterprises.

The desire to see greater diversity and openness also brings the commitment to regularly assess barriers to entry and exit that prevent diversity and innovation from being achieved. The White Paper was launched in a week when Southern Cross went into administration following the insolvencies of Rok and Connaught amongst others, yet failure of suppliers is not perceived by the Government to be a significant issue.

Much of the White Paper is devoted to the restating of existing measures that are currently being implemented. Most of the new proposals – including the scantily mentioned requirement to seek and fully consider three providers will be the subject of further consultation in November before legislation comes forward next year. Between July and September 2011 the Government says it is in ‘listening mode’ and so we will have to wait to see if the detail of how compulsory commissioning will develop. The government recognises that it cannot open up public services alone.

It is easy to see why many commentators are saying that there is little new in the White Paper and that it is more like a statement of intent one year late (like Mike Burton, Editor of the Municipal Journal).

Whilst the Government has an overarching aim of achieving choice in service delivery it appears that this does not necessarily translate into choice for elected representatives on public authorities, whose choice will be limited for those services where enforced tendering is imposed from above. However, the stakes for poor tendering/commissioning practice are now much higher than CCT days, following the introduction of the Contracts Regulations and the Remedies Directive, particularly the prospect of damages if the decision to award is successfully challenged.

Meanwhile the duty of best value, to secure an continuous improvement through economy efficiency and effectiveness, remains with recent consultation on a one page circular to replace circular 2003/03 and abolish many of the other instruments of the previous government, including the requirement to prepare a sustainable community strategy, the duty to involve, statutory guidance on Creating Strong, Safe and Prosperous Communities. The Government also aims to encourage partnerships with the community and voluntary sectors (interestingly not named the Civil Society in this paper). Overall the proposals seem light on the detail of the new Government policy for compulsory tendering and the White Paper seems to have been a lot of effort for measures that are already happening or that will largely feature in future consultation. Are we just being gently softened up for the return of CCT?

Judith Barnes is a partner and Head of Local Government at Eversheds LLP. She can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it. or on 0845 498 4059.