Memorandum from The Local and Regional
Government Research Unit, Cardiff University (PSR 4)
The Local and Regional Government Research Unit,
at Cardiff University, is undertaking a series of research projects
to evaluate current approaches to modernising and improving public
services in the UK. These include:
— Evaluation of the long-term impact
of Best Value on local government in England, commissioned by
the Department of the Environment, Transport and the Regions.
— Feasibility study of the evaluation
of the Local Government Modernisation Agenda, commissioned by
the Department of the Environment, Transport and the Regions.
— Strategy and performance in local
government, funded by the Economic and Social Research Council.
— Evaluating the Effectiveness of Local
Scrutiny Committees, funded by the Economic and Social Research
Council.
— Lessons from community planning in
Norway and Scotland, funded by the Economic and Social Research
Council.
— Investigation of the links between
Best Value and other initiatives, funded by the Improvement and
Development Agency.
— The use of evaluation by central
government, funded by the Joseph Rowntree Foundation.
— The value of internal service providers,
funded by the Public Services Network.
— Performance management and effective
local governance, funded by the Economic and Social Research Council.
— The impact of inspection on local
government, funded by the Joseph Rowntree Foundation.
— Evaluation of the Neighbourhood Support
Fund, funded by the National Youth Agency.
THE VALUE
OF INTERNAL
SERVICE PROVIDERS
This project, funded by the Public Services
Network (formerly the Association of Contract Service Chief Officers),
aims to investigate the rationale for internal service provision
within local government and to analyse the characteristics of
effective in-house services.
In the last six months we have emailed questionnaires
to 210 Direct Service Organisation managers in the UK, achieving
a response rate of just over 40 per cent. Interviews were then
conducted with service managers and politicians in six case study
authorities with in-house teams that have a reputation for cost-effective
service provision. The research is still ongoing but we have reached
some interim conclusions that may be relevant to the committee's
deliberations.
INTERIM FINDINGS
Traditionally, the case for public sector delivery
has hinged upon the need to preserve the much debated, but rarely
defined, "public service ethos" (CPPP, pp. 130-132).
In practice it has not been clear what is meant by the public
service ethos, whether it is distinctive to the public sector
(Brereton and Temple 1999) and in turn whether it should be taken
as a summary case for the benefits of public sector delivery.
Our research found little evidence of a distinctive public service
ethos. Few of the people we talked to had any clear conception
of what it might mean in practice. We suspect that this notion
has therefore outlived its usefulness.
Two assumptions underpin the current fashion
for the private delivery of public services: first, that an institutional
division between the commissioning and providing of public services
makes for good public management (see CPPP, p.28 and pp. 42-43);
second, that the ownership of those responsible for delivery is
of little relevance to the quality of outcomes. Or as the Commission
on Public Private Partnerships puts it: "The British public
is arguably more interested in the quality of public services
than with who is providing them" (CPPP 2001, p.17). However,
our research evidence causes us to call these assumptions into
question.
Proponents of a split between the commissioning
and providing of services claim that strategy is improved by the
fact that commissioners "are not distracted from strategic
planning... by having to manage a service delivery organisation"
(CPPP 2001, p.42). But this is a suggestion supported only by
one strand of the strategic management literature and it was not
borne out by our research. Fewer than a third of the respondents
to our survey believed that the effectiveness of the services
they managed was enhanced by the existence of a strict client
contractor split. Instead we found evidence that good strategy
may be seen as emerging from operations (see Mintzberg, 1994).
It follows that where strategy is, or should
be, informed by operational matters then a split between purchaser
and provider could damage the public sector's capacity to make
strategy. There may be important strategic benefits associated
with the in-house provision of services.
The managers we interviewed believed that the
strategic ambitions of private companies and local authorities
were very different (see also Pollock et al, 2001). Although
something of a caricature, private sector strategy was seen as
focused on the maximisation of profits. Public sector strategy,
in contrast, focused on solving social problems and creating public
value (see Moore, 1995). Part of the case for public sector delivery,
as put to us by in-house services in local government, amounts
to a reaffirmation of the merits of a unitary organisation. The
in-house providers we talked to believe that they make a significant
contribution to their parent organisation's strategic capacity.
Our case studies highlighted at least five areas
where well-managed unitary organisations, with directly employed
service providers, could have a "comparative advantage"
over their externalised and networked peers:
1. Responsiveness: an organisation which
employs its own people, has its own depots and transport is more
flexible than one which procures these services through other
agencies. Strategic responsiveness counts most in emergencies
or whenever there is a major change in the operational demands
made of the organisation.
2. Learning and innovation: unitary organisations
may be better equipped for innovative engagement with their strategic
priorities than are external contractors. Learning and innovation
are premised on a sense of purpose. The contingent character of
networked organisational forms can make learning and adaptation
difficult.
3. Procurement: we are doubtful that specialised
services can be satisfactorily procured by officers trained only
in the general skills of purchasing and supply. An "intelligent
client" requires both an intimate knowledge of the services
on offer and, crucially, the capacity to provide the service in-house
as a last resort.
4. Communications: a unitary organisation
will find it easier to talk to front line staff. Good communications
are more important in public organisations because of the absence
of market signals. Without sales indicators, managers need feedback
from the front line to judge whether they are providing their
clients with the right kind of service.
5. Discretion: contracting works best when
services can be tightly specified (Donohue, 1989). This is why
the traditional local authority blue-collar services were the
first subjected to CCT. But it was a mistake to think that good
waste management involved nothing more than collecting black sacks
and dumping them in a landfill site. As the policy complexity
of these blue-collar services is rediscovered, it is increasingly
apparent that there are real problems in a narrow contracting
approach. Local authorities should neither be providing services
nor procuring them; they should be solving problems.
Our research does not suggest that in-house
provision is inherently superior. Many of the managers of the
in-house operations that we have studied regarded competition
as useful discipline. 94 per cent of the respondents to our survey
believed that CCT had made their service more effective by making
it more competitive. Most of the managers we interviewed supported
the notion of a mixed economy of provision and some made extensive
use of external providers. We also found evidence that the requirement
in the Best Value framework to compare the cost and quality of
alternative forms of provision has called into question some traditional
assumptions about the inherent superiority of in-house operations.
There are, of course, cases where the strategic
advantages of unitary organisations are outweighed by bureaucratic
and cultural rigidity. Economies of scale mean that in-house operations
serving a single authority may find it impossible to compete with
larger commercial operations. However, our study does indicate
that in some circumstances, well-run in-house services are at
least as effective as the private sector alternatives. Where this
is the case they can offer significant strategic benefits that
authorities would sacrifice if they opted for external provision.
Expectations of public services are undoubtedly
rising and local authorities find themselves at the sharp end
of a demanding agenda for change. There is though little evidence
from our work to suggest that "hollowed-out" local authorities—stripped
of their operational expertise and physical assets—will
necessarily prove better able to improve services and provide
community leadership.
REFERENCES
Brereton, M and Temple, M. (1999) "The
new public service ethos: an ethical environment for governance",
Public Administration 77(3): 455-474.
Donohue J.D. (1989) The privatisation decision:
public ends, private means: Basic Books.
CPPP (Commission on Public Private Partnerships)
(2001) Building better partnerships: IPPR.
Mintzberg, H. (1994) The rise and fall of strategic
planning: Prentice Hall.
Moore M.H. (1995) Creating public value: strategic
management in government: Harvard University Press.
Pollock, A., Shaoul, J., Rowland, D., and Player,
S. (2001) A response to the IPPR Commission on Public Private
Partnerships: Catalyst Trust.
October 2001
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