Memorandum by SchlumbergerSema Consulting
(PSR 22)
Here is our response to those questions which
we feel best qualified to contribute valid opinions.
Q5. How do we know if public service reform
is effective?
A5. We, as a private sector consultancy
organisation, would naturally advise you to measure it.
— Firstly, be absolutely clear about
what are you trying to fix/improve/reform—at both high level
and low level
— Then, set clear Key Performance Indicators
and Critical Success Factors—whether qualitative or quantitative
— Also, set clear and measurable performance
objectives/quality standards, eg in social, political and economic
terms—for key areas such as finance, health, education,
communication, crime, employment, etc.
— Measure and establish baselines in
all the parameters which you wish to improve, and clearly identify
units of measurement in each case
— Set up (preferably) IT-based measurement
mechanisms to capture periodic metrics on each of the attributes
and parameters which are subject to change
— Compare performance measurements
periodically to their original baselines and also to proposed
target levels
— Periodically review and evaluate
results, trends and forecasts using the appropriate technology
— Manipulate key drivers to produce
"what if" scenarios using IT systems.
Additionally:
— Measure customer satisfaction levels
and changes
— Possibly, implement the above process
on trial basis first, in a controlled environment or pilot study
— Visit and study overseas models to
gauge success of similar or alternative initiatives elsewhere
— Review how many more projects, undertakings,
contracts, initiatives, programmes, developments, are delivered
to time, to budget, to performance target.
Evidence as to the success of this approach
is provided by the National Audit Office report into Sema Group's
(now SchlumbergerSema) role as outsource supplier of Medical Assessment
of Incapacity and Disability Benefits (Report by the Comptroller
and Auditor General, HC 280 Session 2000-01, 9 March 2001).
It stated that prior to the start of the Sema
Group (now SchlumbergerSema) contract:
"Business targets for costs and turnaround
times and quality standards were not being achieved. After assessing
several options the Department pursued outsourcing as the best
way to achieve a range of objectives: to improve the quality of
reports, speed their throughput, maintain services to customers,
lever in investment and reduce costs." An example of setting
clear objectives.
After the Sema Group (now SchlumbergerSema)
contract was awarded it stated:
"Sema Group offered the cheapest bid, below
the cost of the existing in-house service. . . The Department.
. . . estimate that outsourcing will save between 10 and 14 per
cent compared to the in-house operation (the public sector comparator)."
An example of setting measured performance targets.
Q.6. Is the concept of a public service an
anachronism?
A6. If we define "anachronism"
as being a thing of the past rather than the present or future,
then clearly there has been a trend away from the provision of
public services over time, whether free at the point of delivery
or otherwise. This has come about for a number of reasons, for
example the cost of fulfilling higher citizen expectations fuelled
by wider, more expensive possibilities, linked with an increasing
community resistance to paying for it.
However, the answer to the question for any
one country depends on a blend of several parameters:
— The historical tradition of the country
in question
— The current and expected future economic
status of the country
— Its demographics (eg working population
versus pensionable/unemployed/student age etc)
— The political colour of the Government
— The policy priorities of that Government
— Its taxation-versus-provision of
central services ideology
— The current and expected world economic
climate
Applying these variables to this country we
can say that Britain has:
— A strong historical tradition of
in-depth provision of central social services (eg in respect of
healthcare, education & training, social service benefits,
transport infrastructure, environment development)
— A relatively wealthy economic standing
(in European and world terms)
— A Government with a public service
philosophy and priorities.
Therefore, it is reasonably evident that an
extensive, centrally provided, public sector service will continue
to be provided.
However, this country also has to contend with
certain other factors, namely:
— A recent tradition of public sector
services being privatised, removing the infrastructure for future
public delivery
— A world economic situation in which
this country is likely to face downturn of GDP per capita
— An increasing loss of relative wealth
vis-a"-vis other countries, i.e. an expected downturn in
the economic climate of this country
— Changing demographics (ageing, less
employed population)
— Current governmental tax policy which
militates against extensive increases in general provision of
public service, free at the point of delivery.
Thus, clearly, this is not a black and white
issue. Although a core of public service provision must sensibly
continue, and in some areas be enhanced, new and in some cases
traditional areas need to be reviewed (viz. tertiary education
funding, transport, healthcare), with a view to re-structuring
what is provided from the centre.
Q.7 Is there a public service ethos and how
can it be defined?
A.7. After considerable thought, we consider
that the traditional Civil Service ethos does still exist but
that its practical definition depends on which echelon of the
service you examine. We consider that there appears to be a schism
between the ethos of the upper echelon and the lower echelon.
The way in which senior members of the service relate to ministers
of state and each other is largely alien to the manner in which
the workers in the field relate to the world. It is possible that
this is due to an "implementation gap" in the ethos.
However, it is also possible that the ethos is substantively different
at the different levels.
The traditional (largely upper echelon) public
service ethos can be summarised as follows:
— Public servants are motivated (at
least in part) by a desire to perform their duties on behalf of
the public good, ie they have a sense of vocation and service
— They believe in an even-handed political
impartiality, ie a desire to serve the will of which ever political
master is incumbent without prejudice
— They have a high standard of legal
compliance and probity, ie a reputation for dispassionate service
delivery, integrity and incorruptibility
— They believe in advising ministers
without fear or favour of the consequences
— They believe in selection and promotion
on merit
— They believe in accountability for
their efficiency and effectiveness to various public bodies
— There is no bottom line profit motive
in their work, however this is theoretically replaced by a need
to adhere to strict financial budgets, or to demonstrate costs
savings, or in some cases to demonstrate VFM.
— As there is no profit element, there
is an ethos for Civil Servants to be willing to earn somewhat
less than the open market rate for their qualifications and not
to have the same range of job opportunities in their chosen field,
compared with the private sector.
— In return for this, there is an ethos
of expecting to have better job security and longevity of tenure
than those enjoyed by workers in the other two sectors.
— There is a strong ethos involving
skills training, career development , status improvement is met
through such initiatives as Investment in People, regular promotion
boards and a much wider opportunity to apply for sideways career
moves.
— Critics of the ethos of the higher
echelon of the Civil Service have also evidenced it to have problems,
however. Sir Richard Wilson, in the annual progress report on
Civil Service Reform, Dec 2000, remarked on:
"The perceived slowness of its reaction,
poor performance in providing policy advice, an inattention to
policy delivery, inadequate understanding of risk management issues
and bad project management."
At the lower echelons of public service, however,
the more negative elements of the public service ethos are apparent:
— Perhaps the biggest negative element
of the ethos is that, due to the low pay, there is a tendency
not to work over hard, i.e. to deliver a second rate product as
the pay is second rate, as there is no difference in price the
consumer pays for a first class product or a second class one,
so why produce a first class one?
— Lower echelon public workers tend
not to have such a rosy view of ministers - sometimes accusing
them of, "being interfering, here-today-gone-tomorrow, having
no idea of the real issues or upsetting the status quo"
— At its very worst, this manifests
itself in the citizen's perception of the ethos of lower echelon
public sector worker as being one of "laziness, incompetence,
being a `jobsworth', slow, poorly qualified, disorganised and
having a serial (chain) absence of accountability", however
unfair this may be.
Q.8 How is the public service ethos different
from the private (or voluntary) sector ethos?
A.8 If for the purposes of this question
we assume that the public service ethos is as described above
(see A.7), then in contrast, our view of the voluntary sector
ethos would be that:
— There is an obvious lack of profit
motive
— There is not necessarily a complementary
desire for low remuneration, rather a desire for an equitable
one
— There is possibly a greater lack
of willingness to be accountable to public bodies for performance
— There is a tendency not to adhere
easily to budgets, VFM initiatives or savings targets.
— It has a need to be competitive in
order to obtain repeat offers, and it often will be, due to lack
of profit mark-up
— It is not worried about longevity
or personal/organisational development
— It is motivated by a wish to work
for the public good.
Our view of the private sector ethos can be
characterised as follows:
— A desire to earn financial profit
and maintain or increase market share. If a publicly quoted company
to satisfy shareholders/The City
— To do this not to the detriment of
clients or host organisations but in order that both may benefit
(win-win situation), so as to maintain or to grow the relationship
— To deliver a high quality of service,
within budget, to agreed timetables so as to achieve repeat sales
or earn an agreed performance related payment
— Although not necessarily motivated
by idealism or a public-spirited ethos, to promote its positive
image in the public domain by good work, innovation, reputation
for quality that helps the public well-being, in order to benefit
its subsequent market position.
— A desire to make the customer or
client look good, in order to obtain repeat orders or to gain
references for the acquisition of new customers
— A wish to maintain a close customer
/ client relationship or partnership relationship, so that the
private sector supplier can merge its cultural, aspirational and
visionary ideals with that of the client/customer over time, to
improve or develop the goods or services provided and thereby
its relationship
— A belief that the customer is king,
the customer is always right - two slogans which may clearly distinguish
the private and the public ethos.
Building on our thesis described above, we consider
that ethos depends on which echelon of each sector is compared.
Taking the public and the private sectors, then contrasting upper
levels of the public sector with the upper levels of the private
sector would, in our view, not produce as much difference in ethos
as contrasting the upper levels of the public sector with the
lower level of the private sector. Indeed, we consider that there
is more of a contrast between the ethos of the upper level of
the public sector and the lower level of the public sector and
similarly with the ethos of upper and lower levels of the private
sector. (See Figure 1).
Private sector companies polarise quite strongly
into those prepared to do public sector work and those not, either
at an overall company level or by establishing different units
within the company. Attractiveness of public sector work is primarily
measured in terms of profit, with a balance struck between lower
margins and longevity.
Q.9 Is the public service ethos necessarily
a good thing? Can it be an obstacle to the effective delivery
of services to the public?
A.9
As indicated by our answer A.6, clearly the
public service ethos is not necessarily a good thing per se.
It depends on the balance of the elements listed above, as some
are more positive in promoting good service and some are more
prohibitory. Clearly, if it were a good thing per se then, as
the private sector mostly lacks the public service ethos, the
private sector would not have been so effective as it obviously
has been in producing wealth in capitalist society.
Ways in which the public service ethos can be
an obstacle to the effective delivery of services to the public
include:
— It can encourage the civil servant
to view himself as the agent of officialdom, leading to a sense
that there is little need for him to be particularly quick or
thorough, as the customer is a captive audience and he cannot
go anywhere else to fulfil his requirements.
— The non-competitive element of the
ethos lends itself to the belief that the work is never-ending,
ie just keeps coming no matter what, so there is little incentive
to finish what you've got, as there will be only be more of the
same to do tomorrow if you do.
— It can lead to the absence of commerciality,
where the service element can take over too much from the cost-effectiveness
element. This can lead to over-elaboration, slowing down and overspending.
There is a conflict between efficiency of the commercial kind
and the public sector ethos. Efficiency will always reach (and
test) a boundary, eg it is more efficient to build houses without
windows but they will not sell. Likewise, efficient services have
to be used by the customer, or the service provider will not get
paid.
— The ethos could be something the
Service hides behind to avoid change; inhibiting modern, efficient,
reformed public services, ie could be detrimentally responsible
for upholding of traditional approaches, contributing to the phenomenon
of "channel rivalry." For example, the introduction
of Risk Management could imply breaking ethos of the equitable
treatment of people, because it involves in treating people differently
according to their risk evaluation.
— The public service ethos has a tendency
to create inbred generalists. This is supported in evidence given
to the Select Committee on Public Administration, Seventh Report
stating:
"The Civil Service's policy-making expertise
has also been called into question by the fact that it has traditionally
been composed in the main of generalists—that is, people
equipped with a good undergraduate education but not further trained
in any specific professional skill. . ." (PASC, 2000).
It is also supported by the statement that it
needs a greater degree of external recruitment to prevent it from
becoming "a stagnant puddle," (PASC, 2000).
To reverse the question, evidence to support
the view that the delivery of public services can be enhanced
by the private sector ethos, is provided by the National Audit
Office report into Sema Group's role as outsource supplier of
Medical Assessment of Incapacity and Disability Benefits (Report
by the Comptroller and Auditor General, HC 280 Session 2000-2001,
9 March 2001). It stated:
" Before outsourcing, the Benefits Agency
medical service was an underachieving organisation operating within
tight resource constraints. Outsourcing has reduced the cost of
the operation to the Department and has seen valuable improvements
in the speed with which work is processed."
Q.11 Is it possible for profit-orientated
organisations to maintain the public service ethos?
A.11 Yes. If we assume that the key elements
of the public service ethos are as listed in A.7 dash points 1-6,
then the private sector can quite simply be made to maintain them
during service delivery, by building the adherence to these values
into Service Level Agreements, so that remuneration is linked
to them—so long as commitment to shareholders is added.
In any case, it is somewhat superfluous to do
so, as it is not essential for the private sector organisation
to maintain the ethos. It can be made to contribute to agreed
targets and standards which incorporate adherence to these values
via contractual arrangements without necessarily having to subscribe
to them themselves. In any case, the public sector ethos does
not really need to be "maintained" by the private sector
in order to survive.
Evidence for this view is obtained by reference
to the National Audit Office report into Sema Group's (now SchlumbergerSema)
role as outsource supplier of Medical Assessment of Incapacity
and Disability Benefits (Report by the Comptroller and Auditor
General, HC 280 Session 2000-2001, 9 March 2001). It stated:
"The contract provides strong incentives
to deliver medical assessments to time. . .Since outsourcing the
speed and efficiency of medical assessment have improved. . .
".
Also:
"They also deliberately agreed a single
price for all Incapacity Benefit reports, whether or not an examination
had taken place, to provide better incentive to Sema Group to
reduce unnecessary examinations."
Two examples of how it is possible for a private
sector company to uphold public sector objectives.
Q.12 What measures, if any, need to be put
in place to ensure that the search for profit does not undermine
the public service ethos?
A.12 Probably, contractual constraints would
be sufficient backed up by the normal audit process. This is evidenced
by three recent statements (Select Committee on Public Service
Report, Part 5), the first by The Director General of the Prison
Service, Mr Richard Tilt, who said:
"We require them (privately run prisons)
to be run to the same policies, the same standards, the same rules,
and we specify quite clearly what sort of regime we want and what
they (the private sector) must deliver on a daily basis."
The second supporting piece of evidence is by
Lord Mackay of Ardbrecknish who, asked whether if a public service
function was contracted out to the private sector, confidentiality
and accountability could be maintained and preserved in the way
they traditionally had been in the public service, said:
"I think you can because you simply put
that into the contract with whoever is doing the work for you.
. . ".
The third supporting statement was made by Dame
Ann Bowtell who said about the way the DSS handled contracts with
the private sector:
"What is absolutely critically important
in these is the specification you give to the private sector,
and what incentives you build in for them to behave in the way
you want them to behave. . ..It is the contract and the contract
specification and the monitoring of that contract which is all
important. If you get that right, you can get them to do whatever
you want."
Clearly a good contract is as good if not better
than a good ethos, as it is legally enforceable.
Regarding the search for profit, Mr Tilt further
evidenced, and we would concur, that:
"The value of integrity includes exercising
effective stewardship of public money and assets. For the private
sector there is in addition the obligation to produce a return
for the shareholder. So far there is no evidence that these two
objectives are inconsistent."
In our view, there is no need for the private
sector organisations while on assignment to literally adopt the
public service ethos in order to maintain it, their profit-making
attitude would, therefore, not undermine it. If, on the other
hand, the question hints at the public service ethos of the public
service workers being contaminated by being in close proximity
to the private sector, by definition this cannot really happen,
certainly not by the limited actions of private sector participants,
as the massive public service body must be largely immune from
such relatively small pinpricks.
Possibly the best insurance against the potential
degradation of the public service ethos when engaging the private
sector is to "sandwich" it quite firmly in between layers
of public sector control. Please see our suggested model for how
this could be done (see figures 2-4). Figure 2 shows the basic
consulting model.
The aim would be to extend the use of Public-Private
Partnerships, Outsourcing deals, and Private Finance Initiatives.
Also, greater imagination needs to be used in cementing the two
sectors more firmly together in terms of their direction, management,
planning, control and monitoring of assignments. This could be
done by introducing more risk-reward schemes, cost improvement
benefit sharing schemes and SLA payment-by-results schemes. By
harnessing the drive for private sector profit linked to delivery,
costs to the community can be driven down and standards raised
for mutual benefit.
Further "Sandwich" models for Public-Private
Partnerships and Outsourcing arrangements are shown in figures
3 and 4 below.
Alternatively, as with Civil Servants, performance
could be measured in terms of excellence of public service rather
than financial measures - which are necessary but can be considered
separately. An example is the Passport Agency offering a fast
stream passport issuing service. This service would command a
premium charge, which could be seen as distorting the ethos by
special dealing. However, the Passport Agency was regarded as
providing a "better" service to the public. A further
example is the successful running of private sector prisons.
Further evidence for this is provided by the
National Audit Office report into Sema Group's (now SchlumbergerSema)
role as outsource supplier of Medical Assessment of Incapacity
and Disability Benefits (Report by the Comptroller and Auditor
General, HC 280 Session 2000-2001, 9 March 2001). It stated:
"We found no evidence that the company had
sought to maximise their profits through a systematic policy of
under-examination. . . "
This clearly indicates that the normal audit
process can be an adequate safeguard against profiteering.
Q.13 Can lessons be learned from the experience
of private sector involvement in public services in other countries?
A.13 Most definitely. There is a strong
case for examining initiatives taken in countries and their subsequent
effect. Changes and results can then be modelled to reflect Britain's
values for the same parameters, in order to gauge the effect the
same changes might have on our environment.
A useful exercise, if not already in done, would
be to draw up a league table of the leading developed countries,
for such parameters as levels of service provided in each of the
key areas of public life, income per capita, GDP, other measures
of wealth, the levels of national debt and taxation percentages
from direct and indirect sources. Then by reading off where Britain
lies in the table, the quantity of money that should be spent
on public services can be estimated by comparison with other adjacent
countries.
International comparison will be made easier
with the advent of e-business.
Q.14 Do private sector people working in and
around Government, including secondees, task force members and
others, undermine the public service ethos? Are special measures
needed to regulate their activities and prevent possible conflicts
of interest?
A. 14 No, private sector people working
in and around Government, especially secondees, task force members
and others, do not undermine the public service ethos. Therefore,
no special measures are needed to regulate their activities or
prevent possible conflicts of interest.
In our view, the biggest threat to the erosion
of the public service ethos comes from within, ie from its own
membership or leadership's altered standards and attitudes, over
time. In our experience, those coming from private and voluntary
sectors tend to adopt the values of the public sector while they
are working within it, as it is always advantageous for them to
conform to the culture of any organisation into which they are
inserted.
Because of their level of professionalism, private
sector workers can be taught how to work within the ethos while
on their assignment. At worst, it is even conceivable that interaction
between the two sectors would enable improvements to be suggested
which might bring the ethos up to date without undermining basic
principles.
The fact should not be overlooked that many
private sector firms have a large number of ex-civil service workers,
generally, and also as a result of outsourcing / TUPE deals.
Q.15 Many companies are becoming increasingly
aware of social and ethical issues. Does this make them more suitable
for work in partnership with the public sector, or does it make
no difference?
A.15 It probably makes no practical difference.
It does not harm the case for such companies to be involved in
public sector delivery. However, the companies in question would
soon cease trading if they let their awareness of social and ethical
issues make them less entrepreneurial than those who were not.
If there is any benefit, it probably comes from the initial feeling
of extra trust and confidence which the public sector may have
towards such companies at the outset of their relationship.
Q.16 Do the views, motivations and attitudes
of public sector workers differ from those in the private sector?
Does any difference in motivation have an effect on the delivery
of public services?
A.16 Yes, the views, motivations and attitudes
of the public sector workers do differ from the private sector.
As already stated though, we do not think they
necessarily harm the delivery of public services, as they can
be adequately controlled by various means. In fact we consider
that it might be beneficial if the public service would start
to think and act more like the private sector, instead of the
other way round. For example:
— To the private sector worker everything
is a resource. It is innately understood that all resources are
scarce. All resources have a value and a cost and must be paid
for. In turn, each product and service which is produced also
has a cost, price and worth.
— The private sector worker also understands
that services and products have to be produced to budget. If not,
there is a serious consequence which could be terminal. Services
and products have to conform to VFM, usually with work having
to be carried out as cheaply as possible to meet agreed budgets
and maximise profits.
— Also, the private sector has a "project
mentality". It understands that jobs must be contracted.
Contracts must be respected. Also, work must conform to standards.
Standards must be high and measurable. If standards are not met,
payment is not forthcoming. People can lose their jobs (and companies
contracts) if they do not meet standards.
— In the private sector, if the current
workforce does not have the appropriate qualifications, someone
is recruited from outside who does have the skills. In the public
sector, there is too great a tendency to send away on a course
the selected person who does not have the requisite skill. This
is often counter-productive, as the job waits while the person
is away on a course. When the person returns the person is often
ineffective, because the person returns as an inexperienced novice
in the new technique.
— Without this attitude and motivation,
there is reason to believe that public sector service is delivered
with less concern for speed, accuracy and quality, less likely
to be delivered by the most appropriately expert personnel, to
budget, to the best budget, i.e. with the best value for money.
There is evidence to show that the benefits
and advantages of private sector thinking have already been recognised
by the Government and implemented. This is happening in respect
of VFM and compulsory tendering for best price. Similarly, Resource
Management has been in practice for years in the public sector
, with financial budgeting controlling departmental expenditure.
In summary, we consider there are certain advantages
of the private sector worker attitude over the public sector worker
attitude, namely:
| Public Sector | Private Sector
|
| Insufficient incentive to work hard | Motivated to harder working
|
| Motivated by impartiality | Motivated by ability to negotiate pay rises
|
| Motivated by public good | Motivated by the sack
|
| Averagely paid | Better paid
|
| Arbitrary quality | Quality defined by standards
|
| Stagnant | Honed by mobility
|
| Slow change by evolution | Fast track change by revolution
|
Q.17 There is conflicting evidence as to whether the public
is in favour of private sector involvement in public services
(MORI polling, June 2001). What in your view is the truth about
public attitude?
A.17 It depends what is understood by the word "public".
Clearly, "public" could refer to "the men on the
Clapham omnibus", who generally support hanging and flogging.
Alternatively it could mean a statistically representative cross
section of all those not personally involved in any of the three
key sectors involved in this consultative document, which is completely
different. If a well researched professional poll found conflicting
evidence then that is exactly what there must be.
However, If you are asking for our "personal point of
view" i.e. what we think, as opposed to what we think the
public think, which is basically all we are able to provide authoritatively,
then we would say the following.
It would be probably be ideal if all public services were
able to be provided entirely by public servants, to the full needs
of the populace, efficiently, affordably, economically, loyally,
dedicatedly, with leading edge ability, with quality, in a timely
fashion, honestly, equitably, in the required quantity, in the
appropriate locations and at the required times. However, failing
this, (which it does) it is totally appropriate for the Government
to seek the best or better alternatives to support this provision
from any sector suitably placed to deliver them, on the understanding
that they are appropriately commercially viably obtained, managed,
monitored and audited.
Q.18 If there are to be rules regulating private sector
involvement in public services, should they apply also to, for
example, the voluntary sector? Should there be less stringent
regulation where profit is not involved?
A.18 Once an external voluntary organisation has been
procured to provide work, i.e. its proposal and charges have been
deemed to be acceptable, then in our view, it should then be subject
to equally stringent regulation as a private sector organisation.
The reason for this is that it is equally bound by its contractual
responsibilities as a private sector company to the audit requirements
of the public purse, to ensure that it adheres to its service
level agreement, achieves its target deliverables, savings or
performance objectives, within agreed timescales and to agreed
quality levels. If it does not, it will be equally guilty of wasting
public money and the public service employing it of maladministration.
Q.25 Does the growth in private involvement in public services
threaten to reduce public accountability?
A.25 No. Quite simply either the private sector organisation
involved in supplying services is responsible to the public sector
organisation via an SLA, and the public sector organisation continues
to have public responsibility; or, if a public-private partnership
is formed, the partnership is drawn up so that it has a statutory
responsibility to submit to public audit office authority.
Q.26 Do the demands of commercial confidentiality threaten
the accountability of public services when the private sector
become involved?
A.26 They could, particularly when requested to disclose
their profit gearing or internal cost structures in a procurement
situation. However, this can be overcome so long as a flexible
approach is adopted by the procuring authority, to enable comparisons
to be drawn on an equitable basis between private sector companies
by other means. However, it should not threaten the ongoing association
between the organisations once the relationship has begun.
November 2001
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