WRITTEN EVIDENCE
SUBMITTED BY
THE BUSINESS
SERVICES ASSOCIATION
(LOCO 08)
INTRODUCTION
1. The BSA—Business Services Association—is
the trade body that represents companies and advisors delivering
outsourced and business services across the public and private
sectors.
2. BSA members are involved across the full range
of public service provision—including health, education,
defence, waste management, housing and other local services, IT
and digital services, security and transport. Full members have
a combined worldwide turnover of c £70 billion and employ
around two million people. In the UK the combined turnover is
c £16.5 billion and c 365,000 people are employed across
the country.
3. The BSA cautiously welcomes the coalition
government's commitment to decentralisation and a new focus on
localism, but it must consider the effects that that may have
on public expenditure and the effective provision of good services.
4. We wish to make the following key points:
¾ Locally
determined services can be more appropriate and more responsive
to community needs.
¾ However,
it is crucial for procurement and service contracting to be done
well given the fiscal strain facing public bodies.
¾ The
procurement of local services cannot ignore economies of scale.
Small-scale contracts dotted across local authorities will represent
poor value for money, and let down the council, the consumer and
the taxpayer.
¾ Local
authorities may therefore have to think of new ways to reconcile
these competing imperatives. This may mean a greater emphasis
on whole-service contracts which can be easier, bring lower costs
and provide better service.
5. This submission will attempt to provide an
opinion on each question asked by the Communities and Local Government
Select Committee.
Does decentralisation lead to more effective public
service delivery? What should be the limits of localism?
6. Decentralisation can lead to much more effective
public services if it is done right. Locally determined services
can be more responsive to community needs. However, it is essential
that decentralisation does not come with a price-tag of poor and
costly public services.
7. Only by effectively outsourcing support services
can local authorities focus on the frontline, providing better
services for less money. The BSA is concerned that procurement
skills may be lost as mechanisms are devolved to a local level.
There can sometimes be a paucity of skilled and experience procurement
staff at a local level.
8. Furthermore, the good value of scale economies
must not be overlooked in the haste to decentralise. Larger contracts
often represent better value for money, because the buying power
of well-capitalised private sector service providers means that
more money can be invested up front. This may mean that in order
to ensure public service contracts can be of the highest quality,
local authorities opt for more encompassing contracts than they
have done in the past - contracts which give extra responsibility
to the private sector, allowing it to deliver to a far greater
extent.
What are the lessons for decentralisation from
the Total Place initiative?
9. Total Place is a good model for future local
governance structures. Its emphasis on a "whole area"
approach challenges waste and duplication and provides a more
holistic basis for service contracting.
10. The BSA believes that the Total Place initiative
provides an excellent model for simultaneous cost-cutting and
decentralisation. By treating a local authority's problems as
one, institutional and budgetary boundaries can be broken down
and money channelled more effectively.
11. The widening of the potential contract portfolio
means good news for auditors. Service contractors can treat each
local authority as one client with a diverse range of needs, and
avoid service silos which work to the detriment of consumers and
taxpayers. Economies of scale mean that larger contracts tend
to be cheaper per unit of output, which is good news for a public
which expects better services at a lower cost.
12. Total place is an excellent example of how
the sometimes competing dynamics of decentralisation and cost
efficiency can be combined. Greater localism does not have to
mean poorer quality services.
What should be the role of local government in
a decentralised model of local public service delivery? How far
should localism extend to other agents?
13. Local authorities are better in tune with
the needs of their communities. The paradox is that their smaller
budgets and relative lack of expertise can mean that they are
less able to satisfy those needs by working alone.
14. The BSA has long promoted the benefits of
outsourcing support service functions, particularly for local
government. We believe that the best and most responsible way
for local government to serve its community would be to adopt
a model of outsourced support services, allowing a better focus
and more resources on frontline operations.
15. Local authorities need to improve their procurement
capabilities to do this. Procurement expertise could be improved
in central government, but much more work needs to be done within
the local tiers.
16. Without careful thought, such changes could
come at the expense of the decentralisation agenda.
What action, if any, is required from Whitehall
departments to achieve decentralised public services?
17. For decentralisation to work for people and
government, it must be effective. That means making sure that
decentralisation is done only where it is appropriate and conducive
to the public good. The potential for localised diseconomies of
scale in service contracts threaten the good value for money that
the taxpayer deserves.
18. Although localism should be pursued from
the bottom up, there should be a role for Whitehall in decentralisation.
Incentives and guidelines for adopting regional procurement frameworks
or whole-service contracts could mean that the buying power of
contractors can be fully exploited. This would remain entirely
optional, thus preserving local self-determination.
What would be the impact of decentralisation on
savings in local public services? How could cuts be targeted effectively?
19. Achieving cost savings whilst maintaining
or improving the standards of local services will only be realised
by properly utilising procurement expertise and buying power.
Failing to do this could threaten the good value of large contracts.
20. Multi-service contract models similar to
Total Place can and should become more widespread. Having several
different contracts for different services is not cost effective,
encourages silos, and engenders disparate decision-making and
responsibility.
21. Should regional procurement frameworks be
created, and support services effectively outsourced (allowing
local authorities to focus resources on frontline operations),
a situation could arise where costs decrease and output improves.
22. In this respect, and although it will of
course be up to local authorities to decide, we feel that cuts
should be targeted on back-office functions by outsourcing their
delivery to the support services industry. This would bring investment
to the area, and could create more jobs at the same time, whilst
saving the taxpayer money and improving performance.
Should there be any oversight or accountability
mechanisms to judge local authority performances and services—especially
where money from Parliament is concerned?
23. This is a necessary measure to make sure
that local authorities are spending public money wisely.
24. It is possible that the remit of the newly
created Office for Budget Responsibility could be extended to
oversee procurement processes at local level—or the OBR
could work in conjunction with CLG.
25. Oversight could include benchmarking, league
tables, quality assessments and frameworks, and would hopefully
increase competition and increase accountability. This is particularly
important for the use of money allocated to local authorities
by Parliament.
KEY RECOMMENDATIONS
¾ That
localism be promoted as the best way to understand the needs and
requirements of communities.
¾ That
Whitehall works with local government to develop an incentives
and guidelines to promote full-service contracts, greater procurement
expertise, and greater cooperation among local authorities in
tendering and outsourcing.
¾ That
the principle of "whole service£ contracts in the Total
Place initiative start to become the norm so that waste and duplication
can be minimised.
¾ That
local authorities strongly consider outsourcing support service
functions so that they can focus resources properly on the frontline.
September 2010
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