New challenges for next generation public sector providers
To meet the challenge of delivering local services with less money, councils need to be asking the market for different kinds of support, writes Campbell McDonald, Director of Public Sector Practice at Baxi Partnership.
Radical restructuring of how local services are delivered increasingly looks inevitable for every council who want to make their numbers work over the next five years.
There seems to be a growing realisation that salami-slicing services is not a solution that will last the course and more fundamental alternatives must at least be explored. Whether sharing officers or merging departments, be you a co-operative council or a commissioning council, deeper structural reform is being considered if not enacted almost everywhere you look.
Ultimately that process is going to involve the creation of new organisations of many and varied descriptions, be they in-house teams spinning out into new mutuals, the rise of a thriving local and regional economy of social enterprises vying alongside more traditional commercial providers to win contracts, or entirely unseen before species of joint ventures and partnerships that will stretch old definitions of public and private sectors to the limit.
However, this brave new world will throw up challenges as well as opportunities that local authorities – and those who supply them – should be ready for. Local government is already in a Jacob and the angel-style struggle to get exactly what it needs from the market, but that battle of wills and intent will get tougher before it gets easier on both the supply and demand sides.
On the supply side, providers of services to and for local government are already starting to change gear in terms of what they offer – but there is still a long way to go. Anything that can help drive efficiencies with what’s already there will always be welcomed with open arms, particularly where suppliers are prepared to work for a percentage of that which they help to save.
Yet as options appraisals throw up new alternatives there will be a growing need for additional expertise around designing and setting up special purpose vehicles and partnerships, around raising capital and investment, around achieving the levels of behaviour change that will secure necessary service improvement, and around providing the ongoing hands-on commercial support these new providers desperately need to survive and thrive.
In the same vein, suppliers will also need to think more and more beyond a straight-forward contract model of doing business with local government. As the state puts more on the table in terms of people, assets and whole new markets in service delivery, so they should be looking to suppliers to show that they are prepared to make greater commitments to sustainable success – to be prepared to put some skin in the game.
On the demand side, local government must get better at ensuring it gets what it really needs from the market. That means enlightened commissioning which has the courage to back new delivery models and the nous to pick good partners from bad and create new ways for suppliers to demonstrate their ultimate motives are as aligned as possible.
Councils would also benefit hugely from thinking more broadly about how they create and continue to support a thriving local market place in service delivery. In part, that means recognising that new organisations will have no local hands on support anymore from RDAs or Business Links.
Beyond that, every time an authority awards contracts to large out-of-area suppliers they not only transfer capital value outside of their local economy but also court the opportunity cost of not deploying local providers who bring a positive economic and often social footprint. A greater focus on a level playing field in market locality would go a long way to securing the long-term success of radical reform of service delivery.
This article will run in the LGA Annual Conference Publication, where the Public Sector Team at Baxi Partnership will be running workshops and exhibiting on 27th June at the ICC in Birmingham. To talk to us about public sector spin outs, contact Campbell McDonald, Director of Public Sector Practice, Baxi Partnership on 07879 466959, or email email@example.com.