G4S: Government’s ideological commitment to using the private sector not matched by proper resources

Well, first of all Northern Ireland Water have a problem tracking contracts with the private sector. Then the Housing Executive. In the midst of all the rest Northern Irish Primary schools have been let off compulsory testing because a £3 million contract failed to deliver a functionable product.

Now it turns out that the UK Department of Justice has been massively overcharged for the services of G4S… Chris Grayling has brought the Serious Fraud Office in to investigate (which is something our boys and girls could learn from). But already it is far too late.

What all these cases have in common is government’s abominably poor handling of external contractors.

Ever since the early 1980s there has been an ideological commitment to using private sector contractors to do public sector work. The problem is that that ideological commitment has not gone hand in hand with a commitment to  sufficient resources, in two regards:

  1. Under resourcing of departments tasked with choosing the best bid often leads to  a culture of choosing the cheapest one. Cheaply structured contracts often leave the service deliverers with little scope to deal with unforeseen contingencies. You also run into the pay peanuts, get monkeys problem.
  2. Poor to no client management before during and after the life of the contract suggests that the attitude within the civil service is that once a job has been taken on by the contractor, they are simply ‘expected’ to deliver. Government has no reliable resources to launch post hoc value for money checks.

Starved of contract management resources the big lawyers of large private sector contractors run rings round their non specialist public sector counterparts and accountants. In each of these cases the long term cost of such slack management has varied from small to huge.

What’s rarely recognised is that the enormous scale and complexity of the jobs undertaken by the public sector often far outstrips the experience and capacity of any single private sector contractor. Banks may have millions of transactions to process every day, but patient databases are not reducible to simple number crunching.

So the NHS has spent years and billions trying to create a one size fits all, and failed miserably. The ambitions of senior civil servants and their political masters often outstripe the resources they are prepared to commit to make it happen.

G4S was not the first, nor will it be the last screw up. If the public sector continues to see value in using private sector contractors, then it must commit resources upfront to ensure proper contract management expertise, or be prepared to take more and more punishment when the chickens come home to roost.

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  • thethoughtfulone

    The fact is that we, the taxpayer, are stuffed however you do it.

    Either a lazy, inefficient and largely incompetent public sector, or a greedy, money-grabbing, short-changing private sector.

    No idea what the answer is, get used to it I suppose!

  • The Raven

    Wow. Insightful. “Thoughtfu”l, even.

    The entire workforce is out to get us.

  • thethoughtfulone

    Yeah, whatever.

    Personally, if all I had to offer was a snide, sarcy comment I wouldn’t bother commenting at all but whatever amuses you I suppose!

  • Cric

    Failures like this do happen in the private sector, I worked for a company a couple of years back which wrote off a £2m software project after a breakdown in a relationship with an outsourced development company in India.

    I guess the difference is that it is private investors and stockholders who are hurt by such inefficiencies – and more efficient companies will do better in the long term over their less efficient competitors. The Government having a monopoly over the public sector and a captive audience doesn’t have to worry about competitors stealing their customers – Democracy is supposed to address this, but certainly in this part of the world we’re more interested in flags and parades than good governance – and have practically no mechanism to switch governments anyway.

    My own solution to this problem has been to work abroad and offshore, vote with my feet as it were. I’ve a feeling that in the coming decades aging populations and plummeting birth rates will make this a lot more common than it is now – states will need productive citizens and will therefore have to offer a better product than their competitors. The introduction of market forces into statecraft.

  • A great piece Mick.

    ‘Either a lazy, inefficient and largely incompetent public sector, or a greedy, money-grabbing, short-changing private sector.’

    Very simplistic, don’t you think thoughtfulone? I’ve worked exclusively in the private sector in many countries and tbh I see inefficiency and incompetency in all sectors, the NI Civil Service is much maligned when in reality it does a decent job, not a great job but not an awful job in general either.

    The sole driver in government departments in relation to their legal work is a drive for it to be completed as cheap as possible, this was the case when the law firm I worked for in London would do its tender for the Met’s contract (for instance) and it meant that often government departments confuse value for money with going for the cheapest (as Mick has already noted) and it costs them in the long run with litigation in some instances.

  • Mick Fealty

    Thanks FC, gratifying to get some ‘contact’ on the subject… Cric’s point I think is best illustrated by what’s happened to governments underwriting a badly regulated banking sector.

    They cannot write off the loses in the way the private sector can so people are in fact going to have to continue to pay back money on value that no longer exists.

    When a private sector contract burns, the public money that burns with it is gone and has to be replaced with scarce tax revenues.

    One of the problems we have in NI is that a lot of people think this doesn’t matter, because its someone else’s money.

    But if you stop thinking about how to make the best use of scarce govt resources towards your own political ends, you are not acting politically in government.

  • thethoughtfulone

    “Very simplistic, don’t you think thoughtfulone?”

    Of-course it’s simplistic, as any comment on such a large percentage of the entire UK economy must necessarily be.

    But as a generalisation from a client i.e. me!, who provides the money and is then given a product or service in return, I think it’s a pretty fair assessment and there in no scarcity of examples from both sectors over the years to back up my assertion.

    In fact go back over the headlines for a couple of months pretty much anytime and you’ll find enough material to support it.

  • thethoughtfulone

    “One of the problems we have in NI is that a lot of people think this doesn’t matter,”

    Yes, but that’s the fault of government themselves and how they present the countries finances to the public. They should make it clear to people that THEY don’t actually have any money, the only money they have is OUR money and when they spend, they’re spending OUR money.

    Then again, look at the state of so many peoples personal finances and can you blame the government for not trusting the public either!

  • Mick Fealty

    TTO,

    In this digital age, there are more potential opportunities to draw the public much closer into grappling with these policy dilemmas, but we also have a political class that’s been weaned on religious and factional conflict who reflexively fall back on what they think they know best: ie, how to negotiate.

    Waving their ‘stumps’ at each other (and occasionally, the rest of us) is what they do better than anything else. They need to learn the value of policy before they can go to the public with anything that just might make a difference to their lives. And that’s a very political problem, not just a government one.

  • cynic2

    The fundamental problems are a lack of skills in the public sector in setting these contracts up and then in running them.

    Self interest plays a huge part. Many outsourced contracts in the Thatcher era were set up by civil servants who were immediately recruited by the bidders / successful contractors. That position still persists.

    I recall being told that in my Department we must now start to use a particular framework contract. We asked for a copy of the contract so we could work out how bets to manage it.

    It took months of effort but we eventually secured a copy. It was full of holes leaving us with all the liability and the contractor with money for old rope. Many of the staff involved in setting it up had retired on pension and walked straight into jobs with the suppliers.

    Equally many civil servants have no understanding at all of concepts like ‘business processes’ or ‘quality standards’ and how these are used commercially. They are so used internally to fudging every target to make it appear that they are delivering that this carries forward into external contracts.

    Can anyone remember a major public contract being terminated and the Government getting its money back from the supplier for poor service? I cant. Why not? Because to even do that would be seen as an admission of failure by the civil service

  • cynic2

    “When a private sector contract burns, the public money that burns with it is gone and has to be replaced with scarce tax revenues.”

    Depends what the contract is. Let me give you a direct example in Belfast

    Two almost identical jobs. There are small differences but not much ….its a fair comparison

    One job for new internal staff qas advertised by a public body. Staff are paid £11 an hour + pension + all usual public sector benefits. Just the £11 an hour grosses up to £13.77 employment costs never mind the benefits.If you add the pension etc the true employment cost is probably closer to £15.50 /hour maybe more

    The other job was outsourced to a contractor let on a lowest cost competition. The supplier is paid a net £8.60 +VAT an hour and is employing staff on minimum wage with no pension or other benefits. The costs of employing those staff on minimum wage is around £7.75 so you can guess the quality of service, training, and supervision built in

    Personally I think the second example is far too low but externally the civil service always want lowest cost so that’s what they are getting. You may also ask why internally they will pay 80% extra for much the same job.

    PS If you need an answer to that question look at the pay structure in the public sector and the pyramid of supervisors and managers that rests on the pay of that post and whose conditions might be undermined if it was so much cheaper

  • Mick Fealty

    Cynic, NO! It’s lack of will, before lack of skill. The chief accounting officer in each department is responsible for the deployment of resources… And the accounting practices are archaic to say the least…

  • Money corrupts: so we get the charging for work not done by G4S, Serco and Housing Executive contractors. Power corrupts, so officials and politicians set up loose conditions then walk through the revolving door, like Charlie McCreavy. He, by the way, was the only person ever refused permission to take up a job in the 12 months after he finished as a European Commissioner. He wanted to set up a company to buy up cheap all the assets banks had to sell under regulations his department set up. That was refused. He now works for a lobbying company near the European Parliament.

    I suggest a modest solution. An assumption of corruption act. All senior politicians, civil servants and heads of companies with large public contracts should go to prison one day a year, and not be let out until they have proved beyond reasonable doubt that they have done nothing corrupt, or exceeded their powers, in the last year.

  • I saw a report yesterday on BBC World News regarding corruption. They said that 10 years ago, Georgia (the country) was close to, maybe even at the top of the list of corrupt countries. Today it is one of the least corrupt. Here’s how Saakashvili achieved that : He rebuilt police stations with large windows allowing the public to see what was going on. No closed offices in any public building or unobserved meetings between any official and a member of the public. Total openness so that no bribe could be handed over. Interesting to say the least.

  • cynic2

    “It’s lack of will, before lack of skill.”

    I actually think we are saying the same thing Mick. My point is too that its self interest.

    If you outsource why do you need all their tiers of supervisors managers and pen-pushers? So thee is an inherent self interest in not outsourcing or making it fail if you do

    Then even if they are forced to, they haven’t a clue on how to set up and manage eg a managed service contract> It should be simple – fiurst lets define the servcie and volume. Niope in public sector we dont do that.

  • cynic2

    Money corrupts: so we get the charging for work not done by G4S,

    It may not be corrupt. Just utterly shambolic where the customer has no idea the prisoners are back in side and tells G4S to keep monitoring!!! Lets see the outcome

  • Seamuscamp

    “In this digital age, there are more potential opportunities to draw the public much closer into grappling with these policy dilemmas,”

    Makes you sound as if you know nothing about the digital age or about the type of people who can be arsed to get involved. Neither of which is true, I know. Perhaps you are just a Conservative manque – you know, bread and circuses – invite people to make a case knowing that dissension and nothing clear will emerge. Remember that petition to D Cam about the PSNI and civil rights. The only decisions worth anything are the hard decisions and straw polls of interested parties are not the way to go. But perhaps you have a magic way of involving everyone including the digitally illiterate.

    While the NI electorate goes on choosing decision makers almost entirely on the basis of sectarianism, the process will be paranoid. And the uncharismatic, policy-light APNI is not a rational alternative. Roll on the generation after next.

  • Mick Fealty

    You may surprised to learn that I agree with most of that Seamus… My golden rule has always that you should never ask a question that you don’t want to hear an answer to…

  • TTO,

    I know there are plenty of examples of public sector incompetence, however, if you’re going to be overly simplistic in assertions it means a discussion on what to do is in essence pointless. Let’s be honest here, papers are not renowned for reporting when government organisations do well as that’s not what people want to read, therefore if we start with what is reported which is more often than not dictated by the whims of an editor or proprietor rather than what may be happening, then we’re not actually shining any kind of light on what needs to happen to improve service development.

    Mick,

    ‘When a private sector contract burns, the public money that burns with it is gone and has to be replaced with scarce tax revenues.

    One of the problems we have in NI is that a lot of people think this doesn’t matter, because its someone else’s money.

    But if you stop thinking about how to make the best use of scarce govt resources towards your own political ends, you are not acting politically in government.’

    I’d largely agree with that, there is a massive disconnect between society in the North and the taxes spent on it and there are a lot of reasons why (no devolved control over its collection, raising or lowering would definitely be one for me) and I think that feeds into parties in the north not effectively tying in spending decisions with their ideologies.

  • Mick Fealty

    Seamus,

    “As for politicians, they should get on with the job of thinking through, examining and ultimately (because that’s what we pay them shedloads of money for) decide government policy and law. If they choose to draw on blogger-led insights, it is still their judgment in the end that counts. Bloggers are in the lobby and, as much as columnists and sundry other polemicists, are merely ancillary to and not replicative of representative democracy.”

    Source: http://www.guardian.co.uk/commentisfree/2007/apr/30/thephantomofdemocracy

  • Zig70

    This isn’t a public sector problem but found in any organisation that grows too big. Human nature results in people spending more time protecting their department. They hide decision making because it gets complex and stifled very quickly. A common flawed strategy from senior management is to put in a layer of management to control it. The problem for the public sector is that downsizing isn’t always an option. One option is to starve the beast a fairly crass tool. The private sector get it wrong a lot and the speed of decision making means more risk is taken but also that it is forgotten about and on to the next.
    I don’t think the public expect the kind of micro management the media expects of politicians. They should be responsible for strategy. Let’s not go nuts when things screw up or waste more money deliberating over it. Lesson learned, move on, don’t make the same mistake and for gods sake don’t be sending me flyers, emails or tweets about your happy public sector department. However, corruption and interference in contracts is a different thing. Some people are just crooked and a call from the cops is needed.

  • Zig70

    The other thing is the cost of all this outward communication. With it you may be adding another layer of government contracts. Software engineers are some of the worst for overcharging.

  • SeaanUiNeill

    Zig70:

    “Some people are just crooked and a call from the cops is needed.” But…..”Quis custodiet ipsos custodes?” Just one little phrase: “Petition of Concern.”

    If I were employing freelance workers in a project I managed in the past, I needed to know how to judge their work from a full understanding of what they were required to do. Have you ever filled out one of these tender sheets for local government contracts? Very big tick sheets in essence, with formula answers required! How anyone can assess individual jobs from such crude information beats me!

  • cynic2

    “How anyone can assess individual jobs from such crude information beats me!”

    They cant and frankly they generally don’t give a damn. They are just going through hoops in the knowledge that if they fill the forms in correctly they cannot be criticized. Thats the way the Civil Service works – blame avoidance not delivery