Understanding the Public Services Industy

Public Services Industry Review
Section 4: What has helped and hindered the
development of the PSI Market in the UK?
4.1 Over the past decade there have been a number of government-sponsored reviews
and reports which have touched on areas of relevance to this Review. These reports
have recommended policy changes in areas ranging from procurement techniques and
skills to enhancing the role of the third sector and partnership working (see Annex F for
a summary of some of the most relevant work).
4.2 Not withstanding the many changes underway, this section takes a longer term and
broader look at the development of PSI markets in the UK. It considers, with the benefit
of hindsight, what policies have helped and hindered the PSI’s development, what
other countries can learn from the UK’s experience and how we can improve.
4.3 Four key policies have been identified as having helped the PSI develop and are
described in this section of the report. These are:
1. The pursuit of contestability as a policy goal;
2. The move from lower cost to more general ‘value for money’ criteria;
3. Employment protection policies, such as TUPE; and
4. The use of the PFI model.
4.4 Six areas which are preventing the full value of using the PSI to be realised were also
identified:
1. Policy uncertainty;
2. Poorly specified contracts;
3. Lack of competitive neutrality in comparing bids;
4. Inflexibility during contract delivery phase;
5. Poor commissioning and project management skills; and
6. Complexity and cost of the procurement process.
These are discussed in turn and recommendations are made for improvements in each
area.
Helpful Policies
1. The pursuit of contestability
4.5 The pursuit of contestability as a policy goal has clearly had an important role to
play in the development of the PSI. The introduction of Compulsory Competitive
Tendering (CCT) throughout the 1980s was a first step in this move to contestability.
CCT was introduced in an attempt to bring greater efficiency to local government
and health services through the use of competition. The initial phase introduced CCT
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