Open access – Delivering quality and value in our public ... - CBI

Open accessDelivering quality and value in our public servicesIndependent research byCBI onpublic services

2Open access – Delivering quality and value in our public servicesOriginal research conducted by Oxford Economicswww.oxfordeconomics.com

Open access – Delivering quality and value in our public services 3ContentsForeword 04Executive summary 05Why the government must commit to open public services 06There is a clear zone of opportunity to access untapped savings across public services 11Local government services 13Healthcare support services 16Education support and development 19Offender management services 23Police support services 27Government must manage markets more effectively to maximise the benefits 31from open public servicesReferences 38

4Open access – Delivering quality and value in our public servicesForewordThe forces of change facing our public services areintense. The pressing need to find savings torebuild the public finances is puttingunprecedented pressure on all areas of publicservices. At the same time, social and demographicchanges are driving a significant increase indemand for services.So, business as usual is not an option. To afford thelevel and quality of public services the publicexpect in a modern economy we need to do thingsdifferently. The CBI believes that open publicservice markets, with providers drawn from thepublic, private and third sectors, can square thiscircle and lead to an increase in quality, choice andvalue for money.The case for this agenda has been made moredifficult by recent high-profile failings in the privatesector. Business has to respond to these publicconcerns and rebuild trust through sustainedbehaviour change and consistent delivery ofresults.This report sets out a compelling case for thegovernment to go further and faster in opening uppublic service markets. By applying a ‘best-providerprovides’ approach the government could realiseaverage efficiency savings from productivityimprovements of 11% or more across billions ofpounds worth of expenditure on public serviceswhich the CBI believes could conceivably beopened up more to independent providers.Delivering savings will be tough and won’t happenby default. It will require new skills on behalf ofgovernment to metamorphose from a directprovider into a market manager. It will need a clearvision from the government about the markets inwhich it is prepared to see an end to the statemonopoly of provision. It will require more work toensure continuity of service provision in everymajor public service, even when things go wrong.And a focus on outcomes will reassure the publicthat whoever provides their public services isdelivering the best value for money for them.Above all, it will require strong political leadershipto finish the job. The potential size of the prizemakes a compelling case for action. This task isurgent – the window of opportunity to act in thispolitical cycle is closing fast. If the governmentmisses this chance for decisive action, the negativeeconomic consequences will be significant, andtaxpayers and users of public services alike acrossthe country will not thank them.John CridlandDirector-General

Open access – Delivering quality and value in our public services5Executive summaryBalancing the budget by the end of 2016-17 willrequire significant reductions in public spending,savings which can then be used to support bothdeficit reduction targets and programmes tostimulate badly needed economic growth. Thechallenge of balancing the public finances andresponding to the social and demographic changesmeans business as usual is not an option.Research commissioned by the CBI from Oxford Economics showsthe government could achieve major savings when public servicesopen up to a range of diverse providers. These come primarilythrough efficiencies and productivity improvements – doing what isalready done to the same or higher standard but at lower cost. Theycan be achieved while still maintaining the quality of the serviceoffered and, in many cases, improving it.The research shows the average saving from productivityimprovements generated by the competitive pressure on providersoperating a sample of services worth £24.5bn was 11%, with a rangeof savings between 10-20%. If similar efficiency savings wereachieved across the estimated £278bn of public services which theCBI believes could conceivably be fully opened up to independentproviders – assuming a similar proportion of services closed off toindependent provision as found in the research (74%) – thensavings of £22.6bn or more could be achieved. 1Independent providers already play an important role in managingpublic services, but the scale of openness is uneven across thepublic sector, with many services still largely monopolised by thepublic sector. While the Work Programme – a new service – is 100%delivered by independent prime contractors working with a supplychain of businesses, social enterprises and charities, just 2% of themarket value of the UK’s 5.3m social housing units is open toindependent management.While the public is in favour of greater openness of public services,recent poor performance of a small number of private sectorcontracts has raised questions in the public’s mind about the roleof independent providers in delivering public services. Thegovernment must take steps to ensure the public retains confidencein open public services by becoming a more effective marketmanager and ensuring that the best providers from all sectors havethe opportunity to manage our public services. Providers too mustwork with the government to address the public’s concerns aboutvalue for money, accountability and service failure.This report recommends six ways in which the government canachieve the best results from its open public services programme:Express a clear vision for how public service markets willoperate in futureCreate a transparent market place to allow commissioners tocompare providersEstablish mechanisms to address provider failure andmaintain service continuityPromote contracts that are structured to focus on outcomesEnsure the public sector has the right mix of commercialskills to commission effectivelyCreate effective government engagement with all types ofprovider

6Open access – Delivering quality and value in our public services1Why the government must committo open public servicesThe fiscal challenge makes public servicereform essentialThe challenge of bringing public finances into balance, coupledwith the impact of major demographic change over the next 20years, means there is an urgent need to re-think how we approachpublic services. Business as usual is not an option. We simplycannot afford to continue to run them in the same way if we are todeliver the services needed and demanded by the public.Balancing the budget by the end of 2016-17 will require significantreductions in public spending, savings which can then be used tosupport both deficit reduction targets and programmes to stimulatebadly needed economic growth. Central departmental budgets willbe on average 8% below their current levels in real terms in 2014-15.The situation in local government is tough too: councils face a cut of28% in the central government grant.Progress has been made, but there’s much to do. At the end of2011-12, while two thirds of the fiscal consolidation to be achievedthrough tax were in place, 94% of the cuts to current publicspending were still to come. 2 Lack of growth is making theachievement of deficit reduction that bit harder.Policymakers must pull all the economic and fiscal levers availableto them – in order to find cost savings while trying to maintain thequality of services as far as possible. This report looks at one suchlever: opening up more services to a range of diverse providers.Opening up public services to independentproviders will save money and promote qualityIndependent research commissioned by the CBI from OxfordEconomics shows that the government can achieve major savingswhen public services open up to a range of diverse providers. Thesesavings come primarily through efficiencies and productivityimprovements and from doing what is already done to the same orhigher standard but at lower cost.Just as mining a coal seam close to the surface delivers earlyrewards, so some gains will be relatively easy to realise. Greaterriches – like deep-lying coal – need more work, which will comefrom fundamentally changing how our public services are run andre-tooling them to cope with rising demand. But achieving thistransformation will be extremely difficult to achieve without movesto open up the provision of services to competition.Oxford Economics looked at a cross-section of public services andfound that independent providers are already helping publicservices manage this vital trade-off between funding levels and thequality of the services. But there is much more that they could do tohelp, given the opportunity. It focused on some specific areas ofpublic services which are to some degree open to provision by arange of independent providers – businesses, social enterprises,mutual bodies, charities – to identify the impact this approach had.They ‘deep dived’ into a small part of public spending and used thedata to understand to what extent, and how, independent providerswere making a difference (Exhibit 1). In twenty discrete servicesthey found the following results:

Open access – Delivering quality and value in our public services 7£2bnEfficiency savings fromfull market openness£6.4bnIndependentlymanaged services• The total spend on the services researched was £24.5bn• Of this, £6.4bn of services are open (26%) and the average costsaving generated by the competitive pressure on providersoperating these services in an open market was around 11%,with a range of savings between 10-20% 3• Where evidence is available, it shows independent providers aremaintaining or improving the quality of services to the public,measured against what was previously delivered• Services worth £18.1bn are still managed in-house (74% ofservices). The evidence therefore suggests that at least £2bn ofpotential savings are possible over the next five years if thesein-house services were opened up to a range of diverse providers.The government cannot afford to ignore the potential for furtheropening up of public services, given the size of the potential prize ifsimilar levels of savings were achieved across the areas of publicservices expenditure which could conceivably be opened up tofurther independent provision, which the CBI estimates could be upto £278bn. This change will not happen by default. The governmentmust lead the agenda.£16.1bnIn-house servicesExhibit 1 Breakdown of the public spendingexamined in the research 4Efficiency savings from full market opennessIn-house servicesIndependently managed services

8Open access – Delivering quality and value in our public servicesIndependent providers could do more to supportpublic service reformIndependent providers already play an increasingly important rolein managing and improving public services, but as Exhibit 2 shows,openness to a range of diverse providers in public services isuneven, with many services still largely monopolised by the publicsector. For instance:• 98% of the management of social housing, by market value, isstill delivered by the public sector or its appointed arm’s lengthbodies• 86% of prisons remain under the control of HM PrisonsServiceThere are areas of the public service where independent providerscould make a major difference. These are discussed in detail in thenext chapter, but examples include:• Just 2% by value of the market for the management of the UK’s5.3m social housing units is open to independent providers.Opening social housing management to more competition couldpotentially save £675m. The CBI would like to see investmentboosted in affordable and social housing through existingschemes such as Decent Homes, empty properties, the GreenDeal as well as other options available to both private and socialhousing.• 73% of schools catering is still controlled by in-house caterers.Public expenditure % outsourced1009080706050403020100Work programme 100%Electronic tagging 100%Prisoner escorting 99%Hospital security 48%Local waste management 47%Police fleet management 40%Hospital catering 32%Hospital cleaning 32%School facilities management 32%Local government HR and payroll 30%Hospital facilities management 29%School catering 27%Local govt finance services 23%Police custody services 18%Police forensics 16%Prisons 14%School improvement 13%Teacher development 10%Probation 3%Social housing management 2%Exhibit 2 The openness of the public services reviewed by Oxford EconomicsCommissioned locallyCommissioned centrally

Open access – Delivering quality and value in our public services 9• After successive rounds of outsourcing, just over half of wastemanagement, recycling and street cleaning services remainsin-house. 5 The research identifies a minimum £192m of savingsfrom a fully open waste services market.• At the other end of the spectrum, the Work Programme, a newprogramme within the spectrum of welfare-to-work services, isfully contracted to independent providers who are delivering newservices to the long-term unemployed using a payment-by-resultsmodel. While it is too early to determine the success of theprogramme in getting the long-term unemployed back into work,a recent CBI report has identified the steps needed to ensure itslong-term success. 6If an average 11% of productivity improvements is achievable acrossjust £18.15bn of the £666bn 7 annual public sector expenditure onservices in the UK, then similar levels of savings must be possible:not just in the un-open proportion of the markets researched but inthe unopened proportion of the estimated £278bn of publicservices spending which could practicably be more opened up toindependent provision.Exhibit 3 shows this ‘zone of opportunity’, the proportion of theservices looked at not currently open to independent providerswhich, if fully opened, could deliver significant productivity savings.Public expenditure % of total1009080706050403020100Work programme 100%Electronic tagging 100%Prisoner escorting 99%Hospital security 48%Local waste management 47%Police fleet management 40%Hospital catering 32%Hospital cleaning 32%School facilities management 32%Local government HR and payroll 30%Hospital facilities management 29%School catering 27%Local govt finance services 23%Police custody services 18%Police forensics 16%Prisons 14%School improvement 13%Teacher development 10%Probation 3%Social housing management 2%Exhibit 3 The ‘zone of opportunity’ for open public servicesClosed public sectorOpen to competition by independent providersThe ‘zone of opportunity’

10Open access – Delivering quality and value in our public servicesOver the long term, the real potential for savings lies in rethinkinghow public services operate. For example:• £3.4bn savings each year would be available to the NHSthrough moving more long-term healthcare from the hospital intothe home and community 8• £1.95 of savings are expected from every £1 of governmentspending going into the Work Programme, where providers arebeing paid on the results they achieve in helping the unemployedback into work 9• Making more use of shared services across the public sector willalso achieve significant improvements in productivity, creatingsignificant cost savings: the NHS Shared Business Servicespartnership with Steria, for example, is already on target todeliver around £224m of savings by 2015. 10‘Opening up a public service to arange of diverse providers is thefirst step to transforming how itruns.’It prepares the ground for challenging this market of diverseproviders to come up with the service innovations that will bringabout the more significant transformations needed. Both areessential to meeting the objectives set out in the Open PublicServices White Paper.In local government, the Whole Place approach to sharing resourcesand collaborating at a local level will enable councils to tacklecomplex social issues through more co-ordinated action whichpools local spending on health, education, policing, probationservices and welfare services and targets it more effectively at thepeople that need these services. 11 The zone of opportunity indeedextends far beyond the public services reviewed in the study andincludes many more administrative services such as payment,collection and debt management services that need not bedelivered exclusively by the state, where lower costs and improvedlevels of service can be achieved.

Open access – Delivering quality and value in our public services 112There is a clear zone of opportunityto access untapped savings acrosspublic servicesOxford Economics examined the impact on spending and servicequality of opening up public services to a range of providers andusing the competitive tension created to stimulate innovation andstrip out waste. 12To do this, they looked at 20 discrete public services in order totake a snapshot of the degree to which public services are openand what savings and improvements were generated when theywere. The data indicated that on average savings of at least 11%were possible when a service was opened up to new providers andthere was a range of savings between 10-20%.There is as yet little published information on the scope andperformance of services delivered by independent providers. Toovercome this, Oxford Economics used previously unpublisheddata, official data sources and evidence from CBI membercompanies to focus on a number of services where there is somedegree of involvement of outside providers. These are:LocalgovernmentservicesHealthcaresupportservicesEducationsupport anddevelopmentMethodology for the Oxford EconomicsresearchhMore than 600 requests for data were sent to localauthorities, primary care trusts and foundation trusts,probation trusts and police authorities. Oxford Economicsasked for data both on the amount of expenditure placedwith independent providers to deliver selected services aswell as the proportion of the service that is outsourced.Along with a full survey of existing government analysisand academic research, Oxford Economics surveyed CBImembers providing a range of public services, forevidence of performance improvements and maintenanceof quality standards. Data on the potential productivityimprovements that come from opening public services tocompetition was also requested.A full version of the original Oxford Economics report isavailable at: www.cbi.org.uk/open-access/OffendermanagementservicesPolicesupportservices

12Open access – Delivering quality and value in our public servicesOverview of the research findingsIn order to get an understanding of the existing and potential futureuse of mixed provision and competitive contracting mechanisms,Oxford Economics picked 20 discrete services across a range ofsectors to understand the full picture of open public services. Theheadline findings are:Opening up to new providers the £18.1bn of servicesexamined which are currently closed could achieveproductivity savings of £2bn• The £2bn of potential savings identified is an average cost savingof 11% compared to the in-house provision, if these services werefully open to new provision. The range of savings shown in thisresearch of 10-20% is consistent with previous research on theperformance of independent providers 13• Hospital facilities management (FM) and social housingmanagement account for just over half of the savings identified inthe research• The savings predictions are conservative due to gaps in data.Anecdotal evidence suggests that in many cases the savingsfigure is higher than stated.There are significant opportunities to extractsavings using independent providersCost savings do not need to be achieved at theexpense of quality• Independent sector providers face strict performanceassessments following a successful bid to run a service. Thecontracts stipulate an average of 20-30 key performanceindicators (KPIs), which are monitored regularly. These ensurethe provider focuses on performance and identifies new ways ofdelivering the same outcomes at lower cost• The evidence in areas such as police fleet management,education consultancy and local authority back-office servicesindicates that engaging specialist third-party providers candeliver maintain or improve the quality of public services.Three quarters of public services remain in-house –there is significant potential to go further in openingup services• Around three quarters of services analysed were provided by anin-house provider, in a market where there were alternativeindependent sector providers available to compete for the work• There is a wide range of openness in service delivery. Many localauthority services are still largely in-house, whereas theDepartment for Work and Pensions (DWP) has contractedindependent providers to run all of the new Work Programme.• There are areas where the government is delivering savingsthrough opening up services to new providers. Official data andevidence from providers suggests potential efficiency savingsfrom productivity improvements within a range of 10-20% arepossible• Where there is a range of providers able to bid for services, oftenthe competitive pressure can also drive efficiencies and improveperformance in public sector providers. National Audit Officeresearch indicates that market testing has improved thecompetitiveness of in-house prison management. 14

Open access – Delivering quality and value in our public services 13LocalgovernmentservicesPublic expenditure % outsourcedWaste managementLocal authorities spend around £2.4bn per year in the UK on regulardomestic waste and recycling collection, disposal, and streetcleaning services. The provision is currently split fairly evenlybetween in-house public providers (53%) and outsourcedindependent sector providers (47%). 17Based on a conservative estimate of 15% savings arising fromproductivity improvements which independent providers arecapable of delivering, 18 potential cost savings of £190m could beachieved if the whole market was open.Transactional finance, HR and payroll servicesSuch ‘back office’ services are a core running cost of any council.Local authorities in the UK spend approximately £500m every yearon them, much of which is still delivered in-house.Waste managementIn-houseHR and payroll servicesIndependently managedExhibit 4 Openness of local government servicesTotal local government spending in England on services alone isestimated to be £92bn. 15 Under the government’s deficit reductionplans outlined in the 2010 Spending Review, 16 the money localgovernment receives from central government will be reduced by28%. Council budgets are forecast to decrease by around 14% onaverage, but some face the challenge of reducing their budgets by20% or more.Transactional finance servicesManagement of social housingSpecialist providers account for less than a third of these services,but evidence suggests that councils can reduce costs and improveperformance in these areas. Potential cost savings of £70m arepossible through more open competition to deliver these services. 19Social housing managementLocal authorities and registered social landlords spend £4.6bn ayear on managing the UK’s social housing. Less than 2% of socialhousing by market value is managed by independent providers.The research identified savings of 15% where they are managed byindependent providers. If all social housing management was opento competition, further potential savings of up to £675m could beachieved.Given the scale of the spending reductions, the progress made inopening up public service markets in local government services,although already considerable, must go further. It should be justthe start of a wider change in how services are delivered thatensures funding is better focused towards achieving the outcomesrequired.

14Open access – Delivering quality and value in our public servicesLocal government services£675mpotential productivity savingsfrom opening up socialhousing management tocompetition£190midentified potential savingsfrom improved productivity inwaste management£70mpotential savings in themanagement of selectedback-office functions98.2%the proportion of social housingmanagement managed bypublic sector providers orarms-length bodies53%proportion of waste servicesstill delivered by the publicsector77%transactional finance andHR services managedin-house by localgovernment£4.6bncost of managing the UK’s5.3m social housing units£2.4bnthe annual cost of domesticwaste collection and streetcleaning£500mannual spend by councilson transactional, financeand HR servicesSavings Degree to which open/closed Size of the market Factoids Case study

Open access – Delivering quality and value in our public services 15Enterprise Manchester, a jointventure between Enterprise andManchester City Council, istransforming waste management inthe city. Since its establishmentthere has been a significant growthin recycling tonnages of 147%.Enterprise Manchester hasdeveloped the service deliverymethod for waste collection in thecity, improving resource utilisation,minimising unproductive time andreducing duplication, resulting in14% productivity gains.Capita’s Service Birmingham runsBirmingham City Council’s ICTfunction and helps drive forward itsbusiness transformationprogramme, which saved £244mbetween 2006 -2011. It alsomanages the council’s contactcentre (dealing with 2.5 million callsa year) and runs Birmingham’srevenues department. Thepartnership has delivered newcapabilities while improvingsystems.Oxfordshire County Council issaving £500m over ten yearsthrough combining all of its facilitiesmanagement services into onecontract with Carillion over the nextten years.A revolution in recycling: North SomersetCouncil and May GurneyWaste is a challenge for all local councils at the best of times,and tougher requirements on recycling put pressure onexisting services. Simple innovations in the way a wasteservice operates can have a real impact on costs andresidents’ everyday lives.North Somerset Council’s partnership with May Gurney, aninfrastructure services provider, manages recycling for87,000 households and 6,000 commercial properties.Through making it easier for households to recycle byproviding more bins, the amount of recyclable material hasincreased to 19,000 tonnes a year. 25% less waste is nowgoing to landfill – the equivalent of more than 16,000 tonnes– which has saved the council £1m in landfill costs. Kerbsiderecycling is now provided to 60% of households, meaningNorth Somerset is on track to become the best performingunitary authority in England for its recycling rate.Benefits for Bayswater residents: CityWestHomes and PinnaclePinnacle manages 800 homes in Bayswater, West London,on behalf of Westminster Council’s managementorganisation CityWest. It is responsible for all aspects ofkeeping the busy estate happy: complaints and repairs,grounds maintenance and cleaning, dealing with emptyproperties and rent arrears.Pinnacle has built relationships with the residents andlistens to their views regularly, so its staff can focus theirefforts on the people who will be affected by any changes.Pinnacle’s annual Community Compact with residents,agrees their priorities for improvement and sets specifictargets. These are then linked to a percentage of Pinnacle’sfee. Strong resident satisfaction levels of 88% indicate thisapproach is working in the way they want.

16Open access – Delivering quality and value in our public servicesHealthcaresupportservicesPublic expenditure % outsourcedHospital facilities management (FM)Hospitals in the UK spend over £7.3bn per year on the provision ofboth ‘hard’ (estate and building management) and ‘soft’ FMservices (hotel services including catering, cleaning and security).Cleaning alone costs around £1.1bn per year, while catering costs£700m and security £120m. Nearly one third of these services isoutsourced to independent sector providers and £5.2bn of spend isretained in-house.Many catering, cleaning and security contracts are part of widerprivate finance initiative facilities management contracts. As aresult it is difficult to isolate savings from productivityimprovements in particular services. Oxford Economics thereforecalculated an aggregate cost saving across all FM contracts from theavailable data.With information from CBI members and other sources suggestingcost efficiencies of up to 10% on new contracts, opening up all ofthese services to new providers could potentially lead to savings ofaround £517m.Hospital securityHospital cateringHospital cleaningHospital facilities managementIn-house Independently managedExhibit 5 Openness of healthcare support servicesWhile delivering best value from the services which support theUK’s primary and secondary health facilities is essential,transforming the way clinical services are delivered is key toimproving performance and service quality over the coming periodof static healthcare budgets. For example, a recent CBI reportshowed that delivering more healthcare closer to home – throughmore staff remote working, increased homecare and wider use oftelehealth technology to allow patients to manage long-termconditions at home or in the community, rather than in hospital –could save the NHS £3.4bn a year. 20The NHS is a vital public service accounting for £106bn of publicexpenditure a year and, like every other service, facingunprecedented spending constraints. It must deliver £20bn ofsavings by April 2014 and budgets are expected to be static over thenext decade. Rising demand created by an ageing population andincreasing long-term health problems like diabetes will also test theNHS severely.

Open access – Delivering quality and value in our public services 17Healthcare support services£517mpotential savings if allremaining in-house FMservices were opened up tocompetition71%of FM services stilloperated by the NHS10%average cost efficienciesfound in outsourced hospitalFM services£106bnannual expenditure on the NHS£7.3bnspent on ‘hard’ and ‘soft’ FMby the NHS each year£20bnsavings to be found in theNHS by April 2014Savings Degree to which open/closed Size of the market Factoids Case study

18Open access – Delivering quality and value in our public servicesInterserve’s introduction ofmicrofibre cleaning at UniversityCollege London Hospital hasresulted in an estimated saving of30% per month on disposables anda productivity saving between10-30%, by enabling cleaners tocomplete multiple tasks per shift.This cleaning process also reducesbacteria levels by up to 99%.Forth Valley Royal Hospital inLarbert has 860 patient spaces.Serco is part of the team behind thisnew hospital. The hospital’s uniquedesign separates the FM servicesfrom patients and visitors. Thirteenrobot vehicles use segregatedtunnels, lifts and hubs to collectpatient meals, linen, waste, andmedical supplies, meaning thesecan be managed withoutinterrupting clinical care.The Hull & East Yorkshire NHS Trustuses MITIE to manage cleaning andenvironmental services at threelarge hospitals, treating tens ofthousands of people. MITIE cleaningstaff are members of the ward teamand are all trained to NVQ level incleaning and domestic services.They are using new technologies toget the best outcome in the wards,common areas and theatres.Rigorously high standards: Interserveand University College LondonHospital NHS Foundation TrustInterserve has responsibility for 40 UCLHbuildings across four main sites. It runs a rangeof services crucial to the smooth operation ofthe hospital: cleaning, portering, caretaking,waste management, window cleaning, courierservices, building maintenance and engineeringservices.Interserve has pledged to reduce carbon usageby 10% a year. A dedicated energy managerworks alongside the Trust’s environmental teamon the energy savings project. In just 12 months,the Trust achieved a 4,324 tonne reduction inCO2 emissions – 14% of the trust’s footprint. Inaddition, Interserve has delivered 5% savings inthe cost of soft services through makingefficiencies, investing in new equipment andchanging its methods.Respecting the needs of patients: Balfour Beatty and theBirmingham and Solihull Mental Health NHS FoundationTrustBalfour Beatty provides a range of support services to the Barberry,Oleaster and Zinnia mental health centres, ensuring minimal disruption totheir operations, which is crucial given the nature of the services provided.Systems have been developed to ensure the FM teams do not interferewith the running of the hospitals. The Trust operates a ‘protected meals’regime, which means work must be planned around this part of the day.The company proposes changes that go above and beyond what isrequired in its contract to ensure patient wellbeing is maintained. Forexample, some of the team is receiving training in sign language to helpstaff at the Barberry Centre, where there are a number of deaf serviceusers.Regular meetings review all aspects of the contract, providing a platformto discuss everything from agreed targets to operational questions.Services to the Trust are built on an incentive share mechanism, whichencourages both the provider and Trust to work towards a common goal ofcontinuous improvement. To date the contract has not seen any service ordeductions for failure to provide a quality service.

Open access – Delivering quality and value in our public services 19Educationsupport anddevelopmentPublic expenditure % outsourcedThe effect these changes will have on the delivery of educationsupport services in the future is uncertain, as schools developchains and federations to procure services. This research foundthere are still significant cost savings to be achieved from openingup services more widely. A range of more diverse providers willstimulate providers and schools to develop solutions to thelong-term transformation of UK schools, which will help schoolsmanage their resources and ultimately support sustainededucational improvement.Oxford Economics looked at three discrete education supportservices: workforce development, facilities management andschool catering, which equate to £3.8bn of spending. 23 Thoughmuch is still managed by the public sector, a significant proportionis run by independent providers. The research identified potentialsavings of £302m if these services (excluding school catering, forwhich the right data were not available) were opened up tocompetition, based on the average savings achieved whereservices are open to new providers. 24School facilities managementIn-houseSchool cateringIndependently managedEductation consultancyWorkforce developmentWorkforce development: school improvementservicesUK schools spend over £600m on education consultancy servicesand over £200m on workforce training and development every year;88% of these services are provided by the public sector. 25 Based onnumerous case studies and first-hand examples of improvedoutcomes and efficiencies arising from outsourced services ofbetween 10 and 15%, savings of at least £93m would be likelythrough opening up this market fully to a range of diverse providers.Exhibit 6 The openness of education support anddevelopment servicesTotal education spending in 2012 is £91.7bn. 21 Funding for schoolsis estimated to fall by 1% in real terms over the next four years andall schools will be under pressure to increase educational outcomesat lower cost. 22School facilities managementManaging the school estate costs £2bn a year across the UK. Withjust a third of services contracted out to independent sectorproviders (much of it through existing PFI contracts), there issignificant scope for services in this sector to be further opened upto new providers. Identified savings of 15% would lead to savings of£209m if these services were subject to full competition from arange of diverse providers.

20Open access – Delivering quality and value in our public servicesSchool cateringIt costs schools in the UK £1bn a year to provide meals for pupils.The data suggest around 73% of schools in England use in-houseprovision to manage their catering services. 26 This is broadly in linewith the figures reported by the National Audit Office (65%) andother industry sources (77%). 27 Identifying the potential costsavings from opening up all schools catering to public sector andindependent providers is difficult due to the lack of research in thearea, but evidence suggests savings of 5% per meal are common.The education market is also changing with the introduction ofacademies, free schools, studio schools and university technicalcolleges. Where previously services like HR, finance and legalsupport, special educational needs consultancy and facilitiesmanagement were largely provided by the local authority under ablock contract, all schools independent of local authority controlnow have a wider choice of providers from which to commissionservices.‘With school budgets constrained,it is crucial that schools target theirresources effectively to supportimproved education delivery.’Evidence suggests that poor financial management has an adverseeffect on school performance by diverting resources away fromimproving the quality of teaching and learning. 28 Over half of allsecondary schools are now academies, with direct control of theirbudgets and the freedom to purchase services from a range ofproviders other than their local authority. These freedoms presentnew opportunities for schools to partner with external providers toadopt new commercial approaches which drive efficiencies andcost reductions in non-core services.‘Value for money could beundermined unless schoolsactively invest in thecommissioning and procurementexpertise necessary to undertakeeffective purchasing decisions.’

Open access – Delivering quality and value in our public services 21Education support and development£209mestimated savings fromopening up facilitiesmanagement in schools£93mlikely productivity savingsfrom a fully open market inworkforce development andeducation consultancy10-15%average cost savingfor schools usingindependent providersto boost school andworkforce development69%of school FM is undertaken bythe public sector88%of workforce developmentand school improvementservices are not open toindependent providers73%of schools using publicsector-delivered catering£2bnvalue of the market forschool facilities managementservices£800mspend by UK schools onworkforce development andeducation consultancy£1bnannual cost of schoolmeals provision in UKstate schoolsSavings Degree to which open/closed Size of the market Factoids Case study

22Open access – Delivering quality and value in our public servicesAmey serves over half a millionmeals in Northamptonshire schools.It uses a system using biometriccashless tills, removing the need forcash-handling and redirecting thoseresources back to the kitchen. Thesystem is currently implemented infour schools throughoutNorthampton and they report anaverage 15% increase in customernumbers.95% satisfaction – the averagemonthly rating of Balfour Beatty’sTransform Schools FM partnershipwith North Lanarkshire Council tocreate an effective learningenvironment in 24 schools.£2m – the estimated potentialsavings resulting from a new BTVirtual Data Centre for NorfolkCounty Council Children’s Services,which links up databases across allof its 450 schools.Transforming a school’s curriculumFrom ‘special measures’ to ‘good’: Edison Learning and StMary Redcliffe, BristolSt Mary Redcliffe Primary School is one of the first in thecountry to come out of special measures straight to a ‘good’Ofsted rating. One of the key factors was the decision by theschool to work with EdisonLearning in September 2011 anduse its Primary Connected Curriculum programme.In 2010 the school was in special measures, with issuesaround teaching and learning, leadership and achievement.Progress was inadequate: the curriculum was uninspiring andfailed to engage the children as learners. The leadership teamneeded significant support to turn around the school. Theyimplemented the EdisonLearning Primary ConnectedCurriculum, working with senior staff from other Bristolprimary schools who had experience of it. The school startedto implement the Core Learning Skills aspect of the PrimaryCurriculum from October.An HMI monitoring visit recognised that the new curriculumhad re-energised the pupils.Improving school standardsSaving cash, boosting results: Babcock 4S and SurreyCounty CouncilSurrey has secured improved schools results and securedmulti-million pound savings from its joint venture withBabcock 4S to deliver a wide range of classroom andworkforce development services to all of the county’s 396maintained schools. Babcock 4S has created cashablesavings of approximately £11.3m for the council so far andprovided it with a further dividend payment in 2010 of £1.7munder a profit share agreement.These savings are achieved through its management of arange of services including HR, finance, leadership,governance and teaching and learning support, alongsidesignificant investment in staff development. Since the jointventure started standards have improved considerably: atKey Stage 4, Surrey is ranked 19th in the country, asignificant improvement from 47th in 2004. More than 70%of all schools inspected by Ofsted up to March 2011 werejudged to be either good or outstanding.

Open access – Delivering quality and value in our public services 23OffendermanagementservicesPublic expenditure % outsourced23% by 2015, 29 the whole offender management system will need totransform how it manages all parts of an ex-offender’s journey tofull rehabilitation. A reduction in reoffending of 20% could save thegovernment at least £1bn a year.Offender management is one of the more progressive areas ofpublic service in terms of its openness to independent provision.Private companies, charities and social enterprises operate acrossa range of services – often in partnership or in a joint venture. Someservices are completely open to independent provision, whileothers are opening up more slowly.Prisoner escort and custody servicesElectronic taggingIn-housePrisoner escorting and custodyIndependently managedExhibit 7 The openness of offender managementservicesPrison managementProbation and resettlement servicesPrisoner escort and custody services are almost entirely open toproviders of all types (although in Northern Ireland the service isstill largely in-house). The total market is worth approximately£150m per year in the UK. In 2011, the Ministry of Justice re-tenderedthe contracts in England and Wales. Following this process ofcompetition, it expects gross cashable savings of around £260m, or20%, over the minimum seven-year contract period. Applying thesame rationale to the market in Northern Ireland, 20% savingscould result in annual savings of around £500,000 through openingit to a diverse range of providers.Electronic tagging and monitoring servicesThese services are also fully open. In the UK (excluding NorthernIreland) they cost £150m a year and are completely delivered byindependent sector providers. At the last re-tender, the Home Officenegotiated a 40% reduction in the value of the contract, equivalentto a saving of £100m per year based on the current value ofcontracts.There is a clear economic case for introducing new, more creativeapproaches to reducing reoffending that deliver the best outcomesat the best price. Reoffending costs the UK economy around£12.5bn a year. With the Ministry of Justice’s budget set to fall by

24Open access – Delivering quality and value in our public servicesPrisons managementThere are currently 16 independently operated prisons in the UK– 14 in England and Wales and two in Scotland. A further eight arein the process of being market tendered with a range of potentialproviders, including HM Prison Service itself, which runs most UKprisons. The fact that HM Prison Service is partnering with privateand third sector partners in bidding for some of these servicesreinforces the value of a range of diverse providers, as it encouragesthe combination of different sources of expertise to improveperformance.Total prisons expenditure in the UK in 2011 was £2.7bn, of whichapproximately £370m was spent on privately-run prisons, equatingto a market share for independent providers of 14%. Based on arelatively conservative estimate of potential cost savings – giventhe data available – the government could realise savings of up to£240m through opening the whole prison estate to competition. Itis likely this figure could be higher; for instance, HMP Oakwood –the UK’s newest prison: operated by G4S – will provide placespriced at £11,000 per prisoner a year, compared to the average of£27,400.Probation and prisoner resettlement servicesThe government spends approximately £1bn on probation a year.Most services are provided by one of 35 probation trusts in Englandand Wales, by local authorities in Scotland and by the ProbationBoard for Northern Ireland (PBNI).‘Oxford Economics estimatesthat as little as 3% of probationservices are currently outsourcedto independent sector providers.’The decision by the Secretary of State for Justice to open up much ofthis £1bn+ market to all types of provider and to encourage them tobid to transform and improve services will change this picturedramatically. This approach will support transformation byencouraging new models of partnership that better integrate all theelements of successful offender management including improvingjob skills, providing secure housing, improving mental health andcountering drug dependency.As only a small part of the market is currently open to newproviders, little comparable data on the cost efficiencies that can berealised through an open market are available. However, the firstcontract awarded in this new open probation market – forcommunity payback in London, won by Serco – is scheduled todeliver savings of 37% against the existing operation. 30 Experiencefrom the existing performance of private sector prisons reinforcesthe case for significant cost savings and service improvements.

Open access – Delivering quality and value in our public services 25Offender management services£240mpotential savings fromfully opening up thewhole prison estate£100mannual savings fromindependent provisionof electronic taggingachieved during the lastcontract renegotiation£260mover seven yearssavings expectedfrom recentre-tenderingthe contract forprisoner escorting60%the proportion ofthe £1bn probationservices budget likelyto be opened up tonew providers 3186%market share of prisonsmanaged by the publicsector0%proportion of electronictagging and monitoringservices managed by thepublic sector1%proportion of themarket for prisonerescorting andcustody servicesnow managed bythe public sector97%proportion of probationservices currentlydelivered by publicsectorproviders£2.7bntotal spending each yearon prisons estate£150mannual cost of theelectronic tagging andmonitoring of offenders£150mamount spent onprison escortingand custodyservices each year£1bnapproximate annualspend on probationservicesSavings Degree to which open/closed Size of the market Factoids Case study

26Open access – Delivering quality and value in our public servicesHome Group – a social enterprise– works with government partnersand communities to provideoffender-focussed solution,balanced between support andcompliance. It is this balance thathas allowed Home Group to achievethe results it has in the last twelvemonths. Across four key measures ithas got 71% of offenders in settledaccommodation; 94% havemaximised their income; 76% aremanaging their substance abuse and71% take part in work-like activities.GeoAmey provides prisonertransport and custody suites acrossmuch of England and Wales. It isachieving better productivitythrough integration of inter-prisontransfers within the prisoner escortand custody services contracts.Movement of their purpose-builtvans is planned around the analysisof prisoner movement requirementsin order to achieve optimumefficiency and use less fuel.A4e has since 2005 run offenderlearning and skills services in 20prisons in South West England,Norfolk and Suffolk. These coursesrange from basic literacy to the arts,painting and decorating, welding,catering and construction and havecontributed to a significant rise inthe vocational relevance ofprovision and the quality of delivery.Judged on performance: HMP Prison Doncasterand SercoIndependent provider Serco has managed this category Bprison and young offenders institute since 1994. It focusesheavily on prisoner education and skills, working with charitypartners like Catch 22 to address significant problems of highprisoner turnover and overcrowding (HMP Doncaster is at155% capacity).Serco’s approach puts reducing the rate of reoffending at theheart of its work with prisoners, both in prison and afterrelease. It works in partnership with local charities andemployers to create a positive prison environment completewith comprehensive education, skills and resettlementservices. The Central School of Speech and Drama providesan applied theatre programme dealing with offendingbehaviour and Doncaster Rovers and Yorkshire Cricket Clubrun academies in jail to provide inmates with organised sportand fitness programmes.Improving prisoner conditions: G4S and HMPBirminghamIn October 2011, HMP Birmingham became the first prison inEurope to transfer from the public to the private sector. G4Sdelivered the mobilisation on time and on budget. Over thelifetime of its contract the annual operating cost of theprison will reduce by around 35% and the annual cost perprisoner place has already been reduced by 27%.These changes have been achieved while introducingpositive changes to the prison management. HMPBirmingham was inspected by Her Majesty’s Inspectorate ofPrisons in January 2012, just three months after the transfer.The Chief Inspector of Prisons noted that HMP Birminghamwas a cleaner, safer and more decent place, the prison wasclean and relationships between staff and prisoners weregenerally good and very much improved.

Open access – Delivering quality and value in our public services 27PolicesupportservicesPublic expenditure % outsourcedOxford Economics measured the size of the markets for threeservices: fleet management, custody suite management andforensic science services. 33 Where data were available, at least£37m of savings were identified. Other support services run byindependent providers included shared business support services(HR management, payroll provision, and IT management), policeestate management and case support (evidence management andstatement taking). These were not covered in the research, but areanother source of significant potential savings.Fleet managementFleet managementCustody suite managementForensic servicesPolice forces spend approximately £120m per year on managingtheir vehicles. Of this, 40% of expenditure is estimated to be oncontracts with specialist independent providers.‘If all forces adopted this openmarket approach for fleetmanagement, savings of around10% (around £7m) would beachievable.’This level of cost saving is in line with a study by the governmentProcurement Service on savings accruing from the independentmanagement of the Ministry of Defence vehicle fleet.In-houseIndependently managedCustody suite managementExhibit 8 The openness of police support servicesTotal spending on police services in the UK is £12.6bn. 32 To supportthe government’s deficit reduction goals, all forces are being askedto make significant savings of up to 20% over the next five yearswhile maintaining as far as possible the quality of service citizensexpect.Police custody management costs around £450m for all UK forces.Around a fifth of this expenditure is managed by independentproviders, with the remaining four fifths provided by policeauthorities. Due to a lack of data and the limited number ofexamples, Oxford Economics was unable to estimate the potentialaverage cost savings in this market.

28Open access – Delivering quality and value in our public servicesForensic science servicesPolice forces spend around £350m a year on forensic services,60% of which – until recently – were provided by the public sectorForensic Science Services. Since March 2012, Forensic ScienceServices has ceased operating: removing it from the market willcreate more opportunities for private providers to now bid forthese services.‘Available evidence suggestssavings of 10-15% would bepossible in forensic research – atleast £30m – through opening themarket to a range of providers. 34’However, there is a risk that police forces may be tempted to bringmore forensic services in-house which according to the ForensicScience Regulator would be “highly undesirable” and createunacceptable risks for the criminal justice system. 35Though savings are already being made, the majority of savings willneed to come through transforming the way forces operate.Business as usual will not achieve the necessary savings norprotect the ability of the police to fight crime effectively. Policeforces need to look at different ways of operating and new modelsfor delivery to reduce budgets without loss of service quality.Opening up some police support services to new providers willgenerate significant savings that enable more police officers to stayon the frontline.

Open access – Delivering quality and value in our public services 29Police support services£30msavings possible from fullyopening up police forensicservices84%current proportion of forensicservices managed byindependent providers£7msavings on police fleetmanagement if all forcesachieved 10% savingsthrough better productivity60%fleets managed in-house bypolice forces£12.6bnannual cost of UK policing82%proportion of policecustody suites managedin-house£350mvalue of forensic servicesused by the police each year£120mamount UK police spend eachyear on running their fleetvehicles£450mcost of providing policestation custody suitesSavings Degree to which open/closed Size of the market Factoids Case study

30Open access – Delivering quality and value in our public services10% more time – the averageincrease in police officer availabilityfor Cleveland Police as a result ofSteria managing all of its main ‘backoffice’ functionsSouth Wales Police Authority issaving £1.2m a year through usingG4S to manage its police stationcustody suites, which it can usetowards putting more uniformedofficers back on frontline duty.Savings of over £25,000 of GreaterManchester Police resources wereachieved over a two-week trial ofIBM software in one area ofManchester to track youth offendingand anti-social behaviour. Theresults are now being applied inother divisions across the force.Case study – fleet managementKeeping London’s officers mobile: Babcock and theMetropolitan Police ServiceLondon’s police operate over 4,000 vehicles which travelover 63m miles a year. Babcock is contracted to keep thepolice mobile 24 hours a day and to respond to defects andcommunications problems that might increase vehicledowntime and impact on officers’ ability to protect the capital.It has increased the availability of all the vehicles aboveprevious service levels by introducing best practiceimprovement and optimising the use of new technologies, forexample through using a sophisticated work allocationprogram. Cost savings come from reducing the total numberof assets, lowering the full life costs of each vehicle andminimising the levels of misuse. Trend analysis softwareidentifies potential productivity improvements and pinpointswhere resources are most needed.Operational demands can be accurately predicted throughimproved control of vehicles and easily generatedinformation, so more vehicles are available during the peakperiods. Fifteen mobile maintenance teams carry out 500hours of maintenance every day, optimising the availability ofvehicles by not requiring them to return to base for attention.Case study – police support servicesKeeping officers on the streets, not at their desks: Steriaand Cleveland PolicePolice Shared Business Service (PSBS), part of a partnershipbetween Steria, Cleveland Police Authority and ClevelandPolice, is delivering a more efficient and cheaper way forbusiness support services to reinforce frontline policing.Steria manages Cleveland Police’s HR, finance, procurementand estates as part of a broader partnership that alsoembraces ICT, control room support and criminal justiceservices. Business processes have been transformed,freeing up senior staff time to focus on more strategicactivity and officers to address frontline duties acrossCleveland. Much of the HR provision is now self-service,allowing officers to update their own information onlinerather than through a lengthy administrative process. It isenvisaged the force will gain at least 10% in time savedacross all its officers, time that can be put back into frontlinepolice work.

Open access – Delivering quality and value in our public services 313Government must manage marketsmore effectively to maximise thebenefits from open public servicesThere is broad public support for more openservices. According to a recent ComRes poll, 75% ofpeople surveyed agreed that a variety of differentproviders would be more successful than just asingle provider in coming up with new ways to runa service. 36 Almost two thirds (65%) said a diversityof provision will reduce costs to taxpayers and asimilar percentage agreed that services would alsoimprove. Nevertheless, it is clear people also wantreassurances that such approaches work in theirfavour and government and providers must worktogether to offer this.Recent poor performance in a small number of specific contractsmanaged by independent providers has undoubtedly raised publicconcerns about their involvement in public services. Businessrecognises there are concerns: the public and government are rightto be frustrated at results not being delivered. However, the fact isthat some public sector providers have also performed poorly attimes. The CBI is clear that poor performance from any providershould not be rewarded and that all providers – whether publicsector, business, charity or mutual organisation – should be subjectto the same standards of accountability, value for money and publictrust.But there is a risk that all independent providers become ‘guilty byassociation’ with a small number of private sector failures, despitethe vast majority of public service contracts running smoothly andto everyone’s satisfaction. The debate on opening public services tonew providers has raised public concerns about value for money,service failure and accountability in light of some isolated examplesof poor performance. Business needs to acknowledge and addressthese concerns.It is important that any public dialogue about independentprovision is conducted within appropriate boundaries. There is awide spectrum of services and attitudes which could be opened tonew providers. At one end are transactional and mechanisticservices such as benefit payments or school cleaning where theinvolvement of independent providers is relatively uncontroversial.At the other end are frontline services such as policing andhealthcare, where there is understandably more public sensitivityaround change. By setting out clearly where it thinks there is scopeto go further and faster in opening up services, and where theboundaries lie, the government can promote a more open andhonest public discussion on where change is needed.Otherwise, there is a danger that the opponents of public servicereform could seek to switch the debate from a discussion aboutperformance into a dogmatic attack on the broader principle ofopen public services and mixed types of provider, which seeks toreplay previous battles over public service reform. That helpsno-one and draws attention away from the need for concertedaction to raise quality standards and find new efficiencies across allpublic services.In order for the government to become a more effective marketmanager, the CBI believes it must take action in these six areas:

32Open access – Delivering quality and value in our public servicesThe governmentmust express a clearvision for how publicservice markets willoperate in futureExploiting the benefits of a market of diverseproviders requires an environment in which allpotential providers – public sector or independent,big and small, joint venture or sole provider –are challenged to reduce costs and improveperformance. It needs a well-developed vision forhow the public sector will engage with the market.Crucially, this requires the government to declareits hand and say in which public services it iscomfortable for the state to lose its monopoly ofprovision, and how this change can be realised.Positive steps have already been taken. We are in the middle of thebiggest wave of government outsourcing since the 1980s, with morethan £4bn of tenders being negotiated in 2012 in services rangingfrom prisons and police to defence and health. This is a healthysign of a commitment to using outside help to change the wayservices run.The shift to a single government client model will allow the publicsector to manage its supply chains more effectively and ensure theright mix of providers and delivery models is used. The newprocurement pipelines should ensure that businesses of all sizesare well-placed to compete for contracts and the government canmaximise its purchasing power to drive economic growth. Furtherpipelines, properly managed, will help the private sector secure theinvestment needed to deliver these projects and create new jobs.At a local government level too, the CBI welcomes the LocalGovernment Association’s Procurement Pledge. The commitmentsit makes to streamline procurement processes promotepre-procurement dialogue and make all types of provider aware offuture opportunities. It is encouraging that the LGA has pledged toaddress the skills gaps in local council procurement teams.‘Setting target timetablesfor completing procurementprocesses and using localprocurement pipelines willcreate better value for money,improve outcomes and driveeconomic growth.’

Open access – Delivering quality and value in our public services 33Create atransparent marketplace to allowcommissioners tocompare providersThe government must address the lack ofcomparable performance data on both cost andquality across public services in order to get atuntapped savings. This includes ensuring that infuture public sector in-house provision is subject tothe same level of measurement on its keyperformance indicators on quality as independentproviders.Getting a current picture of the openness and performance of publicservice markets is not easy. Despite extensive research using datafrom local authorities, police authorities, schools, primary caretrusts and other bodies, Oxford Economics found it tougher thanexpected to paint a complete picture of spending, market structureand provider comparisons in the small range of services examined.Transparency is therefore essential as it is one of the tools in thegovernment’s toolbox to help it judge value for money and compareone provider with another. It also helps public sector bodiescontract more effectively and reassures the public that services areperforming to expected levels and their cash is being well spent.The government has acknowledged in the Open Public ServicesWhite Paper the importance of transparent data to raisingstandards across the UK’s public services:‘Providers of public services fromall sectors will need to publishinformation on performance anduser satisfaction … we need toensure that the data collected iswhat users most want to see andthat it is available to them in anaccessible form at the time theyneed it. ’37The recent Open Public Data White Paper sets out its plans to putdata and transparency at the heart of government and publicservices. The White Paper proposes making it easier to accesspublic data; publishing data in standardised, open formats, andengraining a ‘presumption to publish’. The CBI welcomes thisapproach. There is much already implemented which is positive,such as the requirement for all departmental spending over £500 tobe published online, following the example of local authorities.These principles need to be implemented as soon as possible. Theresearch has established that much of the newly published data isstill raw and expensive for anyone to make sense of. The currentlack of any standardised measures of improvements in quality andperformance makes comparisons between providers difficult.

34Open access – Delivering quality and value in our public servicesEstablishmechanisms toaddress providerfailure and maintainservice continuityThe House of Commons Public Accounts Committee hasacknowledged this and advised there is more to do to realise thepotential of open data to strengthen accountability and improveperformance:‘At the moment too much datais poorly presented anddifficult to interpret … As moreand more different providersare involved in providing ourpublic services, there must bea level playing field in terms oftransparency. ’38Its report also raises concerns about the need to balancecommercial confidentiality with transparency and highlights theneed for taxpayers to be able to see at all times how their money isbeing spent.Even though the use of a ‘commercial confidentiality’ clause isoften insisted upon by the contracting authority rather than theprovider, a perception has built up that it is used to hide excessivereturns or poor performance. Providers and commissioners need towork together to find a balance that offers transparency andreassures the public, but also encourages businesses and otherproviders to continue investing in quality services.When any public service performs poorly or theprovider running it ceases to operate, there is a riskthat the public will not receive the quality of servicethey expect.Any failure of a public service can test the appetite for furtherreform. It is essential that public sector commissioners build in fromthe start of any new market processes how to manage and mitigatefailure, so the users of the service see little if any difference whenproblems arise. This is especially important when the service is onethat vulnerable users depend upon.The Open Public Services White Paper highlights the importance ofdeveloping continuity of service plans for critical services.Commissioners or regulators can take action to ensure providersare capable of delivering a service before they are allowed to deliverit, monitoring when to mitigate the potential impact of failure andthen putting in place mechanisms to ensure an orderly transition toa new provider.In healthcare, Monitor is already developing a new continuity ofservice regime for when a provider of NHS-funded services fromboth the public and independent sectors falls into financialdifficulties. Providers will need to meet licensing requirements andcontribute to a risk pool to cover the costs of special administrationregimes. There is still more work that needs to be done, however, todevelop continuity plans in other areas and ensure that providerscan be held to account for mismanagement.

Open access – Delivering quality and value in our public services 35All public sectorcommissionersshould promotecontracts that arestructured to focuson outcomes‘The best long-term insuranceagainst service failure is a rangeof diverse providers ready to stepin and take over and improve theperformance of the service as thathelps ensure a seamless transitionbetween one provider and another.’For example, the failure of the private care homes provider SouthernCross will have created uncertainty for the residents involved andraised public concern. Yet in fact, the market worked effectively inthe end as new providers were able to step in and take over therunning of the contracts with as little impact on the residents aspossible.Open markets also provide solutions when public sector bodiesfail. This was the case with the Hinchingbrooke NHS trust, themanagement of which was transferred to a an independent providerwhich was able to step in when the trust’s performance dippedsignificantly.The only viable long-term solution to achievingbetter results with less money is a root and branchtransformation of public services from beingoutput-led to becoming demand-led organisations.This requires new models for commissioningand managing public services at all levels ofgovernment.Payment by results must be at the heart of this transformationprocess: it is an essential tool to ensure it takes root. The WorkProgramme to get the long-term unemployed back into theworkplace adopts this model. It has the potential to bring about astep change in the quality of support jobseekers receive andachieve significant savings by encouraging providers to adopt newstrategies to tackling long-term unemployment.The £5bn estimated government spend on the programme up to2015-16 will deliver an estimated £6-10bn in welfare savings andhigher tax receipts by 2015-16. 39 Early results show that 24% of thepeople engaged with in the first nine months of the programme hadspent at least three successive months off benefits. 40All parts of government must show leadership in using independentproviders in order to stimulate such fundamental service changesas the Work Programme in other areas. It is positive that thegovernment is actively looking at other services where payment byresults could help transform services: these include court andtribunal administration, payment processing and debt managementand enforcement services. 41

36Open access – Delivering quality and value in our public servicesEnsure thepublic sector hasthe right mix ofcommercial skillsto commissioneffectivelyThe Civil Service Reform Plan announced in July2012 is a positive step towards a leaner, fitterpublic sector. Measures to remove unnecessaryadministrative barriers between Whitehalldepartments should encourage more efficient,joined-up working. Linking pay to performance,and adopting the CBI’s recommendation to raiseskill levels in finance, IT and project managementto make staff more commercially-minded, are clearpriorities for implementation. A more commerciallyminded Civil Service can better exploit the benefitsof new models of working.The Cabinet Office’s reforms of government commissioning andprocurement should also promote the skills necessary to ensurecommercial teams at all levels of government can undertake muchsmarter commissioning and procurement. It is a litmus test of thegovernment’s approach to creating a public sector with aningrained commercial awareness and the capacity to exploit it.‘Government procurement tooshould work much more likeprivate sector practice.’It needs to deliver faster and cheaper processes which get betterresults and ensure that long-term relationships with supplierspromote responsive markets and providers willing to invest inservice improvement. The government’s recent announcement of aprocurement pipeline and procurement reforms is a positive stepand will ensure that businesses are well-placed to compete forcontracts and the government can maximise its purchasing powerto drive economic growth.The public sector must see openness as the default objective andbe looking all the time for new models of delivery which will helptransform outcomes for the public.

Open access – Delivering quality and value in our public services 37Createeffectivegovernmentengagement withall types ofproviderA productive relationship between governmentand its service providers is essential to improvingall public services. Insufficient trust betweenthe public sector and its providers will blunt thepotential for innovation. With recent high-profilefailures having dented that trust, the governmentmust show leadership from the centre and make thecase for effective joint working between providersof all types.The CBI supports the government’s re-examination of itsrelationship with suppliers as a precursor to developing new waysof working. Its publication of pipelines for new services andprocurement pledge, for example, send out positive signals to themarket that the government means business.This change is an important step towards government behavingmore like a commercial body in its engagement with suppliers andadopting approaches that work successfully in business. Ultimately,there needs to be an ‘open door’ mechanism for both commissionerand suppliers, which allows government to talk to all kinds ofsuppliers about the problems it is facing, and challenge them tocome up with the most effective, value for money response.Similarly, suppliers need to be able to talk to government abouthow their ideas can help to transform a service before aprocurement process has even started.This sort of solutions-focused relationship must be based onestablishing future priorities and a shared vision of what publicservice transformation could be. It needs to happen across allproviders and contracts, rather than taking the existing approach ofdiscussions based along departmental lines or supplier sectors. Aspart of developing a vision, independent providers and governmentshould explore:• Where there is current good practice which could be sharedacross departments and other areas of government• The appetite for risk among all partners• The new commercial models available that will promote effectivepartnerships• Where ‘easy wins’ in transforming service provision could beachieved.

38Open access – Delivering quality and value in our public servicesReferences1 This figure is an estimate of the parts of the £666bn of annualpublic sector spending on services which the CBI believes couldconceivably be open to delivery by a diverse range ofindependent providers. We have excluded all those categoriesof spending that could not be delivered by independentproviders, such as constitutional affairs, EU payments, debtinterest, defence and social protection payments. Source: Tables5.1 to 5.5, PESA data 2012, HM Treasury2 Green Budget, Institute for Fiscal Studies3 Third-party delivery of public services in the UK, OxfordEconomics, 2012. The research indicated a range of cost savingsof between 10 and 20% in the services research. A copy of theoriginal research is found at: www.cbi.org.uk/publicservices4 ‘In-house’ here refers to where a service is delivered by thepublic sector5 53% of the £2.4bn market for regular domestic waste andrecycling collection, disposal and street cleaning is undertakenby public sector service companies. The size of the market andthe proportion of outsourced services is based on a series of FoIrequests to local authorities in March 2012. Responses werereceived from authorities representing 45% of the UKpopulation, and the total extrapolated from their responses6 Work in progress: fulfilling the potential of the Work Programme,CBI, July 20127 Public Spending Statistics July 2012, HM Treasury, p50. Table:public sector spending on services by departmental group8 The right care in the right place: delivering care closer to home,CBI, June 20129 CBI calculation based on NAO figures from 201210 A problem shared… realising savings through shared services,CBI, June 201211 Joining up, joining in: why the time is right for expandingCommunity Budgets, CBI, February 201212 Third-party delivery of public services in the UK, OxfordEconomics, 201213 Public Services Industry Review, DeAnne Julius CBE, BERR, July200814 The operational performance of PFI prisons, NAO, 200315 PESA Statistics 2011, HM Treasury16 HM Government Spending Review, 201017 The size of the market for waste management was estimatedbased on responses to a series of FoI requests sent to localauthorities representing 45% of the UK population18 Based on evidence from CBI members surveyed and UK andinternational examples reviewed by Oxford Economics19 The size of the markets for the provision of transactional financeand HR/payroll services in the UK were estimated based onresponses to a series of FoI requests sent to local authorities inthe UK in March 2012.20 The right care in the right place: delivering care closer to home,CBI, June 201221 Out-turn estimated, Budget 2012, HM Treasury22 Public spending on education in the UK, Institute for FiscalStudies, November 201123 The size of each market was estimated using school spendingstatistics published by the Department for Education (DfE) inEngland, FoI requests and data from members.

Open access – Delivering quality and value in our public services 3924 This excludes potential savings for schools catering. Insufficientdata was made available by providers25 Based on FoI requests made to local authorities across the UKby Oxford Economics26 Annual survey 2011, School Food Trust27 Information from Hotel and Caterer, a website for the UKhospitality community28 Oversight of financial management in local authority maintainedschools, NAO, October 201129 Ministry of Justice Business Plan 2011-2015, Ministry of Justice,November 201030 Serco wins first private probation contract, The Guardian, 13 July201231 Competition Strategy for Offender Services, Ministry of Justice,201132 Spending for 2010-11. Source: Home Office34 The figure for cost savings is taken from a Home Office reportwhich indicates that forces can save around 10% on outsourcedDNA services and 12-15% on drugs services. Without fullevidence data available, the most conservative figure of 10% isused to demonstrate theoretical potential cost savings35 ‘The Forensic Science Service’, House of Commons Science andTechnology Committee, Seventh Report of Session 2010-1236 ‘Government must stop dragging its feet on reform’, PressRelease, CBI, 11 July 201237 Open Public Services White Paper, Cabinet Office, June 201138 Implementing the transparency agenda, HC 102, CommonsPublic Accounts Committee, 1 August 201239 CBI calculation based on NAO figures from 201240 Grayling: first Work Programme data shows promising signs,DWP press release, 9 July 201241 Open Public Services White Paper, HM Government, July 201133 These figures are based on responses to a series of freedom ofinformation (FoI) from police forces representing 48% of totalexpenditure on the provision of police services in the UK. This isused to gross up the figures obtained from the FoI sample toestimate a total for the UK as a whole, which is based on totalpolice services expenditure; sourced from Local Authorityrevenue outturns 2010-11 (England – Department forCommunities and Local Government, and Wales – StatisticsWales), the Scottish Local Government Financial Statistics2010-11 (The Scottish Government) and the Police Service ofNorthern Ireland annual report 2011

For further information or a copyin large-text format, contact:Rob MallowsSenior policy adviser, public servicesT: +44 (0)20 7395 8107E: rob.mallows@cbi.org.ukSeptember 2012© Copyright CBI 2012The content may not be copied,distributed, reported or dealtwith in whole or in part withoutprior consent of the CBI.CBIOur mission is to promote the conditions in whichbusinesses of all sizes and sectors in the UK cancompete and prosper for the benefit of all.Printed by Colourscript onRevive Pure White Silk, containing100% recovered fibre certified by the FSC®.Colourscript is certified to ISO andregistered to EMAS environmentalmanagement systems NEZ052.To achieve this, we campaign in the UK, the EU andinternationally for a competitive business landscape.www.cbi.org.ukProduct code: PSE_PSE_290Twitter: @CBI_PublicServ