Public Policy: Using Market-Based Approaches - Department for ...

Public Policy: Using Market-Based Approaches
private sector involvement continues to deliver significant operating cost
efficiency benefits but that the public sector comparator is no longer the most
appropriate means of measuring these. Operating cost savings under this
scenario also include the lower running costs of public prisons attributable to the
development of a private sector market in prison services.
SHARPER INCENTIVES FOR INNOVATION
There are three main reasons for innovation being more likely in the private
sector.
● First, private sector contractors capture the entire rents from cost reducing
innovation for the duration of the contract life since prices are agreed when a
contract is signed. In contrast, public sector managers would be likely to see
their budget cut the following year in response to a cost reducing innovation.
● Second, innovative working practices may also be easier to introduce in the
private sector where working practices are less firmly established.
● Third, the process of competition may encourage both public and private
sector bidders to be more responsive to customer needs.
There is indeed evidence that competition, and, more broadly, the threat of
competition, has delivered greater innovation in the following areas.
Staff recruitment and deployment
The largest opportunity for innovation in a prison-management contract is in
staff deployment, as staff represent around 80 per cent of running costs.
Innovation in staff deployment and recruitment has included a flatter
management structure and the recruitment of a younger, more flexible
workforce, many of whom have had little or no prior experience in prisons.
These features, combined with a higher average staff turnover, have facilitated
the introduction of more flexible working practices such as shift work. As noted
previously, low staff turnover rates in public prisons may make it more difficult
to change established methods of operation. Shift patterns have enabled
receptions to remain open longer, visiting times to be more flexible and
prisoners on enhanced regimes to eat with their families.
Although these recruitment practices may have increased flexibility, they have
raised some concerns about security.
Staff/Prisoner relationship
One of the most significant innovations to occur has involved a focus on
encouraging a more positive relationship between staff and prisoners. The CBI
report notes that:
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