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

Public Policy: Using Market-Based Approaches
● fair treatment of prisoners; and
● efficient management of resources.
The weighting assigned to these criteria will differ according to the purpose of
the particular prison: for example, safety will be of more concern in a highsecurity
prison.
Once a contract has been awarded, each centre is assigned its own Controller to
monitor the operations of the prison and ensure contract terms are being met.
Each controller is answerable to NOMS headquarters. Prisons are then
monitored against performance measures stipulated in individual contracts 84 as
outlined in further detail below.
The degree of risk borne by the private contractor depends on which party is
best able to bear it. Risk is transferred to the private sector through a
combination of payment mechanisms and specific contract provisions. For
example, the risk of the required number of prisoner places being available by
the scheduled date is transferred from HMPS to the contractor through the
payment stream of a DCMF contract: contractors are paid a daily rate for prison
places made available, so no payment is made until the prison is up and
running. The private contractor is also responsible for the risks of obtaining
detailed planning permission, construction-cost and time over-runs, changes in
general legislation and maintenance. Prices are reviewed every five years to
cover external factors that have significantly affected prison operators’ costs,
reducing the risk of the contract for both parties. 85
Multi-sourcing involves sourcing the same good or service from multiple
suppliers, rather than relying on one supplier to meet all requirements. Despite
a high level of aggregation within individual contracts, HMPS has been able to
engage in multi-sourcing by placing the management of a number of different
prisons out to tender over time as discussed above. Multi-sourcing not only
ensures competition for the market in the future, by allowing more than one firm
to develop any incumbency advantages, but also allows for the analysis of
relative performance, encouraging competition within contracts. This latter
feature is one HMPS hopes to make increasing use of with the development of
its benchmarking programme.
The procurement process adopted by HMPS has worked moderately well in
practice, although some private contractors feel there is scope for improvement.
In particular, one operator expressed concerns that whilst the procurement team
84 This is in contrast to public prisons, which are monitored according to performance relative to a set of Key
Performance Targets. Private contracts have recently been adapted to incorporate the same KPTs that apply to
public prisons, with annual performance measures now defined in relation to the appropriate KPTs. This is
discussed in more detail later.
85 For example, HMPS faces the risk that costs in the prison service industry may fall during the life of the contract,
and that it would not then be delivering the most cost-efficient service possible. The contractor faces the risk that
industry costs change, for example staff costs increase, and this may threaten both its ability to deliver its
contractual obligations and its commercial viability.
84