Local Government by contract?


Beyond the known knowns?

“Stuff Happens” (Donald Rumsfeld)

“When the facts change, I change my mind. What do you do, sir?” (John Maynard Keynes)

Forgive the diversion into quotes from yester-year but I hope they will help me ask a simple question about the outsourcing of council services.

This past week I have been knee deep in a contract with an external service provider of my local authority. This contract is for a substantial period of time and yet already we are in the position of needing to change something.

Obviously, needing to change something is going to cost us money. Even the most friendly contractor does, in my experience, require a certain amount of money to change anything they’d originally agreed to do.

The assumption of a lot of outsourcing is therefore that:

a)      Any changes can be predicted in advance and therefore written into a contract or:

b)      The service is so straightforward that we won’t need to change anything significant no matter how long the period of the contract

My experience is that this is not always the case.

I heard of a council that felt they had managed to negotiate an amazing deal. In 2007 (ish) they let a ten year contract that promised 2.5% efficiencies per year over the term of the deal. In 2011, they now realise that the deal is not delivering anything like what they need it to in terms of cuts/efficiencies and are not having much luck in renegotiating. What they thought was a great deal is now anything but.

Outsourcing is, in many cases, effectively ‘Government by contract’ and many local government contracts don’t leave a lot of room for the famous quotes of Rumsfeld and Keynes (a strange combination I admit!) to apply.

‘Government by contract’ assumes that the facts never change and that when they do it is possible to re-negotiate.

But politics is designed to produce disagreements and for those that govern to change their mind and respond to the feelings of the people they represent. A ten year contract, or budget cycle even, might be more efficient but it forgets that the facts might change, that the politicians might change and that stuff happens.

Local authorities are currently flexible and able to adjust to the requirements of the people they serve. Often this is deeply frustrating to the humble officer but if our politicians are acting in tune with the people who elect them then this flexibility is exactly what we should be providing to the people who vote and pay for us to do our job.

And it begs the questions: Is it really better to bind our local authorities into ten year contracts which stop that happening?

I am not anti outsourcing as such (partnerships etc can be very successful for both parties) but I do wonder if the drift into unthinking ‘Government by contract’ should worry me; or, just as importantly, our politicians!

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3 Comments on “Local Government by contract?”

  1. Wendy Mason Says:

    I couldn’t agree more. I don’t think local authorities are alone in making this “error”. Of course negotiating a contract that provides for flexibility and change is going to be more challenging and more expensive initially. And negotiating for shorter terms means you have all the disruption and expense to go through again in say three years. The temptation is to sign the contract on the 10 year deal and give a massive corporate sigh of relief! That is until you realise it stands no chance of meeting needs for the full period and you are going to have to pay up anyway!

  2. Ed Hammond Says:

    Rather terrifyingly I have been writing a report on this issue recently and have come out with many of the same conclusions. It’s not plagiarism – promise.

  3. Big K Says:

    THe other consideration is this world of declining budgets is that it is very hard to cut a service you have contracted out until that contract expires. This might offer some protection to that service but it will increase the pressure on the stuff remaining in-house.

    We also need to think about the accountability issues as we make more and more information publicly available. Do we extend the £500 requirement to our contractors or the publishing of senior salaries, just as we have previously passed on health and safety and equalities obligations?


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