New Models of Working in Government

This event was the third in a series entitled ‘The Future Shape of Whitehall’. The event focused on three key questions:

• As government seeks greater efficiency and effectiveness, what sort of models are now being considered by different government departments?
• What hurdles are in place to implementing these models?
• How can we make these models work as effectively as possible?

Ed Welsh opened the discussion with a general overview on what the Cabinet Office  - through its internal ‘Commercial Models’ team - is doing to promote and manage new models of working. There are two scenarios in which they would seek to use an alternative model: where there’s a need to transform a service, or a need to drive growth (or a capacity to generate revenue that should be utilised). He offered a number of examples:

• ‘Shared Services Connected Ltd’, a joint venture established in 2013 to provide back office services to 13 departments. The private sector has acted as a ‘catalyst’ for transformation.
• Qinetiq, which took the capability that existed within the Ministry of Defence and used that capability to generate revenue.
• ‘Energy for Growth’, a Cabinet Office initiative which takes a percentage of the government’s energy requirements, which can be predicted in the long term, and uses that to support the development of a renewable energy plant in the north of England.

On the challenges of these new models, he identified:

• Difficulty in reaching and maintaining consensus throughout a transaction. There’s a belief that seeking to do something new is an implicit criticism of what was being done before.
• The lack of evidence supporting these models, although they are now beginning to see the evidence of increased productivity and increased employee and customer satisfaction from their earliest ventures.

On success factors, he made three points:

• A structure needs to stand on its merits – you can’t implement change for the sake of it, and there needs to be a good reason for selecting a model
• It’s important to maintain the separation of government as customer and government as shareholder: government should achieve different things in each of those roles
• Management must ‘own’ change across the transaction

Jon Thompson explained that while the Ministry of Defence has a long history of tackling military problems in an innovative way, they have only recently applied that way of thinking to managerial and organisational problems. A pathfinder was Defence Business Services (DBS), which ‘injected’ a new executive management team to lead change and deliver cost cuts on a ‘no win no fee’ basis. The programme reduced costs by 30% in the first two years, a saving which couldn’t have been ‘unlocked’ by an internal team. DBS has been used as a springboard to extend this kind of model into more significant areas of the MoD’s work: they are currently in the market for a contractor to manage their infrastructure business.

He also noted that the MoD has adopted a new way of working with the Big Four. They’ve moved from a ‘Shelf’ model of buying a solution from an external partner, to a model where the partner is involved in the delivery of that solution. As a final thought he added that some of the most important improvements to the everyday work of a department come from incremental changes - such as reducing red-tape, improving technology and cutting internal bureaucracy - rather than new overarching models.

Antonia Romeo began by putting the challenge in context – the MoJ is taking 30% out of their budget over 5 years. They are faced with the choice between cutting back the services they provide, or finding new ways to deliver those services on a reduced budget. One way in which they are meeting this challenge is designing and delivering a new model of rehabilitation and probation services. They will set up 21 community rehabilitation companies to deliver services to offenders. These services will be contracted out to a diverse range of providers, including the voluntary sector and mutual.

She noted a number of ways in which this new model is innovative:

• They are working closely with the Cabinet Office to provide grants to support smaller VCS organisations to bid for contracts, and are seeking to level the playing field to allow mutual to bid for contracts
• The contracts will be run on payment by results basis to focus minds on outcomes, which will allow providers to design interventions
• They have created the ‘Justice Data Lab’ which allows providers to share knowledge and expertise on what works in reducing re-offending. This data will later by published, and will help to create a culture of best practice and transparency

Antonia noted a number of challenges, including:

• The need to build the public sector’s capacity to be an intelligent commissioner of services - the more services you contract out, the more you need to be an intelligent customer and choose the right contracts
• The importance of consulting widely to choose the right partnership, and ‘shadow run’ the model before it goes live
• Avoiding silos between service providers: they’ve including a section in the bidding documentation that requires bidders to demonstrate how they would foster co-operation at a local level
• Gathering and publishing the right data so you can properly assess the results of the intervention and encourage best practice

Tom Gash discussed the IfG’s research on public service markets and the pros and cons of new models of service provision. He noted the scarcity of research and evidence on the impact of contract-based provision of services. Despite this lack of a strong evidence base, the impressions of those involved in contracting services allow us to identify a number of benefits:

• Improving the quality of information on which performance is judged and success is rewarded – as soon as you’ve got to reward someone based on performance that creates a big incentive to improve the information on which you judge that performance.
• Reassessing what outcomes we are trying to achieve, and how to deliver them. The crisis in library funding has forced some creative thinking about how we can use libraries to deliver other services. Doing things in a new way – whether through financial necessity or for other reasons - can encourage new ideas about service delivery.
• The process of bringing in a commercial partner can in itself deliver benefits, in that it exposes the public sector to new ideas of how to do things, and new ways of thinking.

Experience also points to a number of risks:

• If a service is very connected to other services, it can be challenging to contract it out – as Boeing found when they tried to outsource their fuselage production. That function was too core to their operation to be outsourced.
• An additional risk is prioritising commercial considerations over other considerations – when reconfiguring public services it’s important to involve users and communities, along with commercial partners.
• A failure to encourage real competition. An example of this was the MoJ contract of tagging services – only two companies could provide this in the UK, and, if one of those providers is excluded from the bidding process, that can provide real challenges and a lack of competition.

Tom posed an additional set of questions about what internal changes to civil service skills and capabilities are require to support the roll-out of new models, and what is the most sustainable model for providing these skills.

Questions from the audience included:

• What’s the future of accountability in contracts?
• What needs to happen in the voluntary and private sectors to develop capabilities to work with government departments?
• What are the biggest gaps in civil service capability, looking at delivering a new service model?