Councils and providers must work together before formal procurement: report

Local authority commissioners and independent providers of public services should work together to identify local outcomes and their solutions, “long before the formal procurement process has begun”, a report by the New Local Government Network and the CBI has claimed.

The two organisations said: “Such early engagement, through ‘safe conversations’, will bring more creative – and efficient - solutions to light.”

Calling for a more sophisticated approach to commissioning, the NLGN and the CBI argued that conversations between the two sides were currently “stuck in a low gear”.

As a result, councils risked being unable to access the new partnerships they need if they are to cope with growing demands, spending cuts and changing social needs.

The report, Commissioning Dialogues, also suggested that providers in the private sector and beyond were unaware of the wider context of what local government actually wanted and so proving slow to invest in innovation.

“The likely outcome is that partnerships will get stuck in the rut of the same sorts of contracts that have failed to deliver in the past, limiting the savings and service improvements that business can bring to the table,” the NLGN and the CBI warned.

Research conducted for the report found that almost half of authorities (45%) were moving towards becoming ‘commissioning councils’, while a further 24% were seeking to become an ‘enabling authority’ and 6% were aiming to become a ‘co-operative council’.

The research revealed differences in perspective between commissioners and providers around councils' priorities for commissioning. Providers felt that ‘reducing net service cost’ was important for commissioners, the report said. However, commissioners preferred to view their role as ‘securing value for money’.

The researchers meanwhile found that more than half of commissioners agreed with the statement that councils should move away from long-term contracts, to avoid becoming locked-in to service delivery models. Around a quarter disagreed, while a further quarter neither agreed nor disagreed.

Half of the providers surveyed were hostile to such a move. Just one in 10 backing this approach, while the remaining 40% neither agreed nor disagreed.

The report also found that:

• All providers and 90% of commissioners surveyed agreed that councils should seek to develop more open contracts that can allow providers to innovate to improve services;
• More than 80% of providers and almost 90% of commissioners agreed that councils should play a proactive role in shaping the market to ensure a mixed supply chain; and
• Two thirds of providers and more than 80% of commissioners believe councils should develop new forms of neighbourhood working with services increasingly tailored to the needs of small localities. A quarter of providers disagreed.

In terms of the limits to outcome-based commissioning, 39% of respondents mentioned the difficulty in defining desired outcomes. A further 29% cited a lack of data on outcomes. The third most frequent response (11%) was the associated cost.

The most important factor hindering the effective commissioning of services by local authorities was seen as the shape of the provider market. This was followed (in descending order) by the capacity of the commissioning team, EU procurement rules, central government policy, local party politics/provider attitudes, and the skills of the commissioning team.

Just over 40% of respondents said EU procurement rules acted as a significant barrier to the ability of local authorities to commission services – mirroring the findings of Local Government Lawyer’s recent Procurement Law 2012 report with Bevan Brittan. A similar percentage suggested the rules limited this ability but only by a little.

Mathew Fell, CBI Director Competitive Markets, said: “Only limited savings can be realised by transactional relationships that focus on procurement processes. If providers understand more about a local council’s wider objectives, they can propose innovative, cross cutting ways to meet them based on real business capabilities.“

Simon Parker, NLGN Director, said: “A healthy and competitive market is vital for the future of local government, but on present trends we risk getting stuck in the old rut of incremental savings and adversarial relationships. Local government and its partners must work together to create a new generation of innovative contracts.

“Councils need to be more open about their emerging needs, while business must be prepared to invest in innovation and share risk more imaginatively.”

Parker also called for an improvement in the skill set of commissioners to reflect a more commercial mindset.

This call comes the day after it was revealed that Norfolk County Council chief executive David White had recommended the scrapping of his role in its current format.

White argued that the authority needed its most senior manager to have greater commercial skills and experience if it was to achieve its aspirations.

A copy of the NLGN and CBI report can be obtained here (£). 

Philip Hoult