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Market failure - a dawning reality!

There has been a lot of trade journal speculation recently about the state of the outsourcing market in public services and I have been asked to give several press comments on this, therefore hopefully it's worthwhile posting these views here.

Firstly, it's hardly surprising that given the current economic circumstances and the high profile market failures that have occurred, that procurers are backing off, at a fast rate of knots, from what are high risk deals. On the other side of this suppliers in the market are trying to minimise their own risk amongst their portfolio's and are reducing their exposure to any new risk in order to consolidate in many cases their already overstretched position.

Having sat on the Office of the Deputy Prime Ministers, Strategic Partnership Taskforce from 2002, it was even then widely recognised that the market had limited capacity to deliver, barriers to entry were high and some who were filling their boots were stretching themselves to the limit.

I guess what has happened in the last few months has exposed the myth about plurality of provision - the supposed move away from 'monolithic' state provision has just really seen a whole variety of public sector providers transfer services to a handful of companies with a vice like grip on their own preferred segments of the public services market.

One of the biggest ironies of this situation is that in a time when local authorities are evermore required to find efficiency savings they are locked into contracts for 10, 15 or even 25 years duration and it is now extremely difficult to renegotiate with contractors who were probably brought in on the myth of achieving value for money in the first place. The pain will then fall once again on the in-house providers within the Council to create savings.

I have already mentioned in previous posts about the APSE research work in Swindon that demonstrated that for every £1 spent on direct services £1.64 is guaranteed to circulate in the local economy, surely it is time for this work to be closely examined and future procurement decisions taken on the basis of what is best for the local economy in the long term.

Already many in the public sector are seriously reevaluating the faith that has been placed in the market and starting to come to the conclusion that if you deliver services directly at least you have a degree of control over your own destiny!

Promoting excellence in public services

APSE (Association for Public Service Excellence) is a not for profit local government body working with over 300 councils throughout the UK. Promoting excellence in public services, APSE is the foremost specialist in local authority frontline services, hosting a network for frontline service providers in areas such as waste and refuse collection, parks and environmental services, cemeteries and crematorium, environmental health, leisure, school meals, cleaning, housing and building maintenance.

           

 

          

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