Lessons for commissioners from Carillion
Tuesday, July 31, 2018
Between the spectacle of President Trump's visit and the drama of Brexit, it would have been easy to miss the report from the Public Administration and Constitutional Affairs Committee (PACAC) on the lessons for politicians and public service commissioners following the collapse of Carillion.
The report contains no reference to children's services, but it is vitally important for the sector and raises huge questions about how the whole "business" of competitive tendering for public service contracts is approached. Here are three critical findings children's services leaders and commissioners should learn from.
First, the committee raises "grave concern" at "the government's preoccupation with price" - which it says is too often the primary rationale for contracting. This, they say, is at the expense of a proper understanding of quality, or of the financial sustainability of the businesses they contract with. Focusing on lowest price is high risk in commissioning "complex services for vulnerable people" - a term that could describe all services for children and families. With the advent of 100 per cent price-weighting - in other words no credit given for quality at all - on tenders in some areas' fostering contracts, and having seen 4Children grow rapidly by undercutting other bidders on price, only to then watch them collapse as a business, this is a long-overdue warning from parliament that the children's sector must heed.
Second, PACAC calls for a halt to payment by results (PbR) and other complex "innovative" financing mechanisms that have exacerbated the transfer and complexity of risk in contracts with service providers. PbR has been widely experimented with in children's services, and failed in the case of children's centres pilots and the Troubled Families programme. This recommendation presents a particular challenge to the government's evangelism for social impact bonds (SIBs), which are complex financial deals for funding public-benefit projects, that promise financial rewards for private investors from taxpayer budgets in return for delivering practice "outcomes". How the government responds to PACAC's demand to halt new PbR contracts and renegotiate existing ones will be interesting to see.
Third, the committee underlines the fact that many public service markets, like fostering and children's homes, are monopsonies - "markets" where the only paying customer is the state itself. In monopsonies it is not enough for the state to go "shopping" for the cheapest offers they can get, as it is responsible for the market in its entirety. In children's services, this means councils must stop complaining if they feel they are victim to private profit-making fostering firms, for example. When the state holds all the spending budgets and makes all the decisions, they are the ones with the power to decide who provides, or not. If they keep spending on cheapest bidders that can't sustain their business on the terms they are offering, they won't be able to wash their hands of responsibility if those businesses collapse like Carillion.
- Kathy Evans is chief executive at Children England