OC&C: Government outsourcing grows to 110 billion

30 April 2015 Consultancy.uk

Public sector spending on outsourced services is projected to increase by £20 billion to £110 billion, an analysis from OC&C Strategy Consultants finds. With the importance of outsourced services on the rise, and spending relative to budgets accelerating, government bodies need to ensure they make the right strategic considerations, ensuring taxpayers’ money is spent wisely.

In a recently released analysis, consulting firm OC&C Strategy Consultants analysed the spending patterns of 176 of the UK’s largest central government bodies to create a database of public sector spending. The database shows that spending on outsourced services has increased from 22% to 28% over the course of the current Parliament.

UK parlement

Even with the steady decline in public sector spending, at 2% annual over the current parliament, the analysis shows that spending on third parties has grown 4% between 2012 and 2014 by the largest public sector players. The increase in spend is an acceleration of the past 25 years’ continuous growth on outsourcing by the UK’s public sector, and follows demographic changes in the UK and growing demand for public services, say the advisors.

Despite the massive amount of funds flooding towards private operators, and the debate which it at times sparks, Vivek Madan, Partner at OC&C Strategy Consultants, highlights that outsourcing can build on a value-adding track record. “Well managed outsourcing can have an immensely positive impact on the country’s ability to deliver world-leading public services. People often forget that frontline staff such as nurses, soldiers and teachers only represent 15% - 20% of departmental spending and that most outsourcing is politically uncontroversial.”

The research reveals a diverse field of suppliers of outsourced services, with tens of private and third sector organisations supplying goods and services to local authorities. The largest 15 managed services players account for around 10% of spending, and include Capita, Veolia and Serco. While public services contracts are worth 36% of all charity funding in the UK.

OC&C - Outsourcing

Looking ahead, public sector outsourcing will continue to grow – by the end of the next parliament the bill for private sector services hosted by third parties is forecasted to increase by £20 billion from £90 billion to £110 billion. With the stakes so high, Madan emphasizes that money spent on outsourcing should be carefully monitored to ensure it lives up to expectations. “Outsourcing neither fundamentally guarantees nor fundamentally prevents the delivery of world-leading public services. What we’ve seen all too often is successive governments and organisations committing one of the three deadly sins of outsourcing – focussing on inputs rather than outcomes, devolving too much or too little control to the contractor, or letting politics rather than reason drive decision-making.”

A key element of the successful approach lies according to Madan in taking a broader view than the political horizon, in order to strike the right balance between short-term incentives with long-term effects. “Regardless of the outcome of this election, it will be up to politicians, civil servants and vendors to find a way of working together that prioritises the common good over salami-slicing short termism.”


Manchester Mayor criticised for £250,000 consulting spend

19 March 2019 Consultancy.uk

The Mayor of Greater Manchester has been criticised for splurging hundreds of thousands of pounds on consulting fees before determining that the region’s fire brigade must slash its budget by millions. Andy Burnham put more than £250,000 towards work from ten consulting firms as part of a review into the region’s emergency services.

Despite the continued argument that projects like the Northern Powerhouse initiative are helping to address the North-South divide in the UK, statistics still show that the North has borne the brunt of austerity in England. Northern English cities have been disproportionately affected, with their spending cut on average by a fifth since 2010, while cities in the south and east of England had average losses of 9%.

The impact of spending cuts has been keenly felt in Greater Manchester in particular, where local government spending has fallen by as much as £650 per person since 2009 in some parts of the region. As the area looks to find further savings, while the Central Government continues to fail to deliver on its pledge to end austerity, it has been announced that the fire brigade for Greater Manchester faces a reduction of up to £10 million from its budget.

The swingeing cuts to hit the emergency service would likely see its fleet of fire engines reduced from 56 to 47, while six fire stations face closure, and 113 support staff could suffer the axe. The news follows an investigation from Mayor Andy Burnham, which was triggered in part by the admission of Chief Fire Officer, Jim Wallace, that since 2015 the service has failed to deliver “its own efficiency plan”.

Greater Manchester Mayor Andy Burnham spent £268,300 to review the city’s fire service

The review itself has been far from inexpensive, however, and it has led some to accuse Burnham of hypocrisy. During the review of the fire service, which has delivered demands for the service to find major efficiency savings, the Greater Manchester Mayor reportedly splurged £268,300 in public funds on consulting work for his root-and-branch review.

According to local newspaper Manchester Evening News, Burnham tasked ten different consultancies with helping to compile the review, receiving payments ranging from £101,000 to £7,000. The largest amount was handed to Leicester headquartered P. Cooper & Associates for the expertise of a “senior change and transformation programme specialist,” while it was reported that another of the consultants gave “guidance on leadership and culture”.

A Greater Manchester Fire and Rescue Service (GMFRS) spokesman said of the spending: “The Programme for Change programme has required input from specialists who are expert in areas such as organisational transformation, operating models for fire safety and estates.”

Manchester’s fire brigade was criticised in 2017 when, in the wake of the Manchester Arena bombing, a report by Lord Kerslake noted crews had been held back from helping. Contrary to helping deliver a more efficient service, Unison has told the press that it believes the proposed cuts will make the residents of Greater Manchester “less safe”. With the expenditure of the review on private sector consultants now public, meanwhile, the union has slammed the report for throwing away public funds while jeopardising vital public sector work.

Unison represents the 113 staff who may lose their jobs, and a spokesperson for the union told Manchester Evening News, "It's disappointing that when finances are clearly tight, priority has been given to hiring external consultants rather than engaging with the workforce. This will be a shock to our members who were only told on Monday their jobs were at risk."

In recent years, a succession of local authorities have come under fire from officials and the general public for their consulting spending in the UK. Earlier in 2019, a freedom of information request by The Times revealed that local councils across the UK have spent around £400 million on consulting firms in the last year alone. According to the report, this represents a rise of more than a fifth since 2014, with critics using the figures to call into question the value added by engaging external expertise.

Commenting on the criticism many councils face, Tamzen Isacsson Chief Executive, Management Consultancies Association, said, “Consultants play a vital role in the public sector, [providing] transformational impacts, innovation and increased efficiency… Vital front line services continue to operate uninterrupted [while] consultants often help local authorities get better results with less money. As the MCA awards this year demonstrate consultants are delivering social benefits across the UK – from work on getting better outcomes for children in care to finding better processes for finding homes for vulnerable families in London these examples offer a true reflection of the consulting excellence that operates across the UK to the benefit of councils and the wider society.”