Select Committee on Education and Employment First Special Report

Seventh Report: The Role of Private Sector Organisations in Public Education (HC 118)

Seventh Report: The Role of Private Sector Organisations in Public Education (HC 118)

Published: 29 June 2000

Government Reply: As Command Paper

 Cm 4844 dated

 September 2000

Published: September 2000


Government Response

1. We believe that private sector organisations can play an important role in providing high quality education services where there is clear evidence of long term under-performance to provide these services to an acceptable standard.

The Government welcomes this review of the role of private companies in publicly funded education and, in particular, the endorsement that private sector organisations can play an important role in providing high quality education services. Similarly, we welcome the Committee's view that approaches to under-performance should be found that benefit all the children in an area. We believe that in order to raise standards for all children and to meet the needs of an increasingly diverse educational community, we need to harness the widest range of skills and expertise by engaging in partnerships with representatives from the public, private and voluntary sectors. We are doing this through a whole range of policies including Education Action Zones, City Academies, Specialist and Beacon Schools, Public Private Partnerships and the wider involvement of business in schools through mentoring and sponsorship. The Government is creating, through these policies, a mixed economy of provision to raise standards for all children. Our policy of intervention in failing local education authorities (LEAs) is to use a range of measures tailored to local circumstances.

2. In our view, what matters most in each case of long-term under-performance is that an approach should be found which benefits all children in the area.

As 1 above

3. We agree that a pragmatic approach to raising education standards is necessary. Long-term under-performance in the education sector cannot be ignored. Where more traditional approaches have not raised standards or produced success, we should make use of expertise wherever it is found in the public, private, or voluntary sectors. A pragmatic approach to addressing long-term under-performance should not always end with intervention or involvement by a private sector organisation. Some public sector providers have a good record of innovative, high quality education services, often in the most challenging circumstances.

We welcome the endorsement of our pragmatic approach to tackling the problems faced by individual LEAs. The outcomes of our work with different local authorities have been very different, and have included, but not been confined to, long-term involvement of an alternative provider. The evaluation of options for tackling issues identified by OFSTED has involved outside consultancy, which has come from the public and private sectors. We recognise that there are some excellent public sector providers and have praised local education authorities which have received good inspection reports. We are very pleased that there are a number of good LEAs on the DfEE's list of consultants and function providers, able to work with us and other LEAs to help tackle their problems. Best Value requires local authorities to review the way in which all their services are provided, and consider the potential benefits of employing alternative providers. To support this process the DfEE is offering to provide up to £1.5 million in development costs for up to five innovative schemes for new ways of working in partnership to deliver LEA services.

We expect these schemes to facilitate partnerships among LEAs and involve the private sector in enhancing the quality and value of services. Schemes might include a company contracting with a range of authorities to provide a particular or variety of services, or a company acting as a broker to improve schools' skills as purchasers of services. Bids have been invited from all LEAs.

4. We recommend that the Department for Education and Employment and local authorities consider ways in which the involvement of private sector organisations could support and enhance the quality of education services.

As 3 above

5. Although we agree that a pragmatic approach to raising standards of achievement is necessary, we do not believe that the underlying principles of public accountability should be disregarded by the DfEE, by local education authorities or by school governors.

Public accountability for LEA services will continue to rest with the LEA whatever the contractual arrangements for their delivery. The legislation approved by Parliament for intervention in authorities failing to discharge their responsibilities to an adequate standard allows the Secretary of State to determine the nature of the contract and identify the contractor, and to transfer the responsibility for taking specific decisions to the contractor, but in each case the contractor acts on behalf of the LEA. OFSTED inspection reports have so far provided the initial evidence on which intervention has been based. These include an assessment of the LEA's capacity to implement the necessary improvements. In some cases failure has been longstanding, and reflected in successive reports, but in other cases the severity of failure or the management capacity of the LEA has suggested that alternative delivery models should be considered at an early stage. Consultants have been appointed to analyse all the options and assess which is most likely to secure rapid and irreversible improvement.

The Government does not believe that identified failure should provide the only trigger for consideration of alternative delivery methods, which a growing number of authorities are choosing to adopt for other reasons.

6. We note above our support for the Government's intention to intervene in under-performing local authorities. We accept this approach is necessary, but it should be based on clear principles that underpin intervention by private sector organisations. We welcome the DfEE's three general principles, but we recommend that the additional principles set out in the following paragraphs should guide any involvement by private sector organisations in public education.

As 5 above

7. We consider that a long history of under-performance should automatically trigger serious consideration the contracting out of the management of an LEA's education service. We recommend that a clear case should be established that the LEA does not have necessary skills and commitment to address the causes of under-performance. Only then should private sector or alternative external involvement be seen as the only means of addressing the LEA's weaknesses.

As 5 above

8. We do not see that a single model of involvement in under-performing authorities of schools can be found which meets the varying needs of all authorities. We support the Government's policy that a wide range of solutions to the problem of under-performing local education authorities should be developed.

The Government welcomes the Select Committee's endorsement of its policy of customising solutions to meet the challenges faced in individual authorities. To date, solutions have included new in-house management; consultancy support; the establishment of new machinery to monitor and maintain progress; and partial and total outsourcing on a range of models.

9. We recommend that the ultimate responsibility for the quality of service provided to users of the education services remain with locally elected representatives. This principle is at the heart of public accountability, and should not be compromised by the involvement of private sector organisations in service delivery.

Elected members remain ultimately responsible for the performance of their statutory functions. This is in no way compromised by the involvement of alternative providers in offering services. Private sector providers have been involved in many areas of local authority activity for many years.

10. We recommend that potential contractors should make a serious attempt to consult local parents and others with an interest in education.

Whether private contractors are employed or not, local authorities remain under a duty to consult, and must ensure that the duty is fulfilled. That may require undertaking such an exercise themselves or monitoring a private contractor carrying out the consultation. The Government ensures that consultants appointed to advise on LEA improvement strategies have an obligation to consult with local stakeholders. The nature of the procurement process for alternative providers means that the ability of potential contractors to engage in widespread consultation during that process is limited, but contractors will be required as part of their transition plan, and under the contract, to consult widely and collect user views on a systematic basis.

11. The involvement of the private sector in the management of public education services can have major effects on neighbouring schools and authorities. We therefore recommend that the effects of such involvement on the LEA's or school's immediate neighbours should be monitored.

Tackling failure in LEAs or schools must benefit the whole education community. A newly improved authority or school can act as a stimulus to improvement in neighbouring areas, and we will encourage the sharing of good practice so that all can benefit from new approaches.

12. We do not consider that private sector organisations are inherently more skilled or are more likely to achieve high standards than public sector organisations.

As part of our strategy for developing a mixed economy of provision, we have encouraged public as well as private sector organisations to come forward. Our list of consultants and function providers for use in LEA intervention includes high performing LEAs as well as private sector companies. Private sector providers are recruiting staff with a background in local education management which up until now has been the preserve of LEAs, but these distinctions will become less relevant as a mixed economy of provision emerges. We already encourage the sharing of good practice between authorities through the Department's Standards Site, through conferences and events, and through the Beacon Council Scheme, and hope that those involved from the private and voluntary sector in delivering LEA services will become involved in this activity. We also expect that they will be able to participate in activities run by groups of LEAs.

13. We conclude that the most effective intervention and involvement in local authorities will probably rely on external organisations having both the management skills associated with the private sector, as well as the experience of delivering educational services in the public sector. We consider that organisations without any direct experience of managing education services will need to work in partnership with those possessing that expertise to regenerate under-performing education services. We therefore recommend that the DfEE should develop means by which exemplary public sector organisations, particularly local education authorities, may work more easily with other, less successful, parts of the state education service and with private sector providers.

As 12 above

14. We recommend the Government should consider establishing and funding adequately a scheme to 'twin' under-performing local authorities with successful authorities to help spread good practice and to develop solutions to common problems. In this context, we note the addition of Camden LEA to the Department for Education and Employment's list of approved service providers to help turn around under-performing LEAs in other areas.

We have helped facilitate a number of relationships between local education authorities either facing similar challenges or who can benefit mutually by sharing ideas and practices. These informal arrangements are proving fruitful and we will continue to seek to remove barriers to authorities working with and learning from each other. At this stage we do not see the need to develop a formal twinning scheme.

15. We are concerned that the most successful LEAs will not be able to work with under-performing authorities because of the nature of the contracts currently being developed for LEA intervention, particularly the financial penalties which are applied if targets are not met. We recommend that the DfEE should consider whether different types of contract are required to allow successful local authorities to work in partnership with private sector organisations.

The Government notes this recommendation. We are developing new models for contractual relationships, and examining the arrangements for sharing of risks and rewards. It is our aim to ensure that local authorities and other public sector organisations are not disadvantaged in entering into partnerships for the provision of education services.

16. We recommend that the Government should establish a scheme to allow highly experienced LEA officers from successful authorities to support the work in under-performing authorities.

The Department has facilitated a number of arrangements to bring in highly experienced officers to authorities in need of urgent interim management, and our contractors are now increasingly in a position to do the same. We do not at this stage see the need for a separate scheme to supplement these arrangements.

17. We recommend that the Government should establish mechanisms to enhance the capabilities of a cadre of high quality public sector education administrators who could support under-performing LEAs. The National College for School Leadership might act as a model for such a development.

The Government is working with local authorities to raise the standard of education administrators including through the Virtual Staff College.

18. Members of the Education Sub-committee were impressed by the way in which some charter schools in the USA could promote both innovative partnerships and opportunities for new and challenging experiment. We recommend that the Department for Education and Employment should take careful note of such international experience and progress using it to inform its own work on City Academies and other similar initiatives.

The Department keeps a close eye on all international developments and is eager to learn from the experiences of others where they can add value and are applicable. The Standards and Effectiveness Unit is actively involved in following and contributing to international discussion and development on these issues, and is represented in the global debate on education for the 21st century.

19. We note the City Academies proposal as evidence of the Government's willingness to study constructive and imaginative solutions to existing problems in the education system. Nevertheless we are concerned that the experience of City Technology Colleges might suggest some difficulties in attracting substantial contributions from the private sector. The Department for Education and Employment should not rule out other private sector options which are available through independent contractors in relation to interventions in LEAs and in individual schools such as King's College, Guildford. In light of this we urge the Department to reconsider seriously their funding options for City Academies.

We have had encouraging approaches from a number of potential sponsors, many of whom are already working in partnership with LEAs to put together expressions of interest in the City Academy initiative. City Academies will require a contribution from sponsors to capital costs, but recurrent funding will be provided by the Government and City Academies will be funded at a comparable level to other local specialist schools. We welcome other arrangements to involve independent contractors in improving school education and increasing diversity, and hope that they will continue to develop further.

20. We recommend that at least two elected members of local authorities should be present for all substantive meetings with private sector organisations bidding for management contracts with the local authority, and that they should continue to attend such meetings after the contractor has been selected and during the contract negotiation. This will help reinforce the direct link between the service provider and the local community which it will serve.

Elected members have a key strategic role to play in shaping the commissioning and procurement policy of the authority, and in ensuring that this addresses the needs of local people. They also exercise an important scrutiny role over the performance of key services whether these are contracted out or not. They should not be involved in the detailed management of the contracts themselves. Contractors will want to know and take account of the views of elected members as they prepare their bids, and once they are selected will need to develop appropriate relationships with Councillors and other community representatives. There is no single model for that, and solutions will need to be found to meet individual circumstances.

21. We recommend that, where LEA services have been transferred from public sector providers to an external contractor, a report should be published annually by the locally elected members. That report should include a description of the activities undertaken by the external provider and a commentary on the progress made towards agreed targets. The report should be made available at a meeting open to the public.

This is a matter for local authorities. Where DfEE has been involved in an outsourcing we have ensured that a duty is placed on the contractor to provide regular performance information which could feed into this kind of report, which might supplement the local performance plan required under Best Value.

22. We recognise that contracts for periods of up to seven years provide opportunities for significant changes to the context in which the contract was initially signed. We are not persuaded that it will be in the best interests of pupils or the local community to be locked into a long term contract. We therefore recommend that a formal opportunity should be built into each contract for a mid-term review. Such a review would focus on the performance of the contractor, the need to renegotiate any aspects of the contract and, most importantly, end of contract procedures.

Changes in context can occur at any time and a set mid-term review might occur just before a major event. Ongoing reviews of the Contractor's performance and the context within which they are operating are an essential part of contract management. All contracts with which the DfEE has been involved currently include arrangements for monitoring of the Contractor's performance and provisions to deal with changes in external requirements or circumstances. When changes occur the Contractor can be required to provide an assessment of the impact these will have on provision, and make proposals which would be subject to discussion and agreement by the parties to the Contract. Contracts should also provide for the termination of the contract in the event of a change of ownership of the contractor or other specific changes of circumstances, for example, in the unlikely event of bankruptcy.

23. We recommend that contracts between local authorities and private sector organisations should provide opportunities, if both parties agree, for a reconsideration of the contract if there are significant changes to the status of either the contractor or the local authority.

As 22 above

24. We recommend that the Government should establish a clear picture of the role it sees for LEAs.

LEAs continue to have an important role in the planning and delivery of education services. Over recent years that role has changed significantly, as schools have gained greater autonomy, to reflect their additional responsibilities. It is as a result of this evolution of the role of both schools and local authorities that the Government plans to publish shortly for consultation, within the Green Paper on local government finance, proposals for a new, fairer and more transparent funding system for education. In addition we are seeking to clarify the role of the LEA through the revised Code of Practice on Local Education Authority-School Relations, issued recently for consultation. In relation to schools, LEAs have four key functions: school improvement, special educational needs, securing access and strategic management. In the case of school improvement, authorities should ensure that schools are supported and challenged in their task of raising standards; and intervene only where schools are under-achieving, low performing, have serious weaknesses or are failing.

Under existing arrangements authorities should delegate maximum funding and responsibility to schools. They are first and foremost enablers and facilitators, helping schools to work with each other to spread good practice, and ensuring that all partners and stakeholders cooperate in securing the most effective provision in accordance with the principles of Best Value. This role extends to early years and childcare and to post-16 provision, where—as with the Connexions service—LEAs will be key partners in the new arrangements.

25. We recommend that OFSTED with the Audit Commission should review within every contract period the performance of educational services in LEAs who have contracted out some or all of their educational services, and that the contract negotiated between the local authority and the external provider is capable of delivering the required improvement in education services. This will help to ensure there is public confidence in the contracted out services. We also recommend that the Audit Commission should examine the contracting process and individual contracts to ensure that Best Value principles have been applied to the tendering process. Publication of the reports of both these evaluation processes will help develop guidance on best practice.

The OFSTED/Audit Commission inspection procedure has to date scheduled a further re-inspection in LEAs in which the Government has intervened and where some or all of the education services have been contracted out. These re-inspections will act as independent assessments of the performance of the external provider and the local education authority.

26. We recommend that the DfEE should commission research on the strengths and weaknesses of LEAs contracting out education services to private sector organisations. Such research should be made publicly available to inform future debate at local and national level.

The Government agrees with the Committee on the importance of summative research and evaluation at an appropriate time. At this early stage we are taking steps to ensure that we, LEAs and potential partners learn from recent experience and share information to inform future development of this work.

27. In many cases the objective of contracting out local authority education services will be that the authority should in due course resume delivery of the service. This would depend on the authority choosing to resume this service and being able to demonstrate it would have the capacity to do so. Locally elected members could choose to renew the contract with the external provider, or to seek other providers, if they so wished. That need not always be the case. In our opinion it could be appropriate for a further period of public consultation before this happens.

The Government agrees that contracts should have "lead-out plans"written into contracts and that contracts should enable the LEA to delay final payment to the contractors until they have complied with the "lead-out" obligation. We agree that there should be public consultation before an LEA takes any decision to continue with an external provider or make alternative, possibly in-house, arrangements for delivery.

28. We are concerned that lengthy contracts might reduce a local authority's capacity to provide high quality education services. This may act against local authorities who wished to resume service delivery at the end of the contract. We recommend that all contracts should include the option for an orderly handover from the contractor to the authority so that the standard of education services does not decline. The success of such 'exit strategies' would then determine part of the contractor's payment at completion of the contract.

As 27 above

29. We recommend that the DfEE should ensure that each contract fully reflects changing practices in employee terms and conditions when outsourcing education services and regularly reviews the adequacy of such contracts in the light of changes in TUPE interpretation.

If, as is likely, TUPE applies, it protects the terms and conditions of transferring employees at both the start and end of contracts. In the case of pensions we have amended regulations to allow employees to remain in the TPS/LGPS. We suggest following the Cabinet Office statement of practice on staff transfers and the Treasury's five point plan on pensions.

30. We recommend that the DfEE should consider the implications for employees' terms and conditions of employment, and the applicability of TUPE regulations, at the end of contracts between local authorities and private sector organisations.

As 29 above

Note: The Recommendations and Government Response of this Report are included in this volume for the sake of completeness; but the DfEE was not asked to update its response because it was so recent.

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