Select Committee on Public Administration Appendices to the Minutes of Evidence

Supplementary Memorandum by the Business Services Association (PSR 5(a))

  This paper is supplemental to the Initial Memorandum submitted on October 25. In this submission we deal with the remaining questions in the Committee's request for evidence.


  The guiding principle for reform should be to raise UK public services to a world class standard. For instance, the NHS at its inception gave the world a model for universal treatment free at the point of service. The challenge for the current generation is how to maintain this commitment when technology and patient expectations have long-outstripped circumstances envisaged by the founders of the NHS and the level of care may not always match standards elsewhere in the European Union. This Association believes that this can be done most effectively by utilising the complementary skills of both the public and private sectors. Working together we can achieve the highest level comparable to the best in the private sector in order that they deliver the best, most appropriate style, quality and standard of services to those who use them, the citizens of the United Kingdom. Nothing less should be adjudged satisfactory.

  Central government has to set out the essential strategy for reform; determine the levels and sources of funding; the framework for managing change in public services; and how success will be measured. Working with Parliament, it must also seek to ensure that public accountability for these matters is robust and transparent. It may not, however be best placed for determining detailed service delivery and, indeed, may operate in ways that prevent the most efficient devolution of management responsibility to professionally led teams that can tailor their approach to local circumstances and experiment in order to take advantage of changes in knowledge and technology that offer the prospect of improved services.

  While there have been many central plans for modernisation, it is not always easy to detect the level of coordination which is necessary to ensure that reform is introduced smoothly and with effective support from public servants. The history of the Private Finance Initiative has demonstrated that roll-out can be hindered in the public sector by lack of project management skills, commercial awareness and an unwillingness to give up detailed control over inputs and concentrate , instead, on the bigger picture, by getting outputs right. Moreover, privately managed services have been seen too narrowly as a series of individual projects and not as benchmarks for how directly managed services themselves could be modernised. This points to the pressing need centrally to create a clear policy framework and an adequate level of central guidance on technical issues before change programmes are initiated, while encouraging plurality of provision, innovation and value for money defined as the optimal cost/quality standard of service not the lowest price. This in itself may not be sufficient without the effective use of central quality assurance procedures such as OGC project reviews and specialist delivery teams. The latter would replicate the advantages of the Prison Service and Highway Agency specialist PFI procurement teams in ensuring that sufficient skills and experience are available throughout the public sector. The example of NHS LIFT demonstrates that specialist delivery teams can be created to provide support for highly decentralised public services that make use of a large number of privately owned assets.

  The position in relation to devolved institutions and local government is less clear. There is a clear commitment to modernise within the devolved institutions in ways which fit their local needs. Within local government, Best Value has failed to deliver the overall reform and modernisation which underlies the policy and legislation. This is being addressed currently by DTLR in the Review announced by Stephen Byers in October. The association is unable to comment in general on whether regional institutions could assist. However there is a growing body of opinion that the NHS in England, at least, is too monolithic a structure to make the best use of the increase in funding indicated in the Chancellor's Pre-Budget Statement. The successes of PPPs in Scotland and Northern Ireland in being frequently at the leading edge and more innovative than for similar schemes in England suggest that units of government for more geographically and socially cohesive areas may have advantages in taking forward the modernisation agenda.

  The existing signs of divergence between Westminster, the Scottish Parliament, the Welsh Assembly and local authorities in their approach to modernisation and reform, however, has the potential to make the programme overall look disjointed. The Association would hope to see a greater degree of voluntary coordination between the Westminster Parliament and the three devolved institutions on issues such as key elements of the framework for managing change, such as risk allocations in PPP contracts, the assessment of Value for Money, output measures and accountability arrangements.

  If the premise of the adage is accepted that the proof of the pudding is in the eating, the effectiveness of Public Service reform will be evident when those who use these services express satisfaction with them and when the audit against common national, EU and international norms for these services confirms their high standard.


  Public services have to be accountable to the electorate and to central government. Audit and inspection by the National Audit Office and Audit Commission (as appropriate) are essential tools to ensure public accountability. Currently, they are often misrepresented as watchdogs which will only be satisfied if the lowest priced tender is accepted. This perception needs to be broken.

  Quality of service and whole-life costing of service provision are the most important factors in determining the standard of services. Lowest price is probably the worst benchmark, but as many of the Public Sector Comparators seen by the Association's members indicate, the public sector has a problem in general of calculating the true economic cost of existing services and budgeting realistically for standards of service that are contractually enforceable though a PPP contract rather than, as is the case with most directly managed services at present, merely aspirational. Accountability is particularly evident with PPP contracts, but should also be enforced with equal rigour and independent verification where services are provided in-house. Service or PFI contracts are let to an agreed specification, with clearly identified deliverables for a fixed price with penalties for a failure to deliver. Services which are provided in-house are not subject to such rigour. If they are not performed to specification, they will be rectified by the same staff at additional cost. The additional cost may not even be recognised by the public authority which is unlikely to regard such rectification as an extra cost under the service level agreement. In any event, there are rarely any financial penalties attached to such failure. This is not good accountability and the Association recommends that accountability for directly managed services should undergo the same improvements in accountability that have been achieved for PPP contracts. Indeed, in many instances the same performance measures should be applied.

  As public service delivery changes, so its scrutiny and audit needs to adapt to be able to address the new criteria. This is best achieved through these scrutiny bodies and departmental custodians of performance standards working to introduce common national and, where appropriate, EU-wide, measures of cost and quality. What is important , however, as the problems of the Best Value regime have illustrated, is that performance measurement cannot be allowed to become an all consuming end in itself. This can be avoided by focusing on key outputs, independently auditing the provider's own quality assurance systems, and minimising subjective or judgemental assessments. Parliamentary accountability has been enhanced where Treasury Taskforce PPP guidance has been followed. For example, in depositing contracts in the Library of the House of Commons, in explaining how restrictions based on claims of "commercial confidentiality" need to be exceptional and genuine, and disclosing details of the pipeline of projects in procurement, new standards of Parliamentary accountability have been set for public procurement. In many areas, such as the NHS and local government, there is greater accountability now than there has been.

  There is a prevalent myth, however, that the involvement of the private sector adversely affects accountability. The opposite is normally the case. Public sector contracts ensure that the services remain public although their delivery is entrusted to a private contractor. The full weight of accountability to the NAO or Audit Commission and, thus, to Parliament remains. Indeed the very terms of the contract increase accountability since the service level agreements contained within a contract gives a greater responsibility to the private contractor to deliver a given service to an agreed standard or to face financial penalties and possible loss of the contract. Not only do users of the service vote with their feet where delivery is unsatisfactory, the contractor will be penalised financially or may lose the contract.

  Where commercial confidentiality needs to exist in respect of third parties , this will not apply to those who are parties to the contract who will normally operate an "open book" policy under which relevant commercial information will be transferred between the parties. Moreover, Treasury Taskforce Standard Commercial Terms provide for access to original records and accounts by the NAO.

  The profit which the contractor seeks to make will be included in the contract tender and able to be scrutinised by the client. Regular relets of contracts or market testing will ensure that the public sector client receives services at a competitive rate.


  The modernisation agenda is clearly intended to improve the level and standard of service provision for the client to its end users. Previously, a variety of means have been used to try to make services more in line with citizen and user expectations. None of these have been particularly successful. It may be that they never can be within diverse communities. Nevertheless, it is important that the general public are involved as much as is reasonably possible in the specification of the services to be delivered. More could be done to ensure this in a variety of ways relevant to the communities and services involved. It must be a real exercise rather than a "paper" or formal one.

  There are no easy answers. Treasury Taskforce PPP guidance on stakeholder consultation contained important recommendations relating to the provision of information about the procurement process and signed contracts. Juries and panels may be popular but they have a tendency to attract those with extreme views or a desire to campaign. Such people are not representative of the public as a whole. Polls and questionnaires are likely to receive cursory replies rather than considered views. As internet provision spreads across communities, this may be a better method by which to gauge public and user reaction.

  Users have considerable rights already in respect of negligence and maladministration, but these are slow, time consuming and expensive for all concerned. Prevention is better than a cure. For this reason we prefer the development of the Citizen's Charter and Service First approaches, coupled with the greater use in directly managed public services of the accountability arrangements successfully introduced for PPP contracts. The first two of these are easily understood by the service users and have an inbuilt system of complaint which is easy to operate. This has had a marked impact on standards of service delivery.

December 2001

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