The G4S Olympic debacle should not blind us to the success of outsourcing20 July 2012
G4S’s troubles over its Olympic contract is a headache for the Games, but for others it is manna from heaven. Those people who have already decided that private companies should be banned from public services have seized on the news with unbridled enthusiasm. Steve Richards of The Independent says today that private outsourcing can be a “colossal waste of money”. Ed Miliband will warn later today that the Government must “rethink its position on the role of the private sector in policing”. Polly Toynbee asked in The Guardian on Monday: “After G4S, who still thinks that outsourcing works?”
But these people should look at the evidence of how outsourcing has worked in practice. The reason that governments of both parties have involved the private sector in public services is that it has worked. Major reviews by the last Government, by the Office of Health Economics, and by the British Medical Journal have all agreed that outsourcing has benefits. The most high-profile example of outsourcing in recent years is the contract agreed by Circle Healthcare, a private company, to run an NHS hospital in Hinchingbrooke which was previously failing financially and clinically. That region of the NHS has just completed an innovative survey which asks actual patients whether they would recommend their hospital to their friends and family. NHS Hinchingbrooke was the joint top-rated hospital, with 89 per cent of patients saying that they would recommend it (against 35 per cent for the lowest-rated NHS hospital). That is a remarkable result given the recent history of the hospital. Other countries would be surprised at the UK’s caution over the use of the private sector in health care. Some parts of Spain ask private companies to run their whole health service. They do so at equivalent quality but at 20 per cent less cost. In Germany, which has an outstanding health service, companies run two thirds of hospitals, the public sector only one third.
Health is the biggest public service, but outsourcing has worked just as well in other areas. Prisons are clearly an area of public life where serious failures cannot be tolerated. Private companies have been running prisons successfully for the last two decades. Last year Nick Hardwick, the chief inspector of prisons, commended the privately run HMP Lowdham Grange for the quality of its work, for example effective work programmes for prisoners, despite a big growth in prisoner numbers and an increase in the number of very serious prisoners. In 2010 John Biggin, Director at the HMP Doncaster (also run by the private company Serco), was named public servant of the year in The Guardian’s Public Service Awards.
In policing, as Mr Miliband accepts, private companies have taken over parts of the service where fully trained police officers are not needed (such as the management of holding cells in police stations). The result is that police officers can be moved to the jobs that they should be doing. South Wales Police and Lincolnshire Police are particularly good examples (both working with G4S, as it happens).
The difficulties of G4S in the last week destroy one of the key arguments against outsourcing, that private companies are “unaccountable” in their delivery of public services. In fact G4S will lose many millions of pounds as a direct consequence of their failure to deliver, as the company has made clear. It will also pay the costs of the additional police and Army personnel. In this sense, private companies are much more accountable than public sector organisations, which do not face these kind of direct and immediate consequences for failure. A Ministry of Justice official sits in every privately run prison to levy fines and penalties when contracts are breached. Further, G4S has lost many millions of pounds, again immediately, from a lower share price. The G4S example will itself do a great deal to focus outsourcing companies on their performance.
The private sector can look secretive because the details of their contracts are typically hidden from the view of the public. But this is as much to protect the government as the company involved. It can be embarrassing for the government to admit that a private company is running a public service much better and at much lower cost than the rest of the public sector. Private companies provide complete data to government on their performance. My advice to the private sector, for what it is worth, is to make publish their contracts and performance data, to avoid any hint of secrecy and to show what they can do. The Circle contract for Hinchingbrooke hospital is now available online (with everything except those sections that touch on the intellectual property of the company).
There are inspirational examples of public service delivery in both the public sector and the private sector. There is clearly evidence of failure in both too. Many contracts could be better drawn and deliver more return to the taxpayer. None of that means that the private sector should be banned out of hand. All things being equal, competition will bring in new ideas, higher quality and better ways of working in public services just as in the rest of society. Private companies will make a stronger effort to control their costs (because of the need to make a profit). Because of their contracts, they are more sharply accountable than most public sector organisations, as G4S has shown. The opponents of outsourcing will never accept it but the evidence shows that it should continue.
To view original article please click here.