The UK government has recently published the Outsourcing Playbook. The Playbook provides guidelines and principles for central government and those involved in infrastructure projects on how to avoid the most common errors observed in outsourcing projects.
The Playbook recognises the impact of the collapse of Carillion on the infrastructure sector and acknowledges that steps must be taken to improve how government outsources projects. The government suggests that the Playbook “heralds a new ethos” in how government will make its outsourcing decisions.
Of particular interest is the government’s acknowledgment that they may have previously expected too much from the private sector. One of the key themes emerging from the Playbook is the need to ensure that risks sit with the party best placed to manage them so that contracts do not become too onerous or unprofitable for suppliers. In this regard, the Playbook makes an interesting and encouraging read for potential suppliers as it recognises the need for contracts to be profitable and expectations to be reasonable in order for contracts to be viable for suppliers.
At the core of the Playbook are the government’s 11 key policy changes which aim to develop robust procurement strategies and help shape an environment in which suppliers want to engage and work with the government. The policy changes also aim to help the government and suppliers improve preparedness for the rare occasions where projects do go wrong.
The key policy changes within the Playbook focus on:
- Greater visibility for suppliers: ensuring suppliers have early visibility of contract opportunities by expecting all central government departments to publish a pipeline of current and future projects for at least the upcoming 18 months.
- Market awareness: more consideration will be given to the health of the market as a whole during the preparation and planning stage of projects with the aim of identifying potential weaknesses and facilitating increased competition. Recognition is given to the benefits of greater engagement with the market in order to better understand the deliverability and feasibility of projects.
- Improved decision making within central government: through adopting tools and mechanisms within central government, including project validation reviews and a make versus buy assessment, the government aims to ensure that their decision making processes are improved.
- Better management of risk: greater consideration will be given to which party is best placed to manage risks in particular ensuring that the decision making process is informed by genuine and meaningful market engagement and analysis. More thought will also be given to the pricing and payment mechanisms with the aim of making outsourcing a thriving, dynamic and, importantly, sustainable sector.
Of particular interest is the government’s acknowledgment that governmental departments should not ask suppliers to take on unlimited liabilities and where suppliers are managing risks outside their control, the contract should include the appropriate drafting within the payment mechanism or indexation provisions to ensure that the contract does not become unprofitable for suppliers. The playbook also recognises that if the government wants to have control over how the services are delivered, an input based pricing model should be adopted with minimal or no risk being transferred to the supplier.
- Developing robust procurement strategies: more consideration should be given to the appropriate procurement method depending on the complexity of the services or project being delivered.More focus will be placed on ensuring that the procurement processes selected are proportionate to the size and complexity of the contract.
- Safeguarding against supplier insolvency and better resolution planning: better mechanisms will be adopted to try and help to understand the financial stability of suppliers. The aim being to strike a balance between safeguarding the delivery of public services whilst also being proportionate, fair and not overly risk averse. Changes will be implemented to ensure that central government is better prepared for the rare occasions when things do go wrong.
In what has proved to be a challenging time for the sector, the Playbook is a positive step towards a healthier and more sustainable sector and the Playbook is an interesting and encouraging read for potential suppliers.
It will be interesting to see how the guidance is adopted and put into practice and in particular whether the policy changes will deliver on the government’s aims of improving the efficiency and sustainability of the sector, through better engagement between the government and the private sector.