Government to take on more risk on public contracts to protect outsourcers, says minister
Private outsourcing firms carrying out public services will be exposed to less risk when taking on government contracts in future, the Cabinet Office (CO) has said.
The department today published a new set of guidelines for how the government should procure public services, a process which has increasingly come under fire this year after the high-profile collapse of outsourcer Carillion.
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“A more considered approach to risk allocation will make us a smarter, more attractive client to do business with,” cabinet office minister Oliver Dowden told business leaders at the Confederation of British Industry on Wednesday.
Guidelines set out in the so-called outsourcing playbook stipulate that “when designing contracts, departments must seek to mitigate, reduce and then allocate risks to the party best able to manage it,” he said.
New measures taken include:
- Make versus buy assessment, to determine when it is best to carry out public services in-house, rather than outsourcing them.
- Pilots: when a service is being outsourced for the first time, a pilot is expected to run, which will see companies carry out a small part of a service or project to see whether they can handle it before being given the whole contract. The guidelines do not, however, make this compulsory.
- Key Performance Indicators (KPIs), which measure how well contracts are carried out, will be made publicly available for the first time.
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Earlier this year, it emerged collapsed outsourcer Carillion had owed around £2bn to 30,000 suppliers, subcontractors and other short-term creditors when it failed in January.
More recently, major outsourcer Interserve has come under severe financial pressure, and its lenders have been forced to bail it out with a rescue deal.