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Fact Sheet:2
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Assessing different delivery mechanisms
1. A key purpose of Agency and NDPB reviews is to examine whether
current arrangements have been successful in delivering the relevant
Ministerial policy goals. Agencies and NDPBs are just two of a number of
vehicles for achieving the outcomes which the Government ultimately
wants to achieve.
2. This Fact sheet describes the main options to be considered as
part of the process of deciding how best to deliver public services in
the future; and the sorts of questions which Departments and review
teams should consider asking when considering each one. These options
relate to the whole organisation, and conclusions about the best option
do not rule out other solutions for specific activities within an Agency
or NDPB which should be assessed through Better Quality Services reviews
(see Fact Sheet 11). In
addition, it may sometimes be the case that the best means of delivering
services and functions in the future will be a combination of more than
one of the options described below. And it should also be open for the
review to conclude that although a particular option is not appropriate
at present it may become so in the future.
3. For many Agencies and NDPBs, the delivery of their business
already involves private sector involvement. This should not preclude
consideration of any of the options, but there may be legal, cost and
market implications that will need to be kept in view. Where these
situations exist, the need for sensitive handling of a wide range of
stakeholders is essential. The review should also consider the
organisational possibilities afforded by new technology; and whether
electronic commerce offers scope for delivering services and functions
in a new way.
Options in detail
Abolish activity that no longer needs to be done at all:
 | Is it essential to Government and Departmental policy
objectives? |
| Is there sufficient demand from customers? |
| Would providing the service be a justifiable use of
taxpayers’ money? |
| What would be the costs and other effects of not providing
the service? |
Continued Agency or NDPB status
| Should not be seen just as the default option, chosen
because none of the other options is thought to be
appropriate. |
| How successfully has the Agency or NDPB achieved its key
performance targets and in doing so contributed to the
delivery of Ministerial objectives? |
| How well has the Agency or NDPB informed the development of
policy and vice versa? |
| Have the freedoms and flexibilities, given to the Agency or
NDPB, been used and contributed to its level of performance? |
| What do its customers, staff and their trade unions think
about how well it has delivered its services and functions? |
Further guidance on the types of questions to be asked, when
considering how well the current Agency or NDPB set up has
delivered what was expected of it, can be found in Fact
Sheet 3.
Strategic contracting out
A competition, without an in-house team competing, between
external bidders (usually the private sector, but there could be
bids from the voluntary sector, or other parts of the public
sector) for work previously done in-house. If, in the
circumstances, Transfer of Undertakings (Protection of Employment)
Regulations (TUPE) 1
applied, staff currently carrying out the work would transfer to
the external employer. Effective contract management will need to
be in place should this option be chosen.
| Is the function assigned by statute to a Minister, officer
holder or local authority? If so, the power in Part II of the
Deregulation and Contracting Act 1994 would need to be used. |
| Is the market capable of providing the service? If the
market is not particularly mature, does it show signs of
developing and expanding to meet the challenge of market
testing and contracting out? |
| Is expertise required which the private sector is better
able to offer and develop because of specialisation and
differences in size (and which might also offer transferring
staff the chance to specialise)? |
| Who would bid? Is there a risk of strategic dependence if
the potential market is limited? |
| Where there are workload fluctuations and the potential for
rapid technological change, can the private sector offer
economies of scale and greater flexibility? |
| What would be the effect on staff? How much uncertainty
would there be? What would be the opportunities for staff? |
| Would the private sector be better at managing the risks
associated with delivering the service and can these risks be
transferred at reasonable cost? |
| The results of the option appraisal that justified the
choice of strategic contracting out, including the comparative
cost of the public sector meeting the specified requirement,
should be used as benchmarks and reviewed if necessary. |
| Is capital investment needed? If so, the Private Finance
Initiative should be considered. |
Market test
Hold a competition with an in-house team competing against
external bidders.
If an external bidder was successful, the work would be
contracted out, and, if, in the circumstances, TUPE 1
applied, the staff in the in-house team would transfer to the
external provider. If the in-house team were to win, they should
be awarded a Service Level Agreement 2
– which should be essentially the same as a private sector
contract to ensure fairness during the bidding process.
| Is the service or function new, without an existing in-house
operation? Has the Department the resources to set up a
function in order to compete? What would be the implications
for other parts of the Department of earmarking resources in
this way? |
| Are the skills and management capability necessary to mount
an in-house bid available in the Department? |
| Is there scope for an in-house team to compete in
partnership with an external organisation? |
| How strong is the likelihood that the in-house team would
offer better value for money than the private sector? Would
they be able to make a viable bid? Or, would their
participation in the competition be, in reality, an attempt to
maintain morale? If so, have other means – such as rigorous
internal restructuring – been adequately considered? |
| What would be the effect on staff of uncertainty during the
market testing process? Would they be less likely to
co-operate with a private sector contractor if the in-house
team were to be unsuccessful in the competition? |
| Would it be fair on staff to make them compete with
organisations that later they might have to work for, if an
external bid were successful? |
Merger or rationalisation
Consideration should be given to the scope for merger or
rationalisation with other areas of government providing similar
or complementary services. Where appropriate, this should also
include an examination of the potential for merging offices which
form part
of a regional network with other government offices in order to
provide a "one stop shop" service. TUPE/staff transfer
issues can arise in these cases as well 1.
Support for the costs of doing so may be available from the Invest
to Save Budget 3.
Privatise
The service may need to be provided, but need not be the
responsibility of the public sector. If, in the circumstances,
TUPE 1 applied,
staff currently carrying out the work would transfer to the
external employer.
| Is the service, or something similar, being provided in the
private sector? |
| If the Government was not responsible for the service, would
significant needs go unmet? |
| Would the private sector muster the skills and resources
necessary, if the market were left to respond to the
particular service needs in question? |
| Could the Government ensure that needs were met with better
quality at optimal cost through regulation? |
Privatisation would put the responsibility for funding on the
private sector and provide a tax revenue from the new private
sector provider, therefore reducing central Government's demand
for resources. It should provide the private sector with new
investment and growth opportunities. |
4. Further guidance on other issues to be considered in relation to
contracting-out, market testing and privatisation can be found in the
Better Quality Services handbook.4
5. All options should be assessed equally on their merits and there
should be no presumption at the start that any of the options is to be
preferred over the others, except for NDPBs, where reviews are required
to consider first the option of abolition. In the interests of the
efficient handling of an Agency review, it is also likely to make sense
to consider the question of abolition early on.
6. Not all options will necessarily have to be considered in equal
depth in order to assess them properly, but the review should provide
clear evidence that they have been covered adequately. It may be that,
after an initial but rigorous consideration of each of the options, it
is possible to discard some as inappropriate in the context of the
function or service being reviewed. In which case it is open to
Departments to concentrate their effort on those options which are
potentially the most suitable, before choosing that which is the most
suitable.
7. In considering the various options, the review should seek the
views of customers and other interested parties, including staff and
their trade unions, and interested private sector companies, on the best
way to deliver the Government’s objectives through the services and
functions being reviewed.
Footnotes
1. See Chapter 3 of Better Quality
Services: A handbook on creating public/private partnerships through
market testing and contracting out, 1998, ISBN 0 11 630964 4. (Available
on the Internet at http://www.cabinet-office.gov.uk/eeg/1998
quality/hb_ind.htm).
See also the consultation document Staff Transfers in the Public
Sector: Statement of Practice which proposes that there should be a
presumption that staff transfer and TUPE applies to the contracting of
most services by the public sector, except in certain defined
circumstances. Available on the Internet at http://www.cabinet-office.gov.uk/civilservice/1999/pmp/tupe.htm
2 CUP Guidance Note 44.
3 Copies of the Invest to Save
Budget bidding guidance are available on the Internet at http://www.hm-treasury.gov.uk/isb/isbbid3.html
4 Better Quality Services: A
handbook on creating public/private partnerships through market testing
and contracting out, 1998, ISBN 0 11 630964 4. (Available on the
Internet at http://www.cabinet-office.gov.uk/eeg/1998
quality/hb_ind.htm).
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