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Local government can lead the way in contracting for the future

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Given the current challenges facing all providers of services there is a strong case for accelerating the development of councils as service integrators, who will map, assemble, co-ordinate, align, and yes to some degree regulate, a network of local providers to deliver agreed outcomes within defined budgets.

This could then evolve into a local market maker, incubating new providers to sustain supply-side diversity. An example of this approach, rather than a traditional prime-sub deal, has underpinned the success of the Olympic Development Authority. If you accept this, then we need to look at what drives success in such integration – whether delivered by a public authority or through some form of strategic relationship with an integration partner.

The issue of service commissioning is still political and local politicians need to be comfortable with this approach, with the local authority taking responsibility for policy and strategy and the service integrator ‘delivering’ even if that means acting as commissioner itself (ie engaging the third sector or local organisations/charities.) Of course there are many examples of this in the sector already.

The next stage though is to commission on outcome. Most councils have key outcomes as part of their manifesto, but how do you capture this in a movable outcomes-based contract and what should you, or indeed can you, measure?

Delivery-based outcomes procurement also requires contracts that include flexibility and growth that are built in and accounted for in rewards, as well as ensuring contract length is iterative and business driven. There is also a need for honesty on both sides to share the risk in agreeing delivery based outcomes.

Local government is developing such models, moving away from traditional contracting methods to truly collaborative arrangements which are flexible enough to respond to whatever the future holds. But there is a strong need to revisit procurement processes, potentially transferring these to the integrator with freedom to develop and adapt to deliver what the procuring organisation really wants.

Our work with Hertfordshire CC has given clear sight on what can be achieved this way – an overall contract, and additional delivery decided by business cases where need and outcomes are agreed. This allows flexibility and avoids protracted and costly contract negotiations. It also then allows for workforce development or growth.

Will local government be in a position to contract to reduce something like teenage obesity rates? Potentially – as long as this is reflected in budget, flexibility, and ability to influence all areas, not just technology, and possibly including policy – that would be needed to achieve this.

Why shouldn’t this be possible as long as local government continues to develop new models for contracting?

Philip Ruston, business development director, Serco



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