Institute calls for major contracts review

Published on Thursday, 18 July 2013 13:15
Written by Scott Buckler

Whitehall must slow down its plans to expand markets in public services because it lacks the expertise to design and manage complex contracts effectively, says the Institute for Government (IfG) in its new report Making Public Service Markets Work

New research has found mistakes in the design and management of public service markets in areas such as care for older people, schools, probation and employment services.

Public service markets are now estimated to be worth nearly £100bn, and growing. The pace of the current shift towards using markets to deliver key services, however, outstrips the ability of those in Whitehall charged with designing and implementing them, the report concludes.

The Institute identified poor behaviours by service providers and poor outcomes for service users across all types of providers - public, private and voluntary.

'Making public service markets work: Professionalising government's approach to commissioning and market stewardship'  is an in-depth study, which involved over 80 interviews with senior figures throughout the commissioning, design and supply chain of public services.

The report looks at four key services that are largely reliant on markets to deliver them: employment services (the Work Programme), care for older people, schools (including academies and free schools) and probation services.

The report has found that markets can work well in some services, such as refuse collection, but complex areas need much more thought about design. It concludes that implementing too many market reforms at once is a 'high risk' strategy.

The report gives examples of bad market design, which has led to some providers 'gaming' the system for their own advantage and 'parking' the hardest to help.

Government also needs to ensure that there is genuine competition, with enough providers competing, that it can identify who is doing well (or badly), and that good performance is rewarded and underperformance penalised.  Designing and overseeing public service markets requires Whitehall to acquire a different set of skills; civil servants and local commissioners need to professionalise their approach to market design and oversight urgently, the report says.

The Institute makes radical but necessary recommendations to get the programme on track and on to a more sustainable footing. In order to implement them and avoid future mistakes the government should fix the flaws rather than accelerate this agenda.

- See more at:

Add comment