The public sector spends around £242 billion a year on independent providers. The extent of this spend is often not recognised and it is crucial that public services achieve value for money from outsourcing.
Reform believes that the principle of competitive markets is sound: opening services to competition is a powerful lever to reduce cost and increase innovation.
While there are many examples of successful practice, not to mention the unnoticed success of the day-to-day services that are provided in hospitals, schools and on streets, government does not always achieve value for money. Poor procurement practices underpin this. Officials do not always have the right skills, information or incentives to make sourcing decisions effectively.
High churn leads to a loss of institutional expertise, learning and reduced accountability for services. A heavy focus on price has led to a race to the bottom in cost and reduced trust between government and suppliers. Aggressive risk transfer from government, including asking providers to shoulder unlimited liability, creates barriers to market entry.