Lincolnshire Compact

1. Lincolnshire Compact The impact of the public sector and the private sector working collaboratively to deliver public services – ‘Make or Buy’ and the pros and cons of working together Phil Ruston Business Development Director, Citizen Services, Serco UK & Europe December 2017

2. Outline Agenda • The Business Services Market and why it is important to UK PLC? • What benefits does collaborative, partnership working bring to public service delivery? • Where does it work well and where does it work less well? • Make or Buy?

3. According to the National Audit Office, the UK government spends £100bn a year on the delivery of services by external providers Private and not-for-profit providers have long played a role in the public sector as far back as competitive tendering in 1980 – with the UK now the largest and most sophisticated public service economy in the world In the UK public sector alone, providers employ just over 1 million people according the Business Services Association

4. Business Services is a key part of the UK economy

6. Achieving the intended benefits of contracting-out Getting a specialist in to deliver services can free up the client to focus on policy, strategy and stakeholders, and also deliver economies of scale. It can often provide access to skills that are difficult to retain in-house; contractors can provide clearer career paths for specialists and are not restrained by more rigid public sector pay structures. • Involving a private sector partner can help to do things that are difficult to do within the way the public sector manages itself, such as facilitating ‘spend to save’ risk investment, using commercial incentives, and providing operational flexibility. • Differentiating between the commissioner and the provider can help stimulate the reform of public services, particularly through the rigour of defining services through a contract, stimulating the search for new ways of providing the services and establishing a more rigorous performance regime. Source : The role of major contractors in the delivery of public services – National Audit Office

7. Productivity • We know there is a productivity challenge in the UK economy • Recent research by Centre for Economic Performance (CEP) found that most UK cities lag behind German productivity average. • Compared to UK’s ten “Core Cities” productivity in Munich is 88% higher and 42.8% higher in Rotterdam • January – June 2017 saw the strongest half year performance since 2012 with most activity focussed on private sector • BSA research also shows a link between greater use of business services and productivity. 1% increase in outsourcing adds £2Bn of productivity gains to the UK economy • Also showed that productivity gains were not at the expense of jobs and most intensive users of outsourcing experienced more than double average annual export growth*. • Skills and training is also a key to productivity gains.UK Employers spend less than nearly all other major EU economies and less than the EU average, a gap that has widened since 2005* * * *

8. Connectivity • UK’s Connectivity issues are well known. World Economic Forum ranked Britain's infrastructure as 24th in the world down from 19th in 2006. • HS2 will be the first major new railway built north of London in 120 years • No new runways in the south east of England since the 1950’s • IPPR Norths recent study pointed out that the North is six times less well funded per capita than London. • Importance of place based growth will increase as Brexit nears. • Integrating services such as employment support, skills and Health and social care provision are of equal importance to infrastructure and transport in improving peoples quality of life and providing a healthier, skilled productive workforce

9. Good Case Studies • Defence Business Services, : Serco partnered with Accenture to provide an extended leadership team (management insertion) to deliver DBS transformation objectives, delivering £64m of savings from 2012 to 2016 • LB Barnet and Capita: Capita appointed to transform the Customer Services organisation for Barnet, implementing new technology and modernising the customer experience, delivering net savings of 22% from 2013 to 2016 • Hampshire County Council and PA Consulting: Assistive technology partnership to manage care needs of Hampshire, with £4.7m of net savings made in the first three years and the service being recommended by 98% of users and 6,500 service users now living more independent lives at home

10. Bad Case Studies • Transforming Rehabilitation: inadequate funding jeopardising sustainability of supply chain – breaking up probation services into 21 smaller companies has fragmented the service with the funding model not adequately supporting providers • Nuclear Decommissioning Authority: flawed bidding process cost the taxpayer £122m after legal challenges from unsuccessful firms • Cambridgeshire and Peterborough CCG: Limited oversight and lack of commercial expertise led to poor planning and inadequate data, leading to the contract being wound up 8 months after it started, costing the NHS £9m

11. Weighing the make-or-buy decision

12. Identifying strategic, core, and outsourcing potential Strategic Ensure adequate investment Yes Process Future competitive advantage and/or emerging technology? Core Ensure world-class capability High Core criticality ranking Yes Renegotiate No Outsourcing Unwind/manage investment Pre existing commitments? No Low PWC strategy & report

13. Process Stages Analysing Stage Planning Stage Evaluation Stage Selecting Stage Define organisation needs Engage the market place Prepare and deliver request of proposal (RFP) Evaluate implication on company strategy Determine core competences Define motive, objective and scope Assess risks Senior management and employee announcement Choose the project leader Appoint the project team Choose independent advisor Measure current and future costs Measure current and future performance

14. Costing process Buy Make Providers proposal Costs that don’t disappear Activity costs Invested capital + + Labour Overheads One time costs Poor information + + + + Future pricing in providers proposal On going costs Raw material Other Total costs of buy-it decision Total costs of make-it decision