The Introduction, as scene setter, briefly introduces the new UK procurement legislation and political debates that arose in the context of its enactment, highlighting ongoing and serious problems in public service outsourcing. It outlines the aim of the book. It then briefly introduces each chapter by way of summary.
Chapter 7 assesses the potential design of a new procurement policy on sustainable corporate ownership, which would likely be permissive, leaving scope for discretion and experimentation with bidders mapping themselves against the criteria of sustainable ownership (purpose, power, profit). It considers how the policy might be accommodated within the current legal framework for procurement, assuming, given its very recent introduction, that appetite for further legislative changes will be limited, at least in the short term. The chapter considers both reserved contracting procedures and award criteria relating to quality and wider social value. Substantively, the policy would have to be assessed carefully against a number of risks, including its potential impacts on competition and capabilities in service delivery and on existing social economy organizations. These, however, are not intransigent problems in the medium term.
Chapter 6 considers that by outsourcing more services to sustainably owned suppliers, the state can create important secondary benefits in terms of strengthening the role of these organizations in the economy while also improving public service outsourcing. Winning public contracts can help these organizations access finance and build other important resources (such as governance and measurement tools) to sustain and grow their business, to innovate, to diversify and to reward their workers. There is potential for a positive feedback loop in which the state can create win-win by reducing outsourcing risks at the same time as nurturing more sustainable market actors, tempering the wider problems of a financialized corporate economy for society.
This chapter introduces primary and secondary objectives in public service outsourcing. While the former focus on the delivery of the services in question, the latter address the pursuit of ancillary policy goals in their delivery – for example, to create employment and new businesses, to address discrimination and inequalities, and to support environmentally sustainable business practice. In line with the aims of the book, the chapter considers secondary objectives that relate to corporate ownership forms, introducing the new duty in UK law to consider business diversity in public procurement as well as current policies that support smaller and social providers in public procurement. The chapter considers, more generally, the evolution of ‘social value’ as a secondary procurement objective in Britain.
Chapter 2 outlines typical problems in current public service outsourcing. Complex public contracts are inevitably incomplete, leaving gaps and ambiguities, and allowing discretion in their delivery, which contracting parties may exploit for their benefit. Exploitation becomes particularly problematic where the state relies repeatedly on private partners, creating risks of incumbency and lock-in effects that can give rise to dependencies, transferring capacity from the public to the private sector, sometimes permanently (in the form of institutional knowledge, for example). Where private suppliers operate a highly financialized governance model, incentives to exploit both incomplete contracting and incumbency situations are further reinforced.
Compelling and robust, this book provides an analysis of challenges in public service outsourcing and considers how to avoid failure in the future.
Crucially, it proposes a governance mechanism where outsourcing public services nurtures a less extractive corporate form that is oriented towards a productive purpose beyond maximising shareholder value, with implications well beyond public services. Under these proposals, fostering purpose-driven companies that are independently governed and use profit to pursue purpose can improve both public services and wider economic organisation.
Examining how barriers to implementing this idea within the existing EU and UK legal frameworks may be addressed, the book formulates actionable policy proposals.
Chapter 3 surveys a range of governance interventions that are available for states to resolve outsourcing problems. Contractual governance centres on improving contract design and management, seeking to strike a balance between detail and formalized contracting and relational or framework contracts. Beyond contracting, the state may seek leverage in public markets (public procurement) to impose accountability on providers keen to enter or continue their partnership with the public sector, or it may, by selecting different types of provider, diversify its provider pool to temper incumbency powers. It may use regulatory governance to impose additional constraints on providers, supplementing contractual and market mechanisms, and it may potentially create an institutional body – for example, a public or regulatory agency – to oversee implementation.
Chapter 4 examines solutions to public outsourcing problems that rely on a specific form of supplier ownership. These include, on the one hand, the possibility of insourcing public services – taking them back in-house – to reinstate public ownership. Public ownership comprises variations beyond traditionally centralized administrative control, including, for example, the majority state-owned company. But, on the other hand, the state may select private providers that commit to a sustainable corporate ownership form in which internal governance elements relating to purpose (beneficiary rights), power (control rights) and profit (economic rights) are reconfigured so as to temper financialization within the firm, ensuring that the governance incentives of public and private contracting partners align more closely and reducing exploitation and formalization of outsourcing contracts.
Chapter 5 explores the design elements in sustainable ownership: corporate purpose, power and profit. It introduces elements operating in social economy organizations but also those that operate in the wider economy. In the social economy, these encompass community interest companies, cooperative or community benefit societies and companies limited by guarantee operating under a non-distribution constraint. Those in the wider economy include purpose-driven firms that distribute profits, including certified B Corps or firms incorporated (outside the UK) as a benefit corporation. The chapter considers stakeholder co-determination and mutual and employee-owned firms as well as companies in foundation ownership. It provides no comprehensive survey but addresses what these forms of sustainable corporate ownership might be able to offer to improve public service outsourcing and reduce existing problems and failures.
