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Thinking outside the box

Wed 09 Jul 2014

When it comes to public sector cuts, the private sector has the answers

Since the financial crisis rocked the world economy back in 2007 there have been a number of changes to how Government manages its finances. Nobody has escaped austerity measures and although there are signs of recovery, the level of debt is such that more cuts are required, especially in the public sector.

In order to balance the books, the UK Government is turning to the private sector to utilise its expertise to help reduce current debt levels. “The Civil Service has a very good reputation for delivering on policy and dealing with diplomatic situations, whereas the private sector can offer innovation and operational excellence, which can help Government to drive costs down. So by outsourcing to the private sector, costs can be reduced, and at the same time, a better level of service can be delivered,” explains Steve Lamey, a Consultant Advisor on the public sector marketplace. 

With the cost of debt levels running into the billions, rather than implementing huge tax rises, the Government is leaning increasingly towards outsourcing services to help reduce costs: “The private sector has a fantastic opportunity to build a relationship with Government to combine expertise for the benefit of public services,” explains Marina Calcutt, Business Development Director, Equiniti. “There is a real appetite in Government to start adopting some of the ways the private sector works, especially around innovation and the way it streamlines processes, and as part of this, they have started to think about how they can get the most out of their relationships. That means going so much further than working with private sector organisations that just deliver against a service level agreement (SLA) – it needs to be a partnership,” Marina says.

By developing partnerships based on value rather than just achieving a list of pre-agreed outcomes, both the public and private sector can gain so much more value from the relationship: “It’s all about collaboration and working together to establish how to get the best value out of that partnership. Government is now acknowledging that the supplier relationship is just as important as some of the metrics that come out of that relationship. “In the past it has been a one-way street, where suppliers have just been asked to deliver to a certain degree,” Steve says. “But that conversation is now opening up and that’s a really positive thing because it means that the private and public sectors can come together and get value out of those relationships.”

The private sector has a fantastic opportunity to build a relationship with Government to combine expertise for the benefit of public services

In addition to Government’s change in mood, there has also been a change in attitude, and a desire to harness the creativity that can come from the private sector, with the Government then benefitting from the efficiency in savings. Furthermore, there have been occasions when Government relationships with private sector companies have hit the headlines, which has brought some key lessons to the fore: “There have been major issues in the past, which indicates that there has to be a change in the way the public sector works with the private sector and it’s all about moving away from the terms of a contract to a collaborative relationship,” says Steve.

“The private sector also needs to be aware of the appetite for risk in Government,” Steve explains. “It is very low and they need to know they are in safe hands if they are going to enter into a partnership with a private sector organisation.” This attitude to risk has given way to a joint-venture model, where rather than outsourcing a whole operation, the Government – in direct partnership with the private sector – manages a specific project. “Government is very keen to do more joint ventures, as it gives them greater control over large-scale contracts and helps to minimise risk. It is better for both parties as it allows you to be on the journey together; you’re not working against each other and so going forward I think you will see a lot more of this, rather than just pure outsourcing. Joint ventures are incredibly interesting and Equiniti is working with Government on some of these, so it is a very exciting time,” says Steve.

“As an organisation, Equiniti is able to use the expertise it has built up over the years of working with different organisations – including the recent success of the MyCSP joint venture with Government – to help drive down costs,” Marina says. “In turn, this will have a positive impact on the current debt afflicting the country and help to turn things around for the future of  Great Britain.

“Equiniti is in a unique position to engage in further partnerships with Government,” says Marina. “Government has acknowledged that utilising the skills and expertise of the private sector will help to drive down billions of pounds of debt. Once that has been unlocked, it will have a massive impact on our economy.”