15 April 2019

The Value of Challenge

OPINION: Robin Davies, Business Development Director at Serco Environmental Services, takes a look at the role of competition in relation to local authority waste and recycling contracts.


The continuing impacts of austerity, the aftermath of the Carillion insolvency and the politicisation of public services has led a number of authorities to review their existing arrangements in relation to municipal services, including waste collection, street cleaning and facilities services.

A popular route given of late is the use of the procurement regulations ‘Teckal’ exemptions in order to set up a local authority owned trading company, to deliver services as a form of in-house delivery which has some of the characteristics of both in-house and outsourced arrangements.

Analysis, for a report out soon, has looked at a range of topics including service quality, cost and efficiency (image: Shutterstock)

Those advocating the use of Teckals cite benefits in the form of increased flexibility, avoidance of contractor profit and an ability to run the operation from a ‘ring fenced’ legal entity.

Those advocating outsourcing cite benefits of greater depth/breadth of management expertise, improved safety and KPI compliance and budget certainty from an accountable service provider.

Whilst the debate will continue partially influenced by political ideology and local circumstances there is a vacuum of well-researched and empirical data about the real benefits of both.

The trouble is that business cases made for a change in sourcing strategy are often based on desktop exercises undertaken by consultants or authorised officers which fail to properly evidence the likely future costs, financial and delivery risks to the operation, to the authority and to local council tax payers.

Research

Serco has been involved in commissioning ground-breaking research across municipal service market. The research draws together data from >250 different local authorities across the UK including both external and inhouse provided services.

The work is designed to provide an objective and transparent look at the impact that challenge and competition has had on a wide range of cost and service quality and efficiency related metrics over the past ten years.

The research draws on a wide range of data – the report from the ESA is supported by Serco

The analysis includes cost of service, recycling performance, KPI performance, productivity, customer service metrics and cost inflation over time.

The research draws on the widest data with headline observations before providing a more focussed analysis on authorities with the same collection methodology and frequency, similar demographics and urban/rural mix (nearest neighbours).

Early first signs point to the benefits that regular competition, challenge and contestability has had on improving the cost effectiveness, quality and performance of the municipal services sector over the past ten years.

They support the strategies of both political parties over several decades of exposing public services to competition through competitive tendering or challenge to the status quo through the application of ‘best value’.

What is key is that the ‘way things are currently done’ are fundamentally and regularly challenged in order to ensure services are efficient, cost effective and harness the benefits of new technology and public and private sector best practice.

Evidence base

In publishing the data set Serco and other organisations with an interest in delivering better public services will provide local authorities, consultants and practitioners with an ‘evidence base’ to draw upon when exploring about changes in approach to sourcing decisions.

Most importantly we seek to go beyond a view that one model is good and the other bad and to evidence the very positive impact regular ‘competition and challenge’ has on delivering more effective public services over many years and under different political colours.

AUTHOR: Robin Davies, Business Development Director at Serco Environmental Services

But the research is not just about the past but also the future. The current waste strategy consultations all about moving greater responsibility to fund recycling onto producers of consumer goods.

It is in the interests of those who produce consumer goods that we continue to provide best value for money for each and every tonne we collect, process and recycle. Ultimately this means lower prices for the goods we will purchase at home and a more efficient and agile exports sector abroad.

The Environmental Services Association is due to publish the results of its research into the impacts of contestability and competition on the municipal services market within the next several months. 

 

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