As the civil service seeks to save money and reform services, it will need to adopt new models of delivery. Suzannah Brecknell reports on two round table discussions exploring new ways of meeting citizens’ needs

As we move further into the new decade, civil servants are being given substantially less money; asked to devolve power and withdraw from direct service delivery wherever possible; and encouraged to look at new ways of achieving social and economic goals.

At two recent Civil Service World round table debates, both held in partnership with Tata Consultancy Services (TCS), civil servants from across government met to discuss, firstly, what kinds of new models might be used to deliver services in an era of reduced budgets and public sector reform; and, secondly, how particular delivery models might be developed and implemented.

Civil servants have been looking at delivery models to find savings for many years now but, at the first round table, Institute for Government fellow Adrian Brown, pointed out that it is not just funding pressures which will drive new models in the future. The Big Society agenda, he said, challenges the public sector to think about service delivery “less through the lens of the money and assets that the public sector is in control of, down through its classic delivery chain mentality to the front line; and [instead to] think about the opportunities to blend funding, assets and people across the sectors.”

First things first
Before managers begin to look at new models of delivery, advised Ruth Fraser, TCS business development manager, they should make sure they are building their plans around “the right business model. The commercial model is part of that, but it’s an enabling model; it’s the operational model that matters to the core business.”

Naresh Mohindra, head of European public sector consulting at TCS, suggested that public services could be moving towards a “depolarisation” model, as seen in financial services, where many different providers supply the different parts of the delivery chain. John Quinn, chief operating officer of the Department for Work and Pensions’ Shared Services, drew on his own experience in the financial sector to expand this point. This process, he said, forces organisations to question core competencies and change mindsets: “You don’t need to own the whole delivery chain, [but should ask] what value do you bring to the whole delivery chain?”

In many cases, civil servants will need to perform these analyses quickly in order to deliver reforms and savings needed within the timelines set out by the coalition. What, then, can civil servants learn from the new models which have already been tested in government? And what must they consider as they explore new ways to meet the needs of service users?

Above: First session attendees - (back row, l to r) John Viggers, James Ablewhite, Iain Kent, Adrian Brown; (front row) Sharon Cooper, John Quinn, Ruth Fraser, Naresh Mohindra

A model for innovation
One model which is not yet widespread, but has clear policy backing, is the transfer of public service delivery to new mutal organisations established and owned by public sector employees. In August Cabinet Office minister Francis Maude launched 12 pathfinder projects, and it is expected that a second wave will be announced soon.

This model was mentioned only briefly at the first round table, but in the second discussion the interest was much greater. Perhaps this was because in the intervening time Maude had announced that public service employers will be obliged to accept any well-founded proposals for mutualisation put forward by their staff: this is now a topic with which all managers must begin to familiarise themselves.

It was a boon for the participants, then, that their number included an expert on mutuals: Tom Shirley, a senior policy adviser working on the mutuals project at the Cabinet Office. Shirley gamely answered a range of questions – though in many cases the answer was that, in the spirit of local empowerment and diversity, solutions will vary. Each new organisation will be developed on a case-by-case basis, he explained.

There has been a “wide variety of interested parties”, he reported, although their objectives are consistent: to realise autonomy for frontline staff, and to deliver more responsive, innovative services. This local responsiveness is likely to lead to a range of different solutions, said Shirley, with different resolutions to issues such as the transfer of public pensions and the service commissioning mechanism. It may be necessary to protect new organisations from full market competition initially, he said, but there must be very good reasons for doing so and the chief concern is “ensuring procurement regulations are applied”.

At the first discussion, Brown mooted the possibility that mutuals are simply “a step in the journey towards full marketisation or privatisation of public services”. Responding to this issue at the second round table, Shirley said there will be no general principle to prevent mutual organisations from falling into private hands, but “clearly in some services, some workforces, there are very good reasons why you wouldn’t want to go in that direction”. As services are transferred, officials will need to balance the need for new organisations to access capital and investment with the drive to protect public sector assets where appropriate and to prevent “unduly large rewards,” he said.

There is also an element of self-regulation here, said Phillip Smith, of the workforce directorate in the Department of Health: “If it’s a true mutual the staff would have to vote to go into a private organisation; obviously, they’re not going to vote that way if they don’t think it’s going to work.”

Above: Second session attendees -(l to r, back row) Phillip Smith, Steve Heminsley, Tom Shirley, Sandy Gordon, (l to r, front row) Collette Stone, Gerald Power, Sharon Cooper, Naresh Mohindra, John Collins

The financial driver
Broadly, the new models being developed involve elements of shared investment, shared profits and, underpinning these, shared risks. This might be achieved through formal joint ventures, or profit- or savings-sharing contracts that pay on delivery of results, rather than for the delivery process itself.

Across the two sessions, participants discussed a range of these models, including several current examples. John Viggers, of the DWP fraud and error strategy division, explained that his team is exploring a ‘payment by results’ model whereby a provider sets up a service, and the department only repays them for the capital investment if that provider can demonstrate the value of their service. Intelligent metrics for measuring success are crucial here, he added: “If we can’t agree or agree the wrong measures, somebody or other is bearing an enormous amount of risk,” he said. “Either the company bears all the risk and we don’t refund them, or we end up paying for something we don’t want.”

This was echoed at the second round table by Gerald Power, a channels and efficiency policy adviser from the Cabinet Office who mentioned another payment-by-results model – one in which an external partner’s investment produces efficiency savings which are then shared between the partners.
Power pointed out that such incentive-based contracts have “been going on for decades”, largely in areas that rarely enter the public debate. From these contracts, he said, commissioners have learnt “a lot about risk and the fact that you cannot transfer risk as easily as you think you have”.

If you ask contractors to take on too much financial risk – for example, by requiring large upfront investment with a very slow timescale for returns – they will build in high margins, said Power: “It looks like you’re transferring risk, but in fact you’re buying a very expensive insurance policy.” Mohindra agreed, arguing that most private companies would prefer a more genuine joint venture approach, with shared investment on infrastructure and “joint rewards as you begin to realise the value”.

These arrangements require flexibility in the contract to allow for changes in the market. One drawback of large PFI contracts, said Power, was that you “had to commit to a contract which was going way beyond your horizon of knowing what you’re really going to need”. A more balanced risk approach would allow for shorter, more flexible contracts which could more readily be adapted to meet changing requirements.

Relationships and a good mutual understanding of the required outcomes and delivery process are also important in these models. Quinn, in the first session, pointed out that when developing commercial partnerships in the private sector, numbers are “almost the last bit of it”. It’s all about the relationship, he said.

Skills in partnership-working and relationship-building, however, may be confined to particular departments, or to particular teams within departments; and Collette Stone, head of leadership and management capability at the UK Border Agency, suggested that for “less confident or entrepreneurial” departments it might be useful to develop a “critical friend function” to support and advise less experienced staff.

Franchising
Another model with strong central support is franchising: opening up public sector data to businesses and voluntary organisations, which then design and produce their own front-end delivery systems. At our round tables, this model was closely associated with the drive to move more services to an online delivery model: all departments are now being asked to plan how their online services can become APIs (Application Programme Interfaces, a franchise enabler for the digital world), in line with the recommendations of Martha Lane Fox’s strategic review of Directgov.

Done well, franchising may provide a way to deliver assisted access for vulnerable groups. Services provided through post offices, which are in themselves franchises, offer one such model; Power also cited Citizens Advice Bureaux, which have access to government benefits data in order to provide advice and support to their customers. Sharon Cooper, director of proposition strategy and product design at Directgov, suggested that other specialist charities such as Help the Aged might want to offer a specific service for their beneficiaries – processing benefits for elderly people, for example. Franchising could also “drive more localisation of services,” argued Quinn, “if you had that API link, you could create the hub – which could be in any organisation – to interact with a number of public services”.

Cooper’s Help the Aged suggestion is a strong example of the way in which franchising could benefit citizens through more personalised service delivery, but she also raised the risks involved if less public-spirited businesses exploit this demand to access government services. As Directgov grows, she said, so do the number of scam sites that look exactly like it. Some are explicitly fraud sites; others provide a service of sorts – for example, by charging people to carry out a transaction which they could access free of charge. It’s a scam, she said, but also a legitimate business, making it hard for government to clamp down on. Civil servants, she continued, are not able to rate these services – but the public could. She suggested encouraging the creation of “a ‘Trip Adviser’ or ‘Compare the Market’ for public services”, which would “very quickly use the public to say: ‘That’s a really good service’, or: ‘That’s a bad one’.”

In a formal franchise model, departments can set guidelines on minimum service quality, brand use and so on; but as the government seeks to push out more data through the transparency drive and APIs, departments face the challenge of dealing with informal franchises. “We can’t be overzealous in protecting the brand because we’re saying: ‘We want to give this stuff away, we want to open it up, we want to allow other people to develop much better services than we would do ourselves’,” said Cooper, “but at the same time we want to ensure the public understand who they are transacting with.”

Cooper advised starting small and working, initially, with familiar partners such as community, voluntary and public sector bodies.

Pay as you go
The last model discussed was a ‘pay as you go’ system in which public sector organisations buy in capacity as required, rather than owning their own infrastructure or buying capacity in advance. This is already happening in some areas, such as data storage, but Power added a little-known, service-related example: the health department’s management of contracts with telecoms and call centre providers during the swine flu crisis.

As the situation escalated, he explained, the department negotiated with providers to provisionally book blocks of capacity, agreeing the notice period needed and the costs involved in activating those centres quickly to meet the changing needs of the pandemic. “The fact that we hear very little about it is probably testament to the fact that it did work extremely well,” he commented.

This suggests that achieving this ‘as you need it’ service needn’t be about a straightforward ‘pay as you go’ contract, but may also involve simply having greater flexibility and reacting more quickly to events. This would require two things, delegates agreed. First, a relatively mature private sector market able to provide the required capacity and absorb the risk of under-utilisation; and second, said Mohindra, some level of guaranteed take-up from the public sector.

This means that in many cases a ‘pay as you go’ model might be effectively combined with collaborative procurement, providing both greater take-up and less risk for the private provider, and better value for departments. It is also beneficial to have more than one supplier, “so they will compete with each other and drive the price down and innovate”, said Power. These areas could be overseen by existing ‘category managers’ who “bulk-buy commodities from multiple suppliers for the whole organisation”, he said; their skills would transfer easily to these on-demand style models.

A risk round-up
At both round tables, the discussions turned to risk – concerning both the specific concerns with different models, and the broad risk of failure when developing a new approach to public services.

Delivering new models will require new skills – departments must improve their contract and supplier management, suggested Iain Kent, of the UK Border Agency. Commissioners in particular will need to become much more aware of risk, said Power, and able to explain to politicians and colleagues what elements of risk were built into different pricing and delivery models.

Several delegates raised the underlying concern that it will be officials, not their delivery partners, answering parliamentary questions, facing select committees, and on the end of negative National Audit Office (NAO) reports if a service fails or is seen to waste money. At the second session, NAO audit manager Sandy Gordon was able to offer a helpful perspective on risk management. The NAO wants “decisions to be made on evidence – understanding the costs and cost implications of the transition”, he said. “Where there is no real evidence, the way forward is piloting and testing [using] pilots which release enough information to make a quick decision about whether things are working or not.” Departments should also outline their contingency plans, he said.

But the final word on risk should go to Power, who asked: “What’s the risk if we can’t make it work?” If civil servants don’t develop new models, the public sector could be stuck with outdated and unaffordable services “increasingly out of synch with what people expect in the rest of their lives”, he said. New models of delivery may present “short-term risk to the project manager and the department of the embarrassment of trying and failing”, he added, “but there’s a big risk to the public that we don’t try it at all, and we’re stuck where we are, with the sure and certain knowledge that we’re doing it wrong.”

Written by Suzannah Brecknell, CSW