Outsourcing is Too Big, Time to Manage it Back Down to Size

19th January 2018

Simon Lydiard reflects on the implications for public sector outsourcing of Carillion’s collapse

The collapse of Carillion was an accident waiting to happen. To understand why, just reflect on Theresa May’s claim at PMQs that the Government were customers of Carillion, not its manager.

Until two years ago, I was Director of the Department for Transport’s Contract Management Excellence Programme, and responsible for managing strategic supplier relationships.

In recent times – under governments of various colours – public sector outsourcing has become more prevalent, and contracts have grown vastly in size and scope. The major casualty – apart, perhaps, from value for money – has been the public sector’s intelligent client function: the means by which services are specified and managed. I don’t just mean lack of resources, though that is a factor (I had to close DfT’s supplier management programme during the Coalition Government), but the collapse of confidence and logic resulting from the ideological elevation of the private sector over the public sector.

As contracts became bigger, the public sector began to lose “in house” knowledge and capability, such that even the ability to specify requirements diminished. The result was often the hiring of high-cost consultants to specify contracts. Once the contracts were let and the consultants had gone, public sector employees picked up the burden of management – often of very complicated contracts, which they were ill-equipped and ill-resourced to do.


A particular irony is that large outsourced contracts are both too expensive and too cheap. Fixed-price contracts aren’t usually adjusted up or down to take account either of efficiencies or cost growth. Greater public sector provision or control could hold prices closer to real costs. The price paid also includes a high premium for private sector management – witness the huge salaries paid to Carillion’s senior managers. Public sector counterparts are paid far less. But smaller suppliers are often squeezed on price – meaning that much of the “front-line” activity is under-resourced at the expensive of private sector bureaucracy.

So, is the era of outsourcing coming to an end? I don’t see it as starkly as that. But I do think there should be a major shift – towards smaller, more specific contracts. Outsourcing smaller packages of work, with smaller, more specialist companies. Rather than buying big packages of work from companies, who often themselves outsource to smaller companies – taking a large “cut” to manage them and not always treating them fairly. What this means for the public sector is the need for a larger, better-skilled and properly supported cadre of contract managers.

Public services are not retail offerings, and the public sector is not a casual shopper, a mere customer. Government has a responsibility to deliver to the public that it cannot outsource – and which it must manage.

Simon Lydiard is an Associate of DragonGate and a Founding Partner of Breaking Barriers Innovations.

Related articles

The Care Tech Campus Challenge Fund Report

REPORT Essex Care Tech Campus Assessing the Outcomes from the inaugural Challenge Fund The Care Tech Campus Challenge Fund, launched in May 2023, serves as an early demonstration project for the core principles and benefits of the Care Technology Campus in Essex. These core principles and benefits include codesign and development with users, providers and the…

Read more

Securing National HQ of Great British Railways to Derby

In the teeth of determined civil service opposition, it was brave of the government to commit 750 top posts in the Treasury to Darlington and 500 in the Ministry of Housing and Local Government to Wolverhampton as part of the imminent Whitehall relocation programme and levelling-up agenda.

Read more

Moving Out: What are the Benefits of Civil Service Relocation? 

The Institute has produced a thought-provoking piece as Government prepares for a programme that will see 22,000 civil servants relocated to the English regions and devolved nations during the current decade. But there some important gaps in the paper with too much emphasis on the costs and too little on the very real savings and improvements that can be made, both in the short and the long term.

Read more

Farewell Quarry House!

The BBC’s news today about the Leeds DWP office failing to enforce social distancing following an Health and Safety Executive inspection brought back many memories of Quarry House – a building which carries the rather unkind soubriquet “The Kremlin”.

Read more

You Know When You’ve Been Quangoed

For Boris Johnson’s shellshocked government, there has been little instructive from the worlds of ed and med in recent weeks.

Blame has flown and political heat applied to previously little known quango Ofqual and the much criticised Public Health England (PHE) before its demise and absorption into the National Institute for Health Protection.  Before this, the secretary of state for health and chief strategic government advisers were, apparently, unaware that they had the power all along to direct and control PHE.

Read more

Track and Trace – Why is Serco in the Frame?

Serco was awarded a track and trace contract valued up to £400m, apparently without competition.

Actually, there was a competition – kind of. Serco competed for, and won a place on a government “framework” contract. In effect, it is a catalogue – enabling governments to call off goods and services, without the need for further competition. In this case, the contract was for call centre services, and awarded by the Crown Commercial Service.

Read more

Times Red Box: No 10 must be ruthless to wrench the civil service from London

In his March budget the chancellor indicated the government’s intention to move 22,000 civil servants out of London by 2030. Michael Gove, in his recent Ditchley speech, spoke of relocating Whitehall decision-making centres to not only the main regional centres such as Manchester and Bristol but different parts of the UK.

But this will be nowhere near enough, and the leisurely timescale will provide ample opportunity for further delay and obfuscation, as it has done in the past. What is needed is a truly ambitious programme to relocate the majority of the 85,000 civil servants in London leaving only a core elite of a few hundred.

Read more

Pathways, Place and Priorities

This week Breaking Barriers Innovations hosted the “Pathways, Place and Priorities” Roundtable, discussing the potential impact of digital technology upon the health and social care workforce. We spoke to DragonGate & BBI Programme Manager Rahim Daya, to get his insights into how this fits into the vision for the NHS Long Term Plan

Read more

Connecting the Regions Through Clean Growth

In light of DragonGate’s recent “Connecting the Regions Through Clean Growth” Roundtable, DragonGate Programme Manager George Evans-Jones answers our questions regarding the Clean Growth Grand Challenge

Read more

Out of Sync

Tim Philpott reflects on how local authority property transformation spending may be missing out on the bigger picture

Read more

Passport Blues

Simon Lydiard reflects on the outcry over the contract for new, post-Brexit passports being awarded to a company based in the EU

Read more

Building Transformation in the Public Sector

The demand and financial pressures on the public sector are not going away; but policy activity from central government could nevertheless be the basis for far-reaching local transformation – well beyond the aims of the individual strategies – for the benefit of those who really matter: local citizens. That was one of the conclusions of a recent DGMI round table, hosted and facilitated by Kinnarps.

Read more

Relocation is Good for Our Nation’s Health

In his interesting piece in The Times on the 20th January, Matthew Parris uses the recently published ONS figures that highlight the severe health inequality across the nation. The figures present a jarring picture of imbalance between the London population and the rest of the country…

Read more

Out of Sync: Local Authority Transformation is Missing Out on the Bigger Picture

Ongoing DragonGate research has established that 2018-19 will be a high watermark for Local Government property transformation, with approximately 70 projects due to be completed over the next 24 months. However, with adjacent sectors such as the NHS, Higher Education and Central Government implementing similar programmes for property transformation there is little evidence that opportunities for place-based collaboration are truly being embraced.

Read more

Prime for transformation?

The sustainability and transformation partnerships (STPs) programme should harness and drive digital innovation as a positive force to help overcome barriers to the integration of health and social care and improve standards of delivery

Read more

And Justice for All

Nothing less than a ‘whole-place’ pooling of public service budgets and devolution of criminal justice system powers to local level can create the conditions for community transformation

Read more