Flash Update: "The Outsourcing Playbook"
Given that the UK Government has been rather busy this week, it’s great to see it finally got a chance to publish the Outsourcing Playbook. Simply put, the Playbook provides straightforward guidance on how central government should approach outsourcing from initial decision through to transition.
Chapter 8 (starting on page 38) is a good read for us construction folks. Lots of nice ideas/statements, but unlikely to spark the much needed change we need in my opinion – not without a massive push from public sector buyers anyway. A few choice extracts below to feed into the conversation:
On the topic of risk allocation:
"Ensuring that risks sit with the party best able to manage them is central to the Government’s approach to delivering value for money and partnering with the private sector."
On the topic of contract pricing:
"Departments should avoid fixed price payment mechanisms where the scope of the contract is not fixed (and relevant volume risks are outside of the control of the supplier)."
On the topic of onerous contracts:
"When a contract is publicly designated by a supplier as onerous, this should prompt a root cause analysis and a conversation with the supplier about the options available to address this."
In my experience, plenty of public sector contracts go completely against the grain above. They pass all risks to the contractor… on a lump sum basis… and don’t want to hear anything more about it.
In an ideal world, the market would not price these projects or alternatively, price them properly with a fair allowance for risk. But in the real world, there is always someone out there willing to take on the work at a sub-economic price and no one wins – especially not the taxpayer. Will we ever fix this? I think so, but we are still a long way off.
Anyway, just food for thought. Generally speaking, the Playbook is actually a really well written document and will be useful for both buyers and suppliers alike!
If you have any questions, please drop a comment or get in touch.