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What the Carillion collapse tells us about the unspoken truths governing public sector contracts

January 18, 2018 Leave a comment

Carillion

Carillion is the big news this week, and is likely to remain on the media radar for some time, given the impact that the collapse of a Company of this size is almost certain to have on commercial relationships that are now an integral part of the public sector.

Moments like this are important for reasons which go way beyond the impact that Monday’s announcement is already having on jobs and the potential closures of many small businesses.

It is providing one of those very rare opportunities to glance inside the incestuous workings of contract delivery on behalf of government and gain an invaluable insight into why private interests working at any level within the public sector is in clear conflict with very ideals of what public service delivery is fundamentally about.

Regrettably, the clear focus of the media and political classes has already fallen upon the question and avoidance of blame. Yet if they were to begin to look just a little further and be open with what have for too long been the unpalatable truths, there would be just the merest hope that questions such as whether there can be a future for the NHS when it remains in a perpetual state of financial crisis could perhaps be genuinely answered.

So why are contracts going to private companies outside the public sector?

The best place to begin thinking about the contracting or privatisation problem is to look at why private business is really even involved in the delivery of government services of any kind, when government exists to operate for, on behalf of and for the benefit of only the public.

Man can only ever have one true master after all, and if money is the true motivator, then public service will at best become an oversight – the unwelcome relative left trailing way behind.

Whilst it may feel counter-intuitive to believe or accept it for many of us, the ‘privatisation solution’ has been in the main part created by Conservative governments in response to the consequences of policies created typically by Labour in order to enhance the rights, working conditions and influence of public sector employees.

Positive discrimination and rights, enhanced working conditions, gold-plated pensions and union indulgence within public sector organisations all cost an ever evolving sum of money in an increasing number of different ways, which usually create even more roles and dilute responsibility further and further still.

The cost of employing people within the public sector on conditions which exceed those of the private sector outside – even when salaries appear to be less, has simply made the delivery of services too expensive for government itself to provide.

Against this backdrop, all areas of he public sector have had to go in search of more cost effective ways to deliver services, and have had to do so in ways which also meet the rigorous requirements of providing services and employing staff as a government based organisations.

This has made the ‘marketplace’ fertile for the entry of private contractors who don’t have the same considerations as these former public sector based service providers.

When you consider that private contractors are providing arguably the same level of service, just without the same levels of bureaucracy – whilst making what in some cases is an outrageous level of profit besides, you can soon begin to see that something is inherently wrong with the way that the government system is now designed.

So how does public sector contracting by private contractors become a problem?

Business loves a contract. Contracts give surety. Contracts themselves can be used as a solid-gold guarantee – and particularly so when they are agreed and signed with government. This gives business confidence which can be misplaced, misused, abused and is almost certain to breed a feeling of complacency.

After completing what should be a rigorous ‘tender process’ – the company will sign a contract with the government organisation which agrees what, when and how the ‘contractor’ will provide a service, whether that just be 1 person to sweep a street or 32 bin lorries to collect your rubbish every fortnight for 5 years. On signing this contract, the company will know exactly what it will be paid, know what it will in turn have to spend, will have worked out its costs and borrowing, should have kept back a little for a rainy day and then know what it will make in profit – from which it will pay bonuses to staff and dividends to shareholders after it has paid any tax requirement.

Good managers know that some things change during the lifetime of a contract – such as fuel prices going up, which would be a real concern for a bus service provider or a private ambulance services. But contractual devices or clauses that allow for some variation in charges are usually built in to any contract to allow for this.

As such, genuinely unforeseen events or those which could not have been predicted by anyone within the contracting company itself are very rare to find.

What government contracts don’t allow for however, are lack of knowledge or understanding of the service delivery area on the part of those designing and agreeing a contract. They don’t make allowance for unmitigated trust on the part of either party. They certainly don’t consider the potential greed or indeed malpractice of a contractor or its decision making staff, which cannot be planned for or predictably defined even within the scope of a government contract process.

When a contractor has only a single contract, transparency is bizarrely much clearer and for the management, much more important and kept clearly in mind.

But when you have many more and perhaps and ever increasing number of contracts, the potential for complacency and overconfidence can lead to otherwise unrealistic opportunities, which in more focused circumstances would have been denied.

It may be as simple as paying senior executives massive, over-inflated salaries. But it has the potential to be much much more in terms of investment, questionable projects and big payouts for shareholders when little in terms of adequate checks and balances has allowed an adequate safety blanket to be retained from payouts and quietly put aside.

The overriding problem with a company which has grown to the size, reach and responsibility of Carillion is there is so much in terms of questionable financial activity that it has the ability to very easily hide.

The responsibility for contract design and management doesn’t just fall on contractors themselves however.

In the background to all this and within the protectionist culture in which contemporary public sector commissioning is currently enshrined, purchasing officers simply don’t have the motivation or willingness to do their jobs as effectively as they should. When the money you are allocating isn’t yours, public service and best value isn’t always the overriding priority. Sometimes it’s all about doing anything which proves to be easier, and who gets what doesn’t always work out exactly as it should.

Whether its building maintenance, bin collections, public transport, prison management, forensic services or interim and temporary staff services that contractors provide, contractors are all making unnecessary profit at the ultimate cost to us as taxpayers.

So what can be done to solve the problem and when will anything happen?

What has been outlined here provides little more than a simple snapshot of a very big and complex problem, which those in power are through their actions are continuing to deny.

For these problems to be addressed, it would first be necessary for politicians to accept that the whole system of government delivery is broken, riddled with management focused upon self interest, making decisions based on theoretical premise, and that there are simply too many people operating within the system who are ultimately being allowed to take us all for a ride.

The ‘too big to fail’ mindset has now permeated through political thinking to a level where contracts are being awarded despite very clear warning signals which would tell even very junior civil service staff that something is not right.

This is no longer a question of let’s bail them out so that they don’t fail like Labour did with the Banks in 2008; this is all about awarding contracts because there is a view that they never will.

Solving this problem is far from simple. It is not just about political thinking. It’s about getting the market’s to think differently. But just as much, it’s about getting employees to see their roles differently; to accept that they have a part to play too.

In simple terms, the free for all has to stop.

This bonanza based on self-interest is no longer sustainable.

The perpetuation of the lie that government genuinely works selflessly for everyone has got to be stopped.

No business can perform effectively on the basis that it prioritises the working conditions and needs of its staff before the priorities upon which it was created to deliver. Yet this is how liberalism and rights culture has manifested itself within all parts of government and the public sector.

Not only has the NHS become hamstrung by lack of staff and inefficiency, it is being cut up by the cost of the staff it hires through contracts – thereby being destroyed by the supposed solution itself; by the very respite that additional money is supposed to provide.

Meanwhile local government has its own substantive bogeyman too, finding itself tied up in knots by the cost of the local government pension scheme – the destination of the better part of our council tax, in many of the Boroughs, Cities and Districts where most of us reside.

Then there are the PFI contracts upon which the last Labour Government so heavily relied. A coarse, deceptive instrument designed to hide public spending, whilst fire hosing cash at private contractors over 30 year terms. Just another financial time bomb legacy like the raid on pension funds by Gordon Brown which we overlook daily on the basis that out of sight is very much out of our minds.

The power rests with government to change all of this, if only they would try.

Regrettably, the will doesn’t even exist to even begin doing so today, even if the Government could begin doing so – something that a hung parliament which could last until 2022 will simply deny.

With a good chance that the next Government will be based upon or built around a militant form of Labour, the chances are that politicians will only continue to try and hide the truth thereafter, because action which doesn’t just look responsible is not a pathway to which they are inclined.

As Jeremy Corbyn made clear in his questioning of Theresa May at Wednesday’s PMQ’s, the answer is just to do everything to return everyone to employment in government jobs. No doubt based upon further borrowing, which to those who don’t understand business or economics is a perceived as a policy which when sold looks bullet proof.

images thanks to independent.co.uk, bbc.co.uk, wiltshiretimes.co.uk

The 2013 Budget has created more perspiration than aspiration for those who keep on paying the Nations bills. It’s about time the Coalition Government started growing balls on their own Bench, rather than gifting their Opposition the opportunity to do it for them

March 22, 2013 Leave a comment

This week’s Budget has been received differently by us all and in a manner which illustrates all too clearly how shallow Policy making has now become when imbalance and impact are considered.

Talk of support for working mothers with young families, tax free loans for first time home buyers and even a 1p drop in duty on a pint of beer have done little to disguise the fact that there are so-called  ‘winners’ and then real losers at every turn. The Chancellor has done little to give any credence to his ‘Budget for an aspiration Nation’, other than the complexity of the words he used to speak this statement.

As a culture which now thrives on the use of labels and stereotypes, we have happily painted ourselves into a set of social pigeon holes where many of us hide from the realities which we share with many others. Successive Governments have formed policies on this basis which has left very few of us with any immunity from the pros and cons of a Taxation and Benefits system where the only thing universal is its level of unfairness and the disparity that now fails us all through its application.

Getting to grips with economic problems which are continuing to grow at an alarming rate will not be achieved by tinkering around the edges. Nor will we as a Nation be insulated against the gathering storm of explosive financial issues within the European project, such as those in Cyprus, unless Government begins to consider all Policies in terms of how they will impact upon all others and not just in the isolationist manner that they have continued to do so up until now.

A truly balanced and fair approach to formulating Government Policy now seems to be the most alien of concepts to our Politicians, particularly when party politics has been the long accepted means by which to target benefits to those whom are considered to be your bread-and-butter support.

But until the time that Politicians accept the principle of fairness in a meaningful way as a guide to Policy making, and particularly where Taxation and Benefits are concerned, nothing for anyone else outside the Westminster Village is going to change.

Government will soon have no option but to use systems such as a Flat Tax and wholesale simplification of the Taxation System if they genuinely want to treat everyone fairly whilst encouraging growth, prosperity and ambition in a way which balances the books.

Benefits must be targeted and restricted for the use of those who genuinely need them using common sense as a guideline, rather than the culture of tick-boxes which allows so may to play the System within a politically correct and fearful age.

Above all, Politicians must now accept that Policies created on the basis of improving rights in the workplace have now gone so far beyond their point of good, that they have made some of the very jobs they were created to improve unaffordable to the employers who at one time provided them.

Whether Westminster likes this as a truth or not, each and every Government Policy in existence today interchanges with almost every other, through the impact it has upon the lives of us all. Policy implementation may have its benefits to some, but this has for far too long been at the unacceptable cost to the many. This has to change.

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