UK public sector make-buy decisions

You’ve worked on a number of outsourcing and procurement projects with UK public sector clients. What do you see as the main factors that drive make-buy decisions in the sector?

If you look back at the recent history of the public sector in the UK, make-buy decisions have been approached on a fairly tactical basis. Austerity has driven a lot of that: as budgets have been reduced and cost-pressure increased, departments have had to make tactical decisions about what can be outsourced to reduce costs. And despite the focus on Brexit over the last three years, austerity hasn't gone away.

Cost pressure has been a big factor in public sector procurement—but I think people really need to ask themselves why it is that they expect to get things done more cheaply by using private sector partners. At the end of the day, the goal is to make services as efficient as possible; it doesn't matter who does the work.

My personal preference is to work on first generation outsourcing, and there haven't actually been that many of those in recent years—excepting the part-privatisation of the probation service, which has obviously had its fair share of problems associated with it.

A lot of definitions of “core” activities make reference to competitive differentiation, but obviously that doesn’t apply in the same way to the public sector. So how would you define a public sector organisation’s core activities?

In making determinations of what are core and non-core activities, I would point to the most recent central government guidance on the topic, published in February 2019. Those type of decisions require examination of the individual circumstances of the organisation and trying to understand what the purpose of the organisation is. For example, when I was working on first generation outsourcing for National Savings & Investment, we decided that our core activities were: liaising with treasury and figuring out how much they wanted to fund; deciding how that funding should be allocated across our financial products; and how to market those products to hit the targets treasury were setting. We decided that anything around the actual operation of those products—anything where the private sector had already figured out how to solve the problem—was non-core and should be outsourced where possible.

Decisions about what to outsource in the public sector require a great deal of soul-searching about what the true purpose of the organisation is. But in this modern world, after nearly a decade of austerity and cost cutting, there are very few public sector bodies that don't already have a very clear sense of their purpose and their reason to exist.

Do you think that the increased automation of public sector services is going to have a substantial impact on make-buy decisions?

I don't think automation has really hit the public sector yet. Most of the conversations I've had with clients about the topic have been in the context of doing something in the future—there's been a lot of low-level experimentation with automation, but very few large-scale implementations. For example, we did a piece of work recently with a government department in Scotland where we created an intelligent automation for the digitisation of records. As data was scanned in, the programme would learn common mistakes and correct for them. At the end of that project, they didn't have the budget for wider roll-out, despite seeing positive results.

So why is it, do you think, that public sector bodies haven’t yet invested heavily in automation?

The biggest obstacle to further investment in automation right now in public services isn't cost concerns or cultural challenges: it's Brexit. We're in a bit of a strange world at the moment—with the budget pressures and the technology pressures we have, it would make sense to seriously invest in automation, but uncertainty around Brexit has stifled activity in that area.

I think that large parts of the public sector actually quite like the idea of being able to get rid of large-scale processing factories and replace them with automations; and once Brexit happens, we'll start to see a lot more exploration of those possibilities. Of course, how quickly that will happen depends to a large extent on the political pressures—who the MPs are, for example, in the constituencies that host the existing data processing centres.

So what do you think will happen when we have more clarity about Brexit? Will there be a sudden burst of activity around automation or will it be more of a slow-burn?

It's probably too early to say what will happen after Brexit, but if I had to make a prediction I'd guess that we'll see one or two high profile cases of departments implementing automation programmes first, and then that will create momentum over time. Right now, clients aren't knocking on our door and saying they want more automation—so I think it will really require Cabinet Office or someone else at the centre to make a push for it. 

Do you think that when automation starts to have a bigger impact on the public sector, it will be seen as a replacement for human employees, or as a way to free up resources to focus on other tasks?

I don't think there's necessarily a clear dichotomy between automation to reduce headcount and automation as a way to augment human capabilities. PA's stated position in our thought leadership is that we don't see a doomsday scenario of automation leading to large-scale reductions in employment. Instead, we think the next industrial revolution is going to completely change the nature of work. Early investment in automation might be driven by a need to reduce costs, but in the long-run there will still be a wide variety of human roles required.

Do you think the nature of roles in the public sector will change due to the impact of automation and robotics?

We've been working with Hampshire and Isle of Wight County Councils to examine the opportunities for using cobotics (robots that interact with and share a workspace with humans) in social care. And you can see that cobots could have a fundamental effect on the job that carers do and the nature of their roles. Right now, you often need two carers working together to support a single patient, as they have to be able to lift them. But if you replace that with one carer with a cobotic lifting device strapped to them, then you can both create more capacity in the service and increase the quality of care that each patient receives: it has long been thought that having  two carers diminishes the level of care because they talk to each other rather than to the patient. I see cobotics as something that could change the role of carers and let them focus less on physical labour and more on addressing the needs of patients.

And do you see a role for PA in the future as a provider of managed services to the public sector?

We're definitely exploring opportunities for PA to provide managed services to the public sector. Every consulting business operating in this space is looking at those opportunities and making an assessment about the revenue and the margins relative to the length of the relationship. We'd be keen to provide services, but only where we know that we'd be adding value: we're not going to compete with Serco and Capita. Where there is a demand for high value, white collar services, I could see us building services around the work we already do and have developed a reputation for—but we're not going to start running hospitals.

Data and insights is an area where firms like PA can add value by augmenting existing public sector capabilities. If you're able to sprinkle a few top tier data scientists into an existing team, you can have a substantial impact on the quality of a department's insights.

Do you think that assets and intellectual property will play an important role in those types of managed services?

Recently, we've been starting to think a lot more as a firm about how we can exploit the IP we've developed in the public sector: If we've developed real value-adding IP in one department, then we want to be proactive in seeing how that could be applied elsewhere, with the understanding of the original client. Since the coalition government came in in 2010, central government has gotten a lot more savvy about IP: Where something is truly exploitable, they want to understand how they can maximise how it's going to be shared and how they can maximise its value-add.

Do you have any final thoughts on how you expect automation to change the sector?

Central government still has a lot of work to do in terms of figuring out what impact automation will have in the public sector and how it will change the delivery of services. There's a lot of overlap between processes that would traditionally have been candidates for outsourcing and processes that could easily be automated, so I think the sector will need to recalibrate its approach to make-buy decisions to reflect that new reality.