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Why focusing on the price of services is costing the public sector real value

Public Sector Procurement (1)

by James Reeve

Are public sector organisations really getting the most out of their investment in external suppliers?

Business investor Warren Buffet famously said: “Price is what you pay. Value is what you get.” He was talking about stocks. But his point can be applied to the public sector’s relationship with its private sector suppliers. 

As we navigate increasing economic and socio-political challenges, this relationship needs to focus more on benefits and outcomes, and not just cost. 

But how can we make this happen? How can the public and the private sector build collaborative partnerships which multiply their impact?

Commission, don’t just procure

Instead of focusing on procurement - which by definition places emphasis on the act of purchasing - we should shift our focus towards the broader concept of commissioning in the public sector. This means looking at the value of all outcomes, rather than just focusing on cost. 

This might sound like fine detail, but it’s really important. Because procurement processes like those of the Digital Marketplace are still relatively slow, inflexible and complicated. And their formulaic inflexibility doesn’t necessarily guarantee delivery of work that will create the most value for money or value in terms of impact.

Shape requirements by user needs

The introduction of service standards in the public sector commissioning process means that most supplier opportunities now include a set of user needs that has been identified. But there’s a risk that these are based on assumptions, rather than informed by evidence. 

To tackle this, suppliers could play a more active role in this part of the commissioning process – for example, by offering their support for workshops where evidence is gathered, conducting citizen engagement initiatives such as citizen assemblies or helping to consolidate previous work. 

Timing is key here. Gathering evidence around user needs is especially important if there has been a lengthy gap between previous research or engagement activities taking place and new delivery work being commissioned. Shorter discovery periods should be prioritised for this purpose.

Show faster results: be agile in experimentation

Although there’s still a place for large, multi-year transformation projects in the public sector, this work needs to release value more quickly and incrementally. 

Take, for example, the ongoing work to transform breast screening in the NHS with artificial intelligence. 

In the UK, every woman’s screening mammogram is read by two radiologists - a medical gold standard which can be difficult to achieve due to a global shortage of radiologists. Using AI technology instead of a second reader creates additional capacity in the system and improves the accuracy of each diagnosis. But, in an effort to future-proof investment in the service, and to manage any implementation risk, the NHS has been stuck in a specification stage for the technology, rather than being able to deliver something that benefits patients.

The alternative? Rather than trying to plan everything out in advance, the NHS could have trialled the scheme in one hospital, in an agile way, releasing value much more quickly and enabling the faster evaluation of the service.

Collaborate on skills investment

The use of consultancies in the public sector has always been a hot topic of debate. This is particularly noticeable today, with budget cuts putting the squeeze on public services, and causing many to question the cost of external suppliers. 

As user research, design, product delivery, and product management partners for various parts of government including the Department for Education and HM Land Registry, we (perhaps unsurprisingly) think there will always be a place for external organisations to work with the public sector. But there’s a huge caveat here: it must be done in the right way. 

The overall aim should be building skills and independence, so suppliers should be expected to invest in long term, in-house skills development and capability building as part of their contracts. This way, consultancies can ease digital, data, and technology skills shortages and deliver lasting, sustainable change for the public sector.

Suppliers should also be asked to demonstrate the wider social benefits they can deliver as part of their contracts – whether that’s tackling inequality and promoting diversity, helping local communities, creating new jobs and work opportunities or combatting the climate emergency. 

Focus on value, not just cost

Working more collaboratively in these ways - focusing more on value than cost, listening and learning from each other and being open to new ideas and innovation - will multiply the impact of private and public sector work in the future. 

It will drive the improvements we need to see in society. And it will also provide much needed reassurance that public money is being spent wisely on transforming services that reach and benefit all of us in fairer and more sustainable ways.

Find out more about how the public sector can increase the value and impact of its services in our new book Multiplied, available to buy from Amazon and Waterstones. Multiplied explores the new and creative ways in which we can unlock the technology, data and design potential of the public sector, to do more for Britain’s communities. 

All profits from the book are being donated to the Association of NHS Charities.

James Reeve's avatar

James Reeve

Managing Partner - Central Government

Contact James
Iain O'Neil's avatar

Iain O'Neil

Managing Partner - Health

Contact Iain

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