Tag Archives: private sector

‘Penny wise and pound foolish’ to postpone IT project

By David Bicknell

Sometimes you make decisions over the future of IT systems in the public sector with the best intentions – but still you can’t win. Someone, somewhere, will be unhappy.

Yesterday, I mentioned that a $92m overhaul of a Department of Revenue system in Oregon had been postponed to save money. Now, it seems,  the postponement is a bad idea that will hamper legislators’ ability to make well-informed decisions.  

“I think it is penny wise and pound foolish, if I could use an old saw,” said Vicki Berger, co-chair of the committee that oversees state taxing and revenue policy, according to the Statesman Journal. “We have to bite the bullet. We have to get a better system. We have to know better, more viable information on what impacts our revenue stream.”

Richard Devlin, co-chair of the legislature’s Joint Legislative Audits, Information Management and Technology Committee, has reportedly characterised the announcement as a “nine-month delay” rather than a cancellation of the project.

“I don’t see that as an end to the project, because the need is very real. They need to upgrade their systems, and they will continue to work to that end,” said Devlin. “I can understand the counter-argument, that you do have antiquated systems in the Department of Revenue, but I think citizens in Oregon would want when we invest in this fully that we do it right,” he continued. “I would not want to spend $92 million and then have a project that doesn’t really work.”


It’s a sign of the times that you can get such polarised views over the future of an IT project, but it’s perhaps not surprising when the project is going to cost $92m. I think the current climate is likely to see cost/benefits for IT projects become an issue for many organisations, both in the public and private sectors, but especially in the public sector.

It doesn’t necessarily mean that IT projects are at risk, simply that those making decisions on new systems/upgrades are going to need hard evidence of the real change benefits to justify any decision they make to proceed.

Why the private sector is keen to be a Good Samaritan to new mutuals

By David Bicknell

There is a growing trickle of blogs, comments and discussions emerging around the idea of mutual joint ventures.

The mutuals concept has captured the imagination, even if precisely how they are going to be created; fund themselves; stand on their own two feet and compete in the commercial market has yet to evolve fully. And it will take some time.

Never one to pass up an opportunity, the private sector is now keen to offer itself as a Good Smaritan, lending a helping hand in helping mutuals get off the ground.

As a recent well-written paper from the Business Services Association puts it,  “…several barriers exist to realising the Government’s vision for mutuals. New mutuals spinning out of the public sector will face significant resource challenges – in terms of both expertise in areas such as human resources, finance and business planning, and start-up capital. Raising necessary capital will be a persistent problem for staff looking to form a mutual but lacking a trading history.

“A recent survey of British employee-owned companies found that one-third had difficulty accessing finance. Similarly, a number of studies have noted the “steep learning curve” faced by public sector employees when having to create a business plan, plot income generation for future years and develop marketing strategies – skills commonly required in the private sector. Partnering with a private sector provider through a mutual joint venture could offer a way of overcoming these barriers.”

Inevitably, there is a degree of self-interest here. As the Business Services Association guide  states, “there is a clear appetite amongst BSA members to enter joint venture agreements with, or as part of, new mutuals spinning out of the public sector.

“At the BSA-Pinsent Masons LLP 2011 annual lecture, Minister for the Cabinet Office, the Rt Hon Francis Maude said that the Government was open to hearing about new models from private providers partnering with mutuals to deliver public services. This put the ball firmly in the private sector’s court to consider how to rise to the Government’s challenge.”

It adds that the aim of the paper is therefore to be constructive, not to issue a list of requests for clarity or new demands of the Government, but rather how to work with the existing legislative landscape to make mutual joint ventures happen.

Nothing wrong with that idea. Joint ventures with the private sector may well turn out to be the way forward, provided the key words are mutual and joint. It is in no-one’s interests for a joint venture to be dressed up as a takeover.  As the title of the BSA’s document appositely puts it, it’s about “Making Mutuals Work.”

Will private sector involvement in mutuals make for a perfect partnership?

Although The Times today has been reporting that the Coalition might be getting some cold feet about its plans for public service reform – the Public Services Reform White Paper now looks as if it may be delayed in the wake of  recent discussions about NHS reform – there is little doubt that the role of the private sector in partnerships is being discussed.

The Guardian recently carried a piece in which Craig Dearden-Phillips, founder and chief executive of Stepping Out, a business helping parts of the public sector become a social enterprise, wondered  whether the marriage between public manager and the private sector will work?

“One concern is the compatibility of each side’s goals,” he says. “So far, public sector mutuals tend to be more focused on social rather than commercial aims. Few appear to have share capital financially worth much to staff. They tend to be defined by a passion for people, place or profession, and they often aspire to stay local and be more personal. Every person I have met who leads a spun-out organisation is motivated by social purpose. They identify strongly with public sector values – albeit ones that see a mutual or social enterprise as the appropriate vehicle for this.

“A private company, however, will, quite rightly, be mostly concerned with its shareholders’ or directors’ interests, and that will include a strong focus on growth, either by merger or acquisition and on cutting costs quickly.

“These are legitimate goals, and, arguably, the only way to create large organisations. But you can see a potential tug-of-war here, with one side driven by a growth agenda and the other living in fear of becoming remote from its community – and of losing control to a private partner.

“Can both sides meet at least somewhere in the middle, with private investors accepting the potential constraints on return introduced by being partly employee-owned and former public managers bowing to some of the commercial imperatives of  investors?

“As someone working every day alongside public managers, I hope we can find ways to bring necessary investment and expertise to the table. Unlike in continental Europe, this is unlikely to come from the state. So we need to examine closely how to do this while ensuring the values we hold close are upheld.”

Cabinet Office Minister Francis Maude tells private sector: ‘Come and knock on our door’

By David Bicknell

Cabinet Office Minister Francis Maude has insisted that large private sector service providers are still a part of the Coalition’s pluralist vision for the delivery of public services.  Although the volume of conventional outsourcing will decline,Maude challenged the private sector to engage with the Government and to pioneer new ways of working.
Talking to members of the Business Services Association, Maude laid out his vision of a new chapter in public/private sector collaboration. Giving the Association’s Annual Lecture,  Maude urged private sector contractors to work with him to realise the opportunities to reform the delivery of public services.
As the public sector represents some 40% of the revenue of business services companies, there was ‘standing room only’ to hear Maude’s vision of the future. He referred to this interdependence to justify his call for a shared effort in looking for efficiencies. Whilst the inherited budget deficit lends an edge to the Government’s reforming drive, Maude was keen to look beyond mere cost savings to facilitate new approaches to accountability and stakeholder involvement. Referring to staff consultation over reform, he sees there is potential to energise and challenge Government from within and set out his mission to “set this passion for the public service ethos free” from the shackles of outmoded workplace practices. But he also realises that this objective cannot be realised solely from within and he is looking to establish relationships with the big service providers to help the Government on its way. And in particular, he sees the need for the large players to work with mutuals, SMEs and charities to find new models for the delivery of services.
Commenting on the address,  Michael Ryley, Head of Support Services at Pinsent Mason, the Annual Lecture’s sponsor said: “The Government is clearly conscious of the difficulty of driving change from within a public sector workforce which is steeped in a tradition of delivering services in a certain way.  Given that modern procurement creates the potential for workforces to move seamlessly between private and public sector employers, the Government is clearly attracted by encouraging flexibility and using private sector expertise to energise the public service ethos.”