If December is the time of goodwill to all men, the New Year is often the bringer of bad news. In January 2018 Carillion collapsed, with £1.5bn in debts, and the National Audit office estimating a cost of £148m to the UK taxpayer.
The impact on the NHS was profound, with eleven and a half thousand inpatient beds under their services and several high-profile hospital construction projects.
The result was a wave of hand-wringing in the outsourcing and government purchasing organisations, with a wide-ranging review of policy and process, but little meaningful change.
A year later and fellow outsourcing giant Interserve is still struggling. Its forty five thousand UK staff are bystanders as the Cabinet Office and lenders argue about how to prevent its collapse.
The revelation that Interserve is one of five companies piloting the concept of ‘living wills’ in the wake of the Carillion collapse will serve as little comfort, especially when others in the sector are struggling.
Last year Kier issued £246m of emergency shares to try to repair its balance sheet. Mitie has lost 17% of its value in the last twelve months, and Capita’s ongoing problems with the Primary Care Support England contract continue to rumble on.
Capita was tasked with reducing the cost of national services to GP practices by forty percent, whilst delivering a profit for its shareholders, unifying and standardising what had previously been disparate regional services, and ensuring cervical screening letters arrived.
If ever you needed proof that our approach to procurement in the NHS focusses too much on price, and not enough on sustainable quality, look no further.
In the late nineties and early years of the new millennium, Britain’s banks outsourced thousands of back office jobs to companies in India. The resulting loss of customer satisfaction resulted in huge retrenchment on this policy, and the birth of new battery-hen-style call centres in Scotland and the Midlands. A decade later the local government sector also started realising the flaws of outsourcing, and in the first part of this decade, started bringing services like bin collection back in house.
But as the NHS’s obsession with fax machines aptly demonstrates, we like to be the late adopters.
Less than a month after the publishing of the NHS Ten Year Plan, which promises £700m in back office function savings, Interserve’s announcement acts as a timely reminder that parcelling off complex and gigantic sections of public services to companies who operate on tiny margins, and are, as the banking crisis reminded us ‘too big to fail’, might not be the best way to find bang for your buck.
Chief Executive IHM