Properly managed outsourced operations can add real value to the UK economy

Andy Milner, Chief Executive Officer
21 January 2019
Amey worker, wearing PPE.
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The gap that exists between infrastructure need and actual spend is now a chasm that every nation must find a way to bridge. According to the Global Infrastructure Hub, the discrepancy sits at $3.7 trillion every year. While our congested roads and historically underfunded railways dominate news headlines in the UK, the recent disaster in Genoa is a distressing, urgent reminder of how badly infrastructure may need our attention and resources.

The scale and complexity of modern infrastructure are continuing to rise, with the introduction of smart infrastructure, remote sensing and data-driven asset management. It is an incredibly exciting time to be operating in this rapidly evolving market. Connected autonomous and electric vehicles are on the brink of forever changing highways networks globally; meanwhile, remote sensors, digital technology and data analytics are transforming asset management from the workaday business of digging holes and mending things that are broken to a slick, forward-thinking infrastructure management process.

Investing in new ideas and adding social value to outcomes

These exciting developments, that are all still being thought through by the owners and operators of infrastructure, require a level of continuous innovation and new thinking. New technology brings new opportunities. But it also brings fresh challenges and it is unrealistic to expect the public sector to shoulder this responsibility alone. 

The solution, in my view, must lie in government engaging the private sector to support it by the outsourced management of many of these complex systems. Government needs to engage with private sector specialists so that they can bring forward and invest in the new ideas that will drive down costs and add vital social value to outcomes. 

The demise of Carillion shouldn't spell the end of outsourcing

The collapse of Carillion has unsettled the market and made the term ‘outsourcing’ a byword for corporate greed and incompetence for the public. But the reality is that contracting and outsourcing remains a permanent feature of governments in mature economies across the world, and never more important in the UK, with some £251bn spent last year by central and local government with external suppliers. 

The current backlash by both politicians and the public over a perceived imbalance between private sector returns and public benefits delivered by contractors has raised serious questions over whether such arrangements should continue. 

Rightly so. Whether this backlash is through public perception or reality is largely immaterial; we must react to these legitimate questions with honest, open discussion and, where appropriate, change our approach.  

Seeking profit is not the same as profiteering

We must accept that there should be scrutiny over the way private sector companies are run and over how they operate on behalf of the public. Taking disproportionate profits from contracts without delivering tangible – or recognisable – social value to communities is not on and not sustainable. 

We are all taxpayers. It is entirely reasonable that the money deducted from the nation’s payslips is demonstrated to be spent wisely and prudently. Who could argue with that? 

Every private company delivering services on behalf of the public has to keep customers top of mind and work to demonstrate why they are worth their reward. We need to be better at explaining the value we add to avoid the accusation of profiteering.

Lessons for government 

There is also, however, work to do on the client side. As the House of Commons Public Administration Committee also pointed out, despite the UK leading the world with innovative private sector outsourcing for 30 to 40 years, there has been a depressing inability of central government to learn from repeated mistakes with a patent inability to understand the design, letting and management of contracts. 

Public procurement has long been driven by price and unrealistic risk transfer and an inappropriate view of what constitutes a quality outcome. There is a fundamental lack of understanding about private sector motivations and the way that we operate in the market. 

A robust partnership with the public sector

As an industry, we need to be clearer about what we stand for. That means encouraging and embracing robust partnerships with demanding, flexible, forward-looking clients. Fundamentally, being profitable is not the same as profiteering; the goal – on either side of a contract - can never simply be to do things more cheaply and strip out value. 

To be successful we all have to remain focused on finding the best, most socially appropriate infrastructure solutions. We also have to, when the conditions are right, put up our own money and invest in resources to stimulate economic return for the nation; not simply operating in short-term, technically undemanding operations in which cost not value is the deciding factor. 

Amid all the political gloom and outsourcing angst, it is unlikely that the entire infrastructure supply chain would ever be controlled by the public sector. Nor should it be. We have a strong pipeline driven by increasing demand for infrastructure services and a desire by owners to maximise return on their investment in terms of financial and social outcomes for customers through robust partnership. 

Exciting opportunities in our sector

The development of connected autonomous and electric vehicles presents a rake of new challenges for highway asset owners and operators. No longer are roads simply strips of asphalt; today they need to be evolving information highways capable of drawing information and delivering it to customers in real time. Meanwhile the UK’s long-established network of hydrocarbon-based fuel stations will rapidly morph into a new electric charging network, providing huge opportunities to create new partnerships between government and business.

Private sector investment and innovation will work in partnership with the public sector to build on our historic asset networks to bring new services and opportunities to customers – be they vehicle charging points, smart meters or widespread hyper-fast broadband services.

Value that embraces long-term social impact

Robust partnerships between the public sector and private expertise will be critical to ensuring that these new services are delivered and that value is delivered to the public – value that goes beyond simply measuring financial impacts and embraces longer term community and social impact. 

The future for outsourcing in the UK will require this robust partnership to step up in terms of the way it engages with the public – who it serves together – to ensure that an open and honest conversation takes place over outcomes and value. As such there really is very little holding us back.

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