The unfortunate fate of Carillion—the construction company and provider of a range of services to the UK government—dominated the British press on Monday morning. The organisation announced at the start of the week that it will enter into liquidation.
Carillion has a hand in a slew of public sector work in the UK, from building hospitals to putting 32,000 school meals on the table each day.
Now, after it finally collapsed under the weight of net debts totalling about £900 million ($1.2 billion), the government will provide funding to the official receiver overseeing the liquidation process, to ensure that vital public services Carillion delivered continue to be carried out.
The story highlights a global problem. Governments often outsource large amounts of work across a range of sectors to individual large companies, they granting them enormous amounts of power and storing up risk for the future.
We might look for example to education providers like Bridge International, which manages more than 400 schools across Africa and Asia.
Elsewhere in the UK, the security company G4S carries out swathes of work for the government, including managing five of the 14 privately-run prisons in England and Wales. As recently as December, it took on security duties for more than 700 Department for Work and Pensions properties in what it called “one of the largest integrated security contracts of its kind awarded in the UK”.
There’s no easy solution here: for all the downsides they bring, relationships with large, familiar organisations can be much easier to manage than very fragmented markets.
But governments across the world are working to ensure they procure services from a wider range of providers, in particular looking to encourage procurement from SMEs, which can help create a more innovative economy as well as get the government the most cutting-edge products.
A 2016 National Audit Office report noted the work government is doing on this, but cautioned that “disproportionate bidding requirements” and a low “departmental appetite for risk” were among the barriers that SMEs faced in winning government contracts.
Here’s four policies from around the world aimed at spreading the burden of government work more broadly.
Australia: getting tough on spending
Last summer, Australia announced new regulations that would cap procurement contracts for government IT services at AUD100 million ($79 million).
The tough new rules came alongside AD650 million ($512 million) of annual funding to boost small- and medium-sized businesses, according to itnews. The government aims to splash about 40% of its IT budget on SMEs.
Taken together, Australia hopes the two moves will help it cut down on supersized contracts and boost the proportion of its IT spend that goes to SMEs.
Manchester and Toronto: buying local
In Manchester, UK, city authorities shifted all their procurement activities into one department, and then worked to spend more of that money on local, smaller businesses.
As we wrote in a case study last year, the cut of its procurement spend going to SMEs now stands at 50%, while the proportion going to businesses in the city has leapt by 20%, creating 1,500 jobs.
Meanwhile, Toronto, Canada, has used a similar focus on its own backyard to drive social change.
As we reported last year, the city aims to direct CAD30 million ($24 million) into businesses run by members of disadvantaged communities as part of its poverty reduction strategy.
The US: 18F’s micro-purchasing experiment
In 2015 18F, an arm of the US’ General Services Administration that works to “improve the user experience of government,” trialled a radical way of managing procurement.
They posted online an opportunity for coders—a small piece of work relating to 18F’s CALC government price comparison tool. Potential contractors could participate in a “reverse auction” to determine their fee, starting at $3,499. The winning bidder would have 10 days to complete the task.
The bidding proved popular. So popular that, in the event, the work was completed for the princely sum of $1. “The experiment also validated the core concept that open-source micro-purchasing can work, and it’s a thing we should try to do again,” the agency wrote in a blog at the time.
Until the middle of 2017, 18F proceeded to post further opportunities on a specially created platform. These micro-purchasing auctions allowed them to break down big pieces of work into small chunks, relying on a range of suppliers.
Micro-purchasing is unlikely to be scalable to all aspects of government procurement. But it could have much wider applications than just 18F’s usage.
Canada: having start-ups solve your problems
The Canadian government launched Innovative Solutions Canada last year.
The project, with over CAD100 million ($80 million) in funding, sees the government post challenges that it faces for which no market solution currently exists. Current suggestions range from new comms tools for satellites to enhancements for industrial personal protection equipment.
Businesses suggest solutions and the winning ones get to carry them out.
The programme is modelled on America’s Small Business Innovation Research (SBIR) project. Successful solutions funded there include safe training material for explosives detection dogs and an ocean-powered fresh water generator.
(Picture credit: Pixabay)