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Commercial Question

The private face of the public sector

updated on 14 June 2011

Question

Driving change in the public sector: what role will the private sector play?

Answer

Public sector work now represents around 40% of the revenue of business services companies. This is unsurprising given the private sector’s increased involvement in recent years in the delivery of public services through outsourcing.

What is outsourcing?
Outsourcing (in this context) occurs when a public sector body that previously provided services using its own resources (eg, the running of a prison or hospital) transfers responsibility for providing those services to an external service provider in the private sector. The public sector body usually purchases the services from the service provider for an agreed charge and for a defined period of time. Outsourcing can also occur when a company in the private sector transfers responsibility for providing a service (eg, the IT or payroll function to another company in the private sector).

Reducing costs, creating efficiencies and access to a wider source of skills and experience are commonly cited as key drivers for outsourcing. Damage to staff morale and a loss of control over an important service are commonly cited as the potential drawbacks to outsourcing.

Lawyers play a key role in outsourcings as they negotiate and document the terms that have been agreed between the parties in a service contract. Depending on the type and nature of the outsourcing, legal subject matter experts are also often required. For example, employment lawyers often advise on how employee liabilities should be apportioned between the parties and on compliance with the employee information and consultation obligations that apply when employees transfer with the activities being outsourced from one employer to another.

However, with the volume of conventional outsourcing set to decline in the near future, Cabinet Office Minister Francis Maude has made clear that he is looking for expertise from the private sector to engage with the government on new ways of working and collaborating together. Maude made these comments while talking to members of the Business Services Association recently.

What is the Business Services Association?
This Business Services Association represents companies providing business and outsourced services in the private and public sectors. Full members are those providing business and outsourced services. Associate members are professional firms, including lawyers, who advise in the sector. According to the Business Services Association's website, those businesses that have full membership have a combined worldwide turnover of £80 billion and employ around two million people.

What is expected from the private sector?
Maude made it clear that he wanted private sector contractors to work with him on new models for the delivery of public services. No doubt cost savings play a key part in the drive for reform, but also important to him is facilitating new approaches to accountability and stakeholder involvement.

According to Maude, businesses will need to work with mutuals, subject matter experts and charities to come up with new models for the delivery of public services.

As the government turns to private sector businesses for help and expertise, so too will businesses turn to their lawyers to assist them in coming up with and considering legally sound models that allow the seamless transition of activities and workforces between private and public sector bodies. This presents opportunities for lawyers, particularly those advising in the support services sector (which covers all areas of the law including employment, project work and outsourcing arrangements) and who also have expertise in government (both central and local) work.

Sarah Banatvala is a senior associate in the employment team at Pinsent Masons LLP.