Is innovation possible in contracted public services, james rees, tsrc


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Innovations in public services seminar, Third Sector Research Centre and UK Innovation Research Centre, 17 June 2013

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Is innovation possible in contracted public services, james rees, tsrc

  1. 1. Hostedby:Fundedby:Is Innovation Possible in Contracted-outPublic Services?Innovations in Public Services Seminar 17 June 2013James Rees
  2. 2. Context• Coalition policy to ‘open up public services’• Two major claims are made:– diversification and market rigour promotesflexibility and innovation throughout the servicesystem, and– risk can be transferred away fromgovernment, and that risks can be moreeffectively managed.• Contracting out and payment by results moreadvanced in employment services or welfareto work field…
  3. 3. Work Programme• Launched in context of ‘Big Society’• Rhetoric promised innovation and mobilisation of specialistservices (esp TSOs)…The work programme will provide greater freedom for suppliers to give peoplethe support they need rather than prescribing one size-fits-allprogrammes…[DWP, 2011]• Commissioning as innovation driver… Primes/serviceintegrators– Transfer financial risk to providers (esp Primes)– Arms length ‘black box’ – do what works– Support innovation not specify services
  4. 4. The model• Single programme for all jobseekers• Black Box and payment by results with a back-endedprofile to reward ‘job outcome’ sustainment• Differential payments by customer group• 18 contract package areas (CPAs) covering the UKwith 2-3 primes in each area = 40 prime contracts• Supply chain subcontracting divided into Tier 1 (endto end provision) and Tier 2 (specialist)• DEL-AME funding, part funded by savings frombenefits budget
  5. 5. Prime ContractorEnd to endproviders(tier 1)Specialist provider(tier 2)call-off contractsDelivery / JobOutcomesReferralsfrom JCPDirect (inhouse)DeliveryEnd to endproviders(tier 1)
  6. 6. Barriers to innovation• Evidence of convergence ofapproach…(isomorphism)• Powerful isomorphic pressures:– Funding model drives everything– Risk aversion and Prime management practiceshighly prescriptive• Disruption, suspicion and mistrust arising from(perception) of payment model:– Hinders local partnership and networking– Traditional source of specialist providercomparative advantage and social innovation
  7. 7. Isomorphic Pressures(DiMaggio and Powell, 1983; Bovaird and Downe, 2006)1 There is a trend to organisational isomorphism:• Competitive isomorphism (but, quasi-market)• Institutional isomorphism– Coercive– Mimetic– Normative2 There are deviations and resistance to organizationalisomorphism:• Differences in local external environment (e.g. allowing an organisation toresist resource dependencies; ie having reserves?)• Organizational resistance to intitutional pressures towards isomorphism(e.g. ‘mission’)
  8. 8. Coercive• Financial modelThat black box is a matchbox, by the way, you know, in terms of “Do it howyou want to do it, how you feel it should be done,” it’s just notbeing...[realised]…well it’s bobbins. [local authority subcontractor]Oh, also the financial modelling doesn’t allow for innovation. Well, we haveto be very innovative and creative but there is a limit. [local authoritysubcontractor]• Prime management practices– Performance management systems– League tables– Perform or be sacked[good orgs.] they’ve got really good management … good staff who managewell, who deliver well, and you get the right results. [Prime]
  9. 9. Mimetic• Mimetic – Standardardised approaches touncertainty and risk, imitated across orgs.– Response to risk environment– Merger / acquisition to move into more ‘generic’ provision– TSOs shifting focus, reading the marketwhen we went and opened up in a white working class part of Leeds, followed asimilar approach i.e. recruiting local people, and running the service in exactlythe same way, lo and behold, we were just good at getting people jobs [Prime,11]• Normative – not so relevant but developing?– Professional standards/accreditation– Intermediary bodies
  10. 10. Vulnerable innovation• Org 1 (social business). Working in the prime to help‘signpost’/refer clients effectively.– But is the resource there to continue this?• Org 2 (CIC). Insisting on keeping up high qualityservice despite Prime resistance– Prime wants surveillance role for org.• Org 3+4. (statutory and charity) Cross-sectorconsortia. (Innovative?) flavour of the month inpolicy but too costly/slow for Primes.
  11. 11. Consequences for innovation• Prime level– Financial capacity and generic supply chain managementprivileged– Pass model down the chain, strict performancemanagement and dictate scope of service interventions• Sub-contractors– Little room for manoeuvre– Fear/insecurity, low trust• Possible locus of innovation in Prime-subrelationship?
  12. 12. Innovation in the system?View 1:• Intense pressures of funding and Prime mgt.– Risk in Pbr, hence risk averse behaviour– Service quality first casualty– Innovation needs funding and acceptance of failure?View 2:• Pressures drive innovation, reward of what works?– Tight feedback loop in PbR• System and its commissioning is experiment,therefore innovative?– Market concentration, new entrants– Cost saving, efficiency
  13. 13. Concluding thoughts• Innovation key theme of reforms in Probation, other PbRprogrammes– Innovation responses not well understood– Close relationship between risk, resources and innovation• There appear to be risk/innovation/partnership tradeoffs• A number of possible positions:– Reform was never about innovation anyway, or it was intended tofoster innovation but this was naïve or just rhetoric– There may be unexpected innovation in crisis/cost reduction– Only what works matters (purely instrumental)+(quasi-market)• Research agenda:– Drivers, forms of, examples of innovation– Is innovation right paradigm to understand contracted out services?
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