Public Sector Revolution or Public Procurement Problem?

David Cameron has announced today a “transformation” of the public sector by introducing a presumption that any and all services (bar justice and national security) can and will be open to competition from the private sector; http://bit.ly/hQVhKS

Whether this is a good or a bad thing is debatable, as is whether it is a reform that is intended to improve public service or a fig leaf for an ideology of destroying it.

However, one aspect which needs to be considered is the practical impact on the policy of the EU Public Procurement regime. While the proposal is couched in terms of removing regulation and red tape, breaking unnecessary state monopolies and bringing services closer to the control of the people rather than the state as a proxy for them, the application of the procurement rules could have the very opposite effect.

In brief the procurement rules require that all moderately substantial public works, services and supply contracts must be openly advertised throughout the EU and subject to an appropriate form of competitive tendering process. The underlying rationale for this is to ensure a level playing field across the EU and access to markets by businesses in each Member State. In most EU countries, the public sector and public spending accounts for a large proportion of the national economy. It was recognised that in the absence of safeguards it would be too easy for national governments to reserve these parts of their economies to their own country’s businesses and so make the project of a single EU market that much less realistic. The procurement rules were designed to stop public bodies stitching things up.

So far, so consistent with the economic liberalism of the proposals to open up public sector markets to even wider competition.

But. The obligation to have competitive tendering gives rise to substantial compliance costs both for public authorities and for contractors. Changing the presumption opens up the entire public sector to being obliged to go through complex procurement processes for every single contract of note. More than that, it changes every single activity into a separate public contract rather than just being public services.

Why does this matter? Well, now, where a public authority carries out a function in-house, or wishes to bring a function in-house, it can benefit from an exception to the procurement rules stemming from an European Court of Justice case called Altmark and so not be required to go through the rigamarole of tendering. The introduction of a presumption that all public services are capable of being provided on a competitive market and that public sector bodies (including the in-house departments) should compete for them removes the ability to rely on the Altmark judgment. A public body would still be able to award a contract in-house, but instead of merely ensuring that the Altmark criteria had been fulfilled it would also need to take a decision that the new legal presumption of competitive provision was rebutted on the facts. A move from showing that a service could be provided by a public authority’s staff to showing why it must be.

So, in addition to the costs of running competitive procurements for every service there would be a litigation risk introduced for those cases where public authorities decided that in-house provision was most appropriate as that decision would become strongly susceptible to judicial review. The remedies provisions of the procurement rules allow for parties who might have been interested in bidding for a contract to have illegally awarded contracts set aside – what were internal decisions of public authorities to give work to their departments would become challengeable commercial decisions.

Historically contractors have had some reluctance to challenge public authorities under the procurement rules not least because of an unwillingness to bite the hand that feeds. In purely private commercial transactions it is rarely a recommended customer-care strategy to be ready to sue every customer who decides not to buy from you. Moving to a public contract presumption of competition means reversing this. Any service that stays with a public-sector provider and which you’d like to have a go at may be worth readying your lawyers on.

Ah, but of course, lawyers are expensive and litigation can be ruinously so, particularly if a claim is unsuccessful. This will, perhaps, limit the actual number of challenges. So that’s OK then? No, because the real impact will be on the compliance costs for both the public sector and those interested in bidding. Compliance costs are another way of saying “red tape” and “bureaucracy”.

Already the majority of public authorities have very complex and detailed procurement policies and processes. These can seem to gild the lily when the underlying EU rules could be complied with in less formal ways. In practice they are susceptible to leading to public authorities making the wrong choice and forcing themselves into awarding contracts to those who are the best at writing tender documents rather than those who are in fact the best at providing the service. However, when the risks and costs of getting one procurement wrong are high, the impact is for reasonable risk assessments to lead to very stringent compliance processes. More hoops for the customer and contractors to jump through to exclude the possibility that the ultimate award of the contract might be challenged.

Apart from the bid costs for public work being substantially higher than for private sector customers there’s another nasty impact. One which, ironically, is likely to make the high policy behind the proposals (taking the Big Society rhetoric uncynically) fail. Public authorities that have to focus on compliance with rules designed to make cross-border trade fair and undistorted and to minimise the risks of costly legal action from large and sophisticated businesses are going to find it very hard indeed to do this while making contracts realistically accessible to small, local undertakings. Where those service providers are voluntary groups or other Big Society favourites it will be even harder. This has already been seen in the difficulties faced in trying to open up contracting work for the 2012 Olympics to SMEs and will be orders of magnitude worse in areas where there is an obvious lack of commercialism and experience.

This would defeat the Big Society purposes of the proposals and give credibility to criticisms based on a fear that what the government really wants to do is hand over public service to large corporations.

It will be interesting to read the White Paper in a couple of weeks to see how these concerns could be addressed. I don’t believe the circle can realistically be squared.

Elitism defended and criticised

A couple of interesting blogs on elitism today. First Ben Archibald on Reclaiming Elitism at http://nabidana.com/uncategorized/reclaiming-elitism/ and second Prof Richard Moorhead on whether it is wrong for elite universities to favour public school pupils at http://lawyerwatch.wordpress.com/2010/12/03/is-the-profession-wrong-to-favour-public-school-pupils/#comment-314 .

There’s nothing wrong with having, supporting and developing those with “elite” abilities provided that this is not at the cost of ignoring or providing insufficient care to those, the majority, who are non-elite. So, investing in the 2012 Olympics and in the development of British athletes who can do well at those Games is fine, provided that this doesn’t mean that ordinary people are less able to participate in sports than they might otherwise have been. Grammar schools would be OK if we could be confident that they were providing education of that sort to all who would benefit from it and that those who would benefit from other sorts of education got that to at least as high a standard.

The second blog looks at the evidence produced in December 2010 by the Sutton Trust looking at the impact of school type on degree performance. Broadly this concluded that comprehensive school-educated students who received BBB at A level outperformed at degree level grammar and independent school-educated students with the same A level scores. The comprehensive-educated BBB students on average performed similarly to those from selective schools with AAB or ABB. This suggests that the “elite” are mispopulating themselves by favouring those from public schools because the public school products are achieving less than those from comprehensives of similar ability. Two of the solutions to this would be to make entrance requirements for all comprehensive students lower or to engage “talent coaches” as many elite US universities do to go and find diamonds in the rough. The first would shift the windfall of luck from students from selective schools who might coast more at university to those from the highest performing comprehensive schools. The second would trust to the discretion and skill of the talent coaches. This seems somehow wrong and a bit too “American” but is it really so different from getting spotted by a scout from a Premier League football team, a casting director doing a tour of Rep Theatre or an A&R man happening to hear your band when it is supporting the band he was meant to be seeing?

As long as lacking luck doesn’t mean inevitable failure, luck and elitism aren’t such dirty words.

The rise of credentialism and networking – the real barriers to mobility

There have been a lot of comments about the return to power and prominence of “the posh”, particularly since the Prime Minister and many members of the British Government have been educated at public schools and Oxbridge. Aditya Chakraborty in the Guardian’s Comment is Free section has written on this and the BBC documentary by Andrew Neil at http://www.guardian.co.uk/commentisfree/2011/feb/01/posh-back-in-charge?showallcomments=true#end-of-comments .

More recently there have been reports about worsening social mobility and a growing gap between graduates and non-graduates and their future earnings (for example see http://bit.ly/qRigJC ).

I think the phenomenon makes for interesting reading but is a little misleading – even at the most notorious culprits, Eton and Oxford, the numbers and proportions of alumni going on to positions of power are relatively small. Each year out of the 2,000 or so graduates from Oxford only a couple or so will go on to become an MP. The proportions are likely to be statistically insignificant even if the cumulative effect is that Parliament at any one time may have over a hundred Oxbridge graduates in it. As an Oxford graduate my recollection is that “hacks” – students from whatever background who devoted large parts of their student days towards politics or journalism – were generally derided by their contemporaries. The networking opportunities available were shunned by the vast majority to create small cliques of people who wanted to get on in those fields and who by and large were desperate to widen the number of people doing it rather than to discourage them. Exclusion was social and from the outside of the cliques – discouragement of tentative hackery by “ordinary” students and ostracism of those who had committed to it or were perceived to have been tempted.

In an environment which selected largely the nerdiest ones from school, it was a chance for those former nerds to find themselves in the majority and to create new minorities of ubernerds in the context of university activities. This was not just for the political and journalist hacks but also, ironically, for the academically-minded who would be classed as “spods”.

However, broadening out from this, there is a problem about how society has developed to favour those who network. A couple of modern developments have unintentionally made things harder for those from ordinary backgrounds to get on generally rather than just in the special atmosphere of Oxbridge Quads and Courts.

I leave aside the move from selective to comprehensive education for the moment as I think the other developments are more significant if also more opaque.

One is the increased focus on qualifications and the expansion of the numbers of people gaining the higher ones.

Previously, it was possible to access most careers without having reams of paper qualifications or the very highest grades. There was a spectrum of qualifications at 16 which were readily comparable and which all were sufficient to enable entry into training and further study of different sorts. Going back to as late as the late 80s having 4 CSEs at Grade 3 would do to get into a skilled trade, having a couple of Grade 1s in key subjects like Maths or English would put you into contention for white collar work in banks and offices where many started at 16 and where most managers would have been no more qualified on entry. The type of school you had studied at would not be so big a deal for getting into good work at 16 at that level of qualification. Having O levels would place you in good stead for more intellectually demanding work like being a trainee journalist, accountant, surveyor etc. Having a couple of low grade A levels would place you in contention for management training. If you wanted a practical career like engineering it would be enough to get you on to HND courses to have had one or two relevant A levels, similarly to do the Teaching Certificate. Few did degrees but they were genuinely the passport to the higher professions or for the luxury of study for its own sake prior to competing with those with fewer qualifications but 3-5 years of work experience.

Now, qualifications below A level are largely worthless in themselves. There are few skilled jobs available to those with just GCSEs or A levels and certainly few opportunities to get on the ladder of management training outside the uniformed civil and military services. Degrees are the norm for those entry level positions but whereas in the past the level and grade of a public qualification was important, the shifting of the point of employment selection to graduates means that employers have to discriminate on the basis of the perceived value of the university attended and the broader merits of applicants outside their qualifications just to make recruitment manageable..

The impact of this has been to make it essential for individuals to be able to differentiate themselves by means other than their qualifications when in the past, qualifications could be used as a helpful proxy for candidates’ relative merits.

Whereas in the past schools could provide a good education by enabling their pupils to get appropriate grades now they all need to push towards getting their pupils to university just to get them into the mix for jobs at 21 and there is a need for those pupils to somehow develop networking skills and be willing to take unpaid internships.

Accepting that comprehensives have not harmed the academic achievements of those who would in the past have gone to grammar schools and even that they have raised the attainment of those who would have gone to secondary moderns (at least for the sake of argument) the problem has been that the post 92 (and particularly the post 97) focus on Higher Education as a goal has shifted the path to adult success. While there were multiple paths to successful adult careers and jobs a comprehensive system might have fitted children to these multiple paths. The narrowing down of post-16 options to a single highly favoured graduate path has had the effect of negating the value of comprehensive education by designing in presumed failure for those who don’t progress to degree level study.

Andrew Neil’s view that the loss of the grammar schools has set social mobility back is thus only coincidentally correct – it is the loss of grammar schools combined with remodelling society to favour precisely the sort of attainment that grammar schools focused on that is the problem. The 80s were not great times for public and private schools – they were a time when the “role models” and economic success stories were not aristocrats and the upper middle classes but barrow boys making a mint in the City and skilled working class people getting to own their own homes and businesses. Being versed in the Classics and setting yourself up to be a salaried professional meant falling behind the lifestyles of the Loadsamoney generation. Making higher education the goal for two or three times as many as previously experienced it gave private schools the chance to offer what the grammar schools used to and thereby find a new role and prominence.

The other development that paradoxically harms social mobility is the advance and ubiquity of social media. This has meant that the standard and quality of “networking” that is needed to get on is radically greater than a generation or two ago. Even at public schools and Oxbridge historically, the proportions of students who had family and friends connections were fairly low so the unconnected were in the majority at both and had to build connections themselves to the extent necessary. In most careers outside politics, the necessary extent was low.

Now, every young person (and many not so young people) is continuously networking through facebook, graduating onto twitter and linkedin. Who knows who and public recommendations (or likes) proliferate. There’s so much networking “noise” because making a twitter connection (etc) is too easy. Only those who have the rare good fortune of coming from the right family backgrounds can get the real networking relationships of value unless they are lucky. Standing out used to be relatively easy – not so much needed to be done past a bit of persistence and a thick enough skin to be a “hack” whether at university or through a trade union or even just by writing to people. Now everyone can and many do have access to the great and the good they are paradoxically further away from being noticed as individuals. So it is inevitable that even those leaders who bemoan the lack of diversity or social mobility will turn to those that they know personally.

The real problem is, how can things realistically be changed? Perhaps we are already seeing the first steps. Some large accountancy firms have responded to the rise in tuition fees by moving their job application stage to before University and offering to pay university fees and maintenance. This may start to replicate itself as a practice across other areas of employment to bring opportunity back to younger people based on their potential – a revival of the entry point to management being at 18. This would also enable teenagers to have a more realistic view of the impact of further study rather than buying into a narrative of degree=higher earning power for all graduates and blindly following that path. Choosing to do a degree without employer sponsorship would mean making a real choice that a degree was still going to be of value to the individual student rather than the default position to enable them to apply for a job in the future.

The move towards favouring a narrowing of the curriculum so that more students do more traditional subjects at GCSE may also help by making qualifications more readily comparable. The proliferation of new subjects and qualifications with nominally equal value has not worked because they are rightly or wrongly still perceived as having lower value. Changing those attitudes has proved too difficult and is perhaps not really worth doing. If Media Studies et al are of equal value then why should modern languages or even history and geography be considered “too hard” or “not relevant enough” for the same students?