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In this edition:-
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Carter Review Published
The much anticipated report from Lord Carter of Coles “Securing the
future: Proposals for the efficient and sustainable use of custody in
England and Wales” was published on 5 December 2007. Lord Carter
was tasked with reviewing the Prison Service and identifying how to
balance the supply of prison places with demand in the short, medium and longer term. The report made recommendations in five key areas:
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The management of the prison population
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Increasing capacity and building out inefficiencies
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Improving the way custody is used
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Improving the operational efficiency and financial control of the prison system
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Improving governance and delivering reforms
The recommendations identify the need for NOMS, Probation and the Prison Service to organise themselves more effectively to deliver Offender Management. Further, the report endorses commissioning and effective contract management and makes a series of recommendations that propose a strengthening of the existing commissioning arrangements and allow for a more competitive and transparent market place for prison and probation services.
Last week, in response to Carter, Jack straw announced the intention to bring NOMS and the Prison Service together, streamlining headquarters and rationalising regional structures in order to improve the focus on frontline delivery. Phil Wheatley, who is currently the Director General of HMPS, will become the Chief Executive of NOMS as a delivery agency. Helen Edwards will take responsibility for Strategy, Policy and Regulation. In a joint letter to NOMs staff last week Phil and Helen write “This reorganisation means that while reducing re-offending continues to be the main aim, commissioning will focus more robustly on ensuring the efficient use of available resources with delivery through effective contract and SLA management”. Work on organisational design and structure is underway and the Academy will seek to provide a forum for debate and discussion as this work unfolds.
The Carter report can be found at:
www.justice.gov.uk/publications/securing-the-future.htm |
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Gary Sturgess
Guest Editor
Serco Institute |
In an attempt to understand the origins of Jeremy Bentham’s thinking about service contracting (and contracting for the management of prisons, in particular), I have been reading some of his brother’s writings. My friends tell me that this is awfully obscure, but unlike Jeremy, who spent most of his adult life locked away in the family home in Queen Place (on the site that would later house the Home Office), his younger brother was an experienced manager of public services (serving for some years as the Inspector-General of the Naval Dockyards).
Samuel was ahead of his time – pioneering the application of individual responsibility in public sector management, cost-benefit analysis and the time value of money. He was also a great exponent of what he called ‘comparative economy’ – in the absence of pricing signals, he recognised that public officials needed to benchmark the performance of different policies, institutions and management model, in order to make intelligent choices. He was one of the earliest exponents of what today would be called ‘evidence-based decision making’.
Two hundred years later, we still need to be reminded of the importance of ‘comparative economy’ in public administration, and by a happy coincidence (and some guidance by the founders of the Academy) this issue of the Bulletin addresses this question in different ways. At the Academy’s very first seminar, in October, and again in a brief article in this issue, the economics
consultancy, Matrix, raised challenging questions about the comparative costs and benefits of imprisonment and community sentencing.
The Serco Institute published a report summarising some 200 academic and governmental studies on the financial benefits of competition and contestability. One of the five markets studied was the prisons sector, and among other conclusions, the authors argued the need for a consistent and more robust methodology for comparing contested and uncontested public institutions.
Gary L. Sturgess
Serco Institute
Executive Director
The Serco Institute |
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Since our first bulletin, things have moved very quickly in a number of key areas. NOMS move to the Ministry of Justice presents an opportunity to reposition the Academy as a learning and development support network for justice commissioners, both criminal and civil. We are therefore ‘re branding’ to the Academy for Justice Commissioning in support of this transition.
The organisational structure for the Academy is also taking shape. We hope to appoint a dedicated full time Academy Administrator in the next few weeks. This individual will provide essential coordination and be a single accessible reference point for our members. The Academy governance arrangements are also being developed, with invitations to join the Senate, our
high level governance and strategic group, going out shortly. Details of the membership of the Executive Group can be found in the ‘contacts’ section of this bulletin.
Productive relationships are developing with other
interested government departments and agencies.
The National School for Government has agreed to assist with the development of draft national standards for commissioning and this is a welcome move which could, in time, underpin the learning accreditation of commissioners working across the public service. We will keep you updated as this exciting work progresses. |
The Academy has hosted three further evening
seminars across a range of subjects which have
attracted a wide audience from within both
commissioning and public, private and voluntary
sector providers. These evening events have
demonstrated the appetite that exists for debating the role and approach of commissioning in driving provider performance and innovation. Details of recent seminars and forthcoming events can be found within this bulletin.
WE ARE ALWAYS KEEN TO HEAR FROM
YOU AND WELCOME YOUR INPUT INTO
FUTURE BULLETINS AND EVENTS. TO
CONTACT US, OR REQUEST INDIVIDUAL
MEMBERSHIP OF THE ACADEMY
(ENABLING EARLY NOTIFICATION OF
EVENTS AND ACCESS TO BULLETINS) EMAIL
US AT Academy@Homeoffice.gsi.gov.uk. |
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Department of Health
‘World Class Commissioning’
In November, the Department of Health published its policy paper on ‘World Class Commissioning’, described as having been designed ‘to raise ambitions for a new form of commissioning that has not yet been developed or implemented in a comprehensive way across any of the developed healthcare economies’.
The document lays down eleven key competencies for the NHS commissioners:
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Locally lead the NHS - actively steer the local health agenda
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Work collaboratively with community partners – take into account the wider determinants of health
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Engage with public and patients – actively seeking their views in making commissioning decisions
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Collaborate with clinicians – recognising that clinical involvement is a critical part of the commissioning process
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Manage knowledge and assess needs – basing decisions on sound evidence, and placing greatest priority on greatest need
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Prioritise investment – developing clear priorities
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Stimulate the market - influencing provision to meet demand and secure desired outcomes
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Promote continuous innovation and improvement
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Deploy procurement skills – to ensure providers have appropriate contracts
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Manage the local health system – in particular, relationships with providers to ensure high quality
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Make sound financial investments – ensure that commissioning decisions are sustainable.
Located at
http://www.dh.gov.uk/en/Policyandguidance/
Organisationpolicy/Commissioning/
Worldclasscommissioning/index.htm
Secretary of State for Business, Review of the Public
Services Industry
In December, the Business Secretary, John Hutton, also announced a six-month review to look at the scale of the public services industry, its contribution to national wealth, key success factors and market competitiveness. The
review is being undertaken by the chair of Chatham House, Dr De-Anne Julius, and will report in the summer. |
Department of Health, ‘NHS in England: Principles and Rules for Cooperation and Competition’
In December, the DoH also published guidance for system managers, commissioners, and providers on ‘the expected behaviours and rules governing cooperation and competition’. The rules are designed to ensure fair and transparent competition, ‘and provide essential safeguards for the interests of patients, taxpayers, and the reputation of the NHS’.
Located at
http://www.dh.gov.uk/en/Publicationsandsta
tistics/Publications/PublicationsPolicyAnd
Guidance/DH_081098
Audit Commission, ‘Healthy Competition’
The Audit Commission released its report on competition and contestability for local public services in late November,concluding that councils can use market mechanisms to generate benefits for ratepayers and service users. Half of all council
expenditure was potentially subject to competition. However, the pre-conditions for successful competition are not widely in place.
Located at
http://www.audit-commission.gov.uk/Products/NATIONAL
REPORT/D8FF4C6D-C465-4f81-9052-
C18A0C16E83C/HealthyCompetition20
07_27Nov07.pdf
Oxford Economics, Public Service Markets
The CBI released the preliminary results of a study undertaken on its behalf by Oxford Economics of the scale of the public services
industry in the UK (this is, the private and voluntary sector contribution). The brief report in the Financial Times in December claimed that the industry employs more than 700,000 people, and that its value-added contribution to GDP in 2005-06 was around £25bn, more than the automotive, aerospace and pharmaceuticals industries combined. The full report is expected
to be released in February 2008. |
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Are prison sentences a cost beneficial way of reducing reoffending?
November saw the publication of ‘The Economic Case For and Against Prison’, a report commissioned from Matrix Knowledge Group by the Monument Trust, the Lankelly Chase foundation and the Bromley Trust. |
The report compares the costs of the community
sentences versus prison sentences and identifies
potential savings to the public purse of between
£30,000 and £88,000 per offender. When costs to victims are taken into account, the savings range from £61,000 to £202,000 per offender.
The research found no alternative intervention/sentence was shown to be less effective than prison. Even when there is little difference between a prison and community payback sentence in terms of cutting reoffending, the conclusion is that it is still more cost effective to use a community sentence.
Although the budget for prisons has risen to almost £2 billion, little evidence exists to demonstrate the
effectiveness of custody – certainly not in terms of
reducing reoffending. The report suggests that a very large proportion of the prison population is undergoing a regime that is less effective at reducing reoffending than comparable community punishment sentences with the right interventions. No alternative intervention/sentence was shown to be less effective than a bare custodial sentence, which suggests reducing the use of custody would allow more effective reinvestment in the development of measures within the community. A full copy of the report can be found at:
http://www.matrixknowledge.co.uk/
prisoneconomics/
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The following article is a summary of an academy seminar held in October 2007
What does economics add to
decision making?
Evidence from the criminal justice literature
Kevin Marsh, , Aaron Chalfin1 and John Roman2
Source: Recently submitted to the Journal of Experimental Economics
Objective: Despite economists’ arguments for economic analysis of criminal justice interventions, compared to the number of observational studies of criminal justice
interventions, there have been few economic evaluations of criminal justice interventions. This paper asks whether undertaking an economic evaluation provides any extra
information to policy makers compared to an analysis solely of the effect of an intervention.
Method: A review of the literature was undertaken to identify evaluations of criminal justice interventions that reported both an effect size and measures of economic efficiency. A number of existing reviews were supplemented with reviews of the following databases: ASSIA, British Library Direct,
Criminal Justice Abstracts, Criminal Justice Periodical Index, Dissertation Abstracts, International Bibliography of Social
Sciences, EBSCO Host, NCJRS, ERIS, JStor, NCJRS, PsycInfo, Social Care Online, Social Policy & Practice, Social Services Abstracts, Sociological Abstracts, and Web of Knowledge.
Studies were included in the analysis if they measured offending and they provided sufficient detail to allow the calculation of an effect size, a benefit-cost ratio and the netbenefit per participant. Once the inclusion criteria had been applied, the final sample included 106 studies. |
A number of regression models were run to test whether effect sizes were predictive of economic efficiency as measured by both net benefit and the benefit-cost ratio.
Results: A bivariate analysis found only a minimal
correlation between effect size and the two measures of economic efficiency employed. Multivariate models tended to support this assessment. Effect size was only statistically
significantly associated with economic efficiency once the majority of the economic evaluation variables are included in the model, suggesting that the relationship between effect size and economic efficiency is only isolated once variables
measuring the contribution of economic evaluation methods are controlled for.
Conclusion: The analysis undertaken faced a number of limitations. First, the analysis relies on estimates of effect and economic efficiency available in the existing literature. As noted above, there have been few economic evaluations
of criminal justice interventions. Second, limited reporting of information in the studies meant that the models employed were potential misspecification. A number of variables were
excluded from the models due to limited data. For instance, length of follow-up is a key determinant of the measure of intervention benefit, but was only reported by a small number of studies.
However, despite these limitations, the research provides important lessons for the employment of research in policy decision-making. It was concluded that effect size is at best weakly predictive of economic efficiency and therefore that economic evaluations contribute additional information about the effect of an intervention. |
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The following article is a summary of an academy seminar held in November 07
Game Theory and the Winner’s
Curse
Alastair Dick
Source: Forthcoming Serco Institute publication
Aims: To assess the implications of game and auction theory for running procurements and to determine how practitioners might find easily applicable lessons to improve how procurements are structured
Overview: This talk, based upon a forthcoming Serco Institute publication, was aimed at applying the lessons learnt from recent game theory and auction theory to procurement practice.
Currently, when practitioners go about designing and carrying out public service procurements – as bidders or as procurers – they may focus little on the extent to which the way that the procurement is structured may determine the
outcome. But the structure of the procurement actually changes the way in which bidders will interact and thereby may determine who wins and what the outcome is in terms of the service delivered.
The Winner’s Curse is an extreme example of this. This is a phenomenon that was first observed in the market for oil concessions. It was noticed (and then proved theoretically) that where there was a lot of uncertainty about the potential
future value of an oil concession and where price was the key basis for competition, the winning bidder was invariably the one that was most optimistic – and therefore invariably
lost money, the so-called “Winner’s Curse”. |
When this is applied to procurements it becomes apparent that any procurement for a new service that is not yet wellunderstood faces a risk of a Winner’s Curse. And in the case of long-term service contracts, there is a risk that where a Winner’s Curse results the service may not get
the long-term investment it needs – meaning that both procurer and ‘winning’ bidder will suffer. However, if this is recognized upfront by the procurement team it can be relatively simply to avoid a Winner’s Curse, by avoiding price-based competition and by reducing the level of
uncertainty within the bid.
Applying this conclusion further across different kinds of bids, it becomes apparent that the Winner’s Curse is just one category of procurement “games” that can be modeled. In particular, it becomes apparent that encouraging intense price competition between bidders is only in the interests of the procurer under specific conditions.
More broadly, it would be possible to classify
procurements according to the level of uncertainty and the relative focus on price vs qualitative factors. Using the resulting classification, it becomes clear that different structures and approaches are better suited to different
classes of procurement – and that procurers need to consider how the underlying structure of a procurement may influence players within it and determine their particular approach to each procurement appropriately.
http://www.serco.com/institute/
institute/index.asp
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Joe Goasdoué, Chief Executive, the British Quality Foundation
Commissioning an excellent supplier involves more than meeting a technical specification. For example, one is looking for high quality, action-oriented management; outstanding quality management; commitment to superior customer service and satisfaction and much more. The
EFQM Excellence Model is ideal for this purpose.
The Model is used to assess an organisation against four results criteria (outcomes and achievements) and five enabler criteria (activities and efforts) and the Department for Transport Rail Group is a good example of its practical
application. The DfT Rail Group successfully uses the Model in its franchise competition pre-qualification phase and these are just a very few examples of the questions they ask:
Leadership – How does the senior management team engage with customers of the train service, the rail industry and all other key stakeholders?
Overview: This talk, based upon a forthcoming Serco Institute publication, was aimed at applying the lessons learnt from recent game theory and auction theory to procurement practice.
Currently, when practitioners go about designing and carrying out public service procurements – as bidders or as procurers – they may focus little on the extent to which the way that the procurement is structured may determine the
outcome. But the structure of the procurement actually changes the way in which bidders will interact and thereby may determine who wins and what the outcome is in terms of the service delivered.
The Winner’s Curse is an extreme example of this. This is a phenomenon that was first observed in the market for oil concessions. It was noticed (and then proved theoretically) that where there was a lot of uncertainty about the potential
future value of an oil concession and where price was the key basis for competition, the winning bidder was invariably the one that was most optimistic – and therefore invariably
lost money, the so-called “Winner’s Curse”. |
People - How are staff involved and empowered,
particularly those in front line service provision?
Processes - How are business, operational and
other key processes reviewed and improved on a
continuous basis in order to generate increasing
value for all customers and stakeholders?
Such questions are rarely asked of a potential supplier but they should be ‘routine’ because finding an excellent supplier means finding an excellent company.
To ensure that the DfT delivers good quality contracts with excellent suppliers the model has become a fundamental part of their supplier selection process. It introduces objective decision-making based on evidence. A key advantage is that it enables robust feedback to
potential suppliers that helps them improve their
performance. It has been widely embraced by the rail industry as a way of benchmarking and a useful tool to identify and deliver continuous improvement.
Further information can be obtained from the British Quality Foundation (joe.goasdoue@bqf.org.uk) and the
DfT (nick.seaward@dft.gsi.gov) |
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Does contestability work?
The relative merits of public versus private provision have been debated since the re-introduction of competitive tendering and contracting in the 1980s. In fact, a perusal of the early 19th century debates over Britain’s Naval Dockyards reveals that it was a warm
topic of debate even then.
In December, the Serco Institute published the results of some 200 academic and government studies over 30 years across a dozen different countries, looking at five sectors – defence support, health services, prison management, waste collection and municipal services.
Unlike many of the studies upon which they drew, the authors of ‘Competitive Edge’ sought to analyse the impact of competition and contestability, rather than the respective merits of the public and private sectors. While the quality of the studies varies and the results
differ from country to country and from sector to sector, the authors concluded that savings of up to 20% were not unusual. |
To Bulletin readers, the chapter on prison services will be of greatest interest. The conclusions are based on 34 studies from the United States, five from Australia, three
from the UK, and one rather disappointing study from France. Indeed, in arriving at their conclusions, the authors dismissed many of the studies as being insufficiently robust to allow for meaningful conclusions.
One of the few studies that looked at the contestability effect was a 2005 report by the Public Accounts Committee in New South Wales, which compared the performance of two new generation public prisons, commissioned under the threat of competition, with traditional public facilities (a challenge process similar to performance testing in the UK). The PAC concluded that contestability had resulted in significant savings, for the most part delivered through much better management of overtime and sick leave.
The Home Office studies of the four anagement-only contract prisons, conducted over a period of several years in the late 1990s, were reported as some of the more robust in the sample. It has sometimes been claimed that these studies also demonstrated a contestability effect, with the Prison Service improving its performance over time to match that of the privatelymanaged
facilities.
‘Competitive Edge’ challenges this claim. The authors argue that ‘cost per place’, the measure used as the basis for this conclusion, was reflecting a shift in the overcrowding burden during that period from the public sector benchmark prisons to the contract prisons. Cost
per prisoner was thus a more reliable indicator, and on the basis, the cost differential remained at 11-15%. |
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Indeed, the Institute suggests that the cost differential may have been higher again, since the public sector expenses appeared not to take into account the full pension costs, and no accounting had been made of the corporation tax paid by the private operators.
And the Private Finance Initiative seems to have
delivered further savings again. The public sector comparator for the first of the PFI prisons, Parc, was constructed on the basis that the facility would be publicly-built but privately-operated. On this basis, the PFI solution was 17% less costly than the government’s public-private alternative. But the price of Rye Hill, which was competed less than three years
later, was 38% less costly than the comparator for Bridgend (a prison of comparable scale). Of course, not all of these savings can be attributed to operational efficiencies, but a reality check against the personnel costs of the two sectors, reported by the Prison Service Pay Review Body, seems to confirm that the savings have been well in excess of 20% and possibly as high as 30%.
Of course, cost reductions do not represent value-formoney improvements unless quality has been at least held constant. This is an area where the Institute found many of the studies to be deficient, although in the case of the UK prisons, there appears to be a consensus that while the public and the contract prisons have different strengths, the quality is broadly
comparable. |
In an appendix dealing with ‘methodology’, the
Institute commented on the variable quality of the
studies, and the need for agreed standards when
research of this kind is being undertaken. The authors
concluded that with many public services (including
hospitals and prisons), statistical analysis will be
difficult because of the significant differences in the
institutions being compared. They argued instead for
a more robust form of case study analysis, based on
a consistent methodology, similar to the approach
adopted by the Home Office in the 1990s. They also
called for academic and government researchers to
pay a great deal more attention to the impact of
competition and contestability on value for money,
rather than pursuing the outdated practice of
comparing public and private ownership.
‘Competitive Edge: Does Contestability Work?’ was
published in December 2007 and can be located at
http://www.serco.com/Images/Competitive_Edge_Fin
al_tcm3-22515.pdf. A more detailed summary of the
almost 200 studies, ‘Competitive Edge: The Evidence’
has been published and can be located at the Serco
website. |
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Programme of future events
These events, which are free and open to
anyone to attend, provide important
context for our work as commissioners
and providers, open up networks of
contacts and promote the role of the
Academy amongst participants from other
sectors.
Places at these seminars are limited,
please contact the Academy at email:
academy@homeoffice.gsi.gov.uk, if you
would like to secure a place.
Forthcoming dates
18 March – at the Rubens Hotel,
Buckingham Palace Road, London
Innovation & Partnering – why, too often,
do good ideas fall into the gaps?
by Gavin Barrett, Pica Consulting Services
Limited |
The Achieving Business Excellence
Programme
This programme has been designed with a
range of key stakeholders in the criminal
justice environment to provide individuals and
organisations with the opportunity to develop
skills for the new commissioning led
environment.
The following courses are running until
March:
Challenging delivery models - 19th March,
Sheffield
The Intelligent Customer - 4th March,
Weston-Super-Mare
From Cost to price - 25th March, Birmingham
If you would like to book a place on any of
these course please contact us at
pcptraining@homeoffice.gsi.gov.uk |
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Getting in touch
Contributions and feedback are welcomed – if you are interested in submitting comments, relevant information or an article for inclusion in a future edition, please contact us at
academy@homeoffice.gsi.gov.uk
Academy for Justice Commissioning
C/O Office for National Commissioning, Elizabeth House, Unit 2, Forder Way, Cygnet Park,
Hampton, Peterborough, PE7 8GX
If you would like to speak to someone directly about the Academy for Justice Commissioning please Telephone: 01733 440451
Members of The Academy Executive Group are:
Trevor Williams, Michelle Jarman-Howe, Patsy Northern, Graham Towl,
Richard Heys, Sam Latham, Jane Grant and John Graham
The Academy web pages will go live on 3 March and can be accessed at the following address:
http://noms.justice.gov.uk/about-us/commissioning-07/training/academy/ |
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