Is the private sector being forced to bear the brunt of public sector costs?

 Is the private sector being forced to bear the brunt of public sector costs?
 

It's tough times for public sector service providers. Whilst the recession appeared to start back in 2008, many service providers are only now feeling the crunch. Whilst the banks, the seeming culprit and first victims of the current financial crisis, appear to be ticking over, rescued by tax payer's money in order to get back into the black, companies providing products and services to the taxpayer are being asked to drop their price or face the service going out to competitive tender.

So what does this mean for tender writers? Under the guise of enforced 'better service delivery models', current providers are being hauled in, one by one, and being asked what they are going to do to help Local Authority's cut costs. What Councils are asking for, ultimately, is more for their money. Whether this means more product or service for the same price, or the same product or service but cheaper, the onus is on existing contract holders to solve the problems of reduced funding to council's, at their own expense. If they are unwilling, or unable, to meet client demands, the likely result is that the contract goes back out to tender and you will find yourself completing a tender.

Of course, it's not always as clear cut as this when contracts go back out to tender and incumbent providers lose their contracts. The recent case of Olympic South Ltd raised the issue of unfairly awarded contracts, where companies were not necessarily chosen for best price or service. Councils all over the UK are shifting their focus from everyday administrative activities to taking a long hard look at the books. Any anomalies that would otherwise have gone unnoticed are now coming into sharp focus. It means that no area is safe from scrutiny, whether the awarded contracts were legitimate or not. And it means that, in future, procurement will be watched over closely by those who need to balance those books in the face of reduced funding.

The unfortunate reality is that there is only so low a business can go when it comes to price. Even taking into account internal efficiencies, staff reductions and lower margins, there is still a bottom price. And if that is already offered by the incumbent, then the outlook is worryingly bleak for both the private sector vying for contracts and the public who need and use those services. Look at the recent case of Gala Trust, which lost it's £75,000 contract to provide carer services for Borders Council and NHS. They claimed that they had a long-standing relationship with both the Council and the NHS, had been flexible and accommodating throughout the contract and, significantly, an independent report found they gave they gave £100,000 worth of value in return for the £75,000 contract. How low can a company go?

Whilst it may be good in the short term for the public purse, and it is also true that some firms have been sitting pretty on lucrative contracts without review, overall, the future is bleak for public service providers and the public in general.