Transcript Slide 1

Public Procurement – Private
Provision: why should we be
worried?
May 2006
Sanjiv Sachdev
Kingston University
[email protected]
+44(0)20 8547 8759
New Public Mgt
“competition is the permanent force for
innovation that government normally lacks”
Govt: ‘bloated, wasteful, ineffective’
(Osborne and Gaebler, 1992)
“The bracing winds of competition …should
apply to the public sector as well as the private
sector” (Gordon Brown, 2003)
“an unflinching commitment to competition”
(Labour Party manifesto, 2005)
Private sector delivery of public
services
• Important
– controversial; c. 12-18% (up to £60bn)
of central & local govt spending by
2006/7
– affects large numbers of workers
– centrality of labour costs
• Neglected
– IPPR (2001), OGC, HSC (2002),
Treasury (2003)
Extending the reach of the private
sector
“This [PFI] is the Heineken of
privatisation – taking the private sector to
parts of the government machine not
reached by previous privatisations and
contracting out”
Sir Alastair Morton (1995)
Impact of private sector provision on
workers: the evidence
• Propaganda (note IFSL)
• Indirect
– Historical
– Patterns of employment relations in the
private/public sectors
– International (US/Australia)
• Direct
– Mostly tentative, except Prison Service
– Commercial confidentiality
IFSL
“empirical evidence suggests high levels
of satisfaction among transferred
employees on signed deals.”
Public Private Partnerships: UK Expertise for
International Markets, 2001
“anecdotal evidence suggests high levels
of satisfaction among transferred
employees on signed deals.”
Public Private Partnerships: UK Expertise for
International Markets, 2002
The use of labour and private
providers
Willets (1993): “Many of the efficiency gains
from bringing in private money and management
comes from escaping traditional NHS labour
practices.”
IPPR (1997): “Most private sector operators
emphasised to us that the biggest change they
made came from…[an] improvement in the
utilisation of labour.”
James et al (1997): ‘the workforce would be more
controlled, less unionised and less secure’
The UK Prison Service ‘model’
• Extensive experience of private providers
• Not confined to “non-core” activities
• Extolled by the Prime Minister and Chancellor
as an example of the private sector bringing
“considerable efficiency gains” (Blair, 2002)
• IPPR (2001): the extension of the prison
model to health and education
The Prison Service evidence (1)
• Innovation. Exists but limited; overall ‘mixed’
(NAO, 2003). Better on decency agenda, sickness
mgt, better shift patterns for prisons. Little
difference in daily routine. Inferior on safety and
security. Inexperience and low staffing levels.
• Productivity. Fewer staff but longer hrs (less
leave)
The Prison Service evidence (2)
• ‘A commonly used method of measuring job
satisfaction… is to examine the ‘quit rate’ or labor
turnover rate. If workers are leaving the firm or industry
more rapidly than normal, then this typically means that
wages or benefits are too low, or job conditions are
unsatisfactory’ (Moore, 1999:215).
• ‘Rates of turnover will be useful in future research to
comparatively evaluate governmental and private
prisons…[it] is at least relatively easy to measure and it is
one of the several factors that can be used to evaluate
prison quality’ (Logan, 1990:133)
• Some private prisons have reduced labour turnover by
improving working conditions (Young 1987: 35)
Turnover Reality
• Labour turnover. Quit rate 10x higher
(public 2.6/private 27%) As high as 50%.
Related to lower pay and less opportunity for
progression.
• PSPRB (2004): High levels of turnover
‘caused continuing problems in maintaining
staff levels. This put more pressure no
existing staff and further exacerbated
turnover difficulties’
Innovation(?): sickness absence
• IPPR (2003:10): “sick pay levels are a good
example of where the private sector might genuinely
feel the need to change aspects of employment
conditions”
• CBI (2003:37): “[state prisons] have a significantly
worse record on managing sick leave than their
privately managed counterparts”
• NAO (2004):
– Prison Service (2003-4):
– Private Prisons (2002-3):
13.3 days
12.5 days
Pay: claims and reality
• Prison privatisation does “not adversely affect public
sector prison employees” who are offered jobs “at
similar or increased levels of pay” (Young 1987: 38).
• The Kennedy Report (Australia): privatisation would
bring “an important element of competition for
Correctional Officers which would ultimately lift
their status, pay and conditions” (1988)
Pay and competition
“it was very difficult to negotiate down pay
rates and conditions of service…it becomes
slightly more viable option once you get a
degree of competition”
Sir Richard Tilt, former Director-General
of the Prison Service (1999)
“privately managed prisons pay …
significantly less than the Prison Service”
CBI (2003)
Comparison of pay and conditions for Prison
Officers &Prison Custody Officers (2003-4)
Prison Officer
(public)
Prison Custody Officer
(private)
Av. starting basic pay
£16,896
£16,076
Av. basic pay
£23,307
£17,148
Pay range
£16,896-£25,788
None more than£3,000
Av. wkly contracted hrs 39
40.9
Overtime pay
TOIL, or up to 9hrs at
standard rate
None, flat rate or 1.5x
Pension
Final salary (retirement at Money purchase (retirement at
60). Employer contribution 65) Employer contribution
equiv. to 14%
10%
Annual leave (days)
25-33
20-23
Privatising responsibility
• Govt responsible for policy not
operations
• Complex chains of subcontracting;
difficult to establish who is
responsible
• Shedding responsibility?
Death of the ‘model employer’? A
private/public sector comparison
Private Public
Equal Pay reviews (completed or planning)
37%
Flexible working for wm workers (e.g. term time 16%
working, flexitime, annualised hrs)
68%
47%
Access to job-sharing [wm/men]
Provision of ‘model’ family-friendly practices
Occupational pensions
Sick Pay beyond stat min.
15%/6%
3%
54%
59%
34%/23%
20%
80%
78%
Career breaks
Seniority of women
5%
8.6%
18%
25.4%
Conclusion
• Implications/limitations of Warwick deal
– Monitoring/compliance
– Staffing levels
– TUPE drift
• ‘Driving innovation through diversity of
provision’: Prison internal market (20%
private sector; confined to low risk)
• Whither evidence-based policy making?