In PERC’s latest paper, Michael Moran and Karel Williams take a close look at the growing outsourcing sector – another means by which the private sector encroaches on the state. They ask why does outsourcing continue to expand despite ongoing fiascos, frauds and cost over-runs? Answers lie somewhere between public and institutional financial illiteracy, market ideology and sleight-of-hand public discourses. For a pdf of this paper, click here.
The Tropes of Unlearning: UK Responses to Outsourcing Fiascos[i]
We have elsewhere described the unlearning state (Bowman et al., 2014) and how liberal democracy in the United Kingdom can, like the restored Bourbons, learn nothing and forget nothing as it persists with the unsuccessful thirty year experiment in competition and markets. Generalisations about neo-liberal policy making and austerity politics, or pervasive conditions like the financial illiteracy of electorates, do not entirely explain such unlearning in this kind of polity which authors like Crouch (2004) describe as post democratic. Here, in various policy areas, the political classes need tropes which both serve as alibis for failure and suggest lessons learned; so that everything can carry on much as before, until the next time when the same tropes will be reused to convey an impression of purposive response to the challenge of events.
We are here dealing with the corruption of liberal democracy which should have a developed capacity to learn from failure. Liberalism should promote open debate about policy options, their alternatives and their consequences; and democratic institutions should ensure accountability of governments in the face of failure. These safeguards should not be rubbished because they are worth something. The great domestic policy disasters of the last century – genocides and famines – have occurred in non-democratic regimes, and are directly connectable to the institutional and ideological arrangements in those regimes. Liberal Democracies have not inflicted suffering on anything like this scale – at least, not on their own citizens. But liberal democracies are not immune from blindness in the face of failure, and this chapter illustrates this point by considering how the UK political classes respond to fiascos about service delivery, cost over-runs and fraud in outsourced public services.
The case is particularly important for some very obvious reasons. Outsourcing itself is now one of the most important economic and political developments in the United Kingdom in the last three decades, and the practice is now being imitated in many other countries. The scale of the outsourcing boom in the UK has produced a new industry with £100 billion turnover and what we have called a ‘franchise state’ – a configuration in which private outsourcing giants assume responsibilities for core state functions like security and welfare (Bowman et al 2015).
Failing to prevent recurrent outsourcing fiascos, or to learn from them, thus constitute major failures of public responsibility. And the failure to learn is, as we explain below, tied to a series of tropes or devices which allow the political classes to explain away each new failure as a set-back which does not justify halting outsourcing or imposing much tighter conditions on outsourcing contractors. This failure to reflect creatively on the causes of fiascos, and how they might be avoided, stymies public debate and criticism and undermines the institutions dedicated to public oversight of outsourcing: the National Audit Office and the system of Select Committees in the House of Commons, notably the Commons’ Public Accounts Committee.
Official reports have dissected successive outsourcing fiascos including fraud over prisoner tagging, failure to provide security guards at the London Olympics and many mundane failures of service delivery on GP out of hours services, court translation services and such like. Here are three tropes that stand in the way of governmental learning from such outsourcing fiascos. They are important learning blocks because with minor variation they recur in different responses to various fiascos; and because they are connected to wider features of a policy-making system whose ill-considered hyper activity produces many other failures. Readers are invited to consider how similar tropes recur in other policy areas in other high income countries.
Trope 1: “It’ll be lovely when it’s finished” the receding market utopia.
The oldest joke about Manhattan – ‘it’ll be lovely when it’s finished’ – underlies also one of the commonest responses to the failures of utopian projects: the problem always lies with the failure to realise to the full the underlying conditions needed for the project to succeed. The mindset created by the pursuit of the utopian ideal has been explored in Scott’s famous study of human catastrophes inflicted by authoritarian high modernism – the utopian fiascos of, for instance, Stalinist and Maoist utopianism (Scott 1998). Outsourcing in the UK takes place in a liberal democratic society but it has the key features of a utopian project: it aims at the fundamental reconstruction of the state according to an imaginary map of an ideal social order – one in which government services are delivered as a result of bidding in a freely competitive market. And when the competitive process fails to deliver, the cause is therefore ascribed to the failure to realise the required conditions for reaching the utopian destination, and a further reconstruction of institutions is embarked on to reach the ever receding market utopia. Here, as an example, is how the National Audit Office responded in December 2013 to numerous instances of the failure of the outsourcing system to create a defensible system for pricing outsourced services. It created an ideal set of outsourcing principles which need to be put in place for a pricing system to work:
‘Principle one: The relevant department understands national supply and demand and intervenes to remedy problems
Principle two: The relevant department understands the national market structure and intervenes in the event of market failure
Principle three: The relevant department should understand the role of, and work with, the competition authorities and relevant quality and sector regulators, to raise awareness, standards and enforce rules and the right market behaviour
Principle four: The local authority understands its impact on local public and private markets as a purchaser of services, and how to encourage the right market behaviour
Principle five: The local authority knows the costs of service provision
Principle six: The price sustains supply at acceptable levels
Principle seven: Quality is acceptable
Principle eight: Users are well informed about quality.’
(National Audit Office 2013: pp 9ff).
It is not that any of these conditions are unacceptable; nor is it the case that they are in some instances not partly realisable (indeed the NAOs own report cites individual instances where some institutions have succeeded in putting some into effect.) It is the way they cumulatively amount to a utopian imaginary – a set of conditions that could never in practice be achieved but which can be used to explain why the kind of real live pricing failures which prompted the NAO report can be explained. It easy to see that the realisation of all these conditions fully and simultaneously is a utopian mirage – but the vision of the mirage can be used to legitimise the continuing pursuit of a society where government services are outsourced despite the recurrence of fiasco.
Trope 2: “That’s life” fatalism
The utopian mirage is one end of the spectrum of responses to failings in the outsourcing system. A very different response, at the other end of the spectrum, is fatalistic: quite contrary to the utopian aspiration it assumes that not only is perfection incapable of achievement, but that failure and fiasco are the normal lot of government, and indeed of life. Utopianism is revolutionary; fatalism is conservative. It is one of the commonest tropes in British government when faced with fiasco (see Moran 1991 and 2007). The world is a complicated place . The complexity of life is such that mistakes must always happen. History is lived forward but studied backward. It is only smart alec journalists, academics who study things after the event, and Parliamentarians who want to make partisan points at the expense of those who actually have to implement policy who think that failures should have been foreseen. In outsourcing, organisations are large and complex; it is practically impossible to control every last operating detail in a giant firm. We learn as best we can from these mistakes, but cannot rule out the possibility of future failure (on the route of our onward march).
This in human terms is a perfectly understandable response that grows out the lived experience of those who actually have to make the outsourcing system work, because they confront the hard realities of institutional organisation and policy delivery. It is therefore not surprising that fatalism is a common explanation for failure offered by those who have to actually run outsourcing programmes. It is one of the most frequent responses by hapless senior executives of outsourcing companies being roasted for failures before the Public Accounts Committee. Consider as absolutely typical the explanations offered by their leading executives for one of the most widely publicised fiascos of recent years: the failure of anyone to spot that two of the outsourcing corporate giants (G4S and Serco) were billing for services (tagging prisoners) that had never been carried out. Ashley Alemanza, at the time of the hearings (December 2013) Chief Executive of G4S, offered the following:
I think it was a judgment that was flawed. It was just a flawed judgment…. We got it wrong….We did not have the systems in place that we needed to have. (House of Commons Public Accounts Committee 2014a, Qs 113 and 116.)
And a similar line was taken by the then Chairman of SERCO on the same occasion:
‘As far as we are concerned (it) might have been a contractual interpretation of what the lawyers might argue, but that still does not make it right’. (ibid: Q115)
One reason fatalism is so often invoked in this way is that those at the sharp end of the outsourcing system – executives responsible in the last instance for implementing programmes – are in the first line of criticism when fiascos occur. And they are in the first line because of the third, commonest, response to fiasco in the outsourcing system: blame shifting.
Trope 3: “Whose fault is it anyway?” blame shifting
As the work of Hood and his colleagues demonstrates, blame shifting is a standard response to policy failure in British government (Hood 2002, Hood and Rothstein 2001.). It is profoundly inimical to efficient policy learning because it transforms systemic defects into human failings, creating a trail of stigmatised public servants and executives who are publicly scapegoated for failure, in official reports or (more vehemently) in the tabloid press. The summary below by the Public Accounts Committee of the whole outsourcing experience catches this kind of reasoning in its most sober and balanced form: here is a lament for the incapacity of firms and civil servants who must both do better.
Government is clearly failing to manage performance across the board, and to achieve the best for citizens out of the contracts into which they have entered. Government needs a far more professional and skilled approach to managing contracts and contractors, and contractors need to demonstrate the high standards of ethics expected in the conduct of public business, and be more transparent about their performance and costs. The public’s trust in outsourcing has been undermined recently by the poor performance … high profile failures illustrate contractors’ failure to live up to standards expected and have exposed serious weaknesses in Government’s capability in negotiating and managing private contracts on behalf of the taxpayer. (House of Commons Public Accounts Committee, 2014:3).
Two particular features of the outsourcing policy system reinforce this propensity towards blame shifting. The first is the historically established system for ensuring accountability which is built round two institutions, the National Audit Office (a descendant of 19th century institutions concerned with auditing for value for money in public spending) and the system of Select Committees in the House of Commons which react to NAO reports to hold public hearings and issue their own critical reports. Of these Select Committees the most important is the Public Accounts Committee, itself a 19th century ‘value for money’ institution of accounting scrutiny. The incentive structures of parliamentary life encourage the development of an inquisitorial investigative style in which publicity is generated for Chairs of the Committee and for Committee members by aggressive cross questioning of witnesses, and the publication of reports which equally aggressively criticise the public servants who wrote the original outsourcing contracts, and the executives of the companies who tried to put them into effect. The activities of the Committee, under two particularly successful recent chairs (Edward Leigh, 2001-10 and Margaret Hodge, 2010-15) have been shaped to the needs of modern media management: brief stylised confrontations in Committee hearings ideal for news bulletin clips, and media interviews with Chairs at launches of Committee reports to highlight the ‘headline’ messages of those reports.
A second feature of the outsourcing system reinforces blame shifting. In recent years outsourcing has moved on from contracting out utility services, like waste management and transport, to contracting out historically core state functions, like the management of security and the management of welfare claimants. These include some of the most sensitive and politically toxic tasks of the state: for instance incarcerating, and sometimes deporting, failed asylum seekers, and scrutinising welfare claimants for their ability to undertake employment. Although justified in the language of efficiency and competitiveness, outsourcing here involves shifting to the private sector tasks which are so politically toxic that elected politicians would prefer not to manage them. The result is that when things (fairly predictably) go wrong the blame can be shifted to the outsourcer. In that case, government ministers have two options: first, they can either harrumph about “completely unacceptable” failures in duty of care in secure institutions; or, second, they can simply let the outsourcers as enforcers take the punishment for operating what is government policy (but not explicitly so)
The way in which enforcers can be used to take the punishment is nicely illustrated by the series of outsourced contracts connected with work capability assessments (fitness for work assessments for disabled benefit claimants). In March 2014 the Department of Work and Pensions and the outsourcing specialist Atos announced that the contract signed by Atos with the previous Labour government to carry out work capability assessments was to be cancelled a year early. The staff of Atos had been required to make brutal judgements about individual cases; underqualified, time pressured and poorly incentivised staff made judgements which did upend lives and could be challenged. In giving reasons for walking away, Atos explained how it had as enforcer taken the punishment:
The key ones were the very toxic environment in which their staff were being asked to work, including threats and security incidents, the lack of public understanding of the separate roles of Atos, DWP and tribunals in the process, leading to Atos being blamed for withdrawal or refusal of benefit; and the contract becoming less viable financially. (House of Commons Work and Pensions Select Committee 2014,p. 29.)
And this is how government washed its hands of the toxic experience. In the words of the then Minister for Disabled People to the Work and Pensions Committee:
when I arrived in the Department eight months ago, on my desk were an awful lot of letters from my colleagues – let us be perfectly honest about it – from across the House who had real concerns about how the assessments were being done and how Atos was performing … it did become pretty obvious that Atos’s confidence as to whether they could perform what we were asking them to do; our confidence; and the public’s confidence was not sufficient, and so I did ask the team to negotiate with Atos as to whether or not Atos could leave the contract. (House of Commons Work and Pensions Committee 2014, Q447)
Blindsided by tropes: unlearning and outsourcing
Although blame shifting is the most common response to outsourcing fiasco, the most important source of knowledge blockage is the utopianism identified above: for nearly three decades now the management of contracting has been in thrall to an ideological vision about competition and markets. The failures in the ramshackle outsourcing system have been nothing as catastrophic as those in the old command systems that were guided by authoritarian collectivist ideologies. But, the inability to learn from failure is strikingly similar: it is hardly surprising that Ron Amman, who spent the first part of his career studying the pathologies of the Soviet command system, and the second as a senior manager in the British policy system, ended up finding strong similarities between the two (Amman 2003.).
Amman, R. (2003). ‘A Sovietological View of Modern Britain’, Political Quarterly: 74: 4): 468-80.
Bowman, A., Ertürk, I., Froud, J., Johal, S., Law, J., Leaver, A., Moran, M., Williams, K. (2014). The end of the Experiment: outsourcing and how it goes wrong. Manchester: Manchester University Press.
Bowman, A., Ertürk, I., Folkman, P., Froud, J., Haslam, C., Johal, S., Leaver, A., Moran, M., Tsitsianis, N., Williams, K. (2015). What a waste: outsourcing and how it goes wrong. Manchester: Manchester University Press.
Crouch, C. (2005) Post-democracy. Cambridge: Polity Press.
Hood, C. (2002) ‘The risk game and the blame game’. Government and Opposition, 37(1): 15–37.
Hood, C. and Rothstein, H. (2001) ‘Risk regulation under pressure: problem solving or blame shifting?’ Administration and Society, 33(1): 21–53.
House of Commons Public Accounts Committee (2014) Transforming Contract Management. Session 2013–14. HC 585. London: The Stationery Office.
House of Commons Public Accounts Committee (2014). Contracting Out Public Services to the Private Sector. Session 2013–14. HC 777, London: The Stationery Office.
House of Commons Work and Pensions Select Committee (2014). Employment and Support Allowance and Work Capability Assessments. Session 2014–15. HC 302, London: The Stationery Office.
Moran, M. (1991) ‘Not steering but drowning: policy catastrophes and the regulatory state’. Political Quarterly, 72 (4): 414–27.
Moran, M. (2007) The British Regulatory State: high modernism and hyper-innovation. Oxford: Oxford University Press.
National Audit Office (2013). Deciding prices in public services markets: principles for value for money. London: National Audit Office
Scott, J. (1998) Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed. New Haven, CT: Yale University Press.
[i] This short argument draws on our recent book (Bowman et al., 2015) which presents a broader overview of outsourcing that combines follow the money research and political analysis
Michael Moran and Karel Williams are professors at Alliance Manchester Business School. Their most recent outputs include the book What a Waste (Bowman et al. 2015) on outsourcing and Where Does the Money Go (at cresc.ac.uk) on the crisis in adult care.