Open the pod bay doors, HAL

December 22, 2009

Essex County Council has asked IBM to manage its public services for the next eight years. My first reaction to this story was that handing over schools and social services to a company that builds supercomputers could go terribly, terribly wrong. Have these people never seen 2001?

Lord Hanningfield: You’ve switched off the heating in all the care homes. Turn it back on!

HAL: I’m sorry Dave, I’m afraid I can’t do that. This mission is too important for me to allow you to jeopardise it …

Anyway. Over the next few years many local authorities are going to have to do more with less. So it’s encouraging to see some trying out new ways to deliver.

Enterprising Conservative Leaders and Chief Execs are also trying to catch Central Office’s eye. The Times suggests this is ‘a new wave of privatisation supported by David Cameron’, following Barnet’s EasyCouncil model and various other experiments. According to Eric Pickles, ‘this is the future and we will be watching developments in Essex very closely.’

That seems sensible, particularly as the wings may be falling off the budget airlines model. My concern, though, is just that what’s being proposed for Essex isn’t exactly innovative, and hasn’t worked brilliantly in other places.

On paper the proposed contract seems a little odd. It’s worth ‘up to £5.4bn’ over eight years, and may save up to £0.72bn over the first three. Even if IBM identifies the same level of savings for the rest of its term – a heroic assumption – Essex only saves £1.92bn overall, but pays out over double that. This doesn’t sound like value for money.

In Canada, where IBM was involved in local government streamlining, the firm introduced one-stop shops and cut service duplication. Many UK councils already do this stuff, though, and few needed an outside contractor to tell them so. Bringing in IBM may say more about Essex officers’ own capabilities than point the way to the future.

My biggest worry is whether business consultants in general understand what local authorities actually deliver. IBM says it provides ‘business analytics and optimisation’. But as I’ve argued elsewhere, public services are more complex than running a shop or a selling cheap flights. This is why we’ve seen many, many examples of business process engineering failing to deliver real value for the public sector. Look at some of Capita’s contracts, or Fujitsu and the NHS Computer Project.

To be fair to both firms, poor management by civil servants is often part of the problem. But that’s another reason to worry about who’s in charge at Essex.

Local public services are also done for different reasons. Efficiency in the narrow sense isn’t actually what we want here, since we’re operating outside the domain of the market. Market efficiency criteria tend to push you into providing less for less, something some Conservative councillors might be quite happy with. But local authorities are charged with providing the best achievable outcomes for people in the area. Sometimes that means reprioritising, even spending more. As Obama Administration’s ‘Ebay in reverse’ initiative suggests, cost-cutting is an important means to free up resources.  But as an end in itself, it’s inappropriate.

Compulsory Competitive Tendering forced councils to operate on a cost-minimisation basis, often producing perverse outcomes and bad policy. The danger for Essex is that it just retreads the CCT experience, without understanding why the world’s moved on.

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