Public Sector Outsourcing Survival Guide: How to disaggregate outsourced public services successfully

5 minute read
23 February 2022

Government policy is clear on the role that contract disaggregation can play in creating healthy outsourcing markets. Breaking up services into their component parts and procuring those separately can help increase competition, drive innovation, increase SME access and allow for flexibility by avoiding future lock-in. However, disaggregation does present its own challenges. Instead of having a prime contractor who is responsible for the end-to-end service delivery, Government Departments find themselves having to step-in to the ring master role – often after having lost the experience that the role requires.

In this second insight in our series, we look at the legal issues that commonly occur on a service disaggregation and share our tips on how you might seek to tackle them.

What are the issues that commonly occur?

  • Mind the gap. Having a web of suppliers providing different but interfacing services can make it difficult to establish the root cause of a service failure, and even more difficult to hold suppliers accountable and ensure the failure is fixed as quickly as possible. Service resilience can suffer as a result.
  • Lack of data on service provision. Where the existing service is provided by a single supplier or managed by a prime supplier, it can be difficult to unravel what the service entails and key interfaces and dependencies. There may also be a lack of performance data at a service line level.
  • Resource. The challenge of running multiple procurements simultaneously should not be underestimated and requires strong programme management. Equally, adopting the role of the ring master requires the Department to have contract managers with the correct capabilities and understanding of the services. On a second generation outsourcing, this knowledge may no longer exist.

Our tips for tackling the common issues:

  • Simplify. It can really help with both the procurement and contract management phase if you have a common set of contract terms that apply to all suppliers. This can be a challenge where services are being procured via existing frameworks as you will be constrained as to the extent of changes that can be made to the framework terms. However, we can advise you on the procurement risk associated with adapting the framework and mitigation strategies.
  • Map it. The more work that can be done upfront to understand the existing service provision, the future requirement and the service interfaces, the better. Having a clear and robust specification prior to going to market will save a lot of hassle down the road. Engaging a service integrator can help where you no longer have a retained function.
  • Share the pain. Consider including contractual mechanisms to incentivise suppliers to collaborate with the Department and/or its other suppliers. This might include:
    • Suppliers signing up to a "partnership charter", establishing a common governance forum for identifying and resolving interface issues and programme level key performance indicators (KPIs);
    • Building collaboration requirements into your procurement documents; and/or
    • An element of the price being contingent on the supplier demonstrating positive behaviours in its relationship with the Department.
  • Man it. Consider how you will resource the procurements and their subsequent contract management. Undertaking a capability assessment can help in creating a plan to enhance the capabilities of the retained team. There are a number of tools that we can provide to help with handover from the procurement team to the contract team, including contract training, contract manuals and obligation trackers.
  • Give the 'future you' a hand. As with transition, there are some things that you can do to give the 'future you' a hand in relation to any further re-procurements. As part of the new contracts, consider requiring suppliers to:
    • Use standard and compatible technology components unless otherwise agreed with the Department;
    • Use a compatibility mechanism for service lines to communicate with other service lines (e.g. APIs); and
    • Deliver and perform a migration plan on exit.

We hope that the above tips help you to take the aggravation out of your disaggregation, but for further information sign up to receive the next insight in the Public Sector Outsourcing Survival Guide series, as well as essential updates from our Public Sector team.

You can also read the first insight in the series if you haven't already - How to make transition a success when outsourcing public services.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.