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Dear Minister…...

14 June 2010

As the ink was drying on the Coalition Government agreement, BSA’s Chief Executive, Mark Fox, was sending letters to the new Ministers outlining the ways in which the organisation's members can help to push down costs and drive up quality

Chief Executive of the BSA, Mark Fox, has written to the key incoming Government Ministers setting out clear recommendations to improve and increase the use of the private sector in delivering essential public services.
He said: “We urge the new government to get a firm grip on widening and deepening the use of the private sector in public service delivery. The private sector has a vital role to play in pushing down cost and driving up the quality of our schools, hospitals and other public services. Billions of pounds could be saved if we sorted out the public procurement system, levelled the playing field between the public and private sector and streamlined management processes.”
The letters are based on three principles – productivity, good procurement and fair competition - which the BSA believes will enable the new Government to deliver economic prosperity for the UK, job growth and efficient public services. The letters were sent to Ministers in Ministries responsible for food, defence, environment, education, skills, housing health and the Olympics.
Each letter is tailored to the responsibilities of the Minister. Reproduced here is the letter sent to Dr Liam Fox, Secretary of State for Defence. The BSA will be making a full Budget submission to Chancellor George Osborne ahead of his emergency Budget this month.

Rt. Hon. Dr. Liam Fox, M.P., Ministry of Defence, Main Building, Whitehall, London. SW1A 2HB. 12 May 2010
Many congratulations on your appointment to Secretary of State for Defence.
You probably know better than anyone the real challenges your department has in delivering a properly resourced front line for a nation which is involved in high-intensity conflict while also trying to constrain expenditure. As representatives of leading UK organisations providing business and outsourced services, the BSA - Business Services Association - is keen to continue to engage fully with you to explore and deliver quickly some of the answers to those challenges. We also seek to build on the already close working relationship we have established with the Ministry of Defence. A full list of our members is included as an annexe.
I would like to take this opportunity to highlight some of our recommendations which we believe could help improve quality of service and value for money. As discussed at our last meeting with you, the procurement process for support services in the defence sector is an area in which real reform could be achieved. We offer real and efficient solutions to streamline the buying process. Whilst large programmes such as aircraft carriers and aircraft grab the headlines, we can make a real difference in the less glamorous side of defence procurement. Support services, such as catering, building maintenance and housing, are often considered a lower priority to that of equipment but when done well can have a significant impact on the quality of life of service personnel and their families. It is clear from your recently published defence manifesto that this is of key concern to you too. Effective support services also mean that when equipment
is bought it is well-maintained over the life of the contract, and therefore saves on costly repairs or replacements.
Evidence shows that outsourcing adds significant value to the services provided. However, we believe the full benefit of the outsourced services industry is not being realised in the defence sector. The MoD should focus on its core functions and embrace, rather than shy away from, the outsourcing of ancillary functions. Not only that, but the Department should look to further integrate support services with the buying of equipment and with the bundling of services which can reduce overheads significantly. The MoD now needs to take full advantage of the expertise and trained workforces of service providers to deliver trusted support at enhanced value for money in this particularly difficult financial period.
The procurement of technically complex equipment differs substantially to that of peopleorientated support services. However, the two are often procured in the same way. This makes service contracts overly complicated and unnecessarily procedural in nature. Better integration of these procurement processes would create great efficiencies and cost savings. BSA members have extensive experience of procurement and management models which identify opportunities for efficiency both client and supply side.
Service providers feel that the procurement processes are often too long and convoluted, which makes them subsequently very costly. This cost has to be picked up somewhere and usually finds its way back to the client, and thus the taxpayer. The cost also forces contractors out of the bidding process which leads to a less competitive market and therefore poorer value formoney.
MoD personnel running commercial units tend to be very senior, but they often lack commercial procurement experience. High turnover of staff means this expertise is difficult for one officer to acquire. The BSA believes that more dedicated, smaller teams with wider experience in procurement would greatly improve the quality of the services provided. Increased contact with the commercial sector could also be beneficial. For instance, it should be routine for MoD commercial staff to be seconded to industry for say a year.
The current lack of modern commercial experience and attitudes can lead MoD procurement officers to fall back on the rule book and to lack the imagination to deliver real change. This in turn leads to overly prescriptive contracts and with contractors that are unable to innovate – indeed there is often no incentive for contractors to do so. Rather than concentrating on processes and inputs, contracts need to become outcome-focused. This would allow contractors to bring innovation to the services provided, creating better service delivery and value for money. Again this is something your party has discussed at length with the BSA and we are keen to work with you now to achieve this aim in the defence sector. This type of contracting depends on the strength of client-customer relationships and both industry and the MoD should aim to develop these at every turn. We believe a more trusting, open relationship would reduce the need for such heavy client side management on contracts therefore avoiding unnecessary costs.
One final comment relates to staff terms and conditions. The industry receives employees transferred over from the public sector with terms and conditions that are often aligned to very different and well-defined work patterns compared to those of the area to which they are transferring. In seeking to make efficiencies companies are constrained to offering new joiners conditions that are no less favourable. This means that when it comes to the workforce the only real way to make savings is to reduce numbers.
More information on these points can be found in our recently published defence procurement policy paper which we sent to you earlier in the year. In addition, I would very much appreciate the opportunity to discuss our recommendations with you and your team at your earliest convenience, and look forward to forging a mutually beneficial relationship with you.
Our best wishes again for your success in your new role.
Yours sincerely,

Mark Fox, Chief Executive, BSA – The Business Services Association


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