“Playing fair” – PPN 05/20 Government’s updates its Outsourcing Playbook

Procurement Policy Note (PPN) 05/20 announced the Government’s update of its “Outsourcing Playbook”. This outlines the Government’s expectations as to how government departments and central government quangos should engage with their supply chain. For other contracting authorities, this is “guidance”, but not guidance to which they are required to “have regard”.

The new Outsourcing Playbook, which can be found here, supersedes the original that was launched in February 2019. Much of its guidance is common sense (eg allocate risk to the party best placed to manage it) and some of it is aspirational (publish a 3 to 5 year forward procurement programme). It is also frustrating sometimes (eg accurately assess the economic and financial standing of tenderers, but only from the Standard Selection Questionnaire, which limits this to an assessment from the latest published accounts).

Key updates in the Playbook include the following:

The “make or buy” decision

The Playbook recommends a “delivery model assessment” to consider whether a service should be provided in-house, outsourced, or split between the two options. The Playbook provides a structured framework for this, and guidance on when each option may be appropriate. However, it provides no guidance on different contracting options (eg length of contract, number of contractors etc) so these key “contract strategy” decisions are left to departmental discretion.

The Playbook recommends piloting the outsourcing of a service that is being outsourced for the first time, suggesting various options how to do this.

 “Should Cost Model”

The Playbook recommends creation of a “Should Cost Model” identifying the expected cost of the service over its “whole life” and makes this mandatory for complex services being outsourced.

Readers with longer memories may recall the “public sector comparator” used for PFI and other major contracts. The difficulty with these was always how to “compare like with like” with potentially very different cost, employment, management and governance arrangements between publicly and privately delivered services.

Procurement guidance

There are some aspects of the Playbook with which we strongly agree. Building in and procuring “social value outcomes” and avoiding “bias” in the award criteria towards “low-cost bids” are things we would support.

We also support the desire to minimise bidding costs for the tenderers. However, insisting on the open procedure as the “default” procedure is inconsistent with this. The open procedure requires tenderers to submit fully priced bids and complete “quality” submissions, where they may be one of a large number of tenderers. This is an excessive burden on tenderers in all but the simplest of procurements, where the costs of preparing “full tenders” are low.

The Playbook also suggests that the costs of using the CD or CPN procedures can be “significant” but “a good investment”. However, this fails to recognise that the cost of a tightly run CPN procedure may not be much more than the cost of a restricted or open procedure, especially where the option to award based on initial tenders is selected.  

Form of contract

The Playbook recommends use of the CCS Model Services Contract as a “convenient and flexible starting point” for external contracts. Given this is 362 pages long, it is not surprising that smaller suppliers find it difficult and expensive to tender for Government contracts.

Contract management

The Playbook rightly emphasises the importance of effective contract management, including monitoring suppliers’ financial position. It encourages departments to undertake what they call “resolution planning” – planning for continuing the services if the supplier becomes insolvent. This is sound advice, particularly in current times.

For more information

For advice on procurement and contracting strategy, including on PPN 05/20 and the new Outsourcing Playbook, please contact Andrew Millross.