Why is entrepreneurialism in the public sector important and why do we need new ways of spending public money that deliver greater public value? Let me frame this challenge with a Quote from Plato, in which Meno asked: “how will you go about finding that thing the nature of which is totally unknown to you?”. In other words, in a procurement context, how can you buy what you don’t know exists?
Let’s start with some basics – and forgive me for those of you for whom this is an area of expertise. In this article I’ll use the term procurement as a shorthand label for all the different ways that money can be spent in the public sector – such as commissioning, grants, challenge prizes and the like. I will also refer to ‘government’ as shorthand for the public sector more widely, including Local authorities and agencies, and not just ‘national government’.
So, why should we care about procurement?
Total public sector spend in 2019 was over £800bn. Without getting in to the weeds of this, day-to-day running costs were over £300bn – pre-Covid, of course! This funding is usually spent across three broad areas:
- providing services (renewing your driving license, welfare benefits)
- solving problems (obesity, pot holes in roads), and
- shaping places (planning, voluntary sector).
Public procurement can drive the innovations we need to do all of these successfully in two broad ways. First, innovation in government is process improvement or new ways of working eg Gov.uk. By contrast, innovation through government is using direct spend more imaginatively in ways that can stimulate local growth and achieve a range of localised benefits, eg GovTech.
The problem is, traditional procurement processes are not enabling the breadth of innovation and public value creation that is possible. How can we use procurement to buy a solution and maximise public value, when By definition you can’t have perfect understanding of a complex, systemic problem, nor can you have perfect knowledge of the market. How could you possibly know every cutting edge innovation or combination of elements that might be possible to address the issue you’re facing?
You might be thinking: of course I can buy what I need, I just put out a spec and the market responds. That works if you’re buying latex gloves to stop the spread of infectious disease, but not when you are trying to buy a reduction in repeat offending or an increase in the aspirations of disadvantaged young people, for example. But not all problems are created equal. We should distinguish between simple, complicated and complex challenges. For all of them, procurement processes are often slow, linear and path dependent. Complex challenges need new forms of procurement.
This is why we can’t we use existing procurement mechanisms to effectively address complex systemic challenges like these. I’ve covered some of the issues that arise in previous blogs, but for now three are worth repeating.
First, our work needs to be systemic. We still disaggregate and seek to optimise the individual parts through procurement, often reinforcing existing silos, usually making one part of the system better at the expense of others. The only real way to address complex systemic problems is by investing in the system as a whole.
Next, economies of scale are usually a red herring. Big solutions are often worse than smaller, locally-informed ones. We need flexible approaches to problem-solving that where possible, leverage the best of all sectors, including local social enterprise, the voluntary sector and user voices. Addressing complex challenges is a context-specific, systemic endeavour.
Finally, problems aren’t markets. We can’t simply buy a solution to a complex social challenge. Preparing a specification assumes you can identify and define all your needs, in other words, you already have a clear idea what the solution is, which is impossible.
In short, traditional linear procurement processes will not effectively address issues that are the product of complex, dynamic systems. We need ways of buying things that we don’t know exist.
In our work we looked for emerging practice and our research led us to particular individuals that we called public entrepreneurs, those operating in, and around, public services – whether in a LA or government department, or perhaps having ‘spun out’ to start up a social enterprise. They have developed their own response to the fact that we can’t neatly package up problems and simply run a procurement process to fix them:
- Public entrepreneurs recognise the complex challenges they face and find ways through barriers to change
- They seek to tilt the field in the direction of change, challenging the status quo and serving as a force multiplier
- They are usually vested in their community and making local quality of life as good as it can be.
- They harness a variety of procurement methods to help figure out the most effective approaches to the challenge they face – within current constraints.
At the RSA we call this the ability to ‘think like a system and act like an entrepreneur’.
So what could we change?
I think we actually have significant opportunity for change in light of Covid and post-Brexit to help build the enabling conditions that support our ‘public entrepreneurs’ to be more effective and to have a wider range of acceptable procurement tools available at their disposal – tools to actively address complex challenges, rather than assuming that market mechanisms alone are enough. This enabling environment could include, for example,
- figuring out how to effectively invest in systems, not services
- identifying, challenging and where appropriate removing the barriers to innovative procurement that currently exist
- creating new or enhanced procurement mechanisms to enable investment in collaborative, cross-sector, citizen-informed, problem-solving
- testing mechanisms for clear citizen involvement – putting the public into public value
- offering wide-ranging support for public entrepreneurs to learn from, and facilitate, their work
This is, I think, one of the fundamental challenges of our time: how might we actively create the enabling conditions to support public entrepreneurs to “go about finding that thing the nature of which is totally unknown?” and thereby deliver enhanced public value for every £ spent? For if recent government procurement practice during Covid-19 is any guide, this is needed now more than ever.