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Open Book Accountability trumps Open Book Accounting every time
by Kerry Hallard, CEO, National Outsourcing Association
Thursday, May 29, 2014

The future’s bright, the future’s…transparent. It appears that the government is about to open the books on its outsourcing deals, with the CBI’s Head of Public Services Jim Bligh telling Public Finance of Whitehall’s desire to ‘move very far forward’ on transparency by introducing ‘open book accounting’ on contractors’ costs, charges and profit margins. Personally, I’d like to see it go way beyond open book accounting and move to a progressive culture of ‘open book accountability.’

Many outsourcing providers have long been willing to open their books up to the public: confidentiality clauses are the government’s wont, and it’s a brave step to consign them to history. Jim Bligh speaks about allowing the National Audit Office to ‘scrutinise deals’ and hopefully, it will delve deeper than P&L statements and get its claws into how deals actually work. Most government suppliers have multiple contracts with a vast array of public sector bodies. Some will be more profitable than others. Some will effectively be loss-leaders. Will the government offer to pay extra on these? Will they take a sensible, holistic approach to relationship management or will they seek to cut profits on the most profitable deals?

Why stop at a conversation about profit margins? It’s always a good idea to engage suppliers in grown-up, ballsy chat about profits, but a truly intelligent customer you consider their own ROI and business benefits to be more important than supplier profit margins. It would be much better to get clear visibility on stakeholder satisfaction than focus on, shock horror, a PLC wanting to turn a profit.

Profit margins will grab the headlines, but measuring the value added and residual benefit is the correct way to spot a bargain. If a contractor is providing an equal or better service than the incumbent government agency, charging them less money than they could do it themselves and making a profit and paying tax on it and creating jobs, that’s an enormously positive outcome that is going largely untracked. 

Like the financial forensics of Detective Lester Freamon in The Wire, open book accountability would ‘follow the money’ - how much of the profit is invested in new technology and innovation that the government will benefit from in the future? The money the treasurer saved, how many electronic whiteboards and skipping ropes does that buy the local schools? These are the sort of indices that need to be calculated and publicised for outsourcing to disarm those cynics that assess the price of everything, but the value of nothing. And that goes for the human effort that went into achieving that value too – profits don’t come from nowhere.

Open book accountability would consider such efforts in detail, offering greater public visibility into the way outsourcing deals are managed with governance schedules, 360° scorecards, SLAs and outcomes independently redacted into an easily-digested report, where interested parties can see exactly who’s delivering the goods and who isn’t. I’m not suggesting dashboards should be published in real time - there is such a thing as too much public consultation - and nor do I think it fair to compromise suppliers’ intellectual property, which in turn would affect their competitiveness - but an omniscient big data approach to public sector service delivery and value creation would be a much more transparent way to let the taxpayer know how well government deals are working than a few cynical headlines about profit margins. 

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