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An emphasis on meeting policy outcomes and an increase in local procurement are set to create a more diverse market for government outsourcing.

New research from Kable shows that growth is likely to revolve around front line services, demanding that contractors are better able to integrate with government systems, and contracts should allow scope for change.

Public Outsourcing: The big picture to 2012 forecasts that the market for services commissioned by government from the private and third sectors will grow from £74bn in 2007-08 to £100bn in 2012-13.

Services to the public will account for the largest share, rising from £40.8bn to £56.2bn, while services to government will increase from £33.2bn to £44.1bn.

Traditionally, outsourcing has been driven primarily by reform initiatives that have emphasised value for money, but the pressure for this has been reduced as the public sector has become more skilled at resource management. This has been accompanied by a shift towards policy priorities that tend to emphasise local, front line delivery.

The trend is encouraging interest in using the third sector to deliver services, as it is often capable of serving people that government struggles to reach. It is also shifting the balance towards procurement decisions being made locally, even under national initiatives such as Building Schools for the Future and NHS Lift.

The trend will demand strong relationships between government and suppliers and within the supplier community. One element of this will be the integration of outsourced services with government information systems, enabling suppliers to share casework and client information. As a result, there will be a strong emphasis on improving information flows, and the structure and procurement of contracts will become increasingly sophisticated.

Local government and the health service are expected to remain as the largest users of outsourced services, but education is expected to provide the strongest growth, largely due to the Building Schools for the Future programme.

Seyi Agboola, associate director of Kable, said the situation is increasingly complex and, to get the best results from outsourcing, government has to be clear about its requirements.

"The agenda demands increasingly sophisticated programmes through increasingly diverse channels," she said. "If the private sector is to rise to the challenge, then government has to be explicit about what it expects."

Anyone wishing to obtain a copy of the report can contact Matt Phelan on 020 7061 3235 or matt.phelan@kable.co.uk.

This article was originally published at Kablenet.

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