Mutual dependence or state dominance? Large private suppliers and the British state 2010–15
| DOI | http://doi.org/10.1111/padm.12578 |
| Date | 01 June 2019 |
| Author | Stephen Greasley |
| Published date | 01 June 2019 |
ORIGINAL ARTICLE
Mutual dependence or state dominance? Large
private suppliers and the British state 2010–15
Stephen Greasley
Department of Politics, University of Exeter,
Exeter, UK
Correspondence
Stephen Greasley, Department of Politics,
University of Exeter, Amory Building, Exeter
EX4 4RJ, UK.
Email: stephen.greasley@exeter.ac.uk
Funding information
The research was supported by a British
Academy /Leverhulme Small, Grant/Award
Number: SG142072
As public outsourcing has grown, the need to understand govern-
ment’s relations with supply side actors has become more impor-
tant for public administration scholars. The article analyses the role
of a small group of large contractors in the British outsourcing sys-
tem during Britain’s Coalition government. These ‘public service
conglomerates’have thus far received little attention in the public
administration literature. The article compares two approaches for
understanding the role of these corporations and analyses why the
corporations faced sometimes severe disruption during the Coali-
tion period in the form of multiple contract problems, conflict with
ministers and financial problems. Over the period, the corporations
became the objects of policy debate, and what had appeared to be
a stable set of arrangements started to fracture. The case shows
the value of analysing the political and organizational foundations
of contracting arrangements.
1|INTRODUCTION
Public outsourcing reforms aim to bring a commercial, if not always competitive, logic into the delivery of govern-
ment functions. The analysis of outsourcing has applied economic ideas drawn from the transaction cost or contract
theory literatures and combined them with ideas from public administration research to explain what is outsourced
and how, often taking account of market characteristics and government-level variables (e.g., Brown and Potoski
2003; Carr et al. 2009). The analysis in the current article adds a focus on firms and their rolesin outsourcing. In the
context studied here, large private corporations operated multiple public contracts and played an important role in
the attempt to transform public functions. Over the period studied, the large corporations experienced multiple con-
tract problems leading to a shift in their position and to their gradual politicization.
The empirical setting for this article is the period of the British Coalition government, 2010–15. The outsourcing
arrangements that the government inherited featured a small group of large corporations. ‘Public Service Conglomer-
ates’(PSCs), to use Bowman et al.’s (2015) label, are large private organizations which substantially rely on selling a
set of services and functions to governments; services which might otherwise be (and may previously have been)
provided directly by the public sector. At any one time a PSC will be managing a collection of often quite large con-
tracts, some extending over long time horizons, which may span diverse policy functions. By 2010, such firms were
Received: 25 April 2018 Revised: 5 November 2018 Accepted: 15 November 2018
DOI: 10.1111/padm.12578
Public Administration. 2019;97:451–466. wileyonlinelibrary.com/journal/padm © 2018 John Wiley & Sons Ltd 451
playing important roles in the delivery of public functions in Britain; according to a newspaper headline one such PSC
was ‘the company that is running Britain’(Harris 2013). The growing role of the PSCs led to concerns that the gov-
ernment had become dependent on large contractors ‘who were too big to fail’(National Audit Office (NAO) 2013a,
p. 10), but equally that the firms were overly dependent on public contracts for their future profitability. The role
played by these organizations and the pressures they faced have so far attracted limited attention in the policy or
public administration literature (e.g., Crouch 2011; Wilks 2013; Froud et al. 2017).
From the perspective of productive efficiency, the existence of PSCs is puzzling. Conventional wisdom suggests
that, in the absence of production synergies, there are economic advantages to specialization but the PSCs some-
times operate in diverse policy areas and it is not always clear where the synergies are. One possible explanation
from within the transaction cost approach is that difficulties of contract enforcement give an advantage to reputable
firms holding multiple contractual relations with the government. From this perspective the PSCs’corporate form is
based on the mutual benefits it allows contracting parties to achieve. A less sanguine view, from a political economy
perspective, sees the PSCs as organizations which are especially skilful at winning public procurement competitions
(Crouch 2003) and whose development reflects misaligned incentives on both sides of the market (Bowman
et al. 2015).
The PSCs are distinctive organizations, and by 2010 they had become important public policy actors. The focus
is on three of government’s most prominent service suppliers during the Coalition: Serco, Capita and G4S, and how
they fitted into the government’s broader outsourcing arrangements. Each of these PSCs was a FTSE100 company
during the study period, and each had multiple and sustained relations with the public sector. Before the 2010 elec-
tion, the outsourcing sector and its large corporations were expected to do well from impending austerity policies
but by the end of the Coalition two of the PSCs had incurred significant financial and reputational damage and the
outsourcing arrangements faced greater scrutiny. The weaknesses of the arrangements were revealed in a series of
contract failures, conflicts with ministers, and financial problems which prompted greater political and media
attention.
The case study shows how the position of the PSCs shifted as negative events related to particular contracts led
to a general tightening of the scrutiny of contracts held by the organizations and how outsourcing and the PSCs
became the subjects of media and parliamentary attention. Outsourcing public services, in this instance, did not
depoliticize them but instead changed the nature of politics around them (Burnham 2001; Flinders and Buller 2006;
Mulgan 2006).
The existing literature on outsourcing is not naive about public contracting. Public administration scholars have
long recognized that ‘real-world’outsourcing at best approximates the classic model of multiple operators competing
for a contract. Nor does the literature ignore politics; studies of municipal outsourcing often test for the effects of
political leadership and administrative structure (e.g., Hefetz and Warner 2012). However, in the first section I sug-
gest that the existing literature cannot easily account for the organizational integration across functions embodied in
the PSCs. The article then sets out two accounts of the PSCs and the consequences of their organizational form. The
case study assesses these ideas in a changing context in which both the government’s outsourcing arrangements and
the PSCs were put under stress.
The case study shows that, in this context, contracts were not isolated exchanges but were linked together by
the organizational structures of the PSCs and that these connections became more apparent in the aftermath of a
series of contracting problems. The first task of the article is to understand where such organizations fitted into the
outsourcing arrangements which were developing at the beginning of Coalition and what benefit the PSC’s organiza-
tional form conferred. The second task is to provide an account of how the position of the PSCs changed and why.
There is some support from the case study for the theoretical ideas set out below but there are also lacunae. Ulti-
mately, the companies and the system were vulnerable to a change in government stance and a gradual
politicization.
452 GREASLEY
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