A toolkit for insourcing in Wales: interim report

Within the refreshed Programme for Government, under the pledge to ‘Make our cities, towns and villages even better places in which to live and work’ there is a commitment to:

“… explore where services and contracts can sustainably and affordably be brought back into a strengthened public sector”.

The Centre for Local Economic Strategies (CLES) have been appointed by the Welsh Government to review the procurement landscape in Wales and provide an options appraisal which explores insourcing. The key policy driver behind the commitment of exploring insourcing is the pursuit of a socially just, fair work agenda for Wales, recognising that insourcing can result in enhanced local employment conditions.

This interim report highlights the importance to embed a systematic and proactive approach to consider insourcing and the impact insourcing can make to service models. Such an approach would take a rounded view of value for money, applying a Well-being of Future Generations Act lens to service design options.

The report examines lessons learnt from case studies of both outsourcing and insourcing from across the public sector in the UK and Wales. Following this interim report, we will produce an additional report providing a feasibility study and a recommended toolkit for Welsh public sector organisations. These will help guide organisations to put the commitment into practice, to consider insourcing at a strategic level.

The toolkit will be published shortly, drawing on the key themes, lessons learned, and proposed criteria set out in this interim report.

This work will help to ensure that insourcing is routinely considered with a clear thread from the Well-being of Future Generations Act running through the decision-making process of the service design options. However, it is important to note that the responsibility of routinely considering insourcing does not just sit with procurement; insourcing needs to be considered holistically within organisations, with ‘buy’ in from Senior Leaders. Moving forward, the toolkit should be used as a proactive and routine appraisal for insourcing against the Well-being Goals and Ways of Working, with a view to achieving longer term social and economic goals and improved population well-being, as well as service efficiency and quality, which can also affect costs in in the long term.

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John F Coyne
Director, Commercial & Procurement
Welsh Government

The Centre for Local Economic Strategies (CLES) has been appointed by the Commercial and Procurement Directorate of Welsh Government to review the procurement landscape in Wales and provide an options appraisal with recommendations and guidance on opportunities where services and contracts can sustainably and affordably be brought back into a strengthened Welsh public sector.

Work to date includes:

• A desk-based research and evidence review of:
  • The legal and policy context
  • Approaches taken in the other devolved nations of the UK
  • Existing UK (and specifically Welsh) research, commentary, and published information
  • Examples and case studies of both outsourcing and insourcing from across the public sector in the UK and Wales.
• A light-touch analysis to contextualise the scale of insourcing opportunities.
• Interviews with key stakeholders in Wales and with case study areas in Wales and the wider UK.

The final output from this work will be a report providing a feasibility study and a recommended ‘blueprint’ or toolkit for the Welsh public sector, to guide decision making processes, identifying where services and contracts can sustainably and affordably be brought back (insourced), and outlining how this can make a strengthened Welsh public sector.

This interim report summarises the findings from the evidence review, data analysis, and stakeholder interviews. This will provide a conceptualised evidence base which will inform the development of the toolkit.

The development of the toolkit will support the delivery of the policy commitment in the Programme for Government to:

… explore where services and contracts can sustainably and affordably be brought back into a strengthened public sector.

A key intent of this policy commitment is that it supports the pursuit of a socially just, fair work agenda for Wales, recognising that insourcing can result in enhanced local employment conditions. However, it is also recognised that insourcing has the potential to contribute positively across a range of other domains. Increasingly, insourcing is viewed as a pragmatic and sustainable means to address service improvement, service efficiency, to recalibrate local services to local needs and to support stronger local supply chains. In the Welsh context, the potential impact of insourcing on employment opportunities, particularly for young people, is relevant to the Welsh Government’s ambitions to tackle the so-called ‘brain drain’ of young talent from Wales through the growth of sustainable and stable employment opportunities.

Insourcing can also provide for more stability of provision, removing the risks around potential market instability and market failures. There are prominent recent examples of significant market failures in outsourced services - the collapse of Carillion and the recent decision to bring probation services fully back in house in England and Wales being notable examples.

In the context of local economic development insourcing can be a key tool to support local economies by combating wealth extraction. Here, there is particular potential to prioritise the consideration to insource where the Welsh public sector is reliant on providers which extract wealth that could otherwise be used to provide additional benefits for citizens and the state. Removing the role of private-equity- and venture-capital-backed providers in the care sector would be one such example. Recent reports have highlighted the prominent role of private equity firms in the UK care home sector. This includes firms with beneficial ownership via offshore tax havens which use debt and financial restructuring arrangements to extract profit disguised as rent and loan repayment costs (Vivek Kotecha - 2019. Plugging the leaks in the UK care home industry – strategies for resolving the financial crisis in the residential and nursing home sector).

There are overlaps with other policy commitments in the Programme for Government, with insourcing having the potential to impact both positively and negatively on related policy agendas. We have therefore approached this work with the intent from the outset that the model of insourcing developed for Wales needs to be one which achieves strategic synergy and commands cross governmental support.

Other Programme for Government commitments relevant in this context, and potential implications, are explored below.

Provide effective, high quality and sustainable healthcare

Insourcing could work in support of this policy objective, by reducing the friction in developing a collaborative public sector focus on prevention and tackling health inequalities. Whist this is not impossible to achieve via outsourced services – for example, a recent NHS Confederation report highlighted examples of collaboration between the NHS and leisure and culture trusts (Leisure and Culture Trusts Health and Wellbeing Support to the NHS in Wales, NHS Confederation - 2022) – direct collaboration between Public Service Board partners would arguably be easier if those services were all inhouse.

The process of outsourcing requires commissioners to delineate a specific service specification through the procurement process. In so doing there is a risk that specifications are narrowly described, inadvertently excluding opportunities to flex provision or innovate in the broader public interest.

Protect, re-build and develop our services for vulnerable people

Insourcing is of particular relevance to the commitments to pay care workers the real living wage and to eliminate private profit from the care of children looked after. However, as we explore later in this report, insourcing can be positioned as part of a broader spectrum of more generative service models, including not-for-profit and cooperative models of delivery. Clearly this policy commitment is also contingent on social care funding to commissioners being commensurate with living wage staff costs, regardless of model of delivery.

Build an economy based on the principles of fair work, sustainability and the industries and services of the future

Insourcing can support the strengthening of local supply chains in that it is easier to influence supply chain relationships directly rather than through the procurement process. Outsourcing providers, particularly larger national or multi-national providers, will often have national supply chain arrangements and may not be able to flex towards more local provision. This is particularly an issue in more rural or remote areas.

Additionally, the public sector is arguably more influenceable than private, outsourced providers in terms of the 30% target for working remotely. 

That is not to say that large employers do not have a role in the pursuit of socially just, fair work agenda, which offer goods and services to the devolved public sector. They equally have a role which smaller businesses or the public sector could not provide, where they can also demonstrate that they are good employers offering fair work jobs.

Build a stronger, greener economy as we make maximum progress towards decarbonisation. Embed our response to the climate and nature emergency in everything we do

The processes of service design or review and the development of options appraisals are opportunities to proactively consider how a service design or model could be adapted to support carbon reduction objectives. Insourcing can be a vehicle to achieve higher environmental standards as opposed to trying to influence the market through the procurement process. The closer the proximity of service provision to local policy, the easier it is to ensure adherence to those policies. As APSE reported: “in-house teams are far more likely to adhere to Green Accords and local environmental strategies” (Insourcing: a guide to bringing local authority services back in-house, APSE, 2009). This is particularly relevant in the current context where public bodies will be strengthening policy in line with climate emergency commitments. Again, however, insourcing is not the only model. For example, there may be opportunities to partner with a local social enterprise, community business or cooperative that has explicit environmental and social objectives – for example, one designed with circular economy principles.

Make our cities, towns and villages even better places in which to live and work

Insourcing explicitly sits under this objective in the Programme for Government. It could also impact on other commitments under this objective. The commitment to “Establish Unnos, a national construction company, to support councils and social landlords to improve the supply of social and affordable housing” (Welsh Government Programme for Government – Update) prompts an interesting question for the insourcing work, in that the same rationale on whether to bring services back into the public sector could also be applied to the development of new public sector provision as alternatives where there are market gaps or known extractive practices.

Build on our approach to the Foundational Economy and develop a Backing Local Firms Fund to support local businesses

The interface with foundational economy work, including the role of progressive procurement as a lever, is of particular importance, and a nuanced approach will be needed to ensure that exploring the potential for insourcing supports and doesn’t undermine foundational economy objectives.

As we set out in our recent publication on employee ownership in Wales (Owning the workplace, securing the future: A plan to support worker buy-outs and expand employee ownership in Wales, CLES, Sean Benstead and John Heneghan, 2022): 

“The Welsh government is committed to strengthening the foundational economy in Wales as a cornerstone of their economic strategy. The foundational economy is a concept that has been developed to describe the economic importance of the goods, services and other forms of provision that are necessary for a “good life to be enjoyed by as many people as possible.”

This can include a diverse range of policy areas including housing, childcare, utilities, health, education, public parks/recreation and culture. Traditionally, many of these goods and services were provided by the state as part of a collective endeavour because of their importance in providing the foundations of a better life for workers, and in recognition of their importance for a more inclusive economic system.

However, in recent decades, programmes of privatisation have disrupted traditional ideas about how everyday services are provided and also given powerful corporate actors access to public services, data and money. There is ample evidence that this transfer of ownership and provision means that these services are often delivered more for the benefit of private rather than public interest.

Measures which provide the basis to disrupt monopolies of foundational economy provision, or at the very least question its power, are vital to help ensure that workers, particularly those on the lowest incomes, can continue to access the everyday goods, services and other provision that are essential to help them live a life that they have a reason to value”.

There are both potential benefits and risks posed for the foundational economy agenda by insourcing. As set out above, insourcing can reverse the trend toward delivery of public services for private gain, restoring public values in public sector delivery. The foundational economy accounts for every 1 in 4 jobs in Wales, presenting a significant opportunity for insourcing to affect fair employment as a lever of progressive economic development. However, other mechanisms of delivery also have a potential role to play in this regard, including delivery via worker owned cooperatives, the not-for-profit sector, and social enterprise.

All these approaches can be used to progress the fair work agenda (better pay, improved terms and conditions, and better opportunities for development and career progression). They can also contribute to improved and more universal access to public services. However, these benefits are with caveats – it cannot be presumed that all private operators are bad employers (or indeed that all public provision is good). There have been significant efforts – supported by the Welsh Government procurement policy statement to drive social value driven through procurement, and there many examples of good private sector provision.

However, insourcing can provide for a more stable and sustained approach to achieving social value. When public procurement is flexed to deliver a positive social value return there can be a risk that positive changes may not be able to be sustained by further contracting, due to the need for open competition. For example, the Better Jobs Closer to Home pilot in Blaenau Gwent saw public procurement being used to support a ‘sheltered workshop’ for the production of protective clothing like NHS scrubs, provided employment opportunities for vulnerable citizens, but this contract was subsequently lost to an international supplier. That being said, the pilot encouraged local business engagement in public sector supply chains through the Better Jobs Closer to Home policy and ambition to grow resilient supply chains linked to public sector investment. As a result, Welsh-based organisations under the pilot were enabled to successfully evolve and secure positions on a Welsh Government Dynamic Purchasing System (DPS) for Personal Protective Equipment.

Public sector procurement can also provide a stable level of baseline demand for Welsh SMEs and other generative economic actors, which contributes to the objective to grow the “missing middle” - establishing a stable base of medium sized Welsh firms which are capable of selling outside Wales but have decision-making rooted firmly in communities.

Nurturing the third sector, including social businesses, not-for-profit enterprises, and democratic businesses such as worker-owned co-operatives, is key to maximising the benefits of a foundational economy approach. These organisations, provided they sit within a generative business structure, are hard-wired to redistribute surplus and benefits locally, so increasing their prominence in the economy, locks more wealth and benefits into local communities. It will be important, therefore, to ensure that the insourcing approach does not result in reducing the very demand which is nurturing this generative local economic activity, provided that socially just, fair work agenda is also met.

Public sector bodies will also want to have in view the relative pros and cons across the spectrum of service delivery models. For example, social enterprise/cooperative models can result in:

• The ability to access different forms of finance, including grants and income generation from commercial activities which can in some cases cross-subsidise other aspects of service delivery.
• Enhanced citizen engagement in decisions and delivery – e.g., member-led businesses. Social enterprise tends to be based in, and formed of, the local community.
• Ability to work across geographical administrative boundaries.
• Ability to integrate with communities, for example, by working with existing volunteering and community activity.

However, there are only limited circumstances in which procurement can explicitly be ringfenced for social enterprises, and not all social enterprises have a generative ownership structure (for example, some social enterprises are arms of profit-making corporations).

As CLES pointed out in its recent report on employee ownership in Wales (Owning the workplace, securing the future: A plan to support worker buy-outs and expand employee ownership in Wales, CLES, 2022), even when democratic businesses do feature in public sector supply chains, these have tended to be management buyouts, as opposed to worker cooperatives, and be at risk of corporate acquisition. Whilst there should always be an imperative to develop progressive procurement approaches which seek to maximise the role of generative business in supply chains, the reality of competitive procurement is that these may be displaced by more extractive competition when tenders come up for renewal. Insourcing, conversely, can lock in these local economic benefits over the longer term.

There are some services where there is a particularly strong case for their delivery via social enterprise or cooperative models – including some aspects of social care. However, there is also a compelling argument that Welsh Government will only be able to fully maximise the levers at its disposal for fair work in the social care sector if significant elements of provision are brought within the public sector. These considerations should be central in current debates and discussions on the development of a National Care Service for Wales.

Housing is another example of where social enterprise models have realised additional benefits – since the move towards stock transfer to housing associations, delivery has often stayed in the ‘public sphere’ but with additional freedoms to innovate. Particularly in Wales, housing associations have tended to have remained smaller, and firmly committed to a public service ethos. These include mutual models providing an equal voice for tenants, owners, and community. 

However, some social enterprise organisations will likely not be able to match the pay and conditions of the public sector unless additional funding is made available through commissioning.

Having regard to the specific local economic context will therefore be important. Issues of scale may also be relevant, with a need for the insourcing approach to be particularly focused on larger-scale provision, where delivery of the mechanism is more extractive, as opposed to smaller contracts where insourcing could potentially conflate with the Welsh foundational economy agenda which, in part, aims to shift emphasis towards developing the cohort of medium-sized firms in Wales.

A central consideration ought to be the extent to which services are seen as a core to the public service being delivered. No public sector organisation could ever be, or would want to be, fully self-sufficient – there will always be a need to procure some goods and services. The NHS in Wales, for example, does not want to be in the business of manufacturing hospital beds or surgical equipment. However, what we have seen over many years across the UK has been large scale outsourcing of some essential frontline and back-office services as if they are peripheral. These services – catering and cleaning, for example - are often delivered by workers at the lower ends of the pay scale and frequently have female dominated workforces. Their cost-base is predominantly labour costs, so any ‘efficiencies’ from outsourcing are inevitably at the expense of terms and conditions, most notably pensions contributions. The services these workers provide are as vital to public service outcomes as other parts of the public sector workforce, so there is a moral, as well as a social and economic case, for them to be brought back into a strengthened Welsh public sector. Consideration of what is core versus peripheral should therefore be a key part of a public body’s decision-making. Additionally, insourcing of core services will then yield greater ability to influence the peripheral.

The Well-being of Future Generations Act provides the contextual framing for:

• the desired outcomes which Welsh Government is seeking to achieve by prompting consideration of insourcing,
• the proposed decision-making criteria to be applied by public sector organisations
• the process of developing this approach.

The table below provides an illustration of how insourcing can contribute, either directly or indirectly, to the wellbeing goals.

The 5 ways of working described in the Act are relevant to the decision-making criteria adopted and the process of insourcing.

Looking at this issue through a wellbeing of future generations lens shifts the perspective from a narrow focus on cost to a wider appreciation of public value.

As the pursuit of a socially just, fair work, agenda for Wales is the key policy driver behind the commitment to explore insourcing, it is important that this agenda is progressed in a holistic way with a view to the wide range of other factors which influence the socially just, fair work agenda and related policy agendas, in Wales.

Drivers of deprivation, for example, go beyond the availability of jobs with a reasonable salary. These include a range of issues (often gendered, with greater barriers experienced by women), including: a lack of affordable childcare and lack of access to transport.

Wigan Leisure

Wigan were one of the first local authorities to take advantage of the trust model, spinning out their leisure service provision from in-house into an independent charitable business that can access benefits of business rate relief, with the added mandate to reduce its £2 million subsidy from the council.

However, a schism emerged as the council began to have growing concerns about the lack of a public service mission and culture at the trust. Here, the council was particularly concerned that the surplus generated was not being reinvested, when 190 out of 300 of the trust staff were not paid the real living wage, with many on zero-hour contracts. Relations soured further when the trust furloughed staff meaning their low-paid staff lost 20% of their incomes. The council responded by offering all of the trust staff the opportunity to join their redeployment effort in care homes and homeless support services. 100 of the trust staff were redeployed and supported the council’s emergency efforts with great success – transferring their skills into care work, the staff have transformed the local care system. One example noted that some of the gym instructors were redeployed to a small, supported living scheme for adults with learning disabilities. The staff there noted that they have attempted commissioning services to influence active lifestyle orientated care for decades, without much impact. After the gym instructors were redeployed from the leisure centre, the lives of staff and residents were transformed. This showed the power of integrated services to deliver on wellbeing goals of local residents, in comparison to the extractive nature of the previous arrangement and the decision to insource leisure services was consolidated.

In total, the work to insource took a period of 4 months but this required significant efforts to achieve within that timeframe. Throughout this period, the main focus was ensuring staff satisfaction and trade unions were consulted early which enabled the council to move at pace – 259 members of staff received an uplift in pay and 255 took up the offer of transferring to Wigan council terms and conditions. One challenge emerged around senior staff exit, which proved to be a painful process, but no different from any other process of significant organisational change.

Neath Port Talbot

In 2003, Neath Port Talbot’s (NTB) leisure service span out into Celtic Leisure (CL), a mission and values orientated Industrial & Provident Society. In 2018/19, CL’s financial reports indicated that it was in financial difficulties and, even with use of reserves, would be insolvent within 18 months. Following this, the local authority had no desire to inject more funding into the current model and early assumptions noted that market provision would be more cost effective. However, COVID had arrived and political priorities shifted with a change of elected members and a sustained trade union campaign which impacted the council’s policy position – this resulted in a shift in emphasis from a financial bottom line to social justice, fair work, pay and terms and conditions. To deliver on broader social justice aims, it was also noted that arms-length service provision would frustrate the ability to exploit partnership working and service integration, as is also seen in the case study from Wigan leisure services, with hopes to integrate active lifestyle NHS schemes with leisure provision. In addition, staff were concerned about their futures with a private sector contractor in an increasingly unstable market.

There are advantages that NPT can exploit in their insourcing process. For example, CL retained the ability to access Welsh Government funding during the pandemic where other trusts could not, and this may have had influence on the insourcing process so far.

As the insourcing process is approaching completion by April 2023, challenges are emerging. The elected members have recognised a funding gap for in-house provision alongside commitments made for significant investment in facilities. This is not insurmountable, with plans to develop an improved service offer to meet the increasing demand for income. In addition, staff felt that CL had some better terms and conditions than the NPT could offer, particularly on redundancy pay commitments. While most are comparable, early and regular trade union engagement allowed for TUPE’d staff to maintain their original terms and conditions.

Islington London Borough Council

After a decade of contracting housing repairs and maintenance with a relatively favourable joint venture agreement (JVA) with a private contractor, Islington embarked on an ‘in-sourcing first’ policy. With 32,000 homes within a small geography, initially they found that the scale of the task to set up an in-house service within the time available was challenging. Islington Council instead embarked on a small pilot, bringing the 10-person estates services in-house, while maintaining the JVA for another contract of 3 years. At the end of the pilot and the contract, it was advised that although it would cost £4 million per annum more to run the entire housing repairs and maintenance services in-house, with another £2-3 million in one off costs, the accrued benefits around customer service and satisfaction meant that in-house delivery would be a good deal for the council and residents. In addition, given current market instability, the move to insource has been deemed as “prophetic” – safeguarding against current and future cost and instability of private and JVA contracts.

The in-sourcing project took a year and has proven to be a very large operation, committing the in-house service to 75,000 repairs per year, and a turnover of £35 million. One key challenge was related to the council’s reasoning for pursing an in-sourcing policy resting on service quality, efficiency and customer satisfaction, there was an extensive operation required to retrain the insourced operatives around new sets of values and incentives as well as expanding skill sets. This has proven to be worthwhile, with customer satisfaction rising from circa 50%, under the old JVA, to approaching 90% undercurrent in-house provision.

Our consultee noted that, moving forward, their ability to insource is directly related to what else, and how much, they have already insourced. For example, the in-house building repairs and maintenance services has enabled the council to take on 4000 stret properties.

Stoke-Upon-Trent Unitas Ltd, Stoke-Upon-Trent City Council

In 2016, with the current joint venture agreement due to expire after 8 years, Stoke-Upon-Trent City Council’s political leadership asked for a review of contracts to compare costs, quality, and productivity. The review found that the current contract was more expensive on basic performance indicators, such as cost of repairs per property per annum. Due to austerity measures and year-on-year budget reductions, there was also a need to generate additional income streams to feed back into budgets, as well as support for local supply chains impacted by the recessionary environment.

Stoke Unitas was established as a wholly owned company founded in 2018 on the council’s vision “to provide a high-quality repairs and maintenance service as a reasonable cost, that meets the needs of tenants and public building users” (Presentation: The Road to Insourcing. Brazier, C. Wilson, S., City of Stoke-on-Trent City Council). Unitas provides repairs and maintenance services for over 17,500 homes and 600 public buildings (Unitas Stoke-On-Trent Ltd: About). Beyond the rationale of improving service quality and cost, Unitas has been reported to be on track to redirect 5 million pounds back to the council’s purse due to its ability to operate commercially, providing services to other public bodies (Rebuilding Capacity: The Case for insourcing Public Contracts. Hulston, M, 2019. APSE). Additionally, Unitas have embraced progressive spending practice and social value through gearing it’s procurement strategy towards broader social justice objectives, supporting local and generative suppliers wherever possible. At current, it is reported that Unitas is procuring 78% of its products within Stoke postcodes (ibid.).

At current, there are challenges emerging in this model. Speaking to stakeholders from Unitas’ trade union representation, we found that industrial relations have deteriorated over time from what was initially a harmonic start. We heard that the drivers of this were two-fold. Firstly, the organisation’s primary aim to generate surplus has been detrimental on workforce culture and employment practices. Secondly, the arms-length nature of the organisation means that internal priorities can be greatly influenced by key senior members of staff which, if these staff members change, the maintenance of healthy industrial relations can become de-prioritised.

University of Wales Trinity Saint David Group

University of Wales Trinity Saint David Group (UWTSD Group) is large, constituting of 2 FE colleges and a university of 5 campuses across Wales and England. The recent history of outsourcing and insourcing across the group, and indeed the sectors, is not consistent. Coleg Sigar, for example, has outsourced catering and cleaning for over 25 years and there is not much confidence that this will ever come back in-house. Here, there are efforts to contract their cleaning services with Welsh SMEs, but this effort is 15 years in the making. On the contrary, Coleg Caredigion has catering and cleaning in-house and is unlikely to be outsourced in the near future due to market instability. This is a similar story at the university, where most services are run in-house with exception to security, cleaning and catering.

Our stakeholder at UWTSD Group noted that the main driver behind insourcing and outsourcing decisions across the group is cost. However, they feel that the costs aren’t always fully understood and that there is a sense that some people do not understand the “real costs of doing things in-house and therefore tend to prefer in-house options”. Here, they specifically refer to the pressure of overheads in general administration, managing supply alongside navigating complex regulatory regimes and auditing requirements. Catering in particular stands out as a service where this pressure is particularly apparent. For HE and FE organisations, this can be a very difficult task for a non-specialist organisation and outsourcing has proven to be a means to ensuring expertise is available. However, this does not mean that contracts needed to be awarded to large, extractive firms – smaller and generative suppliers can be sourced to provide this service. However, as it stands, this practice ultimately rests on the shoulders of individual procurement officers that have personal interest in this agenda.

Hywel Dda University Health Board

Hywel Dda University Health Board (HDUHB) noted that a focus on insourcing might miss the opportunity to think more creatively about how to look at service provision. Given that there is a fixed cash flow from the public sector, HDUHB is keen to explore how best this spend is used to grow a more generative economy. As examples, HDUHB highlighted practices where spend is used to incubate ‘enterprises’ which can then be spun off as cooperatives or social enterprises, similar to the practice previously seen at Port Neath Talbot leisure services which saw Celtic Leisure become its own arms-length not-for-profit which, alike Wigan’s leisure services, were eventually brought back in house.

At current, HDUHB are exploring the role of food procurement, with an opportunity to establish a cook/freeze facility. This will be done in partnership with a locally rooted, family-run SME. This approach, they argue, supports the local economy in a way that whole-sale insourcing may not be able to. However, they noted that safeguards will need to be in place to insure against corporate capture by extractive capital.

Welsh School Catering

The landscape of food provision in schools is similar to Scotland - of 22 Welsh local authorities, 20 deliver school catering for their area through an in-house service and 2 provide it through a contract caterer. In contrast to what we have heard from UWTSD Group, this has proven to be a stable part of the Welsh public sector and fully compliant with regulatory requirements.

However, this can be proven to be more successful at larger footprints where whole local authority areas can provide a sizeable service with a central back-office support to meet the requirements of regulatory regimes. Where schools have tried to run in house catering themselves, they have found it difficult and have often returned to outsourcing or turned to the local authority for assistance. At current, there are 1,366 council-organised catering services for schools in Wales and 58 school-organised catering services. These figures have remained stable since 2015, showing the resilience of the larger footprint model of catering provision.

COSLA, Glasgow City Council

Scotland, having not undergone large-scale outsourcing drives, still retains many in-house contracts including in environment and waste management.

Improving industrial relations is often framed as a key benefit to insourcing, due to services becoming democratically accountable and “run in the public interest, not in the interest of wealthy investors and shareholders” (Better Public Services: A Unite Toolkit for Insourcing in Local Government. Unite). However, there are lessons to be learnt from in-house contracts where deficiencies in industrial relations appear. A significant occurrence of a breakdown of industrial relations occurred when 13,000 Glasgow City Council employees announced strike action in late 2021 after staff, represented by general workers’ trade union GMB, rejected a pay proposal (Council chiefs plead with striking binmen in Glasgow to axe COP26 industrial action. Sutter, R., 2021. The Glasgow Times).

GMB notes that they are not ideological about particularities of public service delivery models, and fundamentally pay and conditions is what matters to them and their members. They noted that, generally, public industrial relations in public contracts are healthy, but issues are likely to occur when there are unclear lines of responsibility within councils for industrial relations and collective bargaining. In addition, improvements in industrial relations within public service delivery often has to wrestle with existing agreements which can frustrate those relations. For example, Glasgow City Council has committed to equal pay agreements across all service areas which makes it difficult to commit to pay increases in particular services without implications across the council’s service portfolio.

Derby City Council

From 1997 to 2019, highways maintenance operations in Derby were outsourced. Prior to 2013, the outsourced contractor was Carillion who was later subject to compulsory liquidation. Historically, the council has struggled to effectively manage outsourced contracts with a series of issues emerging with each retender. This was driven by the skills available at the council and meant that contractors were able to “play the game” in the tender process to maximise their revenue. Unscrupulous practices, such as loading rates for more lucrative work and increasing rates to make significant earnings from subcontracting, meant that disputes were common. In one instance, Derby City Council was awarded a one-off £500,000 from UK government for winter road repairs, Carillion subcontracted the job and extracted a 20% cut.

Ultimately, value for money was a key consideration in the decision to insource. This has been proven to be worthwhile, with Derby City Council citing a greater degree in operational flexibility and resilience to market instability through the ability to internally reallocate labour resource to meet demand. With a demonstrated greater value for money and bolstered through massive political support across the political spectrum, elected members have agreed to increase the budget by £9million over the last 2 years. Looking to the future, the council are looking to establish a trading company, similar to that of system exhibited by Stoke-Upon-Trent Unitas Ltd.

This has not been without its challenges. One specific key challenge was noted in the TUPE process, which created uncertainties about terms and conditions for transferring Carillion workers. A broader challenge that was noted by DCC was the significant investment of time and effort required to manage the process of insourcing, particularly in the level of staff engagement required to maintain high morale and productivity.

Wales Facilities Management

The Welsh Government carried out a review of soft Facilities Management services (mainly office cleaning, security guarding, reception services, pest control, waste management, grounds maintenance and certain other specialist services such as beekeeping, plus in-house catering and hospitality services at offices across the Welsh Government administrative estate) in 2019-20. This was in the context of the recent collapse of Carillion and Interserve and concerns that other large FM companies may also be facing financial pressures and could pose a threat to long term business continuity. There were also concerns about inequalities across the terms and conditions of staff.

The review considered 3 options – ‘do nothing’ (continue with the current outsourced provision), insourcing all the services to be provided in-house, and a hybrid, where the catering elements only would be insourced.

The review discounted both the in-house and hybrid options on the basis of cost and risk.

The business case was evaluated against affordability, economic best value for money, business continuity and staff inclusivity.

Of particular interest in this case study is that the evaluation approach (with the exception of the focus on staff inclusivity) largely centred on implications for the commissioning organisation and issues of service delivery as opposed to a broader framing through a Wellbeing of Future Generations lens. As such, wider socio-economic implications did not influence the decision-making, and the political aspirations were referenced only with respect to concerns about workforce inequality, and not to the broader strategic fit in the context of the Programme for Government.

Merthyr Valley Homes

Merthyr Valley Homes (MHV) is Wales’ only a tenant-employee mutual housing provider and were transferred 4000 properties from Merthyr Tydfil County Borough Council (MTCBC) in 2009. Since then, MHV have been guided by a drive for added value, service quality improvements and support for the Welsh foundational economy to insource elements of their business and service provision. This has included a shared auditing service, shared with two other housing providers, grounds maintenance and youth services.

For the development of the shared auditing service, MHV found that there was a need for this service to be delivered by a distinctively Welsh firm who was more familiar with Welsh regulatory and auditing regimes, with a public service ethos. The set up of this service has been successful, with the service growing into larger, separate independent organisation with their ethos and practices firmly retained and contributing to supporting the Welsh foundational economy.

MHV had inherited their grounds maintenance services from the council and this was generally good service quality and in-house council provision. However, the labour employed were agency staff with no full-time employment offer, poor terms and conditions and no pension offer. MHV judged that this was not offering value for money, so they insourced this service and offered all TUPE’d staff full time employment, on standard terms and conditions, incremental pay scales and substantial career development offers.

Prior to insourcing, MVH worked with Cwmpas to evaluate current service provision and alternatives, while considering impact on local social enterprises if insourcing options were pursued. Here, it became apparent that local generative providers didn’t have all the required skills and capacity to deliver the services that MVH required. MVH began to work with local suppliers to build skill sets for more holistic service offers than currently available.

Wales ICT

Welsh Government ICT services were previously contracted with Merlin ICT, which expired on 11th January 2019. After extensive evaluation of the risk, economic and benefit appraisal an internal ICT with selective outsourcing was chosen as the model of choice. This hybrid model allows for Welsh Government to retain control of key functions and delivery, while considering the potential for strategically beneficial outsourcing. This hybrid model was prioritised over centralisation, despite the latter being potentially the cheapest option, due to risk and critical successes due to the size and complexity of brining the entire IT services into the Centre within a very short period of time.

Within the entirety of the ICT service, it was only professional and technical services that were ear-marked for potential supplementation with outsourcing. It was noted that this model could involve a TUPE transfer of up to 80 staff but would not require any additional costs for HR or accommodation. 

While the motivations to insource and impact evaluation is primarily driven by the need for longer-term cost reductions through greater flexibility of service provision, the Well-being of Future Generations Act is noted as a point of reference within the evaluation criteria. In addition, there is a need for ICT to “achieve [a] citizen focussed model of service delivery … and any future WG ICT operating model will need to be interoperable with the wider public sector” through: taking control of WG ICT; modernising platforms; liberating from infrastructure refresh investment cycles; enabling greater flexibility for staff and; insourcing ICT as a means for job and apprenticeship creation for people in Wales.

Transport for Wales

Transport for Wales (TfW) is a wholly owned company of Welsh Government who, aside from rail, also hold a broader remit in consultancy for local authorities and Welsh Government on public transport provision and active travel. TfW was set up in 2016, under the remit of shortly after the introduction of the Well-being of Future Generations Act (2015), under the responsibility of the Ministry for Climate Change, which enables TfW to offer purpose and policy driven services.

Rail franchising has been, so far, the most significant example of insourcing at TfW but they have also engaged with insourcing of specific business areas such as catering and train cleaning, as well as purchasing a private sector rail maintenance company. Insourced catering services has enabled TfW to take control of supply chains in order to support Welsh generative enterprise, whereas insourcing of cleaning services have enabled fair work practices in line with the Welsh fair work agenda. Further, insourcing has enabled further partnership working with other public services, such as the Welsh Global Centre for Rail Excellence (GCRE).

TfW noted that while the long-term benefits of insourcing were clear, there are tensions that exist around budget management, cost evaluation and the need to deliver on longer-term goals as outlined in the Well-being of Future Generations Act. TfW also expressed that they felt support would be valuable regarding support for new supply chains. For example, when catering is insourced and there is an intention to localise supply chains with generative food enterprise, this may require new business functions in order to evaluate wider impacts of insourcing within the Welsh economy. Further, TfW noted challenges involved within the TUPE process when new staff are transferred when previous roles, pay and conditions are not comparable. This issue is exacerbated when staff are transferred from industries of low trade union density to high, such as public transport.

NHS Shared Services

As part of our stakeholder engagement with the trade unions, we have heard of examples of outsourcing decisions – for example, in relation to cleaning services for corporate headquarters – which have resulted pay and conditions for staff on less favourable terms than had these staff been employed in-house. The view was expressed that such outsourcing decisions can be made via internal governance arrangements that are out of view of public scrutiny.

In comparison to the position in England, public bodies in Wales have not historically embraced outsourcing to the same degree as their English counterparts. Wales is therefore starting from a baseline of less outsourced services to potentially return to a strengthened Welsh public sector. This is in part a reflection that despite a UK-wide shift towards increased marketisation and fragmentation of public services from the 1980s onwards, Wales has consistently maintained a stronger focus on public value and the importance of the public service ethos.

Due to the fragmented nature of reporting and classification it is difficult to provide an accurate quantification of the scale of outsourcing by service area. Published reports (Government outsourcing – when and how to bring public services back into government hands. Institute for Government, 2020) on UK-wide data suggest that just over a quarter of the money spent on adult social care goes on in-house providers, with the figure being considerably higher for children’s social care.

42% of UK-wide waste collection budgets were spent with outsourced providers in 2018/19.

A 2013 National Audit Office report (The role of major contractors in the delivery of public services. National Audit Office, 2013) stated that 4 large contractors (Atos, Capita, G4S and Serco) accounted for a significant proportion of outsourcing in the UK across all public services. Examining the Atamis spend data for the Welsh public sector reveals that spending with these firms in Wales was £43 million in 2018/19 and £30 million in 2019/21 (note that this analysis is based on matching supplier names, not a complete analysis of beneficial ownership across all suppliers).

Based on our stakeholder engagement, currently outsourced services with the most potential to insource are:

• Facilities management
• Catering
• ICT
• Leisure
• Social care

Within these, there are specific issues and nuances which should be considered. In relation to catering, a key barrier to insourcing is concern about the internal capacity of individual public sector organisations to navigate the complex regulatory regimes and auditing requirements relevant to food preparation and service. However, this capacity is likely to exist, particularly within local authorities, suggesting that a more creative partnership approach across Public Service Board partners could unlock opportunities to insource. Catering is also a good example of where some outsourcing decisions are made because the outsourced provision provides a valuable and ongoing income generation opportunity. For example, franchised café facilities on public estates can provide ongoing revenue streams without the risks associated with insourced provision. This suggests a need to consider how the funding regimes for different parts of the Welsh public sector can strike a different balance and incentivise activity which delivers a broader societal benefit but at the expense of individual bodies’ balance sheets where there is a compelling case to do so.

Social care provision requires more nuanced consideration. There is a compelling case for removing profit from social care provision, and an existing commitment in the Programme for Government to do so in relation to services for children looked after. There is a compelling case to minimise the presence of extractive providers in local care markets. However, wholescale insourcing could undermine the valuable contribution of the third sector and democratically owned provision, which provides enhanced reach and reciprocity in communities and underpins the foundational economy approach. In CLES’ 2020 report (A progressive approach to adult social care. CLES, 2020) we suggest that a progressive approach to adult social care would represent a blend of provision encompassing:

• Inhouse delivery: where the service is delivered by the local state. 
• Municipal enterprise: arm’s length management organisations and mutually owned companies.
• Worker ownership: cooperatives. 
• Community ownership: community business, social enterprise and CICs. 
• Local private ownership that supports a triple bottom line: namely, a concern for the wider community, the environment and workers, alongside the pursuit of profit.

However, it must be noted that without progressive legislation and financial mechanisms the generative potential of alternative models of provision (all but inhouse delivery) can be hampered by the influence of private equity capitalisation (the issue of capitalisation and alternative models of ownership in Wales has been discussed within CLES’s report ‘Owning the Workplace, Securing the Future’).

Whilst the numbers of contemporary considerations of insourcing in the Welsh public sector are relatively limited, several factors emerged from our discussions with Welsh public sector stakeholders. Firstly, the consideration to insource has tended to be a reactive, and not a proactive, one. This tends to be a pragmatic response to concerns about the current provision – for example, in relation to cost and value for money, workforce considerations, service quality, or market stability. Decision-making in relation to insourcing is therefore highly weighted to these factors, within the local context of the service in question.

What is missing is any sense of a more systematic consideration of the implication of local choices in relation to service models for the local economy or through the framing of the Well-being of Future Generations Act, or the inclusion and consideration of these factors within any decision-making process.

This suggests that the toolkit needs to:

• make the case for insourcing, relating considerations of choice of service model to the public service missions of the different types of organisations to which the toolkit is aimed. For example, using the framing of local economic development, wellbeing, and the social determinants of health.
• provide a prompt to encourage a more proactive and systematic consideration to insource.
• provide a broader suite of evaluation criteria drawn from the wellbeing goals which increase the likelihood that workers in all parts of Wales can access fair work

Some stakeholders expressed that there is a need to think creatively about how public sector spend can best support job creation, and guarded against a presumption that insourcing will, in every case, deliver the best employment outcomes. Hywel Dda University Health Board, for example, argued that contracting authorities should utilise the reliable, fixed cash flow from the public sector to maximise jobs benefit in local economies, including considering alternatives to a traditional insourcing approach. Here, they pointed to specialist supply chains that will likely never be insourced, such as orthopaedic surgery equipment, to make the case for progressive procurement practices.

Even for less specialised services there may be opportunities to consolidate demand across multiple public sector bodies (as already happens, for example in NHS Shared Services) and use this to stimulate new cooperative or social enterprise models of delivery where the combined demand from the Welsh public sector could enable them to compete for work outside of Wales, in so doing creating significant employment opportunities where they are most needed in Wales.

There are a number of alternative approaches, with their own benefits and limits, that a contracting authority could engage with to meet the broader policy aims around fair work, social justice, and wellbeing. These approaches have the aim of excluding profiteering activity within public service delivery, while supporting the inclusion of socially just enterprise:

Wholly owned company

This approach was taken by Stoke-Upon-Trent, with their wholly owned company Unitas. With the ability to operate commercially with public sector clients, providing an income stream for the local authority. Also receiving its mandate from the council’s political leadership, Unitas also made significant improvements to localising supply chains. However, the arm’s-length nature removes a degree of control of internal employment practices from council authorities.

Generative partnerships

This approach was championed by Hywel Dda University Health Board, who are developing plans on their catering services to be in collaboration with a locally rooted family-run business. This shows the potential for contracts to be a useful tool to channel reliable demand (public money) toward bolstering Welsh SMEs, in line with government policy commitments, albeit with a need to ensure that such models deliver against fair work objectives.

Promoting cooperatives and social enterprise

The Social Services and Well-being Act (Wales) 2014 includes provisions that include a responsibility for local authorities to promote social enterprises and cooperative organisations or arrangements to provide care, support and preventative services (Social Services and Well-being (Wales) Act 2014, Section 16). Meanwhile, Public-Common Partnerships (PCPs) offer new frameworks of institutional design that ensure shared governance and management of public assets (Public-Common Partnerships: Democratising ownership and urban development. Heron, K; Milburn, K; Russel, B., 2021. Common Wealth.). 

Social licensing

This approach entails establishing a social justice and wellbeing orientated criterium for contractors to meet to win public contracts and could ensure that public money is supporting generative economic activity. This could, for example, be inspired by NHS Wales Shared Services Partnership Procurement Strategy (NWSSP - PS) which ensures that procurement practice aims to “strive to deliver the goals of the Well-being of Future Generations (Wales) Act 2015 through a holistic approach to its procurement process” (Finance Committee Report on Community Wealth Building by reporting officer Huw Thomas, 26/01/2021. Hywel Dda University Health Board).

If the potential for alternative models of service provision have been considered and the contracting authority has taken the decision to follow the insourcing route, there are several key considerations:

In the supplier market

We heard that it is important to manage insourcing strategy on risk, which is particularly relevant to providers in children’s social care. The insourcing authority must consider the event in which providers start to exit the market before the public sector can develop the capacity to pick it up, if they recognise that there is no future market for them. However, it is also important to recognise that contracting authorities may have limited ability to effectively manage contracts on their way to be insourced, as exhibited in the Derby City Council case study.

In the labour market

Stakeholders flagged issues with recruitment where services are insourced. This is related to difficulty attracting necessary expertise for specialisms like software development, but also to “rigid” terms and conditions meaning that they are less able to attract casual workers in some sectors like leisure services where casual work is sometimes necessary.

Internal capacity within public bodies

Several stakeholders pointed out that in-house services require significant back-office support “which is rarely factored into options appraisals”. For example, catering requires expert supplier management given the complex regulatory regimes around food – this capacity has been lost from public sector in many cases. (However, Welsh school catering may provide answers to this challenge through the partnership work they exhibit, where they work with their Local Authority to centralise back-office support).

Stakeholders from successful insourcing projects pointed out that once you have skills and ability to run an in-house service, it opens a door for further in-sourcing. This is a process whereupon pilots of smaller service areas can be undertaken to start developing capacity before engaging with larger service areas. As seen in Islington, these larger service areas can take up to two years, with significant effort and resource from across business areas, from planning to completion and the benefits accrued around service quality, integration and efficiency far outweigh the time, resource and effort that has been expended. This points to the need for a dynamic process, with the toolkit for the Welsh public sector encouraging ongoing review and reassessment.

After completion, insourcing can provide opportunities to release pressure on public body resource and improve efficiency in the medium and long term. This can include reducing capacity for contract management and monitoring, as well as increased opportunities for service integration and innovation. As seen in Wigan, insourcing drives have enabled the local authority to dissolve the boundaries around service specification which were necessary to outsourced contracts. In particular, they have driven the integration of social care and leisure services to improve the social care service offer. Neath Port Talbot have similar aspirations around the integration of their health services and leisure, ensuring the development of a healthier and more active local populace – easing pressure on resources in health services in the longer term. Given the explicit remit of Public Service Boards to coalesce around wellbeing objectives, there is ample opportunity for this way of working in Wales.

Workforce transfer considerations

Throughout our stakeholder engagement, all successful insourcing projects noted that trade union engagement was an enabler for the local authority to insource at pace and ensure success. One stakeholder noted that “those being insourced need to be empowered and not subject to a process”. Generally, workforces were engaged from the outset on pay and Ts & Cs alongside their evolving roles and responsibilities. This is crucial given that the need for integration between what can be wide disparities between the public and private sector, with the latter sometimes providing offers of bonus pay and more narrow job descriptions.

In addition, more successful projects, such as that in the Islington case study, saw the co-development of new training regimes to ensure maximum buy-in from the transferred workforce.

On workforce integration, insourcing authorities need to also consider any pre-existing equal pay agreements that could complicate industrial relations. For example, workers who are being insourced may expect a greater pay increase due to new expectations of service quality, which will have implications for pay across other service areas.

With the lessons from our stakeholders and case studies distilled into key considerations, emerging criteria for contracting authority decision making can be proposed. With this is a core understanding that the picture painted in this interim report is not black and white. Contracting decisions cannot be boiled down to insourcing versus outsourcing, nor is all alternative non-profit-making service provision necessarily “generative” or conducive to fair work, social justice or wellbeing policy aims just by nature of their business model. There are no silver bullets and insourcing is one of many possible approaches to meet wellbeing aims within a great diversity of contexts. Consequently, insourcing should be considered as one approach alongside other generative models of service provision.

Governing these criteria is one key question designed to encourage a contracting authority’s understanding of the local economic landscape:

• In evaluating ‘best value’, does the current service provision arrangement underpin Welsh government policy objectives around fair work, social justice, and wellbeing (and specifically the 7 wellbeing goals and 5 ways of working in the Well-being of Future Generations Act)?

This governing question can be broken down into several sub-questions that relate to the broader fair work, social justice and wellbeing aims within the Welsh government policy agenda. 

• Where are current providers located?
• Who do the current providers employ?
• Do they cohere to fair work principles and encourage these principles within their supply chains?
• Do they contribute to improved and more universal access to public services?
• Are services delivered in line with existing commitments in relation to Welsh language and culture?
• Is there a local alternative supplier market that would be better suited to meet current fair work, social justice, and wellbeing objectives?

Accordingly, insourcing is more appropriate in these scenarios related to the above criteria:  

• Current providers are extractive and not conducive to Welsh government policy aims around fair work, social justice, and wellbeing.
• Options appraisals reveal that insourcing would not have a detrimental effect on more generative economic actors within the commercial economy, such as local social enterprise run café offering employment opportunities to marginalised groups on NHS estates.
• There are concerns in relation to current or future market instability.
• The necessary internal capacity exists or can be developed (e.g., auditing and regulatory regimes for catering that require operating licenses or certificates of technical competence).
• There is greater scope for flexibility and integration to transform service offers in line with Welsh government policy aims.
• Conditions for industrial relations and fair work can be improved from current arrangements.

Drawing upon the lessons from our case studies, the practical considerations for the insourcing process include:

• In addition to best value requirements, has an options appraisal been conducted to explore opportunities to support local generative suppliers and the potential for insourcing to impact the local economy?
• If current service provision is outsourced, how will the contracting authority mitigate against effects of early market exit prior to the contracting authority having in-house delivery capability? Are contracting authorities able to monitor contracts in such a way that ensures that minimum standards of fair work are being met and information on employment practices is obtained and analysed, so that the contracting authority can ensure that public funds:
  1. Do not result in labour exploitation
  2. Increase the likelihood that workers can access fair work.
• What is the scope to expand internal or local authority capacity required for insourcing particular service types (e.g., auditing and regulatory regimes for catering)?
• Have timeframes and initial costs been accurately calculated?
• How do contracting authorities engage trade unions as early as possible in the process?
• What are the metrics of success? How will they align with Welsh government policy aims and how will they be evaluated?
• To work towards the Well-being objectives and increase the likelihood that workers in all parts of Wales can access fair work, the toolkit needs to consider what options a contracting authority has to reduce the risk that a worker is in unfair work and their risk of poverty – both now and in later life.

Throughout our consultation process, some stakeholders (particularly those who are less bought into the insourcing agenda) expressed a strong view that insourcing should not be mandated by Welsh Government. This is not, as we understand it, the current policy intention and, as discussed above, a mandate to insource could run counter to the need for strategic synergy across Programme for Government objectives. However, that is not to say that consideration of insourcing could not be mandated. Indeed, it could be argued that this consideration is already mandatory under best value. Positioning this agenda more firmly within the framing of the Wellbeing of Future Generations Act is a practical way in which this can be achieved, and one that is more likely to instil buy-in and understanding from across the Welsh public sector. The toolkit should therefore seek to normalise a proactive and routine appraisal of the potential impact of different models of delivery, (including insourcing), against the Wellbeing Goals and Ways of Working.

The toolkit and insourcing strategy should start with making a strong case for insourcing while speaking to contracting authorities and their specific contexts, opportunities, and challenges. The emphasis here may need to be different for different parts of the Welsh public sector:

For example:

• At the national level, speaking to the need for Welsh Government to be seen to lead by example and to achieve genuine cross-government synergy.
• For health, positioning this agenda more explicitly in line with the social model for health, making the links between fair work and the social determinants of health.
• For Higher Education, speaking to their more nuanced position as a quasi-public sector and their challenges regarding profit-making functions as well as the opportunities available to integrate themselves as key agents in the delivery of the Welsh government’s policy agenda.

There is a need to instil an understanding that there is no guaranteed short-term financial return from insourcing. Rather, the potential benefits of insourcing relate to longer term social and economic goals and improved population wellbeing, as well as service efficiency and quality, which can also affect costs in in the long term.

Additionally, guidance and support should reflect that developing an insourcing approach needs to be a long-term endeavour that for some public sector organisations will require shifts in their culture, skills and capacity to enable their transition from a commissioning to a delivery focus.

An insourcing toolkit cannot be seen as a standalone or a silver bullet, it needs to be framed as a component of a broader suite of guidance, such as the social value report by Cwmpas (For Economic and Social Change: Welsh Government social value review. Cwmpas, 2022), to direct the power of public bodies towards meeting Welsh government policy objectives.

This means that, as part of a suite of guidance aligned to Welsh government’s policy agenda, such a toolkit should be driven across all relevant government portfolios for strategic synergy and consistency. This will not only serve to maximise impact but will also avoid undermining and contradicting other agendas, and vice versa. For example, the Welsh government agenda around strengthening the SME sector, known as the ‘missing middle’, through strategic contracting and procurement practice can be symbiotic with insourcing policy. This confluence can only exist if the policies are framed, engineered, and mobilised toward supporting the Welsh government’s fair work, social justice and wellbeing aims rather than in isolation. Therefore, insourcing should exist as a particular tool in a public body’s inventory to achieve policy aims and not a default policy.

This should be supported by the availability of specialist advice on the national policy context to inform and give confidence to officers in contracting authorities on how decisions can be made within the current legislative space especially in the context of post-Brexit trade treaties and changes to procurement legislation.

Support may also be needed for contracting authorities when taking on responsibility for new business areas by insourcing – for example, on how to evaluate and maximise the local economic impact of new supply chains from insourced contracts and how to collate data to measure the impact.

If insourcing is a policy tool for delivering against longer-term best value through considerations of fair work, social justice and wellbeing objectives then success must be measured against those metrics rather than services being audited on short-term VFM and cost efficiency alone. There will be an ongoing need for the Welsh Government to have honest conversations with the Welsh public sector and to consider where it is possible to evolve and flex its relationships to reinforce that longer-term commitment (encompassing, for example, funding settlements, and approaches to audit and inspection).

We would also recommend that Welsh Government consider how best to monitor, promote and stimulate sharing of knowledge, data and good practice across the Welsh public sector, to encourage deeper engagement with insourcing and alternative models of service provision.

This could be via a Community of Practice (CoP), designed to ensure ongoing momentum after the launch of the toolkit, along the lines of CoP established as part of the Welsh Government’s Foundational Economy Challenge Fund (Foundational Economy Community of Practice. About. Cynnal Cymru, 2022). This could provide a model for a facilitated community of practice of contracting authorities to pool expertise, share challenges that they face and explore the art of the possible regarding insourcing practice and alternative service provision in line with Welsh Government policy objectives.

We will develop the draft toolkit, drawing on the key themes, lessons learned, and proposed criteria set out in this interim report.

In order to ensure that the toolkit lands well across the Welsh public sector, we will carry out additional engagement to seek feedback on the toolkit from a range of stakeholders, including:

• The institutional stakeholders engaged in the first phase of the work (relevant Welsh Government departments, WLGA, Cwmpas, trade unions, and Office of the Commissioner of Future Generations). Here, we are specifically wanting to sense check the rationale and framing of the toolkit and seek high-level views on the proposed criteria and levers. The proposed methodology for this engagement activity is an informal virtual roundtable - presentation from the CLES team, followed by a semi-structured discussion.
• Representatives from: Welsh Government, local authorities, health boards, further/higher education, transport, and housing. Here, we are wanting to test out at a more granular level the usability and applicability of the proposed toolkit and the practical application of decision-making criteria. The proposed methodology for this engagement activity is a series of follow up individual organisational interviews with Welsh public sector organisations previously engaged in the first phase of work – i.e., Hywel Dda UHB, Coleg Sir Gar/University of Wales Trinity St. David, WLGA, Neath Port Talbot Council, and Welsh Government (FM and ICT).

Key milestones for this next phase of work are:

• 31/08/22 - Draft Toolkit produced for engagement with key stakeholders. 
• During August - November - Engagement with Welsh Public Sector to seek feedback on the toolkit from key stakeholders. 
• By End December - Final report to be produced and toolkit published for the Welsh public sector

• APSE
• Bridgend College
• Cwmpas
• Digital, Leisure and Wellbeing Services, Wigan Metropolitan Borough Council
• Foundational Economy team, Welsh Government
• GMB Scotland 
• Gower College Swansea
• Highways Asset Management, Grounds Maintenance and Arboriculture, Derby City Council 
• Hywel Dda University Health Board
• Leisure and Lifelong Learning, Neath Port Talbot Council
• Merthyr Valley Homes
• Ministry for Finance & Local Government, Welsh Government
• Office of the Commissioner of Future Generations, Welsh Government
• Property Services, Islington London Borough Council 
• Transport for Wales
• Unison
• Unite Convenor, Unitas Stoke-Upon-Trent Ltd
• University of Wales Trinity Saint David Group
• Wales TUC
• Welsh Local Government Association
• Welsh Government officials
• Workforce Partnership Council Wales