Cliff Mills and Simon Grove-White explain why local government’s dependence on contracts is undermining public value and public purpose.
Local government in England is once again being reshaped through structural reform. But the more important story lies elsewhere. English councils now deliver a huge share of public purpose through procurement and outsourcing. What is presented as a technical process has become one of the main ways the state operates — and one of the main reasons it struggles to deliver on its public purpose. It is not the formal structure of local government that now determines many outcomes. It is the machinery of outsourcing.
That is where much of the real power now sits: outsourced.
Procurement is not an obscure back-office function. It is the operating system of the local state.
For years, this has been treated as a technical matter best left to lawyers, commissioners and procurement teams. That complacency no longer works. Procurement is not an obscure administrative detail. It is now one of the main ways the state functions. Across the OECD, nearly 30 per cent of government spending flows through contracts. In English local government, where outsourcing has become deeply embedded, the figure is over 50 per cent, with an estimated £91.8 billion spent annually with external suppliers.
Procurement is not an obscure back-office function. It is the operating system of the local state.
Public purpose, private form
There is nothing inherently wrong with public authorities working with external organisations. The problem lies deeper than that. It lies in the legal and institutional mechanism being used to engage with them.
At the heart of most outsourcing sits a basic legal device: the contract. In theory, contracts create clarity. They set out obligations, allocate risk and give each side remedies if the other fails to deliver. In commerce, this can make good sense. Contract law exists to bring certainty to private bargains.
But that is precisely the difficulty. It was designed for private bargains, protecting the (private) rights of the parties against each other.
Contract law rests on the principle of freedom of contract. Parties are assumed to be free to agree whatever lawful terms they choose. Courts do not ask whether the terms are fair, or the outcome serves any wider social purpose; they ask whether a valid agreement exists under contract law, and whether it should be enforced.
On paper, this looks neutral. In reality, it rarely is. The power balance between contracting parties is often unequal from the outset. One side has more choice, more money, more legal expertise, more room to manoeuvre and a greater ability to absorb risk. Once the agreement is signed, the law locks those inequalities in place, backed by the power of enforcement. That’s what drives consumerism and the gig economy.
Councils do not exist to pursue private advantage. They exist to serve public purposes.
When contracts are used by public bodies, the tension sharpens. Councils do not exist to pursue private advantage. They exist to serve public purposes. Their agreements are meant to secure public benefit, not merely uphold a private bargain between two legal entities. Procurement law and the language of social value are supposed to adapt contract law to these public ends.
The question is whether they really do.
The fantasy of specification
Procurement is often presented as rational, transparent and objective: a disciplined way of ensuring that public authorities get the right thing, from the right provider, at the right price. In practice, it often works rather differently.
The process usually starts with a buyer trying to specify in advance what is needed. But this assumes a level of expertise that often does not exist. A council may know broadly what it wants to achieve, but not the full detail of how best to achieve it. That practical knowledge often sits with potential suppliers. Yet procurement rules limit the kind of open, exploratory conversation that would allow both sides to develop a shared understanding.
So the authority writes a specification, often with too much confidence and too little knowledge. Suppliers interpret it and submit bids. The winning bid becomes the basis of the contract. Any ambiguities, misunderstandings or false assumptions embedded in the process are then frozen into legal form. What should have been the start of a collaborative relationship becomes a compliance exercise.
This is not just clumsy. It is structurally inefficient.
In smaller procurements, it can resemble an elaborate game of Chinese whispers: each stage introducing distortion while reducing the freedom of either party to correct course later. In larger, longer-term contracts, the problem becomes more serious still. Procurement assumes that future conditions and risks can be anticipated, specified and priced in advance. But public problems do not behave like that.
Climate adaptation, care, local economic resilience, public service innovation, ecological restoration, public health and food security are not static outputs to be purchased against a fixed specification. That’s what procurement turns them into, when in reality, they are evolving, interconnected challenges.
Why the wrong bidders often win
This system also shapes who gets to participate.
In theory, procurement is open and fair. In practice, it often privileges those best equipped to survive the process rather than those best placed to solve the problem.
For many SMEs and VCSEs, public procurement is simply too risky, too expensive and too bureaucratic. Bid costs are high. Cash flow is tight. Contract terms can be punishing. Larger corporate providers, by contrast, have dedicated teams for writing tenders, managing compliance and absorbing losses in pursuit of scale.
This is where the rhetoric around social value starts to look thin. Social value is presented as the corrective: a way to make procurement more inclusive, more rooted in local benefit and more attentive to communities. But too often it becomes another scoring exercise layered on top of a system whose basic logic remains untouched.
Those with the most polished procurement machinery continue to outperform those with the deepest local knowledge, commitment or trust.
The result is predictable. Scale still beats substance. Those with the most polished procurement machinery continue to outperform those with the deepest local knowledge, commitment or trust.
That is not an accidental flaw. It is how the system is built. Contract law provides a sub-optimal mechanism for public bodies to form commercial relationships.
The price of failure
The consequences are not abstract. They show up in wasted money, weakened accountability and the erosion of public capacity.
One clear illustration is Oxfordshire County Council’s deal with Carillion. In 2012, the council entered into a ten-year, £500 million partnership for property and facilities management services. Six years later, despite poor performance, the council had to pay £10.65 million to settle and exit the arrangement. After Carillion collapsed, it then spent a further £1.7 million auditing and remedying unfinished work.
The contract did not protect the public interest. It protected the legal rights attached to a failed private bargain.
That is the wider problem in miniature. Procurement law is being used to adapt contract law for public purposes, but it fails to address the problem. It reinforces a culture of compliance and blame avoidance. It pushes public authorities towards defensiveness rather than creativity. It weakens trust precisely where trust is most needed.
In 2022/23, English councils spent an estimated £94 million on agency procurement legal staff alone.
It is also expensive. The cost of drafting and negotiating a major outsourcing contract can run into the millions, though much of this disappears into wider procurement and mobilisation budgets. At the same time, public bodies increasingly rely on external legal and procurement specialists because internal capacity has been hollowed out. In 2022/23, English councils spent an estimated £94 million on agency procurement legal staff alone.
That is a high price to pay for a system so often justified in the name of efficiency. Despite failing to deliver meaningful productivity gains, the rhetoric of efficiency, neutrality, and accountability has, intentionally or otherwise, provided a highly effective smokescreen for the ongoing enclosure of public and common goods by private interests.
The deeper mismatch
None of this means every service should simply be pulled back in-house. That would be too easy, and in some cases would merely replace one rigidity with another.
The real issue is not whether delivery is public or external in the abstract. It is whether the legal and organisational framework allows different actors to work together around shared goals in ways that are transparent, adaptive and accountable.
At present, contract law adapted by procurement does not do this well. It reduces public purpose to transactions. It narrows collaboration into competition. It elevates enforceability over shared problem-solving. It takes a legal form built for private advantage and tries to bend it towards the common good.
We need mechanisms built around shared interest rather than narrow exchange.
That is why the problem cannot be solved by another round of minor reform. Another toolkit, another set of social value metrics, another procurement bill — none of that gets to the root of the problem.
Beyond the procurement machine
If we want to stop public wealth leaking away through contracts designed to protect private interests, and unlock the capacities of communities, local enterprises and mission-driven organisations, we need alternative ways of formalising working relationships.
We need mechanisms built around shared interest rather than narrow exchange. We need forms that allow multiple actors, with different strengths and scales, to contribute to common goals without being crushed by a process designed for large corporate bidders. We need institutional arrangements better suited to public and common goods.
That is the real question facing local government. Not how to redraw the map yet again. Not how to make the procurement machine marginally less bad. But whether the machinery itself is the problem.
If the persistence of failure is rooted in procurement and contract law, then the £92 billion question is difficult to avoid:
Is there an alternative?
Few public servants are aware that an entirely different mechanism exists for establishing formal relationships around a common interest, and that a clear legal framework – based on collaboration rather than competition – is already available and in use elsewhere. Fewer still will be aware of the advantages this brings over procurement and contract law.
In our next article for the June issue of The Mint, we’ll explore this through real-world examples, showing why and how this approach provides a more efficient, resilient, and effective way to administer public/common goods.
