Demos Daily: Commissioning in Children’s Services


The return of some non-key worker children to school this week has provided some respite to parents struggling to balance work and home lives. While those children adapt to the new normal in their familiar environments, other children will have to adapt to the return of their classmates, after weeks of being part of a select group attending every day. It’s easy to forget that alongside the children of doctors, nurses and other key workers, nearly 80,000 children looked after by the state have kept school as their daily routine.

Relatively little has been said about the effect of the Coronavirus crisis on children and young people in care. Yet they’re being supported by a system long considered to be in crisis, with local authority budget cuts and an increase in demand for children’s social care services pushing many departments to the brink. Commissioning external and often for-profit service providers can seem like the only option, but can they put children’s best interests first?

In 2016, Demos published Commissioning in Children’s Services, looking at the challenges facing local authorities and how they can make the most of commissioning.

You can read the executive summary below, and the full report here.

Despite significant policy attention and political action, looked-after children and children with special educational needs and disabilities (SEND) remain some of the most vulnerable children in the country with their later life outcomes – social, educational and health related – remaining stubbornly poor. It is no coincidence that in Ofsted’s inspections of local authority children’s services departments from November 2013 to March 2016, three-quarters were given one of the two bottom ratings: ‘requires improvement’ or ‘inadequate’.1 These failings have profound impacts on the lives of children and young people.

Two sets of pressures are putting children’s services departments under considerable strain. First, demand for children’s social care is rising. Between 2008 and 2015, local authorities saw a 22 per cent rise in referrals and a 16 per cent increase in the number of children in care.2 It is not only the volume of demand but the kind of demand that is exerting pressure: the needs of lookedafter children are becoming more complex, and the  introduction of Education, Health and Care plans (EHCPs), although a positive move forward, require local authorities to think more creatively about how they will meet the needs of children with SEND. Second, local authorities are facing continued and severe cuts to their budgets. Between 2011/12 and 2014/15, spending by England’s local authorities on children’s social care dropped by 18 per cent,3 resulting in staff reductions, increased workloads and less support for foster carers.

In short, local authorities need to do more with less, and perhaps unsurprisingly many struggle to achieve the quality expected of them by the government and regulator. In some areas, outsourcing services to independent providers4 has been adopted as a potential solution, while in others, ‘externalising’ (setting up an independent trust) has been used. In some cases, these changes in governance have been forced on the local authority in response to what was
seen as a failure in in-house delivery.

However, there is some concern about the use of outsourcing in children’s services, particularly where it involves the use of for-profit providers. It is also a challenging undertaking to do well. Yet evidence suggests that when used correctly outsourcing has the potential to help local authorities deal with the pressures they face, drive up standards, and ultimately secure better outcomes for vulnerable children and young people. Pressures to do more with less are likely to be exacerbated now Britain has voted to leave the European Union – it is too soon to judge the full effects of the referendum result, but domestic funding will most likely be impacted, and planning in the short term will become more difficult. As pressure to improve outcomes under resource constraints increases, it is likely that so too will the number of local authorities opting to outsource at least part of their children’s services. With this in mind, this report looks at domestic and international examples to identify some of the features common to outsourcing which seem to be working well, and possible pitfalls to avoid, to help inform this rapidly developing agenda.


For this report we reviewed the literature relating to current policy and practice for children’s services, focusing specifically on innovations and responses to failure. We brought together two combined case studies that shed light on how outsourcing has been used to date in the UK and elsewhere – the independent trust model in the UK (as implemented in Slough and Doncaster) and the liberalisation of children’s services in the US (specifically looking at Kansas, Florida and Washington). We also held 12 semi-structured interviews (face to face and by telephone) with professional experts drawn from the voluntary, independent and statutory sectors in England, Wales and the US and received written feedback from a further two experts. In addition we collected evidence using a survey from members of the Children’s Service Development Group.5 Finally, the project benefited from an expert advisory board,6 which met at the start of the project to comment on our methodology, and provided written feedback on our interim findings and this report.


We used our research to identify what outsourced children’s services that work well tend to have in common, and what pitfalls can prevent outsourcing in this
area from working well.

What works

Having strong relationships

Commissioner–provider relationships are critically important to the success of outsourced children’s services. Where these relationships were collaborative, with high levels of communication and trust, and mutual respect between both parties, outsourcing tended to achieve better outcomes. However, we identified further sets of relationships that impact on the success of outsourcing: relationships within local authorities, relationships between local authorities, and relationships between a given local authority, providers and the local community.

Using data effectively

We found that commissioners who made strategic use of data tended to secure better outcomes for the children and young people in their area than those who
did not. Three sets of data are needed:

  • data about populations, so commissioners can plan strategically and ensure they have the right number and kind of placements
  • data about costs, so that commissioners know how much their contracts are worth and can pay providers accordingly
  • data about the outcomes achieved by children and young people, so that commissioners can measure and monitor performance

We found that a number of barriers can make it difficult for commissioners to use data effectively, including the expense involved in collecting them, the skill and time needed to analyse them, and the common error of making incomplete calculations using data about costs.

Having clarity on outcomes

There is little consensus on what precise outcomes local authority children’s services should be seeking to achieve. Yet our evidence shows that a strong focus on consensually agreed outcomes is a typical feature of local outsourced services that have worked well, giving all parties involved in planning and delivery a clear vision of what they should strive towards. Once decided, outcomes can be used in more and less ambitious ways: from using outcomes to measure and monitor  performance; to commissioning according to outcomes – to give providers the freedom to improve outcomes in new and innovative ways; to paying providers according to how far they achieve them. The latter may improve the accountability of providers, but also presents them with greater risks and threatens financial sustainability, so outcomes-based payment mechanisms need to be used with caution and well planned.

Pitfalls to avoid


Budget cuts have a significant impact on service quality. Not only do local authorities have less money to spend on services, cuts radically alter their commissioning practices. The fundamental impact of budget cuts is that they create a price-driven environment. Commissioners are forced to make decisions on the basis of cost rather than quality, data collection may become an unaffordable luxury, and there is a loss of sight on outcomes. All this serves to poison commissioner–provider relationships, can tempt local authorities to use in-house services (without any evidence that they are more cost-effective than independent services) and reduces the range of placements offered (as standard placements are favoured over specialist offers, prompting independent providers to respond in kind). Ultimately, those who suffer most are vulnerable children and young people.

Using outsourcing only in the context of failure

Outsourcing has often been used in the US as a response to significant service failure. In contrast, the most frequently used response to children’s services failure in the UK has been ‘externalisation’ – the creation of an independent trust. Externalisation can enable children’s services to break from past failures, and frees them from the bureaucracy of the local authority. It should perhaps also be used as an opportunity to review outsourcing arrangements. However, our research suggests that outsourcing may not be the best response to failure, in that failure does not create the right conditions under which outsourcing succeeds. Commissioning outsourced services is complex, time-consuming and currently under-supported – it is not easy to get right at the best of times, and certainly not when a local authority is in crisis. We argue that there needs to be a more proactive attitude towards outsourcing – that it should be used to make improvements before a local authority has reached crisis point, so that the process can be properly planned.

Poor planning

Our research has shown that preparation is critical to the success of outsourcing. A decision to outsource should mark the start of a long period of planning, piloting and transitioning to the new system, and the evidence we have gathered shows that less successful outsourcing attempts were invariably rushed or poorly planned. A range of activities needs to be completed before the process begins, including mapping of the provider landscape, designing contracts, establishing outcomes, gathering costs data, and engaging with the local community. Pilots can be used to test how effective this preparation has been, as well as to allow providers to iron out any issues they experience from dealing with a higher volume of cases than before. Finally, there should be a transition period so that roles and responsibilities are transferred safely.