Relational contracting: a fresh perspective

At the GO Lab, our interest in formal-relational contracting emerged organically from our work with outcomes-based contracting and social impact bonds. As we sought to identify whether these novel commissioning models “worked”, we approached a rather unsatisfying conclusion: it depends. Some OBCs do seem to help build cross-sector partnerships which deliver better social outcomes; others do not.

Our focus then turned to the features of particular OBCs which seemed to contribute to success or failure – a vital facet that quickly emerged was their ability to foster collaboration between parties. This in turn led us towards the well-established literature around relational contracting, a field of study focused on the way in which informal trust and relationships augment formal contracting structures. We tried to capture insights from both practice and the academic literature in a report, Partnerships with Principles, and have a number of academic publications on public sector formal-relational contracting in progress.

Liam, meanwhile, comes at this challenge with deep research and practice experience. Having spent almost a decade working for government outsourcing companies, in 2019 he embarked on a research project as part of his MBA. While interviewing commissioners and providers, he heard how service improvement was blocked and disincentivised by the culture and behaviours that lay behind the contracting, and became convinced that a new approach was needed.

In 2022, Liam joined Public Digital, a consultancy set up by the founders of the UK’s Government Digital Service. There, most of his colleagues had worked on the digital transformation of public services. They introduced a new way of designing and delivering services: agile and iterative with fast feedback loops from users to test what works and incrementally improve. Like relational contracting, this approach involves a conscious acknowledgement that it’s impossible to confidently predict in advance how service users will behave, how to best achieve outcomes, or what other external factors might change.

So, via different routes, we’ve both ended up at a point of understanding that to address many complex challenges, government needs to adopt a new partnership approach. Partnership models needs to leave space for adaptation and collaboration as parties respond to unforeseen challenges and must also be publicly accountable. Over the next year, we want to bring together our respective experience in this space to help commissioners start experimenting with relational models which encourage a test-and-learn approach to designing, delivering and continuously improving complex social services.

The GO Lab team bring a deep engagement with the forefront of academic theory on relational contracting, as well as empirical research on projects like the Kirklees Better Outcomes Partnership. Liam and his colleagues at Public Digital, meanwhile, have a wealth of practical experience both from within and working with government across a range of agile programmes and policy sectors.

Building on our respective strengths, and those of the wider public services community, we hope to bring together a framework for understanding the relationship between the characteristics of a particular service and an appropriate partnership model. For really predictable, stable, “product-like” services, a tightly specified transactional contract may be completely appropriate; at the other end of the spectrum, where money is not changing hands but public agencies need to work together to deliver joined-up services to achieve social outcomes together, a contract may not be needed at all, but a set of tools to align organisations around a common purpose are essential. In the middle are the trickier contexts, where commercial incentives need to be considered alongside the need for services to learn, adapt and change – this, we think, is where a “formal relational” model might offer a solution. This provides a nice framing, but over the coming months, we’re hoping to put some more meat on these bones, identifying the kinds of programmes that might fall under these different categories.

As we talk about collaborative, transparent and iterative approaches to partnership working, we’re also keen to practice what we preach. So, as we look to develop this framework, and more formal outputs like an academic paper and practical tool for commissioners, we want to bring you along with us.

We’re keen to engage with those at the frontline of contracting and other forms of partnership, hosting a series of workshops to share ideas and gather valuable practical insights. We’ll use these sessions to refine our understanding of both the theoretical concepts and their real-world implications, adapting our framework to ensure it meets the needs of commissioners facing the challenge of trying to deliver complex social programmes to meet the needs of vulnerable populations. If you want to engage with us and this project in person, join us at this year’s Social Outcomes Conference, where we will present what we’ve learned on our journey.

Following Public Digital’s Show the Thing approach we are also planning to share our reflections as we go, through a series of blogs. Rather than a traditional research project, where academics disappear off and return with a polished paper or policy report, we want to offer an insight into the development process we’re undertaking – warts and all. While our goal is to produce these more traditional outputs, we also hope to document the realities of a messy, imperfect effort to better understand the challenge of building complex partnerships. So, watch this space. As our thinking evolves, we’ll blog about it, and ask for your thoughts, comments and contributions.