The Public Value of Public Sector Research Establishments: Towards a set of principles and guidelines.

Mission-oriented science and technology (S&T) – that is, Government funded S&T activity in direct support of the goals, missions and priorities of public policy – has a long history and accounts for a significant proportion of government spending on S&T. Such mission-oriented science and technology - in fields such as defence, health and agriculture - has its own distinctive institutions and organizational structures that generate and apply knowledge, expertise and technology. If mission-oriented science and technology systems are to continue to deliver what is required of them by policy makers, then they must adapt to these new conditions. Our own research on two decades of reform and change in UK and European public sector research organisations (Cox et al, 2001, James 2009) shows that change is uneven, often comes slowly and may have unanticipated consequences for the performance of the system. In the current context of budget decline and fiscal austerity, there may be particular tensions between meeting short term needs and explicit or implicit longer term goals around maintaining or reshaping S&T capabilities. A key element of mission-oriented science and technology systems are public sector research establishments (PSREs). PSREs are an extremely diverse set of organisations, operating in a range of environments and locations. In the UK, those PSREs which remain play mission-oriented, rather than the generic fundamental or applied research roles playe by, for example, of the Max Planck or Fraunhofer systems. UK PSREs have long and complex histories bound up with changing policy priorities and changing fashions in the organisation of research. There can be no one size fits all approach to reform, and identifying the roles thought to be most crucial will inevitably involve trade-offs: no business model will be likely to work equally well across all roles and all dimensions. It is essential that departments and Government as a whole regularly review their policy and regulatory support needs and how they might best be met, including whether PSREs may need to evolve in order to meet these goals or if such needs may be addressed by alternative mechanisms.Based on our desk research and stakeholder interviews we have proposed a set of basic principles which might underpin future reviews of PSREs so that their distinctive roles and impacts are taken into account. We have also proposed an approach through which these principles could be operationalised. Our initial ideas were tested at a Stakeholder Workshop bringing together a range of Government, PSRE and external stakeholders and were revised on the basis of the workshop discussions and a further round of comments from BIS and other government stakeholders. We suggest the following as basic principles that should underpin any review process: • A PSRE should generate public value where the capabilities, expertise and assets it holds, and the activities it performs, mean that it plays a unique or distinctive role in policy/regulatory, science or economic/innovation systems. This public value may manifest itself by supporting the missions (goals, priorities, operations and service delivery) of the sponsor or other departments, or may accrue to the wider science and economic/innovation systems.• Government needs to consider the public value it seeks to obtain in the short, medium and long-term, and how this can best be obtained. Not only must sponsor or customer departments be as clear and/or aware as possible about their likely future needs but also any review must take into consideration cross-Government needs and over-arching priorities where the public value created by PSREs may be relevant.• Review must be focused on selecting a sustainable business model that can maintain the capabilities, expertise and assets required in the short, medium and long term whilst maximising value for money and avoiding State Aid issues. This presupposes that the real costs of maintaining the capabilities, expertise and assets under alternative business models are fully considered.• The possible risks and benefits of closer collaboration with other organisations (within or, where appropriate, outside of the UK) where synergies might be achievable should be considered as part of the business model review.• Business models should maximise the exploitation of assets, knowledge, technology or expertise so long as this does not jeopardise their ability to generate the public value required by Government in the short, medium and longer term. Review must consider not simply the risks to the sponsor (or customer) departments of alternative business models but must also consider possible cross-Government risks which may not be “owned” by any single department. These trade-offs must be made explicit as far as possible.• Review should not be a closed process ‘owned’ by and involving only the sponsor department and the PSRE. Users, audiences and cross-government stakeholders should be involved and share ‘ownership’ of the review.• The ‘status quo’ business model should be as rigorously tested as any alternative models.Review is inherently difficult: we are discussing complex, multi-dimensional systems and a fully rational review process would require both limitless resources and perfect knowledge of the future. However, our interviewees and stakeholders were clear that more can and must be done to understand future departmental, cross-government and wider public needs, and the true costs and risks associated with different business models through which these could be met. We have proposed that the principles above could be operationalised through a series of questions addressing the public value created by the roles played by PSREs in policy and regulatory systems, national and international; science systems, national and international; and economic or innovation systems, local, regional, national, sectoral or global. It is for Government to consider whether these are the right principles and this is the right approach, but it seemed clear from the stakeholder workshop and the interviews we have conducted that something very much like what we have proposed is needed. It will also be necessary for Government to consider what processes might be needed to provide information and analysis to support such decision-making.