Value of public service outsourcing contracts ‘nearly double the private sector’

7 Jul 14

The public sector is spending almost twice as much on outsourced services as the private sector, research has found.

A study published by the Information Services Group today found that the total contract value of public sector outsourcing agreements reached £51bn over the last two years, compared with £30bn in the commercial sector.
 
In that period, a total of 585 public sector contracts were awarded. In particular, there was a growth in ‘mid-market’ contracts that are valued between £15m and £30m. Some 22% of public sector outsourcing awards now fall into this category, up from 18% in the previous two-year period.
 
ISG partner Luke Mansell said: ‘The recession and the subsequent focus by the public sector on cost reduction and value for money has driven a renewed interest in outsourcing and its role in helping deliver efficient, cost-effective services.
 
‘While the commercial sector has moved to smaller contracts over the past two years, the public sector has seen a rise in mid-market contracts, mainly as a result of the complexity of the services required and the lack to appetite to utilise cheaper, offshore resources.
 
By contract value, 42% of outsourcing awards are with central government, 30% with local government and 13% with healthcare. ISG noted that although healthcare had seen its market share fall as the size of the public sector market increase, the amount of spend in the sector has increased.
 
Mansell added: ‘The UK public sector is a significant market in its own right and is the largest public sector market outside of the United States.
 
‘Looking ahead, we expect to see continuing growth in public sector outsourcing activity as initiatives like value for money make outsourcing a more attractive proposition, while the government’s G-Cloud initiative opens the market to a greater number of specialist service providers.’
  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk