A majority of CFOs recognise that outsourcing is a fact of public sector life. The challenge, in the light of recent experience, is how to do it better
Recent issues faced by G4S, the NHS and other organisations have posed some serious questions about the value of outsourcing and created a debate which has received widespread coverage. And rightly so.
These are important questions which need to be answered. But is the debate becoming unnecessarily polarised? Rather than just looking at whether outsourcing as a concept is good or bad, or right or wrong, the debate needs to be placed firmly in the context of our public sector today.
The simple truth is that outsourcing is already a fact of life, and will become more so as budgets are cut further. Indeed, research we carried out recently as part of our Risk and Response report found that 54% of chief financial officers believe that the current UK public sector budgetary environment is driving their organisation towards increased outsourcing arrangements.
The debate instead needs to focus on whether outsourcing is being implemented appropriately, for the right reasons and with a firm hold on risk and responsibility.
Outsourcing can be a very prudent way of driving efficiencies but with both tighter budgets and fewer staff there is an inherent chance of something going wrong - and clearly the majority of the public sector cannot rely on calling in the army as a contingency!
Perhaps a cause for concern here is that our research for Risk and Response showed that just 4% of public sector leaders list outsourcing as something they believe will increase the chances of a major incident in the future. Should these sorts of arrangements, when it comes to critical frontline services like policing and healthcare, carry a warning sign though?
There has not been much evidence of best practice in public sector risk management around outsourced services to date, and many leaders may have a misplaced confidence in the chances of an incident occurring in their supply chain.
Crucial to any debate around outsourcing, is that it should not be seen as the only solution. Rather, it is one of a number of options available to organisations making changes to operations. And like all options, its benefits and risks must be carefully weighed up at the outset and throughout the contract.
Before anything is signed and agreed upon it is essential that all parties are confident that the right level of resource is dedicated to delivering across the full lifecycle of the agreement and any risks managed. Having a contingency plan is a vital part of managing these risks.
It shouldn’t be painted as all doom and gloom though, because outsourcing can work and it does bring significant benefits. Now is the time for the public sector to really focus its attention on a holistic and thorough analysis of the cost saving measures available to them and, in doing so, weigh up the threats, but also the benefits, posed by outsourcing.
Doing so will mean the sector can make informed decisions, put appropriate measures in place and, most importantly, address any potential problems from the outset.
Andrew Jepp is director of public services at Zurich Municipal
