Is outsourcing out for the public sector?

6 Mar 23

CIPFA’s procurement advisor Mohamed Hans explains why some public bodies are looking more favourably on insourcing services instead of relying on contractors.

Some contracts are underperforming. Image © Shutterstock


The current impact of record inflation and supply chain pressures is eroding the profits of public sector contractors and making delivery on previously agreed contracts challenging. As a result, user dissatisfaction is growing, and contractors are not the reliable option they once were. 

In addition, public sector teams are developing commercial skills after successfully navigating demands though the pandemic.

So, over the next several years we could see a major shift towards insourcing public services.

Previously, outsourcing was sold as a way of delivering public services cheaply and taking advantage of private sector commercial skills and expertise.

Over the years, many of these outsourced contracts have not always delivered on their original promises. Contracts have tied authorities into relationships that are no longer optimal or attractive – let alone affordable. 

Political support in public bodies is growing rapidly for services to be returned with a ‘we can do better attitude’.

Organisations are now looking at the benefits of delivering services themselves, such as having greater control.

It also allows services to be better integrated with the new structure of organisations as well as give opportunities to maximise local economic benefits.

All employers are facing recruitment and retention problems at the moment, which is affecting the quality of services.

Bringing staff back is not going to be an easy task, especially if there is only a skeleton workforce remaining.

But public sector decision-makers still believe services can be better delivered if done with their own hands.

In 2009 Barnet Council was nicknamed the ‘Easyjet’ Council and put forward as a blueprint for the future way public services would be offered to residents.

Recently, the authority has insourced 300 staff back to council employment.

The staff were working under a joint venture offering services including trading standards, environmental health and planning highways. 

The contract was hindered by several controversies including fraud and contracts running massively over-budget.

The current administration has fast-tracked the services back to the council, with a view to achieving better value for money.

This has been followed by Manchester City Council passing a motion for a new ‘insourcing first policy’, which will mean the council taking practical steps towards providing public services rather than indirectly hiring private companies to carry out these services.

Because of the current economic difficulty being felt by all, public bodies will focus on future proofing their contracts and delivery and taking control of their supply chains.

So, insourcing will be high on the agenda.  

While insourcing is not a totally new approach, it hasn’t been considered in the past, or was only seen as a last resort to be used when everything else had failed.

Insourcing does require demanding levels of expertise. It involves organisations having to traverse complex transactions and processes.

Without this, insourcing would be no less risky than other models of service delivery.

Decision-making around whether insourcing is a feasible option can be difficult, especially when the public sector is experiencing economic hardships.

CIPFA has produced a new publication focused on insourcing, which provides an overview of the key stages involved.

It is designed to promote best practice and outline the steps public bodies need to take when considering insourcing as part of future options to deliver public services. 

CIPFA will be holding a procurement conference in London on 16 May 2023, to find out more visit CIPFA’s website.

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