Whitehall documents point to more outsourcing

“Reform of public services is a key progressive cause,” state Cameron and Clegg. “Those who resist reform, put the producer interest before the citizens’ needs, and object to publishing information about how services perform are conspiring to keep our society less fair and less united,” they say, right at the beginning of the new Open Public Services white paper.

Among those certain not to resist the reforms laid out in the white paper, are outsourcing providers; the core principles at its heart point to an upsurge in outsourcing. While charities and social enterprises have their place, when it comes to a “range of providers competing to offer a better service,” it is the private sector that has the experience, expertise and technology to really make a difference to the public sector’s bottom line. It is the outsourcing providers who can do more with less, making “every penny of taxpayers’ money work as hard as possible,” now that “waste and inertia are no longer tolerable.”

A SHIFT IN POWER
The decentralisation of power to the lowest possible level is also good news for outsourcing providers. Now the purse strings are to be held by those closest to services, decision making will become more pragmatic and judicious. It is perfectly natural that the shrewdest decision making will come from those that the decision matters to most. It’s a great idea, and one that will help keep up the service quality at the highest possible level at the same time as reducing costs. Cheapest is not always best! If decision making power was still highly centralised, there would be a danger that, in the quest to slash the budget deficit, service quality would be decimated at the same time. Devolving power to those involved in actually delivering the service, and using it, means that will not be allowed to happen.

KNOW WHAT YOU’RE SPENDING

Accountability is another pervasive feature of the white paper. “Accountability and responsiveness should extend to all organisations in receipt of public funds, regardless of whether they commission services from others or provide them directly. Accountability should improve as people exercise choice (either individually or collectively through commissioned services) and as service providers.” This means, quite simply, that you should know exactly what you are spending and exactly what you are getting for your money. At the same time, you should constantly be looking to innovate, to streamline processes, cut out waste and improve services. These are concepts that sit well with outsourcing providers – it is the very essence of what they do.

GETTING STARTED
So, if you are planning to use your newly devolved power to outsource services, remember that you cannot outsource until you have clearly defined business objectives and an idea about how outsourcing fits into your existing strategy. Deciding to outsource first, then who to talk to, without deciding what you actually want, is a recipe for disaster. Before you speak to suppliers, you must be clear about what you want to do. What does success look like? Less IT failures? Calls handled quicker? New online payment facilities?

Once you know where you want to be, you need to assess where you are already. A comprehensive as-is assessment establishes a clear baseline of performance data. How fast is your network? How many faults do you endure? Once you understand your current weaknesses fully, you are ready for the ‘request for proposal’ stage.

Before you set about preparing to solicit tenders, you need to assemble your deal team. Only by communicating business objectives and involving all groups from the outset will you achieve the universal buy-in required to make your outsourcing deal work. Ensure all key stakeholders are represented here – their motivations may well be at odds.  Your deal team will require at least one well-respected member of each stakeholder group, and must be multi-disciplinary.

CHECK OUT THE VENDORS
When selecting a vendor, closely examine their credentials. Do they have a track record of successful delivery of similar projects? All backed up by references? Thorough checks need to be made on financial stability, technical competence, infrastructure and working practices. Meet a selection of companies face to face; invest time assessing the various proposals. Rigorously explore the range of operating and commercial models on offer. Find the one best-equipped to deliver your needs.

Good outsourcing contracts clearly define success and failure, but should not be overburdened with excessive metrics. Some outsourcing contracts have about 80 metrics. Truly optimised contracts have less than ten. Less is definitely more; there is a tendency, under a deluge of information, not to use it wisely. Concentrate on the big issues at the centre of the original business case.

Before you sign the contract, consider your exit strategy. All too often, exit doesn’t get the attention it deserves until it is on the horizon – when it’s too late, and you are painted into a corner, surrounded by exit charges. That’s when costs can skyrocket. Beware contracts stating ‘no additional costs on exit’ – these regularly lead to suppliers under-servicing at the contract’s end, incurring additional, unplanned for costs.

Although it is not possible to design a detailed exit strategy at the signing stage, good contracts include covenants to test and update exit clauses throughout the outsourcing life cycle. The full plan will include provisions for replacing supplier-owned technology, secure transfer of intellectual property and avoiding supplier lock-in, keeping your options open on a re-tender.

CULTURAL FIT
Another thing to consider at the tender stage is cultural fit. Management teams will be working together on a daily basis. Employees may be transferred to the partner organisation as part of the contract. It is absolutely vital that the values and culture of the organisations are aligned. The only way to truly assess this is to spend time with the team and monitor the chemistry. Speaking directly to managers already dealing with the vendor is another great way of getting a feel for their working culture.

Culture is particularly pertinent when considering sending work offshore, which the recent Cabinet Office guidance suggests may be happening more and more. In fact, the section Annex B – Offshoring and UK jobs is so loaded with pro-offshoring facts and figures, it could be aptly entitled Offshoring Objection Handling Crib Sheet.

If you are considering taking advantage of labour cost arbitrage by offshoring – and, done astutely it can be a great way to trim costs, at no detriment to service quality – make sure to build in robust contract clauses concerning security requirements, protection of personal data, confidentiality and staff vetting. That said, all outsourcing contracts concerning sensitive data should contain such clauses. Data is no less safe offshore – rogue elements exist all over the world, including the UK. So get the right processes in place to keep you data locked away from unscrupulous eyes.

The National Outsourcing Association is always keen to hear from representatives of government departments wanting to improve their outsourcing skills and become savvier procurers of services. Outsourcing, done properly, is a proven way to reduce costs, and optimise service quality. If outsourcing is to be part of the Government’s austerity plan, and judging by the paperwork coming out of Whitehall, it most certainly is, skill up to get the perfect deal.

FOR MORE INFORMATION

www.noa.co.uk