Outsourcing to the rescue

In recent months, we’ve seen a number of initiatives from the government aimed at making it easier for organisations in the private sector looking to supply services to the public sector. Indeed, by pledging to support growth in enterprise, and by trying its best to clear the path for private sector organisations looking to take on public sector contracts, it seems clear that the coalition has nailed its colours firmly to the outsourcing mast. So why has outsourcing proven so popular, and what are the benefits that outsourcing can provide?

LONG TERM EFFICIENCIES
It’s easy for people in the current climate to look at suppliers of outsourcing and see them as the ones to benefit from the government’s austerity measures.  Indeed, television programmes such as Channel 4’s Dispatches programme in March have gone to great lengths to portray outsourcing suppliers as the villains of the piece. However, what very few people seem to take into account is that outsourcing can also provide a number of benefits to the public sector.  

Of course, perhaps the most easily understood of these benefits is the way in which outsourcing can help to provide lower costs. With outsourcing, costs are lowered through reduction in management, co-ordination, administration and improved processes – all of which are an important factor for a government looking to cut costs. However, it’s important to recognise, at the same time, that outsourcing should not mean reducing costs at the expense of performance. After all, using outsourcing to reduce costs in the short-term can result in greater long-term inefficiencies, with increased costs incurred as a result.  

No organisation, whether it is from the public or the private sector, should look to enter in to an outsourcing contract on the basis of cost alone. Instead, organisations must understand the importance of analysing its own performance, identifying which areas it is able to perform well, and using outsourcing suppliers to manage processes which are not part of their core competencies. If managed properly, this can result in not only a reduction in costs, but also an increase in overall efficiency.

Perhaps just as important to the overall success of outsourcing in the public sector is that specific objectives are put in place to ensure that both parties understand what they have to deliver at the outset of the relationship in order to make it a success. Outsourcing contracts without clearly defined objectives rarely, if ever, result in a successful outcome – primarily because a successful outcome has not been defined, which means it’s likely that both parties will have conflicting ideas of how successful the contract has been.

CUE THE PRIVATE SECTOR
Upon reflection, it’s no coincidence that the private sector has been highlighted as one of the key beneficiaries of the coalition government’s austerity measures. Not only can private sector organisations help to lower costs, and drive efficiencies in public sector organisations, but they can also typically call on far greater resources, to ensure that contracts are delivered in a timely, efficient manner.

The latest of a number of government-led initiatives aimed at encouraging outsourcing in the public sector was announced by Communities Secretary Eric Pickles, who recently signalled the government’s intention to scrap the ‘Two Tier’ outsourcing code for local government. The code, which was introduced by the Labour Government in 2003, was aimed at preventing the creation of two-tier workforces by protecting employees recruited to work on outsourced public sector contracts from being appointed at lesser rates in comparison to transferred employees.
 
In truth, news of the code’s imminent abolition comes as no real surprise to anyone, as the government’s austerity measures have dictated that the tendering for public sector must focus increasingly on cost efficiencies and quality of service, without having to worry about other considerations. It does, however, demonstrate that public sector outsourcing is on the rise.

Indeed, it’s no coincidence that the NOA has seen a marked increase in activity in recent months, with new members joining from local government telling us that they have been encouraged by the innovative approach suppliers are offering to this sector. But if outsourcing really is the way forward for the public sector, then surely it’s in the best interests of everyone concerned to make sure they know how to manage an outsourcing relationship effectively?

BUILDING RELATIONSHIPS
A successful outsourcing relationship is something you need to work at and understand, and there is a risk that without proper guidance, public sector organisations could stumble down this road blindly, and end up lost.  With this in mind, it’s also come as no surprise to me to learn that NOA Pathway – the NOA’s training arm – has also seen an increase in interest from local government in recent weeks. Most of these have been in touch with a view to helping them understand best practice in outsourcing and to ensure that they get best value from their suppliers.

Given that public sector outsourcing is a relatively new phenomenon, perhaps training in how to manage outsourcing suppliers could be an important area of focus for those looking to make public sector outsourcing a success? After all, it’s clear that very few public sector departments will have had experience in managing a relationship with an outsourcing supplier, so perhaps this is an area where training has a role to play?

NOA Pathway runs the only University accredited qualifications in outsourcing available today, and its programmes are designed to allow students to learn on-the-job, which means that they can add practical value to their organisation while they learn. Such training courses could also help to educate public sector workers as to how to transfer their skills into the private sector; if you believe all that you hear, the private sector will be looking to take on experienced, skilled workers who face the possibility of losing their jobs as a result of the government’s cuts, which means it could pay for existing public sector workers to gain an understanding of how the private sector operates.

A GROWING TREND
When all’s said and done, it’s important to recognise that the outsourcing industry is buoyant at the moment, because outsourcing is one of the few industries capable of relieving the burden to the taxpayer, by reducing costs and increasing efficiencies in the public sector. As the outsourcing landscape becomes more open in the wake of the government’s commitment to promoting enterprise, more and more suppliers will look for ways they can get a slice of the growing outsourcing pie, thus bringing more competition, effectiveness and innovation into the public sector.   

Perhaps, then, the question we should be asking is not why should public sector look to outsourcing? Maybe, instead, we should be asking why it hasn’t done so before. It’s a question that the NOA’s public sector special interest group has been asking for sometime – if you have the time, why not come along and tell us what you feel the answer is?