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Is the UK’s public sector outsourcing in decline?

by Jeremy Coward

In recent weeks, multiple articles have appeared in the Guardian claiming that outsourcing has fallen out of favour with UK local government, and encouraging councils to bring as many services back in-house as possible.

These articles – which are largely opinion-based – fly in the face of recent research conducted by arvato published in the Outsourcing Yearbook 2016, which saw public sector outsourcing surge in popularity in the second half of 2015. The total value of local government outsourcing contracts more than trebled in the third quarter when compared to the quarter before.

arvato even found that local authorities are signing longer agreements, “with the average length of contracts nearly doubling to 102 months in Q3, from 54 months the previous quarter”. This is unexpected news, as NOA research (also found in the Outsourcing Yearbook) suggests that outsourcing contracts on the whole are getting shorter.

arvato’s report claims that, due to the possibilities offered by shared services and advances in robotic process automation (RPA), the increase in public sector outsourcing is set to continue as councils seek new ways to operate in a more cost effective manner.

But should councils be outsourcing less? Some reporters at the Guardian certainly think so, pointing to recent public sector scandals involving Serco and G4S, along with successful case studies where council backsourcing has proven to be successful. A report is also cited suggesting that over 25 per cent of outsourcing arrangements involving the public sector have failed to deliver. Yet, as Professional Outsourcing points out, “any report that says just over a quarter of projects have failed must by extension be saying that almost three quarters have been a success”.

2015 was also a year when local government bodies looked to outsource in an increasingly innovative manner. The most prominent example is Northamptonshire County Council, which proposed plans to save £150 million through the creation of four new service provider companies, all created and part-owned by the council. The Financial Times frequently report cases like these throughout the year, arguing that more and more councils are embracing outsourcing as part of an austerity-driven innovation push.

This evidence suggests many claims made by the Guardian are spurious at best. And while it is important for local government to rectify failing outsourcing contracts – and even terminate them while necessary – it is equally vital for council representatives to understand that outsourcing can be highly beneficial when properly thought out and implemented correctly.

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In April, the National Outsourcing Association hosts its first Public Sector Conference offering civil servant insight into what the future of government outsourcing holds.

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