Royston Morgan

Price still main driver in outsourcing selection

Outsourcing sector bosses have told MPs that the Government’s procurement proposition had gone “too far” in a quest to keep costs down and that the system needs overhauling, in the wake of Carillion’s collapse.

Speaking to a parliamentary select committee on Tuesday morning, Rupert Soames of Serco said that in his four and a half years leading the company, the only contract he could remember winning on any factor other than price was to manage facilities for Barts Health NHS Trust. Mr Soames said this proved that Government outsourcing was still mainly based on cost, rather than the expertise that private companies could offer.

Phil Bentley, chief executive of Mitie who was also appearing before the committee, said: “There’s always this drive to the lowest price as the easier answer.” He added that he thought more conversations between the public and private sector prior to a contract being awarded would help. “Innovation is taken out of the bids because the OJEU rules [for tendering work] are about creating a level playing field,” he said.

The committee was meeting as part of a wider investigation into the way the Government uses the private sector for services such as running schools and prisons, following the collapse of outsourcing company Carillion in January.

Article source: https://www.telegraph.co.uk/business/2018/05/08/outsourcing-bosses-say-government-contracts-still-mostly-awarded/

News of the latest outsourcing giant to hit choppy waters

Following the collapse of Carillion in January and the losses reported by Capita the announcement of a massive drop in Interserve’s share price comes like the arrival of the proverbial third bus.

And although each company is different they have certain similarities which raise important questions about the balance between the public and private spheres.

All three are – or were, in the case of Carillion – companies spanning the continents and offering services in a dazzling array of sectors.

Capita is very much a child of local government – started back in the 1980s when senior CIPFA staff saw an opportunity to set up on their own and provide outsourced services to councils – but quickly grew into a multinational business operating in Europe, Africa and Asia, with about half its business in the public sector and the other half in the private sector.

Most of Carillion’s business was in the United Kingdom, but it also operated in several other regions including Canada, the Middle East and the Caribbean.

Interserve, the latest to run into trouble, operates in more than 40 countries, providing services to a wide range of industries including oil and gas, civil engineering and construction and providing facilities management at UK embassies throughout Europe.

Business logic might suggest the wide range of skills and experience offered by this kind of international, inter-sectoral organisation can be a big plus. Local government and other parts of the public sector – the NHS, for example – can benefit from the entrepreneurialism and know-how of senior personnel in business. Oil and gas industry executives no doubt have much to offer town hall managers.

But such size and diversity can also be a weakness. Like the Roman Empire, when an organisation becomes too big and geographically spread, it can become difficult for its different wings to co-ordinate and follow the same overall objectives, potentially leading to confusion, duplication and waste. Nevertheless, giant outsourcing companies have become part of the local government landscape and many councils depend on them. Further crises would be bad news for all concerned, not least the employees whose jobs may be threatened.

Unlike Carillion, Capita and Interserve have time to turn their businesses around and look forward to better times. Capita points out that its reported losses were caused by a write-down of goodwill and that its underlying profits actually amounted to £400m.

But taken together the recent spate of crisis stories suggests a picture of local authorities and other parts of the public sector beholden to huge multinationals at the mercy of uncontrollable market forces. It seems to suggest that for all their advantages, massive multi-national conglomerates operating across a wide variety of sectors may not be the ideal partners for the more focused and stability-minded world of local government.

 

Article source: https://www.localgov.co.uk/A-crisis-in-local-government-outsourcing/45223

Aberdeen council leaders have refused to rule out outsourcing services.

The authority is aiming to trim around £250 million from its budget in five years as part of a massive restructure and has already proposed cutting 370 jobs through voluntary and early redundancy.

Yesterday members of the strategic commissioning committee clashed when the opposition SNP group proposed a ban on any council services being outsourced in the future.

Group leader Stephen Flynn said: “I believe we now have the option to draw a line in the sand and tell our staff there will be no more outsourcing of services.”

But Aberdeen Labour’s Sarah Duncan told members she was “not ideological” about the issue – pointing out that services such as road repairs and cleaning were already often carried out by contractors.

The SNP amendment was defeated by six votes to three.

Article source: https://www.eveningexpress.co.uk/fp/news/local/outsourcing-could-be-used-to-make-savings/