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Moral Choices

A crisis in local government outsourcing?

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News of the latest outsourcing giant to hit choppy waters is worrying for anyone with responsibility for their council’s contracts.

Following the collapse of Carillion in January and the losses reported by Capita last week, 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 problems with mounting debts and falling share prices, 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.

Now that the three buses have passed it may be some time before another one comes along.

Certainly that is what is to be hoped, if confidence in big private-sector outsourcing partners is not to be shattered altogether.

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

Investment in Amazon Logistics will grow, as outsourcing goes on… for now

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Amazon plans to retain its current mix of outsourced and in-house logistics operations – for now. But it will continue to invest in its own transport capabilities, to cater for growth.

In an earnings call last week, as Amazon announced its first-quarter results, CFO Brian Olsavsky told analysts the company was growing its own teams.

“We have a great group of carriers that we use globally … But we’re also growing our teams and capabilities to ensure that we can keep up with increased volume on our own, particularly around the holiday season.

“So that’s driven a lot of our expansion of Amazon Logistics; it’s driven the creation of sort centres; it’s driven the purchase of airplanes to move product between points within our delivery network.”

He added: “We will continue to operate with this combination of external partners and internal capability. We like what we see so far with our Amazon Logistics capability. It’s well over 50% in some countries, particularly the UK.

“It helps with Prime Now and AmazonFresh and a lot of initiatives that we’ll see… So we think it’s a core competency that we have and we need to have, and we’ll continue to invest in that.”

Amazon is also investing in Brazil and is reportedly in talks with Azul Cargo Express, the freight arm of carrier Azul, which in December, signed a contract with postal operator Correios to launch an integrated logistics company with 50.01% control, giving it a strong network around the country.

And, earlier this month, Azul announced it was leasing two 737 freighters, to deliver in the second half.

“We see the need to have some dedicated narrowbody aircraft to support the growth of our cargo business,” said Izabel Reis, director of Azul Cargo Express. “With these planes, we’ll have greater versatility based on the needs of our clients, and we will also be able to offer new services, such as air charter. With no doubt, these cargo planes will support our fast expansion.”

Media reports say Amazon is now looking to Azul for its Brazilian logistics operations.

Meanwhile, Atlas Air will continue to see 767-300Fs delivered monthly through the year for Amazon, taking the total up to 20 by year-end.

Mr Olsavsky also revealed that Amazon had had very high inventory levels at year-end, and was continuing to invest in warehouses, albeit at a slower growth rate.

“We were concerned a bit about the relatively high inventory and we’re still very full in our fulfilment centres. But we were able to correct that due to the high sales, without having additional handling and transportation cost that you would normally see [if you] reconfigure inventory locations.”

Capex and capital lease spending grew 33%, year on year, in the first quarter, but in 2017 it grew 82%.

“CapEx, which is predominantly tied to our fulfillment centre network, is up 47%. That is above the Amazon fulfilled unit growth rate, but we combined the strength of the Fulfilment By Amazon programme and the space requirements as we get into bigger and bigger products. That’s a representative number for that period.

“On the capital leases, which is a good proxy for the spend to support the AWS business, that’s up 49% year over year on the trailing 12 months.”

You can see the transcript of the earnings call on Seeking Alpha, here.

Article source: https://theloadstar.co.uk/investment-amazon-logistics-will-grow-outsourcing-goes-now/

Letter to the Editor: We are all against outsourcing

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For two years, the Office of Customer Focused Government (OCFG) and Governor Haslam have tried to outsource all facilities workers’ jobs at Tennessee’s state colleges and universities. Outsourcing will endanger students’ safety, leave classrooms and the campus dirty and damage laboratories and research equipment. Campus facilities workers are experts at their jobs, but they risk losing their positions or suffering worsening working conditions and decreased salaries and benefits. The public has responded loudly and consistently: We are all against outsourcing.

We’ve rallied against outsourcing across campus and at OCFG in Nashville. Workers, students, faculty members, union members, administrators, faith leaders, local government officials and state legislators have joined us in our opposition to outsourcing.

People across the UT community have sent letters and petitions against outsourcing to UT administrators. Almost 300 faculty members signed a letter to Chancellor Beverly Davenport. Hundreds of campus workers and supporters brought a petition against outsourcing to the State Legislature in 2016. Hundreds of UT workers recently signed a letter against outsourcing and will deliver it to the chancellor in person. Faith leaders have written and protested against outsourcing. Local business owners who have worked with UT for generations will be at a loss if this plan goes forward; they too stand publicly against outsourcing. When the OCFG suggested outsourcing would bring savings, United Campus Workers showed that their math was flawed. The faculty senate also found that the savings claimed could not be achieved. Both the Student Government Association and the faculty senate passed resolutions against the proposed outsourcing plan.

United Campus Workers met with state legislators dozens of times during the 2017 session. Our allies introduced legislation to halt the outsourcing, but Governor Haslam called out his cabinet to force the diversion of the bills. When we forced the OCFG to open two statewide comment periods on the proposed policy, the tally was nearly 1600 against to 1 in favor. As the legislative session closed, 75 of 132 senators and representatives signed a letter asking the governor to postpone the outsourcing plan.

We’re not done yet. The decision is now in Davenport’s hands. But the campus community is united, and we want to offer her the message that we are all against outsourcing. Join us at the Torchbearer on Aug. 28 at 12:00 p.m. Help us convey our support for the chancellor to make the right decision against outsourcing.

Signed,

Tom Anderson

Buyer, UTK Facilities Services, 16 years service

Beauvais Lyons, Chancellor’s Professor and 2017-2018 UTK-UTIA Faculty Senate President

Eduardo Miramontes, Class of 2017

Tom Anderson is a buyer for UTK facilities services who submitted this letter on Thursday, August 24. He can be reached at tander13@utk.edu.

Article source: http://www.utdailybeacon.com/opinion/letters_to_editor/letter-to-the-editor-we-are-all-against-outsourcing/article_985ed1ae-89bb-11e7-87cd-5b5c103ae4e1.html