U.K. approach to outsourcing merits study

Buylines | Policies, strategies and trends to watch

Few countries have moved as aggressively ? and as successfully
? as the United Kingdom in transforming the
provision of public services. The private delivery of federal
and local public services in the United Kingdom exceeds $150
billion, up from $60 billion in 1995. This dramatic growth includes a
remarkable diversity of services, from refuse collection to health care,
from military support to environmental protection. Equally striking is
that the growth, while initially spurred by the Conservative Party government of Prime Minister Margaret Thatcher, has really taken off
under the leadership of the Labour Party.

In light of this dramatic growth and the
continued public demand for increased
improvement and efficiency in British public
services, John Hutton, secretary of state for
business, enterprise and regulatory reform,
commissioned a major study of the effectiveness
and challenges of the public services
industry. Conducted outside the realm of
politics or interest groups, the study aimed
to ensure "that we have a thorough understanding
of how we engage with" the private
sector and nonprofit organizations as a key
element of "ensuring our goals of excellent,
fair and cost-effective public services are
achieved," Hutton said.

The study found, that when done properly,
outsourcing and privatization generally
result in long-term cost efficiencies and, of
equal importance, contribute significantly to
the domestic economy.

The public services industry employs more
than 1 million Britons and comprises more
than 5.7 percent of the gross domestic product.
Moreover, the total economic impact of
the public services industry is responsible for
more than 2.3 million jobs across the United
Kingdom. In the United States, studies of the
so-called shadow workforce have reached
similar conclusions associated with federal
outsourcing and privatization.

Furthermore, the U.K. study
found significant evidence that
outsourcing and privatization
generate quality that is at least
equal to and often better than
that which government provides.
This is evidenced by a
2006 survey in which 95 percent
of former public-sector
managers surveyed agreed that
service to the customer had
improved.

The study did not dodge the difficult
issues of maintaining competition, sustaining
workforce capabilities, ensuring government
performance of inherently governmental
functions or negating any negative effects
outsourcing or privatization might have on
existing government employees. Indeed, in
Britain, companies must hire the affected
government workers, and employee pension
benefits may not be reduced by outsourcing
or privatization. Although many of these
issues are also prominent in the United
States, the British take a much longer-range
view of the process: they focus heavily on
"value for money" as opposed to immediate
cost savings. They also genuinely encourage
innovation and pursue partnerships with
industry and public employee unions.

We can learn much from the British
outsourcing experience and from this
study. The issues the British are grappling
with are equally acute at all levels of government
in the United States. And the
study reflects conclusions that have been
found in similarly objective U.S. analyses.
Yet there are key differences.

Perhaps most significant is the longterm,
bipartisan will the British government
and its stakeholders have demonstrated
in focusing on improving
service delivery to the citizenry
in an era of increasingly
complex challenges. The
British openly acknowledge
mistakes and failures, and
they use them as learning
tools to drive improvement
rather than as cudgels to
assign blame or as an excuse
to reverse course. That might
be the most compelling lesson
of all.

Stan Soloway (soloway@pscouncil.org) is
president and chief executive officer of the
professional Services Council.

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