Monday, 22 November 2010

What to think about...outsourcing public services

MRSA: join the dots
For the grim start of winter a grim (and not very funny) topic in my educational series of posts "What to think about..." Their purpose is to summarise correct thinking and help steer people clear of obvious mental pitfalls. They are presented in a bullet-pointed style because management consultants tell us that no subject in the world is too complex to summarise in bullet points and I have to agree because I've had a few drinks and I want to have sex with them all.

  • The public sector is inefficient
  • The private sector is efficient
  • The private sector can thus do everything better and cheaper than the public sector
  • Except running railways, it turned out, after people died, but the general thrust of the argument is true
  • We just have to make sure that the companies maintain standards, since there isn't any competition except every 10 or 15 years when the contract goes out to tender, but generally companies are nice and lovely so this is easy
  •  The profit motive is thus good, not bad, and has a magical effect on service provision, such as might be conjured by a good-hearted boy wizard with a scar on his forehead, though it's funny when you think about it how few heart-warming childrens tales of government outsourcing there are in the bookshops

And what not to think (I apologise for the number of bullet points here but this area is full of potentially treacherous traps for the undisciplined thinker, causing many foolish people to think that outsourcing is little more than officially organised corruption): 
  • Private companies are often very inefficient too and actually make profits because of monopoly positions, or taking advantage of people who don't know enough or, or lying, or frankly, stealing stuff
  • The one thing that sometimes increases efficiency among lumbering private companies is genuine competition, coincidentally the one thing it is usually impossible to have in public service provision
  •  As a point of fact (so pesky avoiding these when seeking to think correctly - quash without ruth) companies habitually bid cheap to get a contract then work in lots of pricey extras or hold the government to ransom for extra money mid-term on the grounds of unforseeable expenses
  • 'Efficiency savings' often come from squeezing workers till they bleed, thus undermining the quality of life not just of the workers but of the entire country since everyone suffers from the increased wealth gap
  • It turns out that when you give companies a regular public subsidy they behave as complacently as the worst public sector bodies, while skimming profit off the top - result! Or rather, 'results', as they say in the management consultancy trade (we give thanks for all your help in outsourcing, ye blessed consultants).
  • The cost of monitoring the contractors to stop them efficiently cutting corners is rarely included in the analysis of costs (This also has a factual basis but thankfully is easier to crush because it is boring)
  •  The authorities usually go for the companies that put in the cheapest bid, not having heard the adage about peanuts, monkeys and the minimum wage receptionist at a government office who went beserk at the stress of his shift patterns and killed everyone walking through the door with a shotgun. 
  • Which hasn't happened yet, but I keep peanuts in my pocket to placate receptionists just in case.
  • So it turns out private companies often don't do a better job, and they often don't do it cheaper, and when they do, it turns out to be a bad thing for everyone (Careful now! These incorrect thoughts can accumulate into bitter and counter-productive notions such as this - be alert!)
  • Measuring efficiency means measuring the end result, but if how we get there is just as important - if the process needs to be, for example, transparent, consistent, or accountable, or if it can do unmeasurable good along the way because it is embedded in wider society rather than a 'streamlined' company process, then perhaps efficiency isn't the only thing we should be aiming for. This bullet point alone potentially undermines the entire array of correct thinking, rendering the points above superfluous: please take care to dispose of it properly, do not expose to naked flames. 


  1. Thank you. It is a lie that the private sector is more efficient. Anyway, quite funny.

  2. I think the distinction between private and public sector is not so clear cut. Even in a supposedly publicly provided service, many parts of it may be executed by private companies (for example, much the equipment used in hospitals is manufactured by private companies). And the converse is also true. For example, banks make huge amounts of money dealing in government debt. Technology companies sell into government departments (inland revenue, military, etc). And you find the same people working in private industry, then the civil service, then parliament or a political party, then private industry again.

  3. Good point there Tim, often public sector is just a term applied to stoop anyone snooping around, it doesn't really mean anything. Consider this especially when public sector industries are run along private sector models anyway, with the idea of public service overrun by profit margins and targets.