Yesterday the Economist posted an article http://www.economist.com/node/21550290, that argued that an old-style reversion to outsourcing was currently occurring in public services, in a manner reminiscent of Thatcher’s transferral of services and assets to the private sector.
I believe this article portrays a dangerously simplistic account of what may be occurring, and posted the following comment on the Economist site:
This article has it wrong. Yes, the assumption that services should be delivered by a ‘special’ cadre of ‘public sector’ employees with restrictive practices and gold-plated pensions not enjoyed by the majority may be under threat. However, the idea that the alternative should be a small handful of large companies is dangerously misleading. Take government ICT. The Public Administration Select Committee of 2011 bemoaned the creation of an ‘oligarchy’ of top suppliers who had muscled in on public services as a ‘recipe for rip-offs’. Such outsourcing contracts as just as uncompetitive and outdated as, arguably, was the civil service oligarchy.
Instead, we are seeing a shift towards new outsourcing models that are based on a more dis-integrated, component-based approach. Rather than simply handing an entire service to a supplier, who will typically charge premium rates for doing much the same thing as they are doing, for example, for another local authority down the road, government organisations are starting to come together and aggregate demand for similar services before approaching a supplier.
In this emerging model, suppliers must increasingly choose between running volume outsourcing deals (in which case these are low margin), or more bespoke work specific to a particular authority/department (in which case these are higher margin). They cannot have both.
It is for this reason that this article is misleading, since it suggests a simple ‘flip’ from restrictive, vertically integrated public sector practices to similarly restrictive, vertically integrated private sector practices, when in fact this is not the case. The REAL quiet revolution is building a more component-based view of public service delivery that favours oligarchies from neither public or private sector, but instead smaller innovators who are able to deliver services in a cheaper, standard, but also more innovative, way.