Is the rise of insourcing the end for outsourcing?

Published by Jamie Wilson on

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After Carillion collapsed into administration in early 2018, many eyebrows were raised in the direction of outsourcing companies competing for government contracts.  The recent news about Interserve and now Kier Group has further highlighted the cause for concern and it appears that uncertainty and questions surrounding their future aren’t going anywhere, anytime soon.

In this post, we will look at the rise in councils choosing to “insource” their contracts and what impact that will have on outsourcing.

The rise of insourcing

In a BBC article written about the demise of Carillion, the closing statement posed the question “who will ultimately pick up its loss-making public contracts – another outsourced services provider or the government itself?”.  Recent research predicts that it will be the latter and we can expect to hear the term “insourcing” on a more frequent basis. 

A fascinating report published last month by the Association for Public Service Excellence (APSE), who work with over 300 local authorities in the UK, states that 77% of UK councils plan on bringing services back in-house this year.  The report also calculates that between 2016 and 2018, at least 220 local government contracts have been brought back into council control.

The contributing factors

After 40 years of awarding contracts to the private sector and in today’s period of ongoing austerity, cutting costs and improving quality are driving factors behind the rise of insourcing. 

According to APSE’s report, 78% of councils believe insourcing increases flexibility.  Due to the structured way that an outsourced contract is delivered, insourcing is seen by many as a way to regain control over a service, allowing local authorities more freedom to allocate resources where they are needed and in some cases source services locally to support businesses in the area.  

ASPE’s report also states that 66% of councils said insourcing saves money, and more than 50% say it has improved the quality of the service while simplifying how it is managed.

Making the case for outsourcing

ASPE’s report on insourcing offers a bleak assessment of the future of outsourcing.  However, there is plenty of evidence to suggest that outsourcing is here to stay and from our own experience working with many councils across the UK, we are entirely in support of this view. 

“After Carillion”, an in-depth report ordered by the House of Commons to look into public sector outsourcing in the aftermath of Carillion’s fate, suggests that savings of 20% are achieved when a service is first exposed to competition.  In terms of the council’s leisure contracts, local authorities are able to include liabilities for any structural repairs to their facilities within an outsourced contract offering huge cost savings. 

Outsourcing to the private sector also creates opportunities for local authorities that they would never have had access to, such as a global pool of talent with new ideas about how services should be run or access to cutting edge technologies. Outsourcing allows local authorities to focus their human resources where they are needed most rather than spending time and money on recruiting talent.

Effective monitoring and both are here to stay

Today, we have access to cutting-edge technology making the monitoring of contracts or services easier than ever. Whether a local authority chooses to insource or outsource a service, it is the effective monitoring of that service that turns it from good to great.

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