London council £1bn outsourcing plan survives vote An eleventh-hour attempt to kill London Barnet Council's billion-pound outsourcing plan has failed. The "One Barnet" plan to commission government services from private companies - potentially including BT and Capita - will roll on after the Conservative Council leader of the London borough survived a no-confidence vote last …
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"....... his argument that the mammoth outsourcing deal was the way to preserve services on a smaller budget, Cornelius said: "Outsourcing is not a dirty word - even Unison is outsourcing its IT department," reported Government Computing."
I would like someone to explain just how an outsourcing company (who's sole purpose is to make profit from the council), can provide services cheaper and make a profit.
And if true, and they can provide todays services at less cost and make a huge profit, how this model could be implemented by the council in its current form.
Lets face it, outsourcing means a lower level of service, or will cost MORE. 100's of failed outsourcing projects past have clearly demonstrated this!
I agree with the sentiment, outsourcing doesn't usually work (or at least we only hear about the failures and frustrations).
Outsourcing theoretically can be cheaper for the same service, because of economies of scale (they've probably done the same job elsewhere, so can shortcut straight to the good stuff) and no wasted resources (if an employee isn't on your work, they can transition onto other work, as opposed to them sitting there doing nothing or making up work).
That's the theory anyway. So, yeah. Explained.
They'll make a profit by moving their tax base offshore, thus taking money from the government, and by cutting jobs and pay so that government support to employees (housing benefit etc.) is increased. The costs to the taxpayer are just moved elsewhere, and will probably be higher. That's the only way these things ever work. It's legalised mugging.
The council will doubtless have to throw more money at consultants to monitor and measure the contract, and will get billed for extras along the way, plus a few million for lawyers to argue about these extras.
(from someone who works in consultancy)
Seriously, anyone arguing against this kind of thing in principle is saying that the best and most efficient way to run any service is to do it yourself and employ all of the staff directly. This is clearly incorrect as subcontracting happens in lots of areas of life, e.g. many readers may be IT contractors which is exactly the same thing. I get a garage to fix my car, not employ a mechanic on a short term contract to do it.
There is a different argument to be made about the *scale* of this, but in principle it's often the case that some specialist company can provide your service better or more efficiently than you can. The profit motive also encourages higher efficiency too. Set your contract terms right and everything works.
Don't forget that, as in many other areas of life, if the subs do a bad job you get someone else to do it next time. Simples.
Outsourcing works well for items you don't have to do regularly, and for which it makes no sense to keep a person fully skilled and trained for.
Servicing your car is a great example of this.
Cloud computing is financially viable on exactly the same model.
BUT for things you do regularly, or long term then both outsourcing and cloud computing both fail the financial TCO test.
I deal with both, and know this for a fact!
But this is Barnet council.
They have been running a' lowest cost' programme for years and we've watched as everything deteriorates. They have spent a fortune saving money with things like flogging off buildings for short -term "We didn't raise the council tax" boasts while long-term contracts on office space have resulted in a ghost town as 'restructuring' of staff over the years has seen people with boxes under their desks never knowing if they are next to go.
OneBarnet has always been 'One for us and one for you Barnet' and we've suffered enough already.
Is that departments run internal to government have no incentive to cut costs. They have a fixed annual budget, and if they don't spend all of it then that amount gets docked from next years budget. The result is a rush to spend any surplus at year end. If you give private management the job, at less than your current budget and with incentives to save money, then they can get costs down.
The other factor is that council staff cost more to employ (they get higher salaries and bigger pensions than the equivalent private staff). Things used to be in favour of employing council staff, but the recent decline in the jobs market has shifted things the other way.
Now in practice the companies chosen for these schemes tend not to be very good at managing them and the contracts are badly written, but that's a different issue.
Outsourcing is typically a good idea for non-core services. The company I work for has a cafeteria; but it is outsourced to an external company. If you're a small company with just a couple of IT bods but you need 24/7 IT support then it's a good idea to outsource to a larger company who can provide that.
Consider the staff's point of view. If you're an IT techie in a small company, your chances of career progression are basically nil. However if you work for a large outsourcing company, and your role involves servicing multiple small companies, then there's more opportunity for training and growth. (That's the theory - in practice most companies are crap at providing training, but that's another issue.) If you're the manager of a small company and one of your two techies leaves, you're in a pickle. Outsource it and that's one less worry.
For local councils, one big area of saving is in merging functions with other councils. The IT systems underpinning the submission of a planning application will be the same across the country, even if the actual decision is undertaken by a local person. Similarly the function to pay council tax by telephone will be the same across all councils: the only difference is the account that the money goes into. By outsourcing they can provide better service (later hours, less time spent on hold) and/or a lower overall cost.
Article from El Reg of 3rd Sept
http://www.theregister.co.uk/2012/09/03/ibm_somerset_council_dispute/
For reference; SouthWest One also promised lots of savings, efficiencies, better services. None have been delivered and the council tax payer has to foot the bill (and will do so for about the 10-15 years).
I think this is also the case with the Mouchel contract that Bournemouth Council have. Although I doubt anyone there is going to admit to that right now. Ironically, the banks now own Mouchel and the taxpayers own the banks, so on that loose premise I'd say the taxpayers are paying for their own cost saving.
There is an interesting piece for you to do El Reg, which councils have outsourced and have any of them been successful, can the Public Sector outsource and to what degree for success/goals to be achieved.
Having been through enough outsourcing bids & worked for some of the major players in the outsourcing arena it is plainly obvious that it doesn work. Far be it for me to cast aspersions but i would say the major drivers for outsourcing are short termism brought on by bonuses which are predicated on apparent savings rather than actual savings.
As others have stated outsourcing usually guarantees a business the following benefits...
- longer time to market & reduced business agility
- increased cost of project delivery
- reduced quality of service
- resistance to business critical change
- an aggreived user base
- an aggreived business end customer
- a happy IT director - probably driving an Aston Martin, with an up to date CV just so they can jump ship once the brown stuff acquires an uncomfortable proximity to the corporate fan
So if youre in charge of the IT purse strings at a financially pressurised, cost constrained business then its probably just the thing for you.
Having worked for several public sector organisations, and currently working for one of the outsourcing companies mentioned in this article (hence the anonymous posting) I can honestly say that my current employer is the most inefficient I've ever worked for.
We recently had to quote one of our bigger customers for the provision of an additional 1tb storage for 5 years - which came to a cost of £57,000! And they accepted it. It's no wonder our insurance premiums are spiralling out of control....
While I accept the arguments about outsorcing companies being able to shift staff around to meet demand & lower costs, I've never actually seen that done in practice.
And does anyone believe that there's ever been an example of privatisation (which is just outsourcing taken one step further) that's ever benefitted the consumer?
"And does anyone believe that there's ever been an example of privatisation (which is just outsourcing taken one step further) that's ever benefitted the consumer?"
Well if knew the quality of water supplied by the public sector you'd never have drunk from the tap, and they used about three times the number of staff to deliver it. I know 'cos I was there, and I saw the like for like savings that the regulator delivered for customers (offset, I openly admit by a vast backlog of necessary investment).
And rail, yes I remember the fabulous, customer focused, cost efficient, forward thinking organisation that was British Rail.
And electricity. Maybe you don't remember the useless and disinterested regional electricity boards, home to the workshy and inept, but again I do.
Some privatised outfits have managed to preserve their monopoistic tendencies to rubbish service and customer disdain (such as British Airways, or BT), but as a general rule privatisation has served this country well.
I'd agree that much outsourcing doesn't work, but that's not a fault with the concept, more with the inability of the public sector to let a contract properly, and this also often applies to the private sector just as much. The core problem with outsourcing is that there's around £6bn a year spent marketing in favour of "buy don't make", but there's no countervailing advisory or marketing for "make don't buy". Commission the management consultants, and they'll tell you outsourcing is a big cost saving opportunity, in the hope of securing the implementation advisory work, rather than give a dispassionate view of the facts. The buyer then leaps in, and when they find it isn't doing what they want at the cost they want it's too far down the road to go back to an inhouse solution.
And rail, yes I remember the fabulous, customer focused, cost efficient, forward thinking organisation that was British Rail.
You mean the British Rail that cost less to the taxpayer than the subsidies to the private rail companies? The one that invested in developing new technology like tilting trains that was scrapped only for foreign companies to make a mint out of? The British Rail that offered cheaper tickets and was more punctual than the private companies?
BR more punctual than the rail companies? Not on the planet I was on. Interesting to note that since privatisation the number of passengers has almost doubled on BR's performance. Why is it that people now choose to use the railways in a way that they didn't under BR?
I'd agree that BR was cheaper in real terms, but that was largely because of the refusal by governments of most colours to invest in sufficient new trains, and that reflected serial failures in capital spending by BR. In fact, HST and the 313 EMU were probably the only BR investments that justified their cost. All the others, including the bulk of the modernisation programme, and going on and up to class 56 in 1975 were a mess.
So who precisely "made a mint"out of the tilt train technology? Rail vehicle manufacture has never been a high margin business, nor an open market. And the sooper-dooper APT technology that I believe you refer to has been proven to be pointless by the Pendolino's on the WCML, because they are still limited to 125mph because of signalling (amongst other considerations). Even where it works similar units are restricted to 140 mph, which ECML had in the 1980s without tilt.
The logical solution was never tilting trains, but to straighten the handful of curves that are a problem (eg Wolverton, Weedon, Leighton Buzzard on the southern section of the route). Then, if you can't take the risks on moving block signalling, you can put in in-cab repeaters. At the same time you ban first class, because that gets you a 25% increase in passenger carrying capacity on a Pendolino format train, and if necessary rebuild stations to accomodate 15 coach units. And all of this could have been done with the a refurb of the Mk3 rolling stock, instead of spending a billion quid on Pendolinos.
Outsourcing adds layers of profit taking that bleeds money away from the local economy. The new jobs that replace the old ones are lower paid and located out of the area starving local people of the jobs and the income they would spend locally. It also in depriving the local community of jobs there are fewer real aspirational pathways to better jobs.
Of course if you don't think is about people then its just fine.
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