Public Sector Outsourcing Research Articles

Beyond outsourcing: Re-embedding the state in public value production

Public Value Theory (PVT) emerged within a broader public administration paradigm that called for the recentering of the state in the identification and management of public activities in response to the attempts of neoliberal politicians to marginalize it. PVT’s advocates remained nonetheless ambivalent about the role of the state in the production of goods and services necessary to create public value. In the decades since, public sector outsourcing has grown in scale and scope, particularly in Anglo-Saxon economies. PVT is unable to account for the implications of this mode of public value production, and why it may undermine the state’s ability to create public value over time. In this article, we argue that the disembedding of the state from the production of public value undermines its capacity for learning and adapting organizations, which are critical if the state is to respond to changing needs and demands. Because what constitutes public value evolves, so too must the resources and capabilities for producing public value be reconfigured. In other words, public value creation is contingent on innovating the means of public value production. We make the case for re-embedding the state in public value production and for public sectors to move beyond outsourcing the delivery of core services and functions.

Modernizing public sector outsourcing: Challenges and opportunities in the evolving landscape

Modernizing public sector outsourcing: Challenges and opportunities in the evolving landscape

Why Is Outsourcing Good for Some Employees and Bad for Others? How Demands and Resources Moderate the Outcome

Research on public sector outsourcing primarily focuses on costs and quality, whereas studies investigating the consequences for personnel exposed to outsourcing are scarce. Based on increased competition and private ownership, this study hypothesizes that outsourcing negatively affects employee job engagement and burnout, with more adverse consequences when job demands are high and resources are limited. With unique survey and administrative data, the study compares outcomes for outsourced employees and public employees in similar jobs. The analysis shows that outsourced employees have significantly lower engagement and higher burnout, while further analysis shows that outsourced employees are worse off when job demands are high but equally or less affected when job demands are low. Finally, the analysis shows that outsourcing has significant, adverse consequences for less resourceful employees. The results advance our understanding of how outsourcing influences public personnel and highlights the uneven distribution of consequences across employees.

Contracting and Outsourcing in Public Sector in the Czech Republic

The aim of this study is to contribute to the recent discussion about contracting/outsourcing in public sector and its results. The study builds on the original research of contracting and outsourcing in the Czech public sector and assesses them from a comprehensive perspective. The following research questions are set: “Does contracting/outsourcing in public sector in the Czech Republic bring efficiency gains?” and “If not, why contracting/outsourcing services in the public sector in the Czech Republic do not bring efficiency gains?”. To answer the research questions two alternatives of services provision, namely internalisation and contracting, were evaluated. The three criteria, 1) expenditure on the provision of the service per citizen/employee, 2) the expenditure per performance indicator and 3) the quality of services evaluated on the basis of citizen/employee satisfaction as consumers of services were used in evaluation. To evaluate the efficiency of contracting services in the public sector was used the method of multi-criteria evaluation for selected samples - the method of the best values of criteria. It is not possible to come to the final conclusion about higher efficiency of internal versus external production. However, what can be clearly and un-doubtfully documented is the fact that depending on the concrete case the more efficient solutions differ. The core factor of the limited success of contracting and outsourcing - the quality of contract management represent critical problem in the Czech Republic.

The limits of institutional convergence: why public sector outsourcing is less efficient than Soviet enterprise planning

This paper explores UK public sector outsourcing to offer a critique of the theory of liberal institutional convergence. The latter argues that NPM is a case of empiricist scientific rationalism but the neoclassical economics that justifies public sector outsourcing operates with a closed-system ontology of the economy that has more affinities with Stalinist central planning than to empirical political economic science, and this has real institutional consequences. The argument sets out the neoclassical logic behind outsourcing, the unanticipated risks in its conception and the deepening problems with its intensification as practice. It shows how, when we put the market rhetoric of NMP to one side, outsourcing necessitates the central planning of private actors, and the success of this venture hinges on the viability of the outsourcing contract as an effective junction of instruction and control. If there is institutional convergence in New Public Management it is with Soviet enterprise planning. It follows that it is not simply ‘second-best-world’ neoclassical theories that can shed light on outsourcing's chronic failures but also the critiques of Soviet central planning. The latter help explain why incomplete contracts in outsourcing are just the start of bargaining games that the state cannot win.

Service outsourcing decisions – a process framework

PurposeThe purpose of this paper is to compare service outsourcing decisions between public and private organizations and against a theoretical decision-making framework to both understand differences across the sectors and to provide an outsourcing framework more suitable specifically for outsourcing (and for the public sector).Design/methodology/approachMultiple case studies, i.e. a study of phenomena (here outsourcing process) at various sites is used as an approach.FindingsFindings indicate that public sector organizations are trailing behind private sector organizations in how the decision-making process is conducted and resourced. The authors suggest regular evaluation of service functions internally as a starting point for the outsourcing service decision-making process. Additionally, the market analysis should be done prior to cost analysis and benchmarking as the availability of suppliers more qualified than the internal process defines the make or buy decision.Research limitations/implicationsThe newly developed framework based on empirical evidence includes the following phases: regular evaluation of service functions, market analysis, cost analysis and benchmarking and evaluating relevant service activities. Applying the framework improves the efficient delivery of outsourced public services and brings public sector outsourcing closer to the professionalism currently present in the private sector.Originality/valueChoosing between in-house and outsourced service delivery is a fundamental decision in both private and public sector organizations. Previous outsourcing research has mostly focused on the private sector, with limited focus on the public sector’s outsourcing processes, yet understanding of the service outsourcing process is important in ensuring organizational competitiveness and cost efficiency.

What is so special with outsourcing in the public sector?

Purpose This paper centers round outsourcing. The purpose of this paper is to direct attention to outsourcing in the public sector and focus on what could be special when considering outsourcing in such contexts. The authors try to portray the business activities in private and in public sector settings and identify some similarities and – more importantly – some significant differences. Design/methodology/approach The authors use two analytical tools, a classification system of various interfaces between a selling and buying firm and a two-fold scheme for strategic analyses of outsourcing or not as well as in what ways to outsource. These tools have been developed in studies of private sector outsourcing but are applicable, as tools, also in public sector contexts. Two empirical cases from public sector outsourcing are used to illustrate options and obstacles for outsourcing ventures in the public sector. Findings The analytical discussion aims at pointing out when and how outsourcing should be a straightforward choice in the public sector. The authors also point at situations when it is a much more complicated process and thus restricted. Originality/value This study gives strong support for the need to identify which theoretical model has been used by the involved organizations in their evaluation of the situation.

Public sector outsourcing

Public sector outsourcing

Perspectives on Public Sector Outsourcing: Quasi-markets and Prices

AbstractPublic sector outsourcing, in the form of private production of tax-financed services, is on the increase with economic and social consequences for consumers, taxpayers, and employees. The development has given rise to so-called quasi-markets with choice and competition between public, for-profit, and non-profit providers. By introducing the main characteristics of quasi-markets with a focus on prices, this article provides background perspectives. It sets the stage for the other six articles on public sector outsourcing in this special issue of the journal. (JEL codes: D23, H11, H44, L33).

Outsourcing Public Services: Contractibility, Cost, and Quality

AbstractWe review the literature on public sector outsourcing to explore if the theoretical predictions from the incomplete contracts literature hold up to recent empirical evidence. Guided by theory, we arrange services according to the type and magnitude of their contractibility problems. The empirical studies point at rather favourable outsourcing outcomes, in terms of costs and quality, for services without severe contracting problems. The picture is more mixed for services with tougher contracting problems, with the weight of the evidence in favour of public provision. This difference between services is largely in line with the property-rights framework and theories of incomplete contracts.

Outsourcing Public Services: Contractibility, Cost, and Quality

We review the literature on public sector outsourcing to explore if the theoretical predictions from the incomplete contracts literature hold up to recent empirical evidence. Guided by theory, we arrange services according to the type and magnitude of their contractibility problems. The empirical studies point at rather favourable outsourcing outcomes, in terms of costs and quality, for services without severe contracting problems. The picture is more mixed for services with tougher contracting problems, with the weight of the evidence in favour of public provision. This difference between services is largely in line with the property-rights framework and theories of incomplete contracts.

Does Public Sector Outsourcing Decrease Public Employment? Empirical Evidence from OECD Countries

Abstract I examine the extent to which public sector outsourcing relates to public employment in Organisation for Economic Co-operation and Development countries. I use new panel data on public sector outsourcing. The sample includes 26 countries over the period 2009–2015. Contrary to common expectations, the results do not suggest that public sector outsourcing expenditure was negatively related to public employment in the full sample. The relation between public sector outsourcing and public employment, however, does vary across countries. If anything, the growth in public sector outsourcing in period t − 1 was positively correlated with the growth in public employment in period t. When public sector outsourcing gives rise to regrouping public employees but not reducing public employment, outsourcing may even increase inefficiencies in the public sector. (JEL codes: L33, J45, P16, C23).

First-Best-World Economic Theory and the Second-Best-World of Public Sector Outsourcing: The Reinvention of the Soviet Kombinat by Other Means

This paper examines how public sector outsourcing has performed in the UK, one of its leading exponents. It sets out the theoretical economic logic behind it, the unanticipated risks in its conception, and the deepening problems with its intensification. It shows how, when we put the market rhetoric of New Public Management to one side, outsourcing necessitates the central planning of private actors, and how the success of this venture hinges on the viability of the outsourcing contract as a fully effective junction of instruction and control. As contract theory tells us, however, the more complex and dynamic the good, the less a contract can guarantee effective control over its production. Moreover, as the critical economics of Soviet central planning teaches us, the resulting asymmetries in information and leverage are just the start of bargaining games that the state (and taxpayer) cannot win. As the paper shows, a state that outsources its complex tasks puts itself at a chronic informational disadvantage, renders itself dependent on poorly controlled private monopoly service providers for essential services that form part of a matrix of interdependent services, and cannot exit failing contracts under acceptable terms. In the USSR a remarkably isomorphic set of hazards had driven Nikita Khrushchev back to the drawing board by 1965.

The (dis)advantages of sector-level bargaining: Outsourcing of cleaning work and the segmentation of the Israeli industrial relations system

This article examines the segmentation of the corporatist industrial relations system through a historical analysis of the public-sector outsourcing process in Israel, which occurred in the 1960s and 1970s. Emphasizing the intersection of class, race/ethnicity and gender in Israeli society, the article analyses outsourcing of cleaning work as the adoption of labour market vulnerability into the industrial relations system. It uses intersectionality to demonstrate how the promotion of outsourcing through sector-level bargaining acted as a means of labour market control and industrial relations centralization, thus legitimizing precarious employment forms. Stressing the links between intersectionality and outsourcing practices in the Israeli corporatist system sheds light upon structural segmentation and differential representation of vulnerable workers in a centralized industrial relations system.

The relationship between supplier control and competition in public sector outsourcing

AbstractThe aim of this article is to develop theory and contribute to empirical studies about how the effectiveness of bureaucratic controls in public sector outsourcing is contingent upon supplier competition, and why and how this interaction plays out differently for hard and soft types of outsourced services. In previous inter‐organizational management control (IOMC) research there is a contradiction between theory and empirical results concerning how bureaucratic control and supplier competition interacts in aligning suppliers. While IOMC theory suggests competition reduces the need for bureaucratic control, empirical studies clearly indicate the opposite. We extend previous research and theorizing by differing between the outsourcing of hard and soft types of services and by testing the joint effect of bureaucratic control and competition on supplier alignment. The empirical case for testing theory is outsourcing by competitive tendering in the public sector. We use transaction level data from 166 local government suppliers in Sweden. In accordance with our prediction, the effect of bureaucratic control in aligning suppliers decreases with supplier competition when hard types of services are outsourced. For soft types of services, our results indicate that bureaucratic control is not contingent upon supplier competition. Furthermore, we show that when supplier competition is low the effect of bureaucratic control on supplier alignment is stronger for hard than for soft types of services. These results constitute an important contribution to the central notion of the interplay between bureaucratic control and competition in the IOMC literature.

Does Public Sector Outsourcing Decrease Public Employment? Empirical Evidence from OECD Countries

I examine the extent to which public sector outsourcing relates to public employment in OECD countries. I use new panel data on public sector outsourcing. The sample includes 26 countries over the period 2009-2015. Contrary to common expectations, the results do not suggest that public sector outsourcing expenditure was negatively related to public employment in the full sample. The relation between public sector outsourcing and public employment, however, does vary across countries. If anything, the growth in public sector outsourcing in period t-1 was positively correlated with the growth in public employment in period t. When public sector outsourcing gives rise to regrouping public employees but not reducing public employment, outsourcing may even increase inefficiencies in the public sector.

Outsourcing the State: New Sources of Elite Power

This article uses the example of public sector outsourcing to explore how elite power can be fallible. A contract between the state and private companies represents a complex interweaving of different kinds of power with uncertain outcomes: the experience of outsourcing in the UK and elsewhere is that it frequently goes wrong, with fiascos creating political embarrassment for states and financial problems for companies. Drawing on Deleuze and Guattari, the article explores how the contract is a political device that can be both tool and weapon but which has uncertain outcomes. In doing so, it makes a distinctive contribution by arguing that elite work is often about repair and managing the political or financial consequences of failure.

Labour Law Implications of Outsourcing in Public Sector

Employers are increasingly resorting to the. contractual delegation of certain activities to outside contractors. Legal status of employees who previously performed this work with the employer depends mainly on whether there has been the transfer of the undertaking within the meaning of Directive 2001/23/EC. According to case law of the Court of Justice of the EU, in addition to the performance of the same activities, a condition is also the transfer of essential means of work or transition of employees. Since the transition of employees in this case depends on the agreement between the contracting authority and the provider of services, terms of public procurement are very important in this regard. The article addresses the question of the application or non-application of the institution of the transfer of the undertaking in cases of outsourcing in public sector while paying attention to Slovenian and Croatian legislation and to the Directive.

Human resource management (HRM) outsourcing in the Asian public sector – a probe into the achievability and consequences in Hong Kong, Malaysia, and Thailand

ABSTRACTUnder the ideology of ‘small government, big individual’, outsourcing of public service functions is gaining momentum, particularly when it comes to certain professional areas such as human resource management (HRM). Upper tiers of the public service and managerial functions have largely been immune to outsourcing. The present studies on outsourcing are extensive, but are largely western-centric, and qualitative or quantitative in nature. This study combines qualitative and quantitative techniques, making use of survey questionnaires to explore the perceptions of bureaucrats and contractors towards public sector outsourcing against an Asian context comprising Hong Kong, Malaysia, and Thailand. The results suggest that the political contexts of the jurisdictions shaped certain perceptions of the respondents. However, for other attributes such as the reasons for outsourcing public services and the constraints facing them, the respondents generally shared typical stereotypes of contractors and bureaucrats.

A managerial application of system dynamics modeling to outsourcing

Purpose – The purpose of this paper is to use modeling and simulation to investigate the puzzling performance problems that plagued the project outsourcing in term of poor quality and delivery delay, and apply the appeal and power of system dynamics modeling as a managerial approach to improve learning and intervention in complex situations to South African context where little or no such attempt had been made. Design/methodology/approach – This work is based on exploratory use of system dynamics modeling to study a web of quality and productivity problems that plagued a company as a result of adopting outsourcing as a policy to bolster productivity and service delivery. Findings – A significant finding from this research is that outsourcing has the propensity to perpetuate any trend it dominantly generates as a result of strong positive feedback loops. It also made explicit the dynamic processes that lead to certain observations that have been made in conventional management literature about the effects of outsourcing. Research limitations/implications – The major limitation to this study is availability of information in form of certain operating data need for calibration thus imposing few aggregations on the model. Originality/value – The authors believe that this work has a degree of originality as it applies system dynamics modeling to public sector outsourcing which not being done before. It also made a significant finding by uncovering possible counteractive effect of outsourcing on internal staff.