The hidden costs of outsourcing

Despite the orthodoxy that outsourcing produces financial savings, the outsourcing industry giants can offer little evidence to support their claims. The same is true of the Government departments who suggest outsourcing will generate savings but then can’t identify these supposed savings on any public accounts.

We have had the scandal of re-financing in PFI deals and contractors seeking profits with supposed ‘contract variations’ but it is interesting that even in the area of insurance costs the public purse is left with hidden costs as contractors fail to take risks associated with public serviced delivery.

Because public bodies still have the overriding responsibility for public services it would seem contractors still avoid the full costs that public sector providers carry. The public sector is left with the costs of meeting both insurance risk and in settling subsequent claims.

This report in the FT highlights the findings from a municipal insurance company on increased costs to the public sector: http://www.ft.com/cms/s/0/22b0bd1a-1ffd-11e1-8662-00144feabdc0.html#axzz1lmPzMYrP

Anna Rose