Numerous governments around the world are struggling to meet the demands of their budgets. Tax revenues are down, social expenses are up, and infrastructure needs continue to take a priority. Because we all need government at some level, one of the ways that elected officials are looking to increase the efficiency of the structure is to outsource specific tasks that can save their communities some cash.
If there is one truth that is universal for governments, it is that they are continually expanding in some way. This process creates jobs for the community that can stimulate the local economy, but it also creates a burden for taxpayers. By outsourcing specific items that can be accomplished by third parties, it is possible to streamline the structure of a governing body without reducing access to services.
The community of Maywood, California, is an excellent example of the pros and cons of government outsourcing. This town scaled-back their government to a controller, a lawyer, and a mayor. These cost control measures were an effort to begin reducing $15 million worth of debt. It also created stories about false arrest, bribery, government corruption, and a poor performance in their schools.
These government outsourcing pros and cons must be carefully evaluated before implementing this idea to ensure that the problems found in Maywood do not occur in other communities.
List of the Pros of Government Outsourcing
1. It stops the government from hiring more employees.
When a government decides to pursue outsourcing as an option, then they are paying for the help they need through a contract basis instead of through employment. This shift in structure makes it possible to avoid bringing more labor costs into the community, which eventually saves money for the taxpayers without reducing the quality of the services they receive. Even when the costs of training new contractors (which is not always necessary) is included with this advantage, most governments can come out ahead financially through the outsourcing process.
2. It provides the government access to a larger talent pool.
Many of the top positions that are filled in local governments occur through an electoral process. The community is restricted to the people who are interested in the open government positions or are willing to have their names written in on the ballot as a way to potentially serve. When outsourcing is allowed, then the government gains access to a larger talent pool that goes beyond what those in the community can sometimes provide. They can access help from any place in the world whenever a specialist is necessary to resolve a problem that is happening in the community.
3. It creates lower labor costs for the government.
The federal government in the United States outsources over 300,000 jobs every year. The reason why they do this is simple: it saves on labor expenses. When you can hire contractors instead of employees to do the work, then there is no longer a cost for their benefits. Government officials could pay contractors the same wage and still save up to 50% on their labor expenses because vacation pay, sick time, health benefits, and other additional costs are eliminated from the contract. It becomes possible to receive high-quality work for a better price, which again places less pressure on taxpayers.
4. It allows the work to be completed faster.
Private agencies typically work much faster than the average government office. There are several inefficiencies found in the governments at all levels because there is no incentive for them to improve their processes. People working in the private sector must rely on innovation and productivity efficiency as a way to stay competitive in their industry. Governments are something that we require, so they do not have the same incentive. Outsourcing can therefore quicken the outcomes that are possible for the work that needs to be done.
5. It creates a smoother operation for the community.
When governments are able to contract with companies or individuals who are experts at what they do, then it becomes possible for the required work to experience smoother operations during implementation. It becomes easier to operate the government because the best people are always on the job. That means the various agencies and offices can carry out the other work that they need to do while integrating the results from their outsourcing efforts to create better results for the average taxpayer.
6. It gives you access to another team of workers.
When governments have the option to outsource work, then they are creating a second team which can be productive at the same time as their elected officials. When you have two sets of hands doing work instead of just one, then it becomes possible to accomplish a lot more in the same amount of time. If the government takes the time to perform the due diligence before hiring, then the outsourced work will be delivered at the same or better quality than what will be available from local employees.
7. It is a way for the government to save money.
Jobs in the public sector typically pay less than what you would find in the private sector. When governments calculate the cost of outsourcing compared to what it would take to do the work internally, then they must calculate the overall benefits that are possible from higher productivity levels and expertise with the expense of the money headed toward the contractors. When all of these factors come into play, it is possible to save up to 30% on the cost of the work being performed without experiencing a reduction in quality. This benefit only applies if there are multiple factors in play, so if the outsourcing occurs solely as a way to slash wages, this advantage may not occur.
8. It is a way to limit the size of the government.
Conservative policies in the United States often prefer privatization over government outreach when providing the services that a community requires. Outsourcing provides the government with an opportunity to spin-off public services to the private sector as a way to reduce its size. There is even the possibility of making money if some segments are directly sold to contractors or encouraging to form their own business. The government can still manage the contract for the private company without reaching into the lives of private citizens to make it happen.
9. It can help to reduce redundancies that can cost taxpayers money.
If you were to look at the jurisdiction map of the average law enforcement service, you would find multiple levels of overlap. Even in small communities, the local police force, Sheriff’s office, and the state police may all have authority in the same area. Then there are the national agencies, such as the Federal Bureau of Investigation in the United States, which may have authority as well. These redundancies come at a cost because they offer duplicated or triplicated services. Outsourcing can help to provide defined barriers that make the processes more efficient in any government agency because everyone has a more-defined role to fill.
10. It eliminates the need for a full-time worker that is permanent.
When the government can hire contractors for specific jobs, then the relationship they have with the private sector ends when the work is delivered. There is no longer a continuing expense that the taxpayers must support because the employee gets assigned to new tasks. Every project can have a defined start and end date with a reasonable estimate of the expected expenses. It is much easier for people to accept an expense when they know the purpose for it and when it may disappear.
11. It reduces the time needed to get a project off the ground.
When governments go through the hiring process for public employees, then there are multiple expenses involved with recruitment, testing, interviews, and the final candidate selection. From the initial posting of an open position to the time when it is filled can take several weeks. When you add the training needs of that new worker into the mix, then it could be six months or more before that individual becomes fully productive. When the government can pursue outsourcing instead, then it can speed up this timeframe dramatically.
12. It can reduce the need for additional public entity costs.
When outsourcing is no longer a possibility for the government and there are needed services or resources that must be offered to the community, then there are only four choices available to the public entity.
• It can decide to raise taxes as a way to cover the gap in finances that develops.
• It can choose to borrow using low interest rates to second bonds that can produce results.
• It can decide to spend less, which may reduce the quality or quantity of the services being provided.
• It can attempt to manage its existing resources more efficiently by reducing waste or improving profits.
Government outsourcing is the preferred option compared to these four choices because it reduces local burdens while still providing potential access to the needed services.
List of the Cons of Government Outsourcing
1. It can cause the government to lose control over the work.
When governments begin outsourcing specific tasks to contractors, then they lose full supervision over the work that needs to be accomplished. They can provide direction in regard to what needs to be finished, but there is not the same level of control as there would be if it were an employee doing the work. Because most contractors are not working on-site for the government, it is challenging at times to supervise the work to ensure the quality outcomes are still achievable.
2. It can create communication issues for the government.
There are several ways that communication can be adversely impacted went to government decides to start outsourcing some of this work. The time zone of the contractors may be very different than what is available locally, requiring someone to be available to match up business hours. There may be different preferred methods of communication, such as email, phone, or instant messaging. Some contractors may not even have access to a reliable Internet connection. Communication is already a struggle locally in government. Outsourcing can make it an even more significant issue.
3. It can create problems with the quality of work received.
Even with all of the benefits of government outsourcing to consider, none of them become a reality if you do not receive the quality of work that you expect from the contractors that you hire. When you receive something that is inferior, then it can impact the community in a variety of ways. There may be fewer services available, less quality provided, and some people may even experience a harmful outcome in an effort to save money.
4. It takes time to teach contractors the rules they must follow.
Government agencies follow several rules and regulations that may not be necessary in the private sector. If outsourcing is going to be successful in this circumstance, then there must be a time commitment involved to help the vendors know exactly what is expected of down each day. Then someone from the government must be in charge of overseeing the operations to ensure that the companies or contractors they choose are sticking to what they must do. Many outsourcing contracts end because the individuals involved decided to do things their own way, which reduced the amount of output that was available.
5. It does not always take into account the hidden costs of this process.
Government outsourcing typically looks at the results that are possible instead of the evaluating the costs which are necessary to achieve them. There could be several hidden costs the taxpayers must pay when a decision is made to hire contractors instead of using local workers or elected officials. There are times when this disadvantage can cause the government to pay 50% more in expenses then if they had kept all of the work in-house instead of trying to outsource items.
6. It can create confusion in both institutions.
The public and private sectors often struggle to work with one another because the expectations that are present in each one is very different from one another. Governments are often consumed with regulations, processes, and rules as a way to ensure quality, while the private sector looks for ways to innovate and reduce rules when it makes sense as a way to save money. When neither side can see what the other is trying to accomplish, then this gulf in communication can present numerous issues that both sides may struggle to mediate. This issue can eventually lead to incomplete or inaccurate results.
7. It may not create an outcome that is usable.
During the Olympic Games in London, the government outsourced one of the largest security contracts in history to a company called G4S. The stipulations given to this multibillion-dollar company included the responsibility to source, train, and manage 14,000 security guards while the events were taking place around the city. Just two weeks before the Olympics were about to begin, the organization contacted the government to say that they would be unable to fulfill the obligations of the contract.
They fell short by up to 50%, requiring local police and military to fill-in the gaps. Government outsourcing works better when there is a defined path that everyone can follow instead of letting contractors do whatever they want.
8. It can filter into all areas of government services over time.
When a government is under a budget squeeze, then cuts occur as a way to keep things balanced. It is a process that occurs at every level. There are programs being downsized and eliminated all of the time to make way for new ideas. It is not unusual for a community to think about outsourcing a jail or disbanding a police force to allow the Sheriff’s office or the state patrol to provide interventions when needed. The national government does the same thing. The Army had more civilians hired throughout outsourcing positioned in Iraq than it did soldiers.
9. It can constrain future options for the government.
When government outsourcing occurs, it essentially places a public asset into private control for a defined time period. Even if the public sector oversees the administration of the contract, the control could be ceded indefinitely to the private world. These contracts can only be written based on the performance measures that are known today. A lot can change in just 10 years, which means the public may not have the control it needs to ensure that the quality of service provision occurs over the life of the agreement.
10. It offers the potential of harm to specific groups.
Private companies have a potent incentive to increase their revenues while reducing costs. This incentive is a good thing to consider when pursuing private assets. When the government uses public assets to outsource to private control, then adverse outcomes can occur. In a free market system, the idea of paying for social safety net programs is ludicrous because it encourages people to remain dependent on the government for their basic supplies.
The pros and cons of government outsourcing make it possible for taxpayers to save money by allowing their community to bring in expertise when it is required. As with any hiring decision, there are some risks to consider when bringing contractors into the processes that support each town, county, state/province, and nation. There is the potential for growth and better service, but it also provides a risk for an inferior outcome as well. That is why this decision must proceed with extreme caution.
Although millions of people visit Brandon's blog each month, his path to success was not easy. Go here to read his incredible story, "From Disabled and $500k in Debt to a Pro Blogger with 5 Million Monthly Visitors." If you want to send Brandon a quick message, then visit his contact page here.