Outsourcing Public Health Laboratory Services: A Blueprint for Determining Whether to Privatize and How

In a continuing effort to reform and reinvent the way public organizations do business, the outsourcing of services has become a popular tool, particularly as resource constraints limit options available to governments. All too often, the decision is made, for reasons of ideology or resource constraints, to outsource services without giving careful consideration to the impact of privatization on the core missions of an agency, or whether privatization, in fact, offers real cost savings. Purchasing tools designed for traditional commodity purchases are often grossly unsuited for making decisions on specialized technical services.
This article suggests a process for the evaluation of an option to outsource laboratory services. It suggests that, prior to contracting or privatizing services, the concerned agency should evaluate:
the impact on the agency's core mission
the availability, stability, and reliability of private sector service providers
the relative costs of internal and external (public or private sector) service providers
the potential impact on regulatory enforcement
the ability to monitor the performance of external providers
potential conflicts of interest
Based on this model, the ongoing internal evaluation of services offers public agencies management tools to obtain the best value for the taxpayer dollar, not only in terms of the raw cost per test, but also in managing the quality of the services.     

Information Technology Outsourcing by State Governments in Australia

Outsourcing of IT services is being undertaken at a rapid rate within the public sector in Australia. This paper investigates the adoption of this practice by a sample of state government enterprises and departments from South Australia, Victoria and New South Wales which have tendered long-term IT outsourcing contracts.
The motivation, decision-making process and extent of outsourcing are examined in further detail. In addition, the tendering process, contract and risk management are investigated to determine whether consideration has been given to the full economic costs involved in entering into longer term contracts.     

中国地方政府公共服务合同外包的发展现状——基于二手数据的分析

近年来,合同外包日益成为地方政府提供公共服务的重要机制。本文基于二手数据,在对地方政府公共服务合同外包发展状况(2000~2009)的概括性分析中发现,2000年以来,地方政府公共服务合同外包发展迅猛,其应用的广泛性和深入性均前所未有,并且逐步迈入法制化轨道。由于影响合同外包成效的因素相当复杂,政府显然缺乏相关操作经验,无论是在合同外包的决策当中还是在实施当中,"审慎"是最明智的策略。     

Risk and the Outsourcing of Risk Management Services: The Case of Claims Management

Outsourcing of risk management activities is a well-established practice, involving a range of services from actuarial audits to loss control training to risk financing management to claims administration services. Surprisingly, little work has been done to examine the risks associated with outsourcing risk management activities. This article examines the outsourcing of claims management services by reviewing the research on outsourcing risks and by interviewing leading practitioners. In doing so, the authors draw some provisional observations about risks and risk costs associated with outsourcing claims management services—observations that seem generalizable to all risk management outsourcing.     

Outsourcing in the public services: a comparative analysis of practice,capability and impact

This article analyses thinking and practice concerning privatization and outsourcing in the public services and compares recent trends with the findings of an extensive comparative survey of outsourcing conducted at Cranfield School of Management. Particular attention is paid to the systems and processes being outsourced, their importance to the organization and the impact of outsourcing on public service organizations. The results of the survey suggest that public service managers are more skilful than managers from the private sector at handling the transactional aspects of outsourcing. However, managers from public service organizations, unlike managers from the private sector, assert that outsourcing is damaging the running of public service enterprises. It is concluded that until the political and administrative processes are more closely aligned public service managers will continue to hold a more negative view of outsourcing. Copyright © 2001 John Wiley & Sons, Ltd.     

Complex Contracting: Management Challenges and Solutions

Governments at all levels buy mission‐critical goods and services whose attributes and performance requirements are hard to define and produce. Many governments—and the public managers who lead them—lack experience and knowledge about how to contract for complex products. The contract management counsel provided to public managers is thin. Missing is a conceptual managerial framework to guide purchasing the complex products that are often so critical to public organizations' core missions. Drawing on perspectives from across the social sciences, the framework presented in this article provides guidance on how managers can harness the upsides of complex contracting while avoiding its pitfalls. The framework helps identify conditions that increase the likelihood of positive outcomes for the purchasing government and the vendor—the win‐win. To illustrate the framework, the article provides examples of successful and failed acquisitions for complex products such as transportation projects, social service systems, and information technology systems.     

A Review of: “Corruption by Design: Building Clean Government in Mainland China and Hong Kong by Melanie Manion”

ABSTRACT

The impact of privatization on public service quality is an enduring issue in public policy and management. Advocates of privatization suggest that market forces prompt private firms to provide better quality services, while opponents point towards the potential for quality to be traded off against profits. Drawing on incomplete contract and capability theories, we explore a more nuanced possibility: that private providers of public services perform better on dimensions of public service quality that are easier to measure and monitor, and vice versa. Using panel data on service quality in prisons in England and Wales in the period 1998 to 2012, we find that privately managed prisons do perform better on dimensions of quality, such as confinement conditions and prisoner activity, which are more easily measured, whereas public prisons perform better on dimensions of quality, such as levels of order and prisoner safety, which are less easily measured and managed.     

Implementing the Contract State

The term 'contract state' can capture three different types of contractual arrangements:
*employment contracts
*intra public sector service contracts (often used in the health and education fields)
*public-private service contracts or outsourcing.
Victoria, since the election of the Kennett government in 1992, has engaged in all three, but in particular, public sector change has been characterised by significant outsourcing. This article outlines the extent of outsourcing in Victorian state and local government, the managerial challenges of a contract state, and the need for continuous reflection on, and improvement of, the reform process.     

QUALITY COST IN THE PUBLIC SERVICE: IDENTIFYING, MEASURING AND REPORTING

Abstract: The identification, collection, and reporting of quality costs are necessary to achieve efficiency in the delivery of public service. This paper argues that quality costs are major elements in the total costs of delivering programs and services in the public service. To support this point, a seven-step system is described that could be used to develop a feasible modification of existing charts of account to incorporate quality cost elements. Incorporation of quality cost elements in the financial accounting system would enable the public service to use quality costs in the current wave of performance management of programs and services to bring about reliable and valid efficiency measures of deliveryfunctions.     

Outsourcing Public Service Delivery: Management Responses in Noncompetitive Markets

Capturing the benefits of competition is a key argument for outsourcing public services, yet public service markets often lack sufficient competition. The authors use survey and interview data from U.S. local governments to explore the responses of public managers to noncompetitive markets. This research indicates that competition is weak in most local government markets (fewer than two alternative providers on average across 67 services measured), and that the relationship between competition and contracting choice varies by service type. Public managers respond to suboptimal market competition by intervening with strategies designed to create, sustain, and enhance provider markets. In monopoly service markets, managers are more likely to use intergovernmental contracting, while for‐profit contracting is more common in more competitive service markets. The strategies that public managers employ to build and sustain competition for contracts often require tangible investments of administrative resources that add to the transaction costs of contracting in noncompetitive markets.     

Private operation with public supervision: evidence of hybrid modes of governance in prisons

Received theories suggest a possible cost-quality tradeoff when private outsourcing arrangements are used in public services. Using data from Brazilian prisons, our study provides evidence that contradicts this prediction: the prisons not only run at a lower cost, but also show similar or improved performance on a range of quality indicators. The attenuation of the cost-quality dilemma in our context is due to the hybrid management, which allocates control rights to a state-appointed public supervisor. We also discuss conditions in which the public supervisor may refrain from colluding with the private agent, therefore guaranteeing an effective monitoring of service quality.     

Outsourcing in China: an exploratory assessment

The increasing demands for public services, growing resource externalisation and decentralisation have driven Chinese governments to seek alternative means of service delivery. This article addresses the largely ignored outsourcing practice in China. Lack of awareness of and research on the widespread outsourcing was a result of the conceptual barriers created by China's economic transition and its choice of incremental reform path. By decomposing national fiscal expenditures, the article finds that from 2002 to 2004, outsourcing accounted for about one‐third of the total governmental services expenditures and demonstrated a trend of continuous growth. Such developments effectively transformed the basic landscape of public service delivery and created significant external dependence. Within just three decades, China has quickly shifted from an omnipotent state to an ‘incomplete’ state. The capacity of the administrative hierarchy has become severely constrained. Nonetheless, the political risks of the macro‐level transformation are largely mitigated at the micro‐level by mechanisms of public–private cooperation. These developments are embedded in informal arrangements that, remarkably, maintain the survival of the current power structure. Copyright © 2008 John Wiley & Sons, Ltd.     

The provision of public services by government funded decentralized agencies

Public services are often provided by lower level agencies that are funded by higher level government. Since markets for such services do not exist, normal pressures to minimize costs do not operate; indeed, usually these costs are unobservable. We study a principal-agent model which emphasizes the distinction between the financing and provision of public services. Two broad situations are analyzed: (i) the agencies are induced to reveal true costs; and (ii) in addition, to minimize costs, agencies must be induced to exert effort. The characteristics of the optimal funding contract and the marginal cost of public funds are derived in each case.     

Contracting Out and Accountability

Governments are increasingly moving to contract out the provision of public services which have previously been delivered by public service departments. Contracting out typically implies provision by private sector contractors. However, it may also include in-house provision by public service departments or other public agencies where the right to provide is won through competitive tendering and is governed by contract. At the Commonwealth level, the trend has been given added impetus by the Coalition government elected in 1996 (Reith J 996; National Commission of Audit 1996).
The main rationale for contracting out is to improve efficiency in service provision by harnessing the virtues of competition, in particular the superior productivity engendered among competitive providers (Industry Commission (IC) 1996, B3.4; Appendix E). At the same time, there is a legitimate expectation that providers of public services paid for by public funds will be publicly accountable (IC 1996, BI). However, contracting out has the potential to reduce the extent of public accountability by transferring the provision of public services to members of the private sector who are generally not subject to the same accountability requirements as public officials. Indeed, reduction in such accountability requirements may be one of the reasons for the greater efficiency of the private sector.     

公共服务外包决策的影响因素研究

目前,公共服务外包已成为市场化改革的重要制度安排。国内外针对公共服务外包的研究已经很多,但是国内大多数的研究为定性的分析探讨,少有通过实证分析探讨影响公共服务外包决策因素的研究。在对相关文献梳理的基础上,对公共服务外包的概念从宏观和微观两个角度进行了区别,根据文献的理论支撑和实地走访调研,本研究创新性地构建了公共服务外包决策影响因素概念模型,并作出了针对性的理论假设。针对假设,运用结构方程验证了服务特性、环境因素以及政府能力对公共服务外包决策的影响作用。研究发现,任务复杂性及市场成熟性对公共服务外包决策有显著影响;政治因素对公共服务外包决策都有显著影响,财政资源与外包决策的关系不显著;政府间的竞争和领导支持与政府的外包管理能力之间存在正相关关系,同时,政府外包管理能力越强,越可能做出外包决策。     

Contract–Management Capacity in Municipal and County Governments

Under pressure to do more with less, governments across the country have moved from direct service provision to providing services by contract. Proponents argue that contracting can reduce costs and improve flexibility and customer satisfaction. Critics point to a growing number of failed contracts, arguing there are numerous pitfalls associated with contracting. Missing from these debates is a discussion of how governments' managerial capacity can improve contract performance. In this article, we identify specific capacities that governments can use to harness the promise of contracting while avoiding its pitfalls. We present analyses of data on municipal and county government contracting activities that show how governments invest in contract– management capacity in response to several internal and external threats to effective contract performance. Because government investment in contract–management capacity is uneven—that is, some governments invest in less capacity even when circumstances would call for more—our analyses may help to explain why some contract arrangements are more successful than others.     

A simple estimation method for aggregate government outsourcing

The scholarly and popular debate on the delegation to the private sector of governmental tasks rests on an inadequate empirical foundation, as no systematic data are collected on direct versus indirect service delivery. We offer a simple method for approximating levels of service outsourcing, based on relatively straightforward combinations of and adjustments to standard statistical series, primarily the National Income and Product Account and the Government Finances series produced by the Department of Commerce. The method permits us to separately estimate state and local from federal service outsourcing and (within the federal government) to distinguish between defense and non‐defense services. Alternative estimates, both including and excluding Medicare and Medicaid, are included, as are estimates of outsourcing from 1959 through 2000. The method confirms the general view that the privately provided share of public services has increased, particularly in the last two decades of the past century. But this increase has been shallower than many observers suggest, and as of 2000 more than two‐thirds of the government's service budget was still devoted to employee compensation. © 2004 by the Association for Public Policy Analysis and Management.     

Managing Markets for Public Service: The Role of Mixed Public–Private Delivery of City Services

The privatization experience of U.S. municipalities shows declining use of complete contracts and a dramatic rise in mixed public–private delivery (joint contracting) of city services. The analysis here shows that city managers have recognized the need to move beyond a simple dichotomy between market delivery and public planning to an approach that balances concerns with efficiency, market management, and citizen satisfaction. The New Public Management stresses the importance of competition and efficiency, transaction costs economics emphasizes the challenges of contract management, and New Public Service assigns primary concern to citizen engagement. Nonetheless, city managers see the need to balance all three. The analysis shows the evolution of a middle position where city managers integrate markets with public delivery and give greater attention to citizen satisfaction in the service delivery process.     

Reforming Service Delivery in China: The Emergence of a Social Innovation Model

In this paper, I find that the political economy of public goods provision by the local government in Shanghai influenced the decision to transition from the existing public service delivery model based on residency, to a social innovation model where the government contracts with non-profits and private firms to provide services at lower costs and experiment with different levels of provision (购买服务). Contracting also forms a bridge between old governance models and new ones, which potentially allow for a process of administrative modernization without social instability. Contracting for public-goods provision is increasing in prevalence not only in Shanghai but also in many other provinces, and is professionalizing participating organizations and providing public goods to vulnerable populations. While this practice is not yet increasing non-profit participation in the policy process, the creation of access channels that are currently operating solely in one direction may at some future date allow groups to participate in relevant policy areas. Contracting public goods might have the potential of significant effects beyond the term of the contract by increasing pluralism in local public policy and generating more demand for transparency and accountability of government services. As such, this is an interesting bellwether for future political change in China.