Outsourcing in Public Administration

1. OUTSOURCING
HARRY T. LEGO
PUP-DOE MPA, MPA 629 GLOBAL TRENDS IN PA
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

2. Public Sector
Outsourcing
Shifting from a
Bureaucratic into
Decentralized Method
of Control:

3. Topic Outline
1 Introduction
2 Quick History of Public Sector Outsourcing
3 Four Modes of Public Service Provision
4 Why Do Governments Outsourced?
Outsourcing Defined
5 Advantages of PS Outsourcing
Three Modes of Public Service Outsourcing
Disadvantages of PS Outsourcing

4. Topic Outline
6 Outsourcing of Public Services Should be
7 What the Government Can Outsourced
8 Outsourcing Cases Around The World
9 Summary
What the Government Cannot Outsourced
Considered only Under Five Basic Conditions
Outsourcing Cases in the Philippines
10 References

5. Introduction
In a perfect Public Sector world, the government itself
provides all public services to the people from cradle
to grave. Everything is provided by the government.
That’s why according to Sir William Beveridge (1942),
a renowned British economist and politician, a national
system of benefits should be introduced to provide
social security, “so that the population would be
protected 'from the cradle to the grave'.”
But, that’s not the world we live in. The government
cannot deliver all public services by itself. Thus, the
need for public sector Outsourcing.
Source: BBC UK, 2014

6. Outsourcing Defined
Contracting out (or Outsourcing)
is the extent to which the public
has access to alternative
suppliers, public or private, of a
given public service.
What is PS Outsourcing?
Source: Schiavo-Campo and Sundaram, 2000

7. Outsourcing Defined
Generally, under contracting-out
arrangements, the activities
transferred to the private sector
remain financed by the government.
What is PS Outsourcing?
Separating the financing from the
delivery allows the governmental
purchaser to choose from among
different suppliers and to control costs
and quality standards, without having
to take into account the particular
interests of its staff or other
bureaucratic impediments.

8. History of PS Outsourcing
The practice has experienced a recent resurgence but is common in history.
2070 BC 776 BC 753 BC 1875 2000s
Prevalence of tax farming.
Tax farming refers to any
type of tax collection
conducted by private
individuals rather than
salaried state personnel.
CHINA
Prevalence of tax
farming.
GREECE
Prevalence of tax
farming.
ROME
Established a
governmental
organization for tax
collection.
THAILAND
Resurgence of
Public Sector
outsourcing.
WORLD
Source: Schiavo-Campo and Sundaram, 2000 l History.com.

9. Four Modes of Public Service Provision
DIRECT PROVISION
Direct provision by the
government department.
REGULATION GRANT CONTRACT
Three Modes of Public
Service Outsourcing
Source: Schiavo-Campo, 2000

10. Three Modes of Public Service Outsourcing
The government is involved
in planning, but not in
financing or producing the
service. (e.g. Land zoning
enforcement).
REGULATION
The government provides
financing for studies, or
technical and legal
assistance, but neither
plans nor produces the
service. (e.g. US Aid, JICA,
AUS Aid)
GRANT
The government both plans
for and finances the service,
but contracts out its
delivery. (e.g. Garbage
collection and disposal)
CONTRACT
Of Public Service
Outsourcing
THREE MODES
Source: Schiavo-Campo, 2000

11. Why Do Governments Outsource?
Reduce service delivery costs
Lack of in-house expertise
Provide a higher-quality
product (or service);
(PSA/Birth Cert. case)
Obtain a yardstick for cost
comparisons between government
delivery and private delivery
(market testing);
Initiate new discrete functions
Limit the size of the government
workforce
Weaken the influence of
employee unions
Avoid labor rules or restrictions
Gain access to specialized
skills and equipment;
Keep flexibility to adjust the size
of the program
Source: Rehfuss, 1989

12. Advantages of PS Outsourcing
Reduce service delivery costs
Provide a higher-quality
product (or service);
(PSA/Birth Cert. case)
Obtain a yardstick for cost
comparisons between government
delivery and private delivery
(market testing);
Initiate new discrete functions
Limit the size of the government
workforce
Weaken the influence of
employee unions
Avoid labor rules or restrictions
Gain access to specialized
skills and equipment;
Keep flexibility to adjust the size
of the program
Source: Rehfuss, 1989

13. Advantages of PS Outsourcing
It creates a smoother
operation for the community.
It is a way to limit the size
of the government.
It reduces the time needed to
get a project off the ground.
It can reduce the need for
additional public entity costs.
It stops the government from hiring
more full-time, permanent employees
and reduce redundancies that can cost
taxpayers money.
It provides the government
access to a larger talent pool or
another team of workers.
It creates lower labor costs for the
government and thus, saves
money.
It allows the work to be completed
faster.
Benefits
to the PS
By outsourcing specific items
that can be accomplished by
the private sector, it is possible
to streamline the structure of a
governing body without
reducing access to services.
Source: BrandonGaille.com.

14. Disadvantages of PS Outsourcing
It does not always take into
account the hidden costs of
this process.
It can create confusion in both
institutions.
It may not create an outcome
that is usable.
It can constrain future options
for the government.
It can cause the government
to lose control over the work.
It can create communication
issues for the government.
It can create problems with
the quality of work received.
It takes time to teach contractors
the rules they must follow.
Downsides
to the PS
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.
Source: BrandonGaille.com.

15. Outsourcing of Public Services Should be
Considered only Under Five Basic Conditions
There are demonstrable cost savings or improved
benefits to the users.
Outputs relevant to the desired outcomes can be
clearly specified.
Performance can be monitored (and the administrative
capacity to do so exists).
The contracts can be enforced (and the administrative
capacity to do so exists).
There are robust accounting and audit mechanisms in
place.
Source: Schiavo-Campo, 2000

16. What the Government Can Outsourced
1
3
2
4
Courier services, airport;
(Canadian airport/NGO)
Travel;
(PNOC motor pool case)
Cleaning and security;
(Most PH gov’t agencies)
Building maintenance
5 Vehicle maintenance and
repair
6
Parks, landscaping, and
recreation facilities
7
8
Waste collection and
disposal; (Makati City LGU)
Streetlights and road
maintenance, etc.
Source: Schiavo-Campo and Sundaram, 2000

17. What the Government Cannot Outsourced
1
3
2
State coercive power
(e.g., Police)
National defense
(e.g., Army, Navy, Air Force), etc.
Essential services whose
disruption would create a major
crisis (e.g., Air traffic control)
08
Source: Schiavo-Campo and Sundaram, 2000

18. Outsourcing Cases Around The World
In Argentina, the city of Buenos
Aires delegated the management
and investment responsibility for
its water and sanitation systems
to a private consortium. Under the
terms of the 30-year concession,
the consortium will invest US$4
billion in upgrading,
Argentina
The National Health Service
(NHS) is the umbrella term for the
publicly-funded healthcare
systems of the United Kingdom
(UK). Since 1948 they have been
funded out of general taxation.
United Kingdom XX
In Malaysia, the Government signed a novel and
ambitious 28-year concession with a private
consortium to upgrade, rehabilitate, and extend
the entire country’s sewerage system. Although
the estimated US$2.8 billion contract was
awarded in 1993, progress has been slow,
primarily because of significant public and
commercial backlash from tariff collection and
tariff increases.
Malaysia
In New Zealand, following the
deregulation of the New Zealand
energy industry in 1992, Mercury
Energy Limited was incorporated
on October 1993 as the
successor to the Auckland
Electric Power Board (AEPB).
New Zealand
Source: Schiavo-Campo and Sundaram, 2000 l
Railwaygazette.com l Wikipedia

19. Outsourcing Cases in PHL
Insert the title of your subtitle Here
Public
Service
Outsourcing Type Provider Regulator
Tertiary
Education
Mixed Mixed
SUC, Private
UC
CHED
Road/
Tollways
Yes Regulation
NLEX, SLEX,
etc.
DOTr
Water Yes Regulation
Manila Water,
Maynilad
MWSS
Telecom Yes Regulation PLDT, Globe NTC

20. Summary
Outsourcing
Public Sector
Outsourcing
Public Sector
Public Sector Outsourcing is common in
history and has experienced a strong
resurgence recently.
The primary reason why governments
outsourced to the private sector are to
reduce service delivery costs and to provide
a higher-quality product (or service).
The advantages of PS Outsourcing far
outweighs its advantages.
Public Sector Outsourcing will stay and
will continue for decades to come.

21. References
Schiavo-Campo, Salvatore and Sundaram, Pachampet. (2000). To Serve
and Preserve: Improving Public Administration in a Competitive World.
ADB, Manila. 497-509.
Rehfuss, John. 1989. Contracting Out in Government: A Guide to Working
Outside Contractors to Supply Public Services. Jossey-Bass Pub.
BBC UK. (2014). Retrieved from
https://www.bbc.co.uk/history/ww2peopleswar/timeline/factfiles/nonflash/a1
143578.shtml
History.com, Wikepedia.com
Railwaygazette.com. (2001). Retrieved from
https://www.railwaygazette.com/news/privatised-cn-is-north-americas-most-
successful-railroad/28990.article
BrandonGaille.com. (2019) Retrieved from https://brandongaille.com/22-
government-outsourcing-pros-and-cons/

22. Thank you!
Keep safe always.