The document discusses recommendations from the SAGE Commission report regarding privatization and outsourcing of Bermuda government functions. It recommends establishing a Privatization and Outsourcing Authority to review all government activities and determine which are justified for the private sector. Several areas are identified as opportunities for privatization, including airports, highways, and utilities. The commission believes outsourcing could provide cost savings while maintaining or improving service levels. It cautions that strategic planning and oversight are needed to ensure accountability if functions are privatized.

1. Presented by
Walter H. Roban, JP, MP

2. 
Privatisation and Outsourcing section are on
pages 78 – 114 of the report;

The report states there is ample evidence that
in some areas of government functions are
inefficiently delivered and there are areas
government should not be undertaking the
function of in the first place.

3. There are a number of clear and compelling
opportunities to use privatization and out sourcing to
reduce the cost of running government.
1. Recommend the establishment of a Privatization
and Outsourcing Authority as an independent body.
It will consist of 7 appointments by the Minister of
Finance, two to be made from members of the Trade
Union Congress
 Charged with reviewing all government activities
and entities to determine whether government
operation continues to be justifiable
 Will have a sunset provision to expire after 6 years

4. 






Airport Operations, Ministry of Tourism and Transport
Civil Aviation, Ministry of Economic Development
Highways Management, Ministry of Works and Engineering
Maritime Administration, Ministry of Economic
Development
Public Lands and Buildings, Ministry of Works and
Engineering
Waste Management, Ministry of Works and Engineering
Water and Sewage Management, Ministry of Works and
Engineering

5. 










Conservation Services, Ministry of the Environment and Planning
Correction Department, Ministry of Public Safety
GEHI and Health Insurance Department, Accountant General and
Ministry of Health and Seniors
Human Resources Department, Cabinet Office
Marine and Ports, Ministry of Tourism and Transport
Parks: Maintenance, Ministry of Environment and Planning
Public Lands and Buildings, Ministry of Works and Engineering
Public Transportation, Ministry of Tourism and Transport
Transport Control, Ministry of Tourism and Transport
Youth, Sport and Recreation, Ministry of Community and Cultural
Development
Vehicle and Equipment Operations and Maintenance, Ministry of
Works and Engineering

6. DEPARTMENT
Airport Operations
Civil Aviation
Maritime Administration
Highways
Public Lands and Buildings
Waste Management
Water and Sewage
EXPENDITURE
19,777,000
OPERATING
LOSSES/SURPLUS
(9,441,000)
STAFF
10,500,000
13,062,000
39
1,904,000
2,246,000
11
6,325,000
(6,325,000)
71
22,869,000
(21,169,000)
169
17,551,000
(12,521,000)
139
5,165,000
(299,000)
24
84,091,000
(49,755,000)
497
44

7. DEPARTMENT
Conservation Services/
Environmental Protection
Corrections
8,825,000
OPERATING
LOSSES/SURPLUS
(7,564,000)
27,469,000
(27,469,000)
251
HID, GEHI
45,076,000
(45,076,000)
23
4,250,000
(4,250,000)
29
Marine & Ports
18,536,000
(12,367,000)
174
Parks Department
10,537,000
(10,537,000)
164
Public Lands and Buildings
22,869,000
(21,169,000)
169
Public Transportation, Ministry of Tourism
Development & Transport
Transport Control Dept. (TCD)
20,945,000
(12,245,000)
258
6,332,000
21,885,000
41
Youth, Sport and Recreation
11,662,000
(10,951,000)
110
5,609,000
(5,609,000)
89
182,110,000
(157,237,000)
1,392
Human Resources
Vehicle & Equipment Operations
EXPENDITURE
STAFF
84

8. 
The SAGE Commission identified what they
believed was the most objective, strategic
approach to considering government
programmes, services that should be privatized
or outsourced:
Can government afford to provide this service?
2. Is this programme or service necessary?
The Commission felt that if these 2 questions are kept
uppermost as privatization and outsourcing opportunities
are considered, decisions are likely to be made
pragmatically and objectively for the greater good.
1.

9.  PRIVATISATION:
Process of transferring
ownership of a business, enterprise, agency,
public service or public property from the
public sector to private sector; either to a
business that operates for a profit or to a
nonprofit organization.
 OUTSOURCING: the contracting out of a
business processes to a third party – in this
case, a public sector function of service to a
private entity.

10. 

The Commission then, set aside those
programmes and services they believed should
be owned and provided directly by the
government believing they could be provided
efficiently and effectively
(NOTE: these are not listed in the report)
They also set aside all departments and activities
involved in the formulation of policy and
strategy; which are the responsibility of the
elected representatives; guided by the Cabinet
Offices and senior Civil Service Executives.

11. Provide net operating savings for Government
 Provide enhanced service levels to the
Bermuda public
 Reduce the physical plant required by
government
 Reduce Government debt and other long-term
liabilities
 Encourage new small business development


12. The Commission expects any privatization
action to provide reliable and consistently
priced long term coverage of public sector
requirements.
They also looked into the potential to:
 Absorb current public sector staff in the new
private sector function or entity
 Monetize Government assets (sale or lease of
land, buildings, equipment)

13. FOR
Currently competes with
private sector
Realizes (or could realize)
sustainable revenue
Can be profitable at market
service rates
Can attract private sector
investment
Based on a clear business plan
Delivers substantial
monetization value
AGAINST
Is essential public service (police,
fire, regulators)
Subject to strict confidentiality
/national interest
Vulnerable to political legislative
change
Requires substantial ongoing
subsidization

14. FOR
Is currently available at
competitive rates in private
sector
Compromise specific project
scope/duration(contractable)
Allows for clearly measureable
desired output KPIs
Has an available contingency
Potential for performance
guarantee
AGAINST
Loss of government control
Possible significant
redundancy

15. The Commission stated that although policy and strategy
are the responsibility of government leaving the execution
to be privatized and outsourced government must
remain accountable for sustainable provision of
required services to the public.
The Commission expressed concern about:
1.
2.
3.
Seeing no strategic plan for proactive management of
government assets or coordinated delivery of public
services;
Many functions and services that were reviewed tend
to reside within operating silos of the civil service;
Any attempt to outsource or privatize them within the
current structure would almost be piecemeal.

16. 




Bermuda 60/40 rule may have to be modified to accommodate
the need for foreign investment for large projects;
Great care should be taken in the creation of monopolies since
competition should be a key driver of innovation to reduce cost
and enhance service;
Where monopoly structures are the best solution government
should maintain fair pricing through a regulatory authority;
Assistance should be sought from the UK Government which
has a track record of successful privatization and outsourcing;
Create a Privatization and Outsourcing Authority before going
ahead with any transactions are started.

17. 



There is considerable scope for outsourcing services and a
number of functions have already been successfully outsourced;
A government Strategic Planning Process must be implemented
within which the Privatization and Outsourcing Authority should
continuously review all government business and entities;
Where compelling outsourcing opportunities are identified every
effort should be made to transfer government staff currently
handling the relevant functions to the outsource partner;
There maybe an opportunity to support ambitious government
staff in setting up their own private sector businesses by seeding
them competitively priced government contracts