This is a summarised blog taken from our latest white paper on public sector procurement: To Insource or Outsource? That is the question.’
More power for local authorities
A new administration usually brings a new broom, making significant, sweeping changes to the policies and practices of the previous incumbent. Seeking to tackle some of the many challenges in the UK, the new Labour government is proposing to revert the privatisation of some key public services, including the creation of Great British Energy, a publicly owned energy company. It also plans to reform the railways by bringing them back into public ownership when current contracts expire, as well as reinstating the opportunity for local authorities to take charge of their local bus services.
These are not new ideas, but the trend towards publicly owned and managed public services replacing private sector partners, also known as insourcing, is gaining momentum. Many local authorities are recognising that they can achieve their fundamental aims – to provide local people with the best quality public services while achieving value for money – if they take back control in-house.
The benefits of insourcing
Insourcing has many benefits, with some finding it lowers costs and gives them greater control over every aspect of the public services they provide. It may help reduce risk, enabling local authorities to take full responsibility for service delivery and actively pre-empt, mitigate, and manage potential risks. When services are managed in-house, the local authority has control over employee pay and conditions, as well as providing more employment opportunities for local citizens, which in turn, benefits the local economy overall.
A visible commitment to using local employees and resources fosters strong local connections. This can help strengthen ties with service users, staff, and local communities. When implemented successfully, insourcing may reduce bureaucracy, simplifying some procurement processes and improving communication and coordination of resources while ensuring better return on investment.
The challenges of insourcing
The decision to move services in-house is not straightforward, as there are a number of challenges to overcome. Each authority must conduct a thorough analysis of their existing service provision and needs to decide whether insourcing is the most appropriate solution for each and every public service they provide. Decisions will revolve around evaluation and alignment with factors including local policy, current and potential performance, and risk.
One of the biggest challenges is the need to invest in staff, equipment, premises, infrastructure, technology, and training to enable in-house provision. These are not insubstantial set-up costs in the current economic climate. Leaders will need to be assured that these investments can be off set with quantifiable projected savings.
The private sector advantage
Technology is the key to a successful transition into public ownership and management. One of the advantages that private sector businesses have over public sector bodies is access to enough budget to invest in and implement the best available technology, driving higher productivity, greater efficiency, and better return on investment.
OneAdvanced has talked with prospective customers working in the public sector who are still using DOS systems – those of us working in the 1980s and early 90s will recall the frustrations and limitations of green screens navigated by cursor. Of course, many local authorities have updated their software and systems since the turn of the century, but many are hindered by legacy technology that often makes processes more complex and time-consuming than they ought to be.
Insourcing may enable greater control over quality of service, but this can be compromised if local authorities fail to secure the specialised skills, expertise, experience, and technology that were being utilised by the previous external supplier.
With its deeper pockets for salaries, training, and career opportunities, the private sector can often attract the best talent. Budgets are designed to support the innovation and ideas development necessary to support a competitive edge within the sector. Public sector organisations may find themselves at a marked disadvantage by comparison.
Driving forwards with greater efficiency
Implementing best in class software and systems that have been developed specifically for public sector organisations, with vertical functionality such as spend management, procurement, payroll, employee performance management, and much more, empowers local authorities and other public sector organisations to operate at a higher level. Crucially, public sector organisations are driven by the need to provide services to people, not profit. Having modern, effective digital solutions not only helps them to attract and retain quality talent, but also ensures that processes and the management of key public services are as efficient as possible.
The new insourcing ideology may well be the best solution for local authorities seeking to deliver better value for the public purse and deliver the best quality services to local people. But success will depend on the implementation of powerful, effective technology, designed to make people’s working lives easier and drive higher productivity. There is no room for outdated and obsolete technology if the new era of insourced public services is to flourish.
Find out more: don't miss our latest white paper, To Insource or Outsource? That is the question.’ for an in-depth look at the pros and cons of each approach, and why public bodies are moving more of their services in-house.