UK: the benefits of outsourcing – where's the evidence?

(12 July 2012) The university sector in the UK, and some universities in particular, are under pressure to cut costs and to outsource services. In response to this challenge the Working Lives Research Institute (WLRI) at London Metropolitan University has produced a very useful overview of the evidence on outsourcing, arguing that there is little to demonstrate that it delivers on quality.

Shared business services outsourcing: progress at work or work in progress? is based on European comparative research conducted by the WLRI in 2007-09 and 2010-12 on outsourcing in the public and private sectors. One of its main conclusions is that:

“…despite experience dating back 25 years, even the more academic advocates of outsourcing are forced to concede, there is remarkably little concrete evidence suggesting outsourcing public services was in the public interest.”

It also brings together some of the main research that exposes the risks involved in outsourcing public services. The report quotes evidence that outsourcing can compromise the quality of service and lead to a competitive race to the bottom for both terms and conditions of the employees and for the commitment these staff then have to providing high quality services. It mentions, for example, the spread of the MRSA bacteria in hospitals in the UK where out-sourced contractor cleaning has not been of the same standards as the previous in-house cleaning, according to work done by researchers at Cardiff University.

Further research at Cardiff University was carried out for the government public spending watchdog, the National Audit Office. This found, in effect, that once a decision had been made to outsource there was no systematic attempt to assess costs and benefits and no quality evaluation that would demonstrate that outsourcing had delivered a better performance. However, the research did include a survey of 1041 local authority officers of whom ‘only 39% believed that increased competition would lead to improved efficiency’.

The study acknowledges that while some elements can be compared before and after outsourcing, “evaluating the public good - whether the service provided is better, worse, or no different than it would have been if the service had not been outsourced - is highly difficult over time. It must also be considered possible that the absence of solid evidence proving the advantages of outsourcing is because the much vaunted advantages are few and far between.”

This problem is all the more relevant to a people-centred sector like higher education, as the report argues: “quality is more likely to be at risk in outsourcing where complex interactions and people-to-people services are involved, and where the outsourcing company is not committed to practising full social dialogue.”