Mark Whitehead 02 May 2018

A crisis in local government outsourcing?

A crisis in local government outsourcing? image

News of the latest outsourcing giant to hit choppy waters is worrying for anyone with responsibility for their council's contracts.

Following the collapse of Carillion in January and the losses reported by Capita last week, the announcement of a massive drop in Interserve's share price comes like the arrival of the proverbial third bus.

And although each company is different they have certain similarities which raise important questions about the balance between the public and private spheres.

All three are - or were, in the case of Carillion - companies spanning the continents and offering services in a dazzling array of sectors.

Capita is very much a child of local government - started back in the 1980s when senior CIPFA staff saw an opportunity to set up on their own and provide outsourced services to councils - but quickly grew into a multinational business operating in Europe, Africa and Asia, with about half its business in the public sector and the other half in the private sector.

Most of Carillion's business was in the United Kingdom, but it also operated in several other regions including Canada, the Middle East and the Caribbean.

Interserve, the latest to run into problems with mounting debts and falling share prices, operates in more than 40 countries, providing services to a wide range of industries including oil and gas, civil engineering and construction and providing facilities management at UK embassies throughout Europe.

Business logic might suggest the wide range of skills and experience offered by this kind of international, inter-sectoral organisation can be a big plus. Local government and other parts of the public sector - the NHS, for example - can benefit from the entrepreneurialism and know-how of senior personnel in business. Oil and gas industry executives no doubt have much to offer town hall managers.

But such size and diversity can also be a weakness. Like the Roman Empire, when an organisation becomes too big and geographically spread, it can become difficult for its different wings to co-ordinate and follow the same overall objectives, potentially leading to confusion, duplication and waste.

Nevertheless, giant outsourcing companies have become part of the local government landscape and many councils depend on them. Further crises would be bad news for all concerned, not least the employees whose jobs may be threatened.

Unlike Carillion, Capita and Interserve have time to turn their businesses around and look forward to better times. Capita points out that its reported losses were caused by a write-down of goodwill and that its underlying profits actually amounted to £400m.

But taken together the recent spate of crisis stories suggests a picture of local authorities and other parts of the public sector beholden to huge multinationals at the mercy of uncontrollable market forces.

It seems to suggest that for all their advantages, massive multi-national conglomerates operating across a wide variety of sectors may not be the ideal partners for the more focused and stability-minded world of local government.

Now that the three buses have passed it may be some time before another one comes along.

Certainly that is what is to be hoped, if confidence in big private-sector outsourcing partners is not to be shattered altogether.

SIGN UP
For your free daily news bulletin
Highways jobs

Head of Looked After Children and Vulnerable Young People

Enfield London Borough Council
Up to £89,319
 This is an exciting opportunity to lead all the services that support Enfield’s children in care and care leavers. Enfield (City/Town), London (Greater)
Recuriter: Enfield London Borough Council

Head of Communities

Kirklees Metropolitan Council
to £61,751 (pay award pending)
We are looking for an innovative and knowledgeable senior professional to join our leadership team with strong experience of working in communities... Kirklees, West Yorkshire
Recuriter: Kirklees Metropolitan Council

Economic Development Officer (Town Centres)

North West Leicestershire District Council
Band F, £29,636 - £32,878 per annum
The Economic Development Officer (Town Centres) post forms part of the Council’s Business Focus team who provide help directly to businesses. Coalville, Leicestershire
Recuriter: North West Leicestershire District Council

Educational Psychologist

Camden London Borough Council
£44,131 - £53,34
The ideal candidates will have an excellent understanding of psychological frameworks and their application in... Camden, London (Greater)
Recuriter: Camden London Borough Council

Economic Development Officer

North West Leicestershire District Council
Band F, £29,636 - £32,878
Are you interested in a challenge and want to help shape the future of North West Leicestershire? Coalville, Leicestershire
Recuriter: North West Leicestershire District Council

Public Property

Latest issue - Public Property News

This issue of Public Property examines how how flexible workspaces can lead the way in regeneration for local authorities, Why local authority intervention is key to successful urban regeneration schemes and if the Government’s challenge of embracing beauty is an opportunity for communities.

The March issue also takes a closer look at Blackburn with Darwen Council's first digital health hub to help people gain control over health and care services.

Register for your free digital issue