The government transition towards service facilitator is followed by new considerations concerning affordability and managing external partnerships.
In a previous blog post, we explored the changing role of government that saw the institution serving more demanding citizens by transitioning from service providers to service facilitators. During this transition governments are not only increasing their outsourcing spending, but also focusing on facilitating relationships with external partners and safeguarding the strategic needs of the state. Let’s take a deeper look into these challenges and how they could affect your next public sector outsourcing contract.
1. Affordability in outsourcing
Making government affordable is the new reality for current and future public sector organisations. Due to demographic ageing, increasing customer demands for personalised services, and growing sustainability challenges; governments will likely need to meet expenditure gaps or shortfalls of billions of dollars over the next dozen years to be able to continue to deliver public services at current levels to future populations. Governments could respond to this challenge by cutting spending, raising additional revenue, developing innovative solutions or by applying a combination of all three. While the application of strategies will be context-dependent and contingent upon the fiscal state of the country under examination - the opportunities exist here for the FM providers to provide innovative external expertise, in order to deliver services more cost-effectively and satisfy the affordability need.
2. Increased involvement of voluntary, charity and non-profit sector
Putting citizens at the forefront of the decision marketing process means that public sector organisations are increasingly being configured to involve external partners including voluntary, charity and non-profit organisations. Public sector institutions will need to balance between, on the one hand, an internal focus on efficiency and effectiveness, and, on the other hand, an external focus on helping and co- creating value with stakeholders in society. In order to succeed in achieving a balance, this requires re-evaluating types and purposes of public services being provided and delivered. In some markets, including local SME’s and third sector involvement in service delivery are compulsory requirements. This places a responsibility on outsourcing providers and the public sector to consider also developing risk and control provisions to include external partners, while maintaining economically feasible.
3. Risk of emergence of the shadow state
Shadow government refer to markets for public services that are controlled by a small number of large, predominantly private companies that have great influence in how these markets work. In the United States, the outsourcing economy has grown to $320 billion annually and employs two contract workers for every federal employee. Therefore, when transparency and accountability are lacking and complexity is increasing, there is a risk that a “shadow” government could emerge in many economies.
In instances where shadow governments become strong – such as in infrastructure and prison markets – governments are often left with a difficult choice. Do they continue to source from “bureaucrats with limited incentive to deliver and sclerotic ability to reform on the one side,” or, do they select from “weak[ly] regulated private companies that know more about winning a contract than delivering services on the other.”
What’s next for the FM provider?
In every situation above, an FM provider could stand to lose a contract with the government or provide bright new opportunities. By identifying these challenges and helping the government in their transition towards agility, innovation, transparency and connectedness; and to better facilitate relationships with external partners and maintain affordability - the FM provider should stand to benefit from the latter.
This blog post is based on the Future of Public Sector Outsourcing whitebook by ISS.