In June, the UK government released a statement that it seeks to “end outsourcing by default.”
Basically, what this means is the government no longer wants its departments to contract services out simply because they have historically been outsourced. It wants them to consider delivering services in-house before going to the private market. There is nothing inherently wrong with this. In fact, it’s a good idea.
However, the government’s initial matrix for deciding whether a service should be outsourced or kept in-house, known as a “Public Interest Test”, is missing a very important element. The test, which is contained in a guidance note published by the government on 17 June, has two main categories: characteristics of the service in question (covering whether the nature of a service makes it optimal for in-house delivery) and organizational capability and capacity (examining whether the government can deliver a service in-house).
None of these categories ask a fundamental question: is bringing a service in-house the best use of scarce public sector capacity? Just because a government has the capacity to do something doesn’t mean it should.
If there is one thing I have learned over the years, it’s that one of the most effective uses of outsourcing is freeing up internal capacity. By ensuring that non-core work is delegated to a third party, outsourcing helps an organization’s in-house team to focus on more high-value work.
When I started out in the outsourcing sector in 2017, my business partner and I sought to address a very pertinent problem. Businesses such as dental and medical practices, among others, were facing productivity problems because they were bogged down by administrative work.
With my business partner Ken Sharpe, and his wife
A dental practice would end up having a backlog of untreated patients because dental staff, sometimes including the dentist, had to split their time between serving patients and doing clerical work. But this was not the reason founders had started their practices.
They hadn’t started them so that core staff would spend all day filing insurance claims or setting appointments. They had set up their businesses to treat patients. Once we identified the core business of each client we sought to bring on board, we approached them with a very simple pitch: we understand what your core business is; let us take care of everything else.
And it worked! We moved from providing clients with 500 team members in 2022 to providing them with over 1,800 team members today. Why? Because we provided clients with an opportunity to save time. With our remote/virtual team members taking care of all the non-core tasks, clients could now focus on high-value work, which increased overall productivity and, of course, efficiency of capital.
Some of our team members
The same concept can be applied to government. When it frees up internal capacity by outsourcing non-core work, it can make quicker decisions, provide better services and dedicate more time to citizens.
I strongly believe the UK government should add an opportunity cost element to its Public Interest Test. This element should assess whether using internal government team members and management to deliver a service will prevent resources from being used for higher-value priorities.
It’s important to note that opportunity cost exists elsewhere in the UK’s government doctrine, but in the Public Interest Test, it is glaringly missing. Such a fundamental element should be part of the initial framework used to decide whether a government should bring services in-house.
