Poor risk analysis deals a blow to outsourcing

22 June 2005
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23 June 2005 | Liam O'Brien

An influential group of MPs has highlighted weaknesses in public-sector risk assessment that raise serious questions over the success of outsourced contracts.

The Public Accounts Committee report, Managing Risks to Improve Public Services, found only a quarter of government departments know how much risk they can take.

It also revealed just one in five civil servants believed well-managed risk taking was rewarded.

Ignorance of risk, the report claims, can lead to an overoptimistic view of how much can be transferred to the private sector, with important aspects of service delivery in danger of "falling between the cracks".

The weaknesses are worrying, the PAC adds, because the government's targeted savings of £21.5 billion and cuts in public-sector staff (in England) of 84,000 by 2008 "require new ways of managing services, and a particular need for the associated risks to be managed successfully".

Public-sector union Unison said the report confirms its long-standing claim that the risks of outsourcing are not fully understood by civil servants.

Martin Deller, a spokesman for the union, said: "A notorious example is the outsourcing of hospital cleaning, so that we now have 50 per cent fewer cleaners than we did 20 years ago, but 5,000 deaths a year are caused by MRSA."

A spokesman for the Office of Government Commerce said it was up to individual departments to assess risk and whether outsourcing was appropriate.

"Each department can consider outsourcing, but there is no central edict from the OGC about whether it is good or bad."

Decisions on how to meet efficiency targets were for public-sector bodies themselves, he added.

Robert Elsey, a member of the CIPS contracts management group, said the public sector still lacks risk management expertise, and that not all public-sector staff recognise it sufficiently.

"There isn't the attention to risk assessment when letting contracts out that there should be," he added.

The Inland Revenue's private finance initiative, which saw ownership of its offices transferred to an offshore company, was also criticised last week by the PAC.

It said the revenue had failed to analyse what would happen if the contract failed and how it could be terminated.

SMjun2005

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