Savings must not be the sole driver of public sector outsourcing

Steve Malone
posted by Steve Malone
27 January 2016

The trend towards outsourcing in the public sector shows no signs of slowing down.

Figures reveal it accounted for £2bn of the £2.2bn of deals signed in Q3 last year, the largest spend since 2012. Even allowing for the ‘general election effect’ – deals stalled until after the new government was revealed – the statistics show outsourcing continues to be a favoured option for many. There have been significant year-on-year rises in both local and central government.

As MD of a company that provides outsourced procurement solutions, I ought to be welcoming this trend. But to drive value, it’s essential that the customer understands what it means to outsource services and is prepared to benefit.

It is clear that the public sector views outsourcing as an opportunity to deliver savings with increasingly shrinking budgets, but this cannot be the only driver. Organisations must be assessing a wide variety of value drivers – improved capability, access to greater resources to cope with fluctuating demands, cultural fit, access to further category expertise, aggregation…. the list goes on.

Organisations often fear the lack of control once they have outsourced and this has to be addressed upfront. Define what control is required and be rigorous to ensure these are the right things to drive quality and value, rather than inhibiting partners.

Also, do not underestimate the role of contract management. Often organisations think they outsource the service and then only ever think of it again when a problem arises. Contract management is essential for both the organisation and the outsourcing partner in making sure the service moves with the changing requirements of the client and all the focus is on the right things and not restricted by an adversarial relationship and contract developed at a specific time.

When it comes to outsourcing your procurement function, organisations need to be focused on what it is they are looking to achieve. Two key considerations are – driving better value and enabling you to focus on your core business. Having worked with a variety of organisations across the public and private sectors, I find the solution is unique in every case and sits somewhere on a spectrum – from a fully externalised function to tailored, specialised support around specific category areas of spend, for example, energy.

Whatever route is taken, it should run to the heart of an organisation’s business: improving spend visibility and category expertise, tackling duplication and inefficiency and driving better value from the supply chain. The huge proviso on any approach is that you will only reap the benefits if you make the procurement function a strategic part of the organisation.

Steve Malone is managing director of Inprova Group

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