Outsourcing govt public-sector services beneficial: US experts

Source:Xinhua Published: 2013-8-8 13:03:31

The US government at various levels has outsourced many public services to private organizations and vendors over the years, and US experts consider it necessary and positive.

"We're living in an era when government -- federal, state, and local -- is looking at any conceivable way to cut operating costs and balance their budgets," said James McClintick, an attorney in Chicago.

"Governments thus look to private-sector outsourcing as a way of saving money and reducing costs associated with 'red tape' and bureaucracy," he added.

McClintick cautioned that the contracts should be well drawn otherwise there will be a lack of transparency. "That will greatly diminish the quality of the services and lead to some very questionable people providing them," he said.

"Government in the US is not good at running things," said Dennis Chookaszian, board member and professor at University of Chicago and Cheung Kong University.

"It's better for the government to outsource services and get things done more effectively," Chookaszian said.

Chookaszian cited cost-saving, efficiency and quality services as key benefits for outsourcing.

The US government has a long history of outsourcing public services to private sectors, according to Kristen Gronbjerg, professor and governance and management faculty chair at Indiana University.

"Local government provided funding to contract private services since the 1900s, state government started in the 1950s, and federal government in the 1960s," said Gronbjerg.

Gronbjerg said that grants and fees are two major forms of payment that the government provides.

"There is a shift from grant to service fees more recently," she said.

Government grants provide funding for academic research, cultural events, economic consulting, foster care, etc., while fees are paid for contract services that are often based on performances, said Gronbjerg.

The third type is subsidies for services such as Medicare and Medicaid, which is more difficult to track, continued Gronbjerg.

The government usually sets up requirements for service providers and audits their reports to check for accuracy.

"It's rare to use a third party to do evaluation due to high cost," said Gronbjerg.

Public sectors that have been privatized include services that are less central, with identifiable outputs, seasonal, or require specialized skills, according to the experts.

There are many challenges to monitor programs contracted out by the government since it involves skills working with different organizations and requires a good feedback mechanism.

Cook County, with its county seat in Chicago, posts all its regulations, preapproved list of vendors, and buying plans on its website in an effort to be transparent and accessible.

The current updated "buying plan" for 2013 lists projects from supplies, maintenance, construction, to repairs, with purchase amount ranging from 25,000 US dollars to 1 million dollars.

The County Government also provides a monthly workshop for interested vendors to assist them in understanding the various aspects of public procurement.

The city of Chicago has also outsourced many public services.

Chookaszian cited the outsourcing of the waste collection in Chicago as a good example.

"It's cost-saving and effective," he said.

Chookaszian said that outsourcing is more beneficial for the government when it is in short term and there are more companies qualified to bid on the contract.

"Long term is difficult to assess," he said.

Bill Huber, managing director at Alsbridge, Inc., a consulting firm, agreed with such point of view, stating that generally, contracts should have a 5-year horizon.

"It's hard to predict long term and few companies are going to last for 100 years," Huber said.

Huber said there should be a balance between government and private services and the government should have the option to take the services back so as to ensure that companies deliver the level of services required.

Huber cautioned the Chinese government to pay attention to three specific areas when it comes to outsourcing public sector services.

"Sourcing well in general and making sure there is adequate investment to cover real cost," Huber said.

"Also, make sure the agreement has well defined contractual mechanism to ensure continued investment and innovation over the life of the contract, and the governance is set up to have defined transparency on performance, communication, and decision-making rights," he added.

Posted in: Americas

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