Trends in Contracting Out

Trends in Contracting Out

The following are excerpts from Working Together for Public Service, Report of the U.S. Secretary of Labor’s Task Force on Excellence in State and Local Government through Labor-Management Cooperation, May 1996. The 14-member task force consisted of representatives from the ranks of labor, management, elected officials, neutrals and academics. Its work represents the most comprehensive examination ever undertaken of the delivery of public services in the United States.

“First, although the level of discussion of, and interest in, contracting out is quite substantial, any increase is far less dramatic than the level of discussion and popular reporting suggests. Even in areas which were reputed to be active in contracting out, new contracting out was actually limited, normally to a few services, and normally to a small impact on numbers of employees.

“Second, contrary to much of the popular discussion, private sector costs are not necessarily lower than the cost of providing the service within the governmental structure. There does not appear to be a widespread cost advantage to outsourcing, particularly in core services.

“Third, where it has been attempted, contracting out does not appear to be as quick or easy as is often suggested. Monitoring contracts of complex, hard-to-measure services is far more difficult than traditional contracting or purchasing. Many public jurisdictions do not have well-established means to set effective bid requirements and conditions, to thoroughly evaluate the bids, and then to measure performance.

“Fourth, there is a general lack of adequate financial and performance data to actually measure cost and quality in order to know whether either a bid or later performance represents an improvement in cost or quality of the service.

“Fifth, wage and benefit levels appeared to be far less significant factors than changes in systems, work practices and improvements in communication and coordination arrangements.

“Sixth, the presumption that quality is lower when done by government appears to be a part of the government bashing that is currently popular, rather than a reflection of reality.

“Seventh, a major issue about which there is substantial agreement among the proponents and opponents is the importance of a 'level playing field'.

“Overall, despite some increase, the use of contracting out appears to be more limited and with far more variables affecting cost and quality than simply the difference between government or private sector responsibility for the service."

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