Jan 18, 2018

Carillion and Co expose serious flaws in outsourcing

Does poor management of outsourcing by governments breed laziness and incompetence in major companies? The collapse of a major UK company poses serious questions for a key tenet of neoliberalism.

Glenn Dyer and Bernard Keane

Crikey business and media commentator / Politics editor

Graffiti at the site of the new £355 million Royal Liverpool Hospital, which was being built by Carillion.

As if neoliberalism wasn't in deep enough trouble across the West, now one of its foundational concepts is sinking into the mire in the UK. Outsourcing of government functions is at the heart of neoliberalism -- from making services contestable to contracting out to outright privatisation, the idea that the private sector can get things done more efficiently and effectively is sacred writ.

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10 thoughts on “Carillion and Co expose serious flaws in outsourcing

  1. Letterboxfrog

    The problem with a lot of these providers is the way the contract is designed. They encourage underbidding to be then offset with recovery of damages with ridiculously high mark ups. Then the desire for litigation starts. If the government doesn’t sack the Vendor quickly, then bad behaviour becomes accepted with no way to sack them without losing in the courts. Despite this, public servants are rarely taught how to manage contracts, only making acquisition convuluded and “fair” by making it difficult for SMEs to compete due to complex contracting requirements. Bring back good public service managers empowered to act swiftly to protect their political masters, rather than expecting their masters to make the decision for them.

    1. Justin Thyme

      Round here the public service managers are on contracts and if they do not suit the incoming government or new CEO then they are gone. The friends of the new government take the senior management positions but it turns out that they do not know much about the business they run. They can hardly be expected to ride shotgun on contractors that are also friends of the government.

  2. JMNO

    I don’t know whether it worked better in the olden days when there was a Department for Housing and Construction which tendered out specific work to the private sector, to be completed on behalf of the Government, and therefore maintained control over what was build and the costs and the Government owned it at the end. It seemed to have been more transparent and more cost-effective.
    Outsourcing is not competitive if you are running a monopoly and if the Government is going to keep shelling out for it, whatever happens.

  3. Malcolm Hutton

    I was caught with a failure of company management to properly monitor what was going on in another franchise, and had to take the company to court in order to get compensation. There have been many failures of company managements in Australia and elsewhere, and on the evidence the private sector does not automatically have better managers than the public sector. Public sector managers are more risk averse, however, and are rewarded by their political masters for not having things go wrong rather than for imaginative achievements. I suspect upper level management typically operates too far from the coal face.

  4. AR

    Straight from the horse’s arse – “Outsourcing of government functions is at the heart of neoliberalism ” – and people (claim to) wonder why it’s a stinking corpse.

  5. Sleuth

    The private sector works best at manufacturing products in a competitive environment, however operate at their worst when providing monopolised services via outsourcing by governments.

  6. Kerr Danny

    Snouts in the trough all round. Some projects go well with private/public building the basic infrastructures. Trouble comes when everything gets outsourced. Recently moved into a new workplace, capably built. Everything geared up for a move, months of preparation. Goes well, except Spotless totally unprepared and clueless. Has taken a year for them to get sorted. God knows what that cost.

  7. Itsarort

    I’m not quite sure why we’re so surprised. And, “…Featherbedding Central for public sector unions”? So what do you call this debacle?

  8. Whodathunkit

    Gut the public service, hand over decision making to wet behind the ears political hacks straight out of uni (AKA “ministerial advisers”), shovel bucket loads of money to the private sector to deliver public services and then be surprised when billions of dollars disappear with nothing to show for the “investment”, whodathunkit.
    As a now retired career public servant I have watched this develop over the last twenty to thirty years. Sorry folks but when you elect fools this is what you get.

  9. klewso

    “Bloody privatisation” what?

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