Council spending on outsourcing rises 23% year-on-year – report

Local government spent £756m on outsourcing in 2015, with the total value of contracts signed by councils up 23% year-on-year, according to new research.

The study, conducted by business process outsourcing (BPO) provider arvato and industry analyst NelsonHall, revealed that local government contracts accounted for 13% of the total value of outsourcing agreements signed in the UK last year.

The data also highlighted that new agreements accounted for 55% of deals signed last year, up from 38% in 2014. Three-quarters of the deals covered BPO services, with councils mainly procuring HR, revenues and benefits and multi-process customer services.

Debra Maxwell, arvato UK & Ireland’s CEO for CRM & Public Sector, said: “Authorities really focused on transforming their services to meet citizen demands and deliver new savings in 2015. In the wake of major welfare reforms, and with new funding reductions announced in last November’s Spending Review, councils need to fundamentally re-think the way they work.

“We expect to see more new approaches to transformation in 2016, such as moving services entirely online, sharing services virtually, and introducing robotic process automation. Private sector partners will continue to play a key role by bringing in expertise and technology to help make those changes.”

The arvato UK Outsourcing Index also revealed that average contract values grew by 30% year-on-year to £37.8m, with deal lengths rising to an average of 66 months, representing a 29% increase over the same period.

Locality's chief executive, Tony Armstrong, criticised today's figures, commenting: “While it’s true that funding reductions for local authorities means that councils need to look again at how they commission and deliver public services, outsourcing mega contracts to large national companies is not the way to achieve efficiency. Standardisation and centralisation of services results in one-size-fits-all packages that don’t reflect the needs or strengths of local communities and waste millions of pounds every year.

“The false belief in economies of scale and standardisation of services is the problem, not the solution, and upscaling and outsourcing to national organisations in this way is actually making the crisis worse. Large-scale, standardised services don’t solve people’s problems; our research shows they lead to a drop in quality and a rise in costs.

“It is possible to effectively transform local public services so they meet people’s needs and deliver savings. Instead of scaling up contracts, local authorities need to realise that community-focused services commissioned and delivered at a local level give people what they need, when they need it, delivering services that work for the individual, the community and the taxpayer.” 

Last year a National Audit Office (NAO) report called for the government to keep better track of how much profit companies are making on outsourced public services. It also called for the government to negotiate greater access to, and make better use of, open book accounting data.


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