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FM Clinic: Future of outsourcing public services

Is the rush to outsource public services in central and local government going to slow down as a result of the public becoming disillusioned by management consultants and major service providers securing large profits amidst claims of very poor levels of service? Will the good work done by FM service providers in the UK be tarnished by the failures of decision makers on the client side and poor results by the few major plc’s repeatedly selected for this work?

THE SERVICE PROVIDER’S VIEW
OWEN GOWER,
COMMERCIAL AND FINANCE MANAGER – BUSINESS DEVELOPMENT AT BILFINGER EUROPA

The main reasons for outsourcing public services are to save money, transfer risk and allow that public body to focus on its core delivery such as curing the sick or educating children. Money pressures don’t seem to be abating so I don’t predict these pressures in favour of outsourcing will disappear in the near future. Outsourcing will continue and has even been predicted to rise in Wales; the councils there having been, up to now, relatively sheltered from financial pressures by the Welsh Assembly Government, Pembrokeshire council’s recent vote in favour of outsourcing being an example of this.

Regardless of financial motivation, public disillusionment has a powerful influence over outsourcing, the public and media backlash against the PFI being the most recent evidence. The political reaction to this led to drastic reform of the model, subsequent banning and eventual dissolution of the procurement method.

Even so, the pressures which led to the PFI continued and it was eventually replaced with the PF2, an evolutionary change rather than a wholesale replacement or abandonment of the principle. Andrew Buisson of Norton Rose wrote a revealing comparison of the change in 2013 which gives an excellent insight owing to his unique point of view.

One of the main issues with the PFI was the perception of excessive profits being made by private companies for delivering public services. Having had first-hand experience of public/private partnerships, the public sector’s aim to outsource risk directly contributed to this perception – if the risk does not materialise then the public does not benefit from the reward. Economies of scale and secondary market refinancing of debt also created a rise in profits for the private sector – a revenue stream not accessible for local government in any other procurement route.

However tarnished by this perception outsourcing may have been, I don’t believe that excessive profits are as significant in the current climate (indeed, many service providers are concerned with the `race to the bottom´ on price when winning contracts), the political landscape and influence of far left socialist values brings with it the perception that any profits made on public services is morally inappropriate. Privatisation is a dirty word in the UK and outsourcing is seen as “privatisation by stealth”.

There is a generally accepted view that services can be performed more efficiently and effectively by specialists, so why not public services such as maintaining street lighting, or the sourcing, supply and development of specialist machinery? It’s within the very nature of our capitalist economy that profits are required to encourage competition and innovation. Specialism and diversification as a business strategy ebb and flow as market conditions dictate, and I believe we are seeing a return to specialists or partial in-house delivery from the recent tradition of procuring a sole provider to perform all services which slightly overlap, otherwise known as Total Facilities Management. Mitie’s recent profit warning and subsequent share slide is an indication of market conditions affecting a major player in our industry.

With limited possibility yet obvious requirement to make profits from public outsourcing, service providers must innovate and disrupt the traditional method of structuring and performing services in order to effectively deliver to the public sector. Equally, public sector clients must change their focus towards becoming commissioners rather than deliverers of certain services in order to efficiently procure and manage outsourcing projects. The question is not, will it end, but how can we all do it better? 

THE HR VIEW
C-J GREEN,
GROUP HR DIRECTOR SERVEST GROUP

FM moves in peaks and troughs. In the general sense, the industry seems to be easily influenced by trends. One minute, everyone’s outsourcing – the next, in-house is in vogue again. Similarly, client needs tend to fluctuate as regularly as the changing tide; for example, single service requirements sometimes trump full service provisions, and likewise.

That being said, we haven’t really noticed a rush to outsource public services in central and local government. Nor have we seen noticeably more involvement from managing consultants.

Regardless of the ebbs and flows, the outsourcing trend – when reduced to its most basic level – stems from the desire to find a way to make things work in the business as cost effectively as possible. As with anything, you pay for what you get. Dwindling budgets can, of course, impact service delivery. However, more often than not, poor planning, lax communication and ineffective collaboration are often the overriding factors behind lacklustre results.

With regards as to whether the industry will be tarnished by the disaster stories out there…? Well, perhaps. But, to be honest, there will always be these stories. We will never cease hearing about the dangerous cocktails of poor decisions resulting in shoddy results. This isn’t solely reserved for FM either; it applies to every sector. As a nation, we love bad news, don’t we?! And we especially love hearing about how big, successful companies with vast customer bases become unstuck. When they get it wrong, it’s something we take notice of.

The truth is that contracts can be poorly managed by small and big companies alike; but we only tend to hear about it when the larger players are involved.

As a result, there may be some disappointment about how other providers have delivered their service… but where there’s doom and gloom, there are also success stories. If you skip past the headlines, you’ll see plenty of examples of how things have gone well. You must not allow the failings of others to cloud what you’re trying to achieve. You have to focus on what you deliver as a business and what you offer as a team.

Regardless of the business size, it’s imperative not to become arrogant or complacent, or else the service delivery will suffer. Lots of things play a part in the good provision of FM. In this industry of ours, the customer has to be at the heart of everything – and maintaining a keen sense of integrity and breathing life into this core value is of paramount importance.

Ultimately, poor decisions will inevitably result in poor results. Part of our job as an FM service provider is to work with our clients to ensure that we offer guidance when it comes to making the right decisions that will filter down through the operations.

At Servest, we have greater success when we go into our client relationships with a true partnership approach. This combined with experience and commitment to values makes the world of difference. If you have a convincing reason why the customer should engage with you, then you shouldn’t be tarnished by the core providers that are named and shamed in the press. 

About Sarah OBeirne

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