Pourcing And Risk Factors Related To Keeping Services In-House?

Submitted By rajeshagg
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Q. Determine risk factors related to outsourcing and risk factors related to keeping services in-house?
Q. How are the privatization options most effectively evaluated?
Table of Contents

In today’s ear where expectations for any deliverable are high, making a right decision is crucial, how best can municipality public services be taken care – weather in-house or privatization. Evaluating the assumptions and alternatives for both the options in-house or privatization is very important, the evaluation process has to encompass accountability for ensuring efficient services at appropriate cost ( (Fryklund, Weil, & McCullough, 1997).
Public sector is not profit driven and its primary goal is not to maximize profits (Røste & Miles, 2005), but to minimize the losses, if any. Public organizations service delivery has to meet objectives regarding productivity, efficiency and quality of services. Privatization has to be managed the same way municipality would manage its own department. Looking in past there have been many problems in opting either method, to avoid repeating the problems utmost care is to be taken while evaluating the privatization on transparency and relationship (Fryklund, Weil, & McCullough, 1997).
Evaluation can be divided in two parts: - Technical approach (Wölfl, 2005) (Kox & Rubalcaba, 2007) (Timmer, M., & van Ark, 2007) and performance approach.
Technical approach evaluates performance on the basis of productivity gains and performance according to management viewpoints (Osbourne & Gaebler, 1992) (Boland & Fowler, 2000) (Propper & Wilson, 2003) (H., 2002).
Service productivity measurement is a challenging issue in the service research. The performance of public services has to take into account multiple objectives, such as accessibility, quality, and equality in services provision, that are even more difficult to measure (Andersen & Corley, 2009), Financial Implication, Citizen Sensitivity, Vendor Switching Cost (Emanuele Padovani & David W. Young, 2006), Jobs aspect and Job Specialized Skill.
Technical Approach– Productivity Gains
Citizens demand better services from Public Administration (PA) with their taxes. PA should look in Quality of work done and is important for City of Saint John (CSJ), since this directly links to the citizen satisfaction. Quality of service provided by CSJ in-house is one area which could be considered as non-satisfactory in service by private company and could lead to the dissatisfied citizen and will affect the citizen sensitivity and if CSJ has to switch additional cost will be incurred and which will delay in providing the services to the customers. Also the objective of PA is different than that of Private Companies as Private Companies mostly focus on maximizing the profits and less on the citizen satisfaction and thus creates the gap in providing the services (Røste & Miles, 2005; Euske, 2003).Although PA focus on providing the services but they cannot ignore the financial matter (Murray, 1975). Private Company service delivery has to meet objectives regarding productivity, efficiency and quality of services. PA’s ability can only be seen by meeting citizens need (Halvorsen, Hauknes, I., & Røste, 2005).
Linking the Measures It is important to measure the quality of each service and improvement of the same for citizens. Every service should be linked to the social indicator. Before assigning the services it is important from PA’s aspect to understand the quality level of services. Refer to Figure - The Three types of Measures in Municipality.
Loosing Key Skill Privatization may lead to the loss of the key skills over a period of time that PA might possess. This could also affect the technical knowledge of handling the issue and discussion while negotiating with the private company. In a long run this could affect in depending more on the private company and possessing less domain knowledge in critical area.
Performance Approach –