When governments choose to outsource, it is usually non-competitive public services and works that are entrusted to the outsourcing provider. Such business process outsourcing solutions would involve the transfer of control and cash flow rights to a private company, usually in exchange for an investment of some kind. Outsourcing contracts of this kind may be conceived as “build-own-transfer” or “build-own-operate-transfer” financial relationships. In other instances the contracts may not involve any capital investments and may be for purely services. An important thing to note is that such outsourced solutions involve some risk of loss for capital investments as well as some other drawbacks.
When government agencies outsource contracts to private firms to work on public properties or estates, the major elements of democracy become unavailable to the people. For example, consider social housing outsourcing – when this is outsourced to private developers, important things such as transparency, oversight, scrutiny, and responsiveness that are integral to democracy are lessened for people who are most directly affected. This is what happened in the Grenfell Tower incident in the UK. The residents speak of how they were not granted their requests, nobody listened to their voices, the complaints they made were not answered, and what they were promised wasn’t given to them.
Unlike government, private companies have no duty to provide for any public interest and their primary motive is to maximize returns for shareholders. Many questions have been raised whether corruption or misuse of public offer for private gains led to the Grenfell disaster. The nature of outsourcing public service is that even the most well-meaning politicians may enter into the contract that can lead to major harm both financially and in human terms without having to actually commit any crime. In the UK for instance,
- The relationship between local councils and companies bidding for contacts is usually highly unequal.
- Local government funding cuts have caused reduction in resources dedicated to providing scrutiny and oversight.
- Since the Audit Commission that scrutinized local authority contracts has been abolished, the huge multinational private companies involved have major advantage over local authorities in terms of technical knowledge and negotiating experience.
- Councillors themselves find it hard to evaluate and oversee outsourced contracts. So it is next to impossible for people using and experiencing services to do so.
- Commercial confidentiality is frequently quoted as a reason for not revealing the information necessary to assess contract content.
- When the service is provided by the private sector, they are not subject to the rules of freedom of information that applies to local governments.
In Lambeth, London, the residents recently undertook a “people’s audit” of the council’s accounts. This resident audit group included highly experienced finance professionals who spent many hours following up on information requests and working with poor quality data. They claim to have found many instances of inadequate supervision of contracts, questionable valuations of council property and land, and regular overcharging and billing for work that wasn’t even carried out. They concluded that financial losses ran into millions.
A stark example of the lack of scrutiny of outsourced contracts is the Lendlease contract in the London borough of Haringey. In this region, council leaders are planning the highest value local government – private sector contract in history. This contract was never presented in any manifesto on which voters could comment or voice their opinion. Two billion pounds worth of council homes, property and land are going to be placed into a new “development vehicle” that will demolish and rebuild vast areas of land. The private company Lendlease will own 50% of this new entity. This company has a dark past. It promised to redevelop the Heygate estate in Southwark by providing 500 social homes as per its initial plan, but they reduced that number to 82 in the final plan, out of which only 20 have been built so far. The company has already made millions of pounds from its contracts with Southwark council.
These examples show that outsourcing government services to private companies must be cautiously done so that democracy is not rendered ineffective. If the government cannot exercise proper scrutiny and oversight when using such outsourced solutions, the better option according to the citizens is to return the responsibility to democratically elected leaders who represent the people.
