Niyamath Parveez

Local governments and public bodies are in a no win situation for some decisions they have to make. Tax payers money and getting the most efficient use from it is extremely important and the public would be up in arms if they thought their money was being wasted. Unfortunately, one way that a public service or non departmental governing body can reduce costs is to examine outsourcing as a way of lowering their labor costs. The people who are strongly opposed to the inefficient use of tax payer’s money should be delighted about the savings that this move will bring but of course, as there is liable to be a local loss of employment arising from outsourcing, there is public outcry. This means that whatever decisions a council or government makes, some parties will take great discomfort and displeasure from it.

This situation is perfectly explained by examining the issues facing the Transit Board in North County at the moment who are struggling to offer a bus service for the income it brings in. There should be a duty placed on bodies like this to ensure a public transport provision is offered to the local community but if the current method is not suitable, then alternative methods should be explored. This is the thinking behind the Board’s decision to look for tenders from firms who are willing to provide an outsourcing service to run their buses. The Board’s way of thinking can be seen that they cannot afford to run the service in its current form but by choosing a different method of providing the service, they will be able to ensure a transit system is provided for the local community. It is certainly not ideal but it is a better alternative than the Transit Board pulling out all conveyance vehicles from the area.

Of course, this move has been criticized by some quarters with six bus drivers making a frenzied opposition to these proposals. As they rightly point out, for the lower wages that the outsourcing firm will be offering, there is next to no chance of the currently highly skilled staff being able to be kept on or for the staff to justify the wage cut. This is extremely unfortunate and the loss of experience and skill from the workplace is a very unfortunate side effect from outsourcing. It is always hoped that the level of expertise brought in by outsourcing will be enough to counter the people who have left but on occasions, it is not.

The potential job losses will cause a lot of difficulties in gaining full public approval but the fact that the same body has managed to undertake similar outsourcing practices on a number of its other lines, without any noticeable loss of quality or service, should be enough to convince the Board that this is a move worth taking. It is true to say that outsourcing will cause a great number of issues and conflicts for a firm and the emotive nature of the move can be never be discounted easily.

The news of job losses is hardly a surprising story these days with so many firms having to cut back on their labor costs or even go release all of their staff. Such is the scale of the credit crunch that is blighting the world at the moment, no one is really safe with respect to their job but there are still companies where job losses make people wince. The banking industry has clearly been affected heavily and even though there have been a number of redundancies in the industry, there are still more expected to come. One of the recent announcements has come from Lloyds, who have said that over 2,000 jobs are being shed.

Part of the reason that a company like Lloyds can make this sort of decision and still keep trading successfully is due to the importance of outsourcing. There seems to be a difference of opinion these days over whether outsourcing is still popular and improving. Some say yes, some say no and it’s all a matter of what you are basing your expectations on. In the current climate, it is probably unlikely that any company or industry will have true success but the outsourcing industry appears to be reacting okay to the current slump and will likely be okay in the long run. However, there are some political pressures that are impacting on the ability of some firms and companies to offshore outsource. When jobs are being lost left, right and centre, it can be a PR disaster for some companies to offshore their work to a different country. They would be viewed as monsters by the public and it could lead to a massive drop in sales, which no organization needs at this moment in time. Therefore, some companies are finding it makes sense to place some clauses in their outsourcing contracts to ensure the public doesn’t think too badly of them.

The British government has long had outsourcing contracts which state that the jobs must be retained in the United Kingdom, which clearly negates some of the benefits that will arise from using outsourcing. As other countries have standard of living and minimum wage levels that are far lower than their UK equivalent, it stands to reason that it will be possible to find lower wage levels in other countries. Not being able to send tehse jobs abroad will make it harder for an outsourcing supplier to competitively tender for jobs but many are finding a way around it.

It has been noted recently that some Governmental departments and Lloyds Banking Group have had an increasing number of workers being shipped in to work with them as outsourcing staff from the company Capgemini. According to notorious right wing English newspaper the Daily Mail, these workers are being shipped over from India in an attempt to undercut the UK workers and the paper thinks this is a disgrace given that the UK unemployment levels have topped the 2m mark. Unsurprisingly, there has been no official comment made about this situation so it is unclear whether it is true or not but if so, it could well spark a dangerous precedent with regards the future of outsourcing.

If firms have learned anything in the past few years, apart from banks don’t always know what is right for the market and the economy is that outsourcing is becoming a tremendous way to reduce costs and to bring in experienced workers to assist your own staff. Unfortunately, when jobs are scarce and the economic climate takes a turn for the worse, the issue of employment becomes an extremely emotive issue and many people can turn on outsourcing and deem it to be distrustful to a local community. It is true to say that many firms have reduced their workforce in certain areas due to outsourcing but equally, the outsourcing capability has enabled many firms to maintain an element of workplace when without it they may actually go bust. It is important to view both sides of the argument as fairly and as unemotionally as possible in order to deem whether outsourcing is a great solution for your firm.

One area where there has been a lot of healthy debate regarding the merits of outsourcing has been in Wisconsin where the local Department of Transport (DOT) has utilized outsourcing capabilities for more than a hundred jobs in less than the past year and a half. A study into the work has indicated that the department has overpaid for these projects and if they used local workers, it could have cost considerably less. This is before you factor in the benefits that would arise from employing local workers and the positive impact this could have on the local economy. Outsourcing can have a positive impact but local councils need to have an awareness of the total costs and benefits that can be gained by outsourcing but equally, those who criticize need to be aware that it is about more than just cost.

Whilst the jobs may have been carried out by local staff, would the same quality of work have been carried out? If the work was put out to tender, a number of factors could have been the key reason for deciding to choose who was granted the project and it is wrong to think that the lowest cost was necessarily the reason for an out of town firm being given the job. A local council or government has a duty of care to ensure that the work being carried out is of a sufficient standard and quality and using a lower quality supplier may actually cost more in the long run. A high quality outsourcing supplier should be able to ensure that the product or service is in good condition and is able to last for a considerable amount of time.

There is certainly no doubt that the government body should be undertaking a cost benefit analysis on the outsourcing project in order to ensure that the right value is being had from the work. This means that the overall benefit to the local community needs to be factored in and if the provision of work to local citizens would have been of the most value, it is likely that the job should have been outsourced in this manner. However, there are many reasons for choosing an outsourcing firm to work with and until the Wisconsin DOT states their criteria, it would be difficult to state if they were right or wrong for the actions they undertook.