Is Public Sector Outsourcing Unethical?

By Allan Watton on

EthicsEvery now and then I will come across an article about outsourcing that gives me pause for thought. One such article was published in The Guardian back in January this year.

The article referred to a review designed to improve the way public bodies behaved. The review claims that privatised public services pose a “significant new risk” to public ethics and questions the extent to which [private sector companies] have genuinely developed the appropriate culture to work with the public sector in front line service delivery.

Although there was no overt claim that outsourcing as a practice is unethical or that methods employed by public and private sector organisations tread upon dangerous ethical ground, the report makes it absolutely clear that there are concerns regarding  the ethics surrounding outsourcing agreements.

So Is Public Sector Outsourcing Unethical?

In a word, no.

As a concept, outsourcing is no less ethical than keeping services in-house. In fact, one can argue that outsourcing is more ethical according to the specific service being delivered, rather than deliver that same service in house. However, it can arguably become unethical through the behaviours of both provider and client. To understand this potential, one must consider the typical reasons as to why any organisation would choose to outsource in the first place.

The primary reason to outsource is to enable an organisation to better concentrate its limited in-house resources on the areas in which they are most effective. Subsequently, an external organisation (be it public or private sector, or possibly as part of a shared service) can deliver services and support the organisation in areas in which the client organisation is not able, for one reason or another, to internally invest to become particularly proficient.

Popular examples of outsourced services are HR administration, payroll, finance, procurement, ICT and so on. The benefit of outsourcing in such areas is that you can leverage your partner’s (usually) more effective and better developed systems and processes to undertake “mass transactional” based services. In theory, this should lead to an increase in service levels at a reduced cost. Furthermore, your partner can typically make a reasonable profit due to the efficiency with which they run the service.

In theory, outsourcing is a win/win for both parties involved and there are no ethical concerns.

Where is the Ethical Conundrum?

The question of ethics typically arises when the desired efficiences are not attained by the external partner, and even more often when service quality falls and costs increase.

Under such circumstances, the trust in the partnership begins to erode as both client and provider start blaming each other for the efficiencies not being achieved. The provider might blame the client for not explaining its requirements correctly and the client might blame the provider for not warning that there was an issue with their requirements during the bidding process – the partner only raising the issue over requirements once accusations of non-performance start to emerge.

From that distrust arises the question of whether genuine mistakes over expectations had been made or whether there was a more sinister and manipulative agenda at play from the very outset. Therein lies concerns over ethics (and culture); typically it is the vendor’s ethics that come under scrutiny. From this flows an assumption by the client that the culture between the parties simply isn’t compatible.

That assumption was reflected in the review mentioned at the top of this post. The “risk” isn’t so much in the concerns of whether the parties involved will conduct themselves in an ethical fashion, but more about the ethical concerns regarding the outsourcing of a service without the express “permission” of the taxpayer.

Usually, this ethical concern only manifests itself if the outsourced service fails to meet its objectives. Otherwise, there is often no cause for complaint. So in a sense, the issue has nothing to do with ethics and everything to do with performance. A public sector body has a duty to select a provider that will deliver on its business outcomes and the provider has a duty to fulfil its end of the bargain. Although the partnership must acknowledge the often-quoted culture clash of public service vs. profit, that clash should not prevent each party from performing as necessary to achieve a mutually beneficial outcome.

These ethical concerns add no further complication to the process of outsourcing. The pressure is on both parties to perform and fulfill their objectives; performance is key. It is only in the event that an outsourcing partnership fails that questions of ethics become relevant, at which point the failure itself takes priority over the reasons for the failure.

Photo Credit: vanhookc