Sections

Services

Information

UK United Kingdom

Pursuing ‘efficiency’ in the public sector: why privatisation is not necessarily the answer

“The reality is that government employees around the world are known not to be as efficient as the private sector.” —Paul Fletcher, Liberal Party, Member for Bradfield “The efficiency of the public system…

The long-held belief that the private sector is more efficient than the public sector is not supported by theory or evidence. www.shutterstock.com

“The reality is that government employees around the world are known not to be as efficient as the private sector.” —Paul Fletcher, Liberal Party, Member for Bradfield

“The efficiency of the public system is about half of that of the private system.” Peter Lindsay, Liberal Party, former Member for Herbert

There is a common misconception that the private sector is inherently more efficient at the provision of public services. But this is not supported by theory or evidence.

My recent report for the Centre for Policy Development outlines why market-based solutions — such as privatisation or outsourcing — won’t necessarily make our public service more effective or efficient.

The field of economics has developed a thorough understanding of the concept of efficiency. Unfortunately, this knowledge is generally expressed in the jargon of the field and has not tended to inform the public debate on efficiency of the public sector. This leads to misconceptions, such as that markets will always drive efficiency.

Not supported by theory

Abstract economic models predict that the tough and invisible hand of the market ensures no effort is wasted on production of items or the provision of services that people are not willing to pay for. And, where there are limits to what can be made or provided, effort goes towards those goods and services that have the highest value in terms of the amount that people are willing to pay.

The model is limited, however, for the real world departs from the model in many important ways. Discussions of “market failure” make it seem as though private sector primacy is at least partially right; that markets are generally more efficient except in special cases where they fail. However, in public service markets, these special conditions are common rather than exceptional.

Public services are provided mainly in areas where standard competitive market conditions do not apply. For example, distributional outcomes are often important: public services are generally thought best to follow need rather than willingness or capacity to pay (like justice or disability services), and minimum service levels are often desired even if they are high cost (like services to rural and remote communities).

Outsourcing also creates a “principal-agent” situation, which is where an individual or organisation (an agent) is carrying out work on behalf of someone else (the principal), and where there is a tendency for the work to produce outputs that are suited to the needs of the agent rather than the principal.

Furthermore, many fields of public activity involve networks and scale efficiencies (roads, statistical collection, meteorology services, and so on) and these are most efficiently delivered as single public systems.

Not supported by evidence

A review of 129 reports and case studies undertaken by Graeme Hodge found that outsourcing works well in some cases and badly in others. And it is worth noting that many studies that found benefits did not take into account the broader economic and social costs of outsourcing. For example, outsourcing frequently results in significant job cuts, and the welfare costs of increased unemployment may exceed any savings. This lack of support for private sector primacy continues to be found in more recent studies. Public and private hospitals show similar efficiency levels once their different roles are taken into account. Public and private schools show similar levels of attainment once the demographic profile of the students is factored in.

Making the right decision

Misunderstanding efficiency not only biases some towards outsourcing or privatisation, it can also cause those who support the public provision of a service, to argue against efficiency or argue it is not important. This is a mistake as pursuing efficiency is critical tool in achieving any aim. Given the scale and significance of the work that the public sector undertakes, it’s clearly important to have it operate efficiently. Allowing mistaken notions of efficiency to drive policy will result in “efficiency reforms” that actually increase waste.

To be clear, I am not suggesting that the implementation of outsourcing in the public sector is inherently bad public policy. There must be, however, an independent and thorough investigation into the advantages and disadvantages of in-house and outsourced service provision before any outsourcing decisions are made.

When it comes to outsourcing, too many of our politicians have tunnel vision. They can only see the private sector as efficient and are blind to its failures. Our public services do a lot for us; they need to be efficient. But we won’t achieve that by blind faith in market solutions. If you don’t want public services run down, it’s important to look both ways (left and right) before outsourcing.

This article is based on research conducted for the Centre for Policy Development. For more detail, see the report ‘Decoding Efficiency’, available here.

Articles also by This Author

Sign in to Favourite

Join the conversation

59 Comments sorted by

  1. Felix MacNeill

    Environmental Manager

    Christopher, you really mustn't try to introduce evidence and reason into a matter of religious dogma!

    Just repeat: 'four legs good; two legs bad!' until your consciousness corrects itself. Another alternative is to read the Daily Telegraph.

    report
  2. Steven Liaros

    Town planner at PolisPlan - town planning and eco-village consultants

    Christopher,
    Interesting article and I agree with your overall conclusions but would like to make the following clarifications in relation to (a) the definition of efficiency, (b) the principle of 'willingness to pay' and (c) what is the relationship between the public and private sectors.

    (a) Economists define efficiency as maximising output per unit of input, which should mean minimising wastage.
    Market participants, though, define efficiency as maximising profit, that is, maximising the…

    Read more
    1. Robert Attila

      Business Analyst

      In reply to Steven Liaros

      Here some REAL world info:

      The corporation i work for has been focusing on reducing resource use & waste for the last 7 or so years.
      We started with the easier low hanging fruit. Ie eliminating wasteful practises with a change in procedures. Then more costly but still beneficial projects were launched that saved $ & waste & hence the environment.

      I can guarantee you that managers have no problem reducing waste if there is an acceptable payback period & the human resources to implement them…

      Read more
    2. Felix MacNeill

      Environmental Manager

      In reply to Robert Attila

      Robert - with a few differences, this sounds very much like my experience in the public sector.

      report
    3. John Holmes

      Agronomist - semi retired consultant

      In reply to Robert McDougall

      In both PS and Private bureaucracies there are often found a number of industrial sociopaths. Some of these individuals seem to rise disproportionally in the hierarchy and can cause huge problems for their peers and subordinates. Not always good for good outcomes ether although can be very well camouflaged. I have seen damaged some and have a few scars.

      report
    4. Robert McDougall

      Small Business Owner

      In reply to John Holmes

      could it be that the mind set that allows some one to fail to empathise with the bodies they walk over to obtain positions of power is beneficial to the pursuit of power?

      I cant help but note that when you analyse the behaviour of large corporations, particularly the multinationals (in terms of psychology), the end analysis is "psychopathic" and the culture begins at the top.

      particularly dangerous given the influence the multinationals and large corporations have on todays politicis and resultant legislation.

      report
  3. Michael Marriott

    logged in via Twitter

    Thanks Chris, interesting article - and I'm intrigued by your references. I'll be chasing up your study out of interest. I do agree with what you suggest, that the concept of outsourcing is not necessarily bad: we just need to be mindful of the context and the services in question.

    Having worked in both large private corporations (some of the largest professional firms in the world) and large government departments at the federal/state level I was often struck by their similarities. I've encountered…

    Read more
    1. Felix MacNeill

      Environmental Manager

      In reply to Michael Marriott

      Michael, my own experience - not so different from yours but also including involvement with para-professional bodies that included both public and private sector members - leads me to very much the same conclusions and I can endorse everything you say from that experience.

      report
    2. Christopher Stone

      PhD Student at Macquarie University

      In reply to Michael Marriott

      Absolutely Michael, in terms of providing public services there is no "one true way" and the advantages and disadvantages of outsourcing need to be considered case-by-case, including complex considerations like cultural fit. A really interesting recent book on this was written by Alford and O'Flynn; a summarising article is here: http://www.canberratimes.com.au/national/public-service/the-new-world-of-service-delivery-20120806-23p10.html

      report
  4. Michael Shand
    Michael Shand is a Friend of The Conversation.

    Software Tester

    Brilliant Article, maybe you could tackle trickle down economics next, you know, the old addage that;

    "Tax cuts for the rich creates jobs"

    report
    1. John Newton

      Author Journalist

      In reply to Michael Shand

      Is it ingenuous of me to cite the GFC as an example of private sector efficiency?

      report
    2. Michael Marriott

      logged in via Twitter

      In reply to Michael Shand

      Research already done in the US: the Congressional Research Service (CRS) reviewed the last 50+ years of economic and tax policy and found no co-relation between tax cuts and increased economic growth(i.e. trickle down):

      "Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita…

      Read more
    3. Robert Attila

      Business Analyst

      In reply to John Newton

      R u kidding or serious? The GFC had nothing to do with private enterprise efficiency or lack thereof.

      It started with US govt & Fed interference via monetary policy (ie low int rates to ensure stocks 'keep a risin') & low / no dock loans so that "the poor" could buy homes as well thus pushing up prices. Both of which make the general public 'feel' wealthier & more inclined to spend $ despite their 'real' incomes stagnating over the last 15+ yrs.

      Private enterprises, investors, you & I, simply try to make the best of whatever system each govt concocts.

      report
    4. Robert McDougall

      Small Business Owner

      In reply to John Newton

      or public/private corruption? i.e. multi-national corporations, their lobbyists and Government legislation written by multi-national corporations?

      report
  5. Jim KABLE

    teacher

    Though economics is not my professional field or area of close study or understanding - I have worked as a teacher in both the state and the private sector (overseas) - and indeed - within those structures at various levels - interchangeable! But on the broader plain of the private profit versus public efficiency (or not) debate/reality I am a not unintelligent observer. Your essay Christopher outlines the positions very clearly though I was happy to see pointed out what happens when public service…

    Read more
  6. John Holmes

    Agronomist - semi retired consultant

    The mantra of out sourcing. What nonsense. To outsource specialties such as publication editors for a scientific based group merely increased the costs of the publication of documents at all levels, and because the wider staff are not interacting with the journalists/editors on a casual level, removes a significant avenue of training. In my case, not complete by any means. Hence publication rates/quality decline and costs go up.

    Likewise, when Depts did all lot of the actual work in house…

    Read more
    1. Christopher Stone

      PhD Student at Macquarie University

      In reply to John Holmes

      Agreed John, de-skilling wasn't something I had space to mention here, but it exacerbates the principal-agent problem and it does get a mention in my report. Also, if you're interested, Tim Roxburgh wrote a great report showing the problems of skill loss in the BER. You can find it here: http://cpd.org.au/2012/09/public-works-public-skills/

      You're also right about appropriate management systems, and the effects of New Public Management in the public service is something I intend to look at, when I have time... (-:

      report
    2. Felix MacNeill

      Environmental Manager

      In reply to John Holmes

      John, an analysis of the successes and failures of the Building the Education Revolution Program ('school halls' to the Murdochly-minded) is really interesting. (I'm doing this from memory, but I think I've got the basics right.)

      Firstly, it was far from being a failure; something like 95% end-user satisfaction and really only ran about 5% over budget over all, which is pretty good for big, complex construction work done on a very tight timeframe.

      But the key analysis came from the patterns…

      Read more
    3. Tyson Adams

      Scientist and author

      In reply to John Holmes

      Yes, who'd have thought that by training, educating and retaining "experts" on a topic would be a good idea?

      report
  7. Robert Attila

    Business Analyst

    Govt & private enterprises are only as good or efficiency or whatever as the people that work in them.
    Thats goes for any 'system'.

    report
  8. Brooke Berry

    logged in via Facebook

    Thank you for an excellent article. Can we make this mandatory reading for the Queensland constituency? I am currently going through the public health "restructure" which is very similar to the failed restructures I've seen in private enterprise. My father, who is by no means a wealthy businessman but has survived 2 recessions, and 2 premises destructions (fire and flood), insists that the two hardest things to do in business are to expand and to reduce. These are costs to a business as expanding…

    Read more
    1. Christopher Stone

      PhD Student at Macquarie University

      In reply to Brooke Berry

      Good points Brooke. The rapid contraction and then expansion of the public service under Howard is a good example of the costs you are talking about. A huge loss of institutional knowledge and capabilities that the APS is still recovering from. Sadly, we are likely to see this again under Abbott.

      And yes, the effects of outsourcing vary greatly with the type of service. The Hodge study I mentioned noted that many of the early outsourcing success stories were in easily specified services such as cleaning.

      report
    2. Michael Marriott

      logged in via Twitter

      In reply to Brooke Berry

      Well put Brooke - valid points.

      I recall the 1990s Howard reforms of the APS and the impact it had: a great deal of valuable talent was lost, which then had to be rebuilt. I anticipate a similar experience come September of this year: a cut to the bone approach, and then the slow and painful rebuilding of services and capacity.

      However, when ideology meets policy things get interesting: there are clear signals the incoming Abbott government is toying with the "Big Society" model:

      http://www.theaustralian.com.au/national-affairs/coalition-floats-big-society-welfare-reform/story-fn59niix-1226595061147

      However, the Big Society model seems to have "failed" spectacularly in the UK. Not only have the Tories sunk in the polls, many of them have also rejected the idea as a "fad":

      http://www.crikey.com.au/2013/03/15/rundle-big-society-wont-work-in-the-uk-or-australia/?wpmp_switcher=mobile&wpmp_tp=1

      report
    3. Felix MacNeill

      Environmental Manager

      In reply to Michael Marriott

      Hey Michael, I took a Howard package in 1997 - saved me a bundle on my ortgage but cost the poor old taxpayers a bit and, like most of my colleagues who did the same, I was back in within a couple of years - mainly because almost everything Howard hacked he rebuilt over the following years when he worked out he actually did need a few poor old public servants if he wanted to get anything done!

      In sum, a rather silly anbd irresponsible waste of public resources that inflicted damage to corporate cultures and expertise without achieving anything beneficial for the punters...

      report
    4. Dao Nguyen

      logged in via Facebook

      In reply to Felix MacNeill

      Hi all,
      On the 1997 APS Restructure (federal PS), please allow me torepeat my observations here.
      High efficiency of the APS <== Good directions + Good skills + Good management.
      (A) Good directions <== Good stream of research officers;
      (B) Good skills <== Good stream of technical and professional officers;
      (C) Good management <== Good stream of administrative officers.

      (A), (B), and (C) are mutually dependent and interact with each other harmoniously => A dynamic high performing PS…

      Read more
    5. Robert McDougall

      Small Business Owner

      In reply to Felix MacNeill

      tends to support the recent study about the Howard Govenrment being one of the most wasteful governments in Australian history.

      We are now dealing with the results of his policies.

      report
  9. Dao Nguyen

    logged in via Facebook

    Efficiency in the private sectors are oriented more toward technical efficiency and economic efficiency where productive factors' costs and output prices can be easily monitored, quantified and adjusted regularly; sometimes even on very short term basis such as daily and regularly with the progress of information technology.
    As for the public sector, a quite different picture emerges. Beside market failures, scale economies, public goods and other aspects mentioned in the article and above comments…

    Read more
    1. Jim KABLE

      teacher

      In reply to Dao Nguyen

      Perhaps restructuring costs - to the kind of APS efficiency levels which existed pre-1997 - could come from the many benefits which have come to the former p.m. and his cronies as a consequence of holding their various upper level ministerial roles - speech-giving to right-wing think tanks here and there and by clawing back some of their more-than-generous superannuation (if they are not truly retired)! Cannot we inject some accountability into the performance of such elected officials for the deleterious effects of their "reform" (much abused word - really re-form, surely) - usually designed - it seems - to benefit their mates outside the parliamentary circle in the world of private profit-making. Would such accountability ensure that re-forms were truly for the benefit of the citizens rather than of the few (many of whom/which are of off-shore basis)? I wonder...

      report
    2. Dao Nguyen

      logged in via Facebook

      In reply to Jim KABLE

      Dear Mr Kable
      You're right! I've observed that Liberal cashed-up pre-GFC time was characterised with many wasteful policies, '"re-form"s', capital flight, APS' short-sighted orientation toward business and commercial trendiness at the expense of dinkum APS "know-how"... They've left many bad socio-economic consequences in both short and long runs. In the short-run, a small portion of money (from extraordinary revenues from the mineral boom) was coughed up to finance band-aid projects to calm down…

      Read more
    3. Jim KABLE

      teacher

      In reply to Dao Nguyen

      Dear Dao

      I have taught in many contexts in NSW - rural and urban - in Spain & Germany - and in Japan over a lengthy period. If the Mr Kêbô you refer to fits any of those parameters then I'll put my hand up. (I studied an intensive sumer Viet-nameses language course at ANU in January 1980. I was involved in TESOL in Sydney through 1979-1985.)

      report
    4. Dao Nguyen

      logged in via Facebook

      In reply to Jim KABLE

      So you are Mr Chim Kêbô` , the famous writer for the Sydney based Vietnamese language newspaper Chuong Saigon which I was a regular reader in the eighties. It is nice to meet you again here on The Conversation. I wish you all the best of peace and happiness. DN

      report
    5. Jim KABLE

      teacher

      In reply to Dao Nguyen

      A big smile on my face! Toi la thay giao. Toi la nguoi Uc! Gia dinh toi gui cho toi... and so on - is about all that remains - buried deep below my later accumulation of Japanese! The famous Chim Kêbô! Hmm! Leaving aside that description - how amazing to be remembered! I really enjoyed my time with Chuong Sai-Gon! I felt I was contributing to making this society something better - ??!!

      report
    6. Dao Nguyen

      logged in via Facebook

      In reply to Jim KABLE

      Indeed you did contribute a great deal to this society, especially to the newly arrived Vietnamese refugees community in Australia. I learnt a great deal from many articles of yours on Australian society and ways of life, socialization and assimilation. I found your articles full of sharp observations on the Vietnamese ways of doing things with very thoughtful considerate and most of the times nicely humorous comments. It is a pity that my paper collection of Chuong Saigon Newspapers have gone after some of my accommodation changes and lack of spaces. Please accept my belated congratulations and gratitude. DN -(other TC readers: please accept my thousand apologies for this message to Mr JK which is well outside of the topic.)

      report
  10. Cornelis Wegman

    Architect

    Clever people go into the public service but something about the system wears them out. Endless meetings, lots of attendees with no-one counting the cost of the participant's time because it doesn't seem to matter. I used to present projects by myself to a committee of at least half a dozen administrators - none of whom actually had the authority to make decisions.

    When I worked for the Commonwealth Government (in my younger days) it seemed that promotions were awarded to those who had more people working under them, rather than by improving outcomes. There was, therefore, no incentive to reduce staff. Perhaps that is still the case. And in the end, no-one cared because it is wasn't their money. Private companies also waste staff and resources but it cost someone something - and the loser can usually be identified!

    report
    1. Cornelis Wegman

      Architect

      In reply to Cornelis Wegman

      Sorry I have moved off the topic - it was supposed to be about outsourcing. Just ignore me if my remarks are not relevant!

      report
    2. Tyson Adams

      Scientist and author

      In reply to Cornelis Wegman

      I'd say the bureaucracy that everyone complains about happens to those in it as well.

      It takes time to get approvals for new ideas and in the public sector there is the "broken telephone" communication system up the line and top down management. The built in layers of management, who are there according to Dilbert's Law and Parkinson's Law, have meetings to create more work for one another, rather than achieve anything, create a gauntlet of approvals processes.

      You also have to remember that about once every two election cycles, public sector cuts are made. They don't sack the managers, whose primary role is paper shuffling, they sack the actual useful people. Or, alternatively, the useful people jump ship to pursue their passions.

      But that isn't to say that the public service doesn't retain good people. Just that those good people are likely to be flying under the radar.

      report
  11. Troy Barry

    Mechanical Engineer

    "For example, outsourcing frequently results in significant job cuts, and the welfare costs of increased unemployment may exceed any savings."

    This is a poor argument. There is no reason to believe nonproductive public sector workers could not be productively employed elsewhere, thus increasing the overall efficiency of the economy. Working in the private sector they may even make a positive contribution to government revenue (beyond merely avoiding their salaries) thereby multiplying the funding…

    Read more
    1. John Holmes

      Agronomist - semi retired consultant

      In reply to Troy Barry

      So you have not tried to change a phone contract?

      Please, there is an assumption here that is based on an unproven mantra spread by the economic ir-rationalists that public services are inefficient, to transfer public assets and funds with out question into the pockets of selected (good contributors) private interests.

      As well, much of the cost of outsourcing in the PS is hidden under 'commercial in confidence clauses', so is very hard to fully cost out any perceived efficiencies.

      report
    2. Tyson Adams

      Scientist and author

      In reply to Troy Barry

      Even if you assume a short-term unemployment period for retraining or job seeking, you are still generally better off retaining staff than outsourcing. This is especially true if you want to continue to operate in that field later. E.g. a contract to analyse sector X is a three month job that you outsource for $25,000, is more expensive than retaining your employee to do that job, because you've just paid out that position, you've had to pay off entitlements and they will likely spend at least a…

      Read more
    3. Troy Barry

      Mechanical Engineer

      In reply to Tyson Adams

      You seem to assume a swap of one public servant for one contractor, but if we replace ten public servants with seven contractors we will very quickly save money. Why would we rather spend money on public sector inefficiency than on delivering more and better services efficiently?

      There are some government activities that cannot easily be contracted out, but for very many it is much simpler to call for tenders on $10B worth of services than it is to administer and spend it through the public service. Then we get the added control of being able to award the contract to a different service provider if the current one is not fulfilling the requirements or if, when the contract expires, an innovative alternative enters a tender with ideas for even greater efficiency. We don't have that option wherever the public sector holds a monopoly on government funding for services.

      report
    4. Tyson Adams

      Scientist and author

      In reply to Troy Barry

      Monopoly? That runs completely counter to the reality, which is that anything that can be made a buck from is being done in the private sector. That is hardly a monopoly.

      As for your insinuation that the private sector would do it with less labour units, that is not a claim that is backed by any data, examples, nor reality. You are mistakenly thinking that the frontline staff that do the work are somehow less capable or something. Either that or you are assuming that the public sector has a lot of staff not doing the actual work (HR, etc) and that there aren't any in the private sector. Your are also forgetting that an employee in the public sector gets paid less than an equivalent in the private sector, so price comparisons will favour the public sector.

      I'd also argue that neither the public nor private sector has the right to claim they are more efficient, as this article has outlined, it depends upon each situation.

      report
    5. John Holmes

      Agronomist - semi retired consultant

      In reply to Troy Barry

      I would take issue with your suggested efficiency. It all depends on how you measure the outcomes. As I have suggested elsewhere, a total analysis of the system is needed to measure the results. Include the number of apprentices as well. The contractor may have none most of the time, or can be using unqualified labour. Apples Apples please.

      I also note that when involved in a LandCare program a while ago with a very large multinational company with a very large mining/processing operation…

      Read more
    6. Troy Barry

      Mechanical Engineer

      In reply to Tyson Adams

      I agree the relative efficiency will depend on the situation. However some of the arguments in the article supporting use of the public sector are contestable. I noted two - that retrenched public sector workers must be economic burdens, and that outsourcing introduces greater principal-agent problems than public service delivery does. You note another problematic and unsupported assumption by the author: moving work from the public to the private sector necessarily results in unemployment because the private sector can do it with a smaller workforce.

      report
    7. Christopher Stone

      PhD Student at Macquarie University

      In reply to Troy Barry

      Hi Troy,

      The arguments are contestable (what argument isn't?), but not unsupported.

      1) Economic burdens: Unless the retrenched public servants find new job immediately, they will likely be drawing on welfare support until they find more work. Average periods of unemployment varies depending on a number of factors, but is frequently measured in months. And this was given as just one example of wider economic and social consequences. Loss of job security for those who retain their jobs is another…

      Read more
    8. Tyson Adams

      Scientist and author

      In reply to Christopher Stone

      Some good points, Chris.

      I'd add some observations, similar to those that John has just raised, that outsourcing often results in inefficiency as only part of the job is done.

      I've noted similar problems with housing maintenance in rural areas since outsourcing of maintenance occurred. This is both a lack of contractual providers, an unwillingness of providers to do the small maintenance jobs until they become a big enough call out, and no direct contact between provider and users.

      I would…

      Read more
    9. Troy Barry

      Mechanical Engineer

      In reply to Christopher Stone

      Regarding principal-agent, I am arguing that without outsourcing or privatisation there is an existing principal-agent situation between the community (principal) and the public service (agent). The gap between what the community wants and expects and what the public service wants and delivers is more difficult to close than the gap beteen two parties in a limited-duration commercial contract. This is because the community does not have the option of saying "We are not happy with this public service so we will switch to one which better aligns with our requirements," and the public service does not have the threat of losing their contract to encourage their alignment with community expectations.

      When we are unhappy with a business service, we take our business elsewhere. We don't have that option with most public services and so we have to put up with bad services, and the public services need not improve service as they usually maintain a monopoly.

      report
    10. Christopher Stone

      PhD Student at Macquarie University

      In reply to Troy Barry

      I'd disagree that the gap between what the community wants and expects and what the public service wants and delivers is necessarily more difficult to close than the gap beteen two parties in a limited-duration commercial contract. Democratic processes means that the public service can be far more transparent and accountable to its citizens, than any corporation is to its customers. And the assumption that outsourced services can always be switched to a better supplier is not always true. As I've pointed out, market failure is common in public services and this leads to an absence of any pressure to provide services more aligned to the wants of their users.

      report
  12. Robert McDougall

    Small Business Owner

    mm, lets see now, privatisation of public services has pretty much uniformly lead to increased costs and a loss of an income producing asset for government that requires the public to make up the shortfall.

    Outsourcing things like call centres deprive the country of jobs, taxes and reduces the quality of service received by the consumer, e.g. Telstra (once took me 4 hours talking to what i suspect was the entire Singaporean Call Centre for a reburnt mobile sim card)

    Some things can not be placed in Corporate hands as the imperitive of making a profit is not necessarily compatible with the service provided or the aims of the service provided.

    report
    1. John Holmes

      Agronomist - semi retired consultant

      In reply to Robert McDougall

      Good point.

      Also note that in the calculations of some of the classical out sourcing, was the failure to include the value of the production of skilled workers by apprenticeships. This was criticized as a waste of monies, yet the value of such workers to the community has been demonstrated by the very high wages paid in the mining industry to attract skilled workers and the cries for special visas.

      In each case can we have a full 'ecological assessment of the impact' of the proposed changes from the micro issues of not having an IT section to trouble shoot small problems like why is my mouse not working, to that of the communities value of another apprentice over the next 40 years.

      report
    2. Robert McDougall

      Small Business Owner

      In reply to John Holmes

      the other issue is the loss of productivity within the organisation due to the lost time waiting for the outsourced function to be actioned and the likelihood that the organisation that has recieved the outsourced contract supporting multiple external entities which creates further complexities.

      i.e. back in banking at the beginning of the 90's transaction processing was done at branches and all records retained by that branch. What this meant is that if you wanted to trace anything, i.e. check a signature on a cheque, it could be done in real time while the customer was in the branch. With shifting this function to a central unit (outsourced from the initial business unit) which previously took 10 minutes now takes 2-3 days with the customer then suffering a drop in the quality of the service provided.

      report
  13. John Kelmar

    Small Business Consultant

    Was this research funded by Government?

    My experience is that the public sector (including politicians) is inherently incompetent and so full of obfuscation that they couldn't organise a "Piss Up in a Pub" if their life depended upon it.

    report
    1. John Holmes

      Agronomist - semi retired consultant

      In reply to John Kelmar

      A bit more fat on your comment above would help in interpenetrating you comments. We can get into the race of who has seen the worse stuff up. Like paying for a stud bull twice. But to get points in the game there needs to be some way of judging the significance. A bit of background makes the stories go round. No group is immune.

      report
    2. Jim KABLE

      teacher

      In reply to John Kelmar

      Are you really conflating the public service with politicians? That's a bit rich considering at least a good 50% of them have a policy position based on making the public service both ineffective and looking bad. Can we just take your comment as a comment?

      report
    3. Troy Barry

      Mechanical Engineer

      In reply to John Kelmar

      Funding sources are noted in the Disclosure Statement near the top left of the column, and don't seem to include government.

      report