Why councils are bringing FM and other services back in-house

First rolled out under Margaret Thatcher in the 1980s, with the introduction of compulsory competitive tendering, the outsourcing of public sector services gradually gained in popularity. It subsequently transitioned into a frenzy of outsourced contracts throughout the 1990s and early 2000s.

Simply put, outsourcing is an arrangement in which a public sector organisation or local council allows a private company to run a particular service on its behalf. Everything from leisure centres and libraries to IT services and facilities management has been outsourced, with varying degrees of success.

Outsourcing giants such as Serco, Capita and Kier built business empires on delivering services on the public sector’s behalf. Promising huge cost savings, improved performance and increased efficiencies, private companies took on a range of valuable contracts, to mixed reception.

While many outsourcing partnerships have worked very well and delivered valuable savings, there have also been some notable disasters, where not only have services been poorly delivered, but they have ended up costing public sector organisations dearly.

Against this backdrop, there has been a shift in the attitude towards outsourcing, with contracts not being renewed and many services being bought back in-house.

In this age of austerity, public sector bodies need to manage their budgets more closely than ever before and this has brought the spotlight to bear on outsourced contracts. Councils, in particular, simply cannot afford to sign up to lengthy contracts that may not deliver the cost savings they so desperately need.

In fact, a recent report from the Association for Public Service Excellence has found that many local councils are planning to bring outsourced services back in-house. Known as insourcing, this will see councils take back control of elements such as catering, waste management or building services.

For many councils, insourcing provides a great way to save costs and become more efficient. Ironically, this is exactly what the outsourcing of services was meant to provide in the first place.

The same report from the APSE also found that nearly 80% of councils believe that insourcing will allow them to be more flexible, with two-thirds hoping it will save them money.

In addition, insourcing can provide better pay, working conditions and benefits for employees, as well as improving relationships with unions. It can certainly be argued that by running services themselves, councils can ensure that public money is kept in the local economy, ensuring that they work with local businesses where relevant to help fuel the local economy.

However, it is not always the council’s choice to insource. In some cases, private companies are walking away from deals as they no longer see them as profitable.

However, some councils are really turning the tables and going a step further, setting up their own trading companies to help drive further revenue which can be put back into frontline services.

It certainly seems as though the heydays of outsourcing are drawing to a close, with a marked shift to insourcing. Whether this trend continues remains to be seen, but for the time being at least, insourcing seems set to become the dominant approach.