12 golden rules for outsourcing

Back in 2012 I attended a national conference entitled Strategic Partnering in Policing. It was an interesting day where 35 of England's 43 police forces were represented and there were  presentations from four different police forces, mainly from Lincolnshire Police, who had recently commenced a 10-year partnership with G4S. One of the speakers was Lincolnshire's then Chief Constable, Neil Rhodes, who had been the Deputy Chief Constable throughout the procurement process and was, therefore, very closely involved in the procurement. In his presentation he explained the twelve golden rules that he would have liked someone to share with him when Lincolnshire began the procurement process.

I wrote about these principles at the time. I share them again now because of the attention on public sector outsourcing caused by the collapse of Carillion. I know there are voices calling for outsourcing to be abolished but that is simply not feasible even if it was politically attractive. Public bodies are not going to set up internal building units when it is easier, cheaper and less managerial hassle to hire expert builders when you need them. And do we really want to see the senior managers in hospitals spend any time setting up cleaning, catering and payroll teams when they have a crisis on their hands in terms of emergency medical care?

My personal rule of thumb for outsourcing is never to outsource something which is strategically or operationally critical to your mission. I think this is what businesses do, too. Apple is happy to outsource assembly of its devices but it does not outsource design or retail (I know there are some authorised resellers but massive volumes go through Apple Stores where Apple controls all the details). This rule of thumb means that every public sector organisation would come up with a different answer about what they could outsource and what they would never outsource. On this basis, if a hospital has a good contract in place for its back office services and its hospital services then it would be best served by sticking with them.

Anyway, back to the chief constable's 12 golden rules. They were:

  1. Have realistic expectations about what the private sector can deliver for you given your starting position.
  2. Get the metrics sorted out early so you know where you are and how you will measure success in the future.
  3. Don't be seduced by promises of "jam tomorrow" by always asking yourself, "can we uplift this promise into the contract?"
  4. Make sure you choose the right route to contract.
  5. Plan the work, then work to the plan.
  6. Chief officers get involved in the process early and stay in it to the end i.e. closely involve senior managers throughout the procurement process.
  7. Bake the partnership's guiding principles into the contract.
  8. Be balanced in your requirements because risk aversion is very expensive.
  9. Set the structure for future projects so that you know in principle how the partnership will adapt to changes in requirements over time.
  10. Don't focus your evaluation scheme too heavily on price because you don't want to sign a deal with a partner who will give you "a mess for less".
  11. If something is not binding contractually it gains little credit in the evaluation.
  12. Maintain the competitive tension between the bidders until the very end.