Outsourcing of Public Services in Australia - Seven Case Studies

Abstract

The paper starts with a brief introduction to the main principles of outsourcing and a description of the recent history of outsourcing in the two largest states, New South Wales and Victoria. The main part of the paper then describes seven case studies which exemplify the process and possible outcomes of outsourcing. The case studies are not randomly selected. Indeed reported results of outsourcing are likely to be biased towards success stories because governments usually suppress poor results. Consistent with other studies, in five of the reported case studies, outsourcing cut costs or raised the quality of services, or both. These examples indicate that there are significant potential gains from outsourcing. However, the potential gains are not always achieved. To achieve these gains, contracting out often requires significant structural reform of an organization and always requires detailed planning and ongoing agency commitment. As the other two case studies show, with poor management contracting-out can produce expensive outcomes or major service failures.