Contracting Out Services

Privatization has grown exponentially over the years as the government continues to try to find more economic ways to conduct business. Through the use of contracts, this is achieved by utilizing the lowest bidder. Should the work being done not meet the standards set forth, the contract is not renewed and the process begins again saving the government money by not having to hire Civil Servants who are then employees of the government, whom do not have a contract and are very difficult to get rid of should their work not be satisfactory.

Why is contracting out so attractive to a public agency? Privatizing has its advantages that represent benefits to the agency.

There are a variety of differences and similarities between federal, state, and local governments. This includes, but is not limited to, the responsibilities, size, and staff of the administration. The machinery of government is intended to better the quality of citizen’s lives. Ultimately, federal, state, and local governments were established to work together in bettering programs and laws (Berkley & Rouse, 2009, p.32).

Any contract for construction, alteration, or repair of public buildings or public works, including painting and decorating;

This specific measure could provide efficient services to the city like in the case of Sandy Springs. The city of Sandy Springs has successfully incorporated in 2005 to a company named CH2 HILL .As a result the city of Sandy Springs does not have current liabilities and its services have met standards of efficiency. Based on that premise the contractor has overseen the process and that the bids with subcontractors were essentially offering prime services. Furthermore, CH2 Hill has also implemented a system where customer service hot lines is offered 24/7 and complaints were resolved and address accordingly without any red tape (ReasonTV,2011). Having the example of Sandy Spring it is evident that the premise of contracting a company to take over the subcontractors’ hiring as well as all services provided should be the best- case scenario to take advantage of the privatization model

Case 06-12 Outsourcing Services, Inc. Outsourcing Services, Inc. (OSI), a SEC registrant, provides a variety of EDP and payroll processing services to third parties. OSI recently has introduced a new service line to provide product help-line support services through customer service representatives (CSRs) who are employees of OSI. On January 1, 2004, OSI entered into a service contract with Company X. Pursuant to the terms of the contract, OSI’s CSRs will provide technical support for Company X’s products. The contract has an initial term of one year and is not cancelable by the customer. After the initial year, the contract is renewable at negotiated market rates. Prior to starting this new service line, OSI hired independent consultants

Because of the size of federal government, there are often opportunities for businesses to work fiscally with the government. When businesses research the possibility of doing business with the government, the verbiage shows that while there are a number of steps necessary in order to qualify for government contracts, there are also tremendous opportunities.

The word outsourcing can be defined in a numbers of ways depending on the type of service and the form of relationship with the supplier. Also referred to as contracting out or buying in. May be the delegation or handing over to a third party. Company to provide services that might other wise be performed by in- house employees. The term is increasingly used to refer to subcontracting of a set of functions or processes by one firm to another, or to a group of individuals.

As one of the best ways to diversify sources of revenue when ordinary clients are not bidding, many small businesses are increasingly seeking to make the federal government a client. This is primarily because the federal government is the largest buyer of goods and services more than any other contractors. For instance, the United States government is the largest buyer of products and services worldwide as it spends approximately $500 billion annually. In 2011, the federal government awarded prime contracts worth $93.3 billion to small businesses. However, the main issue for the contractors and small businesses is to develop a perfect contract that will be most advantageous to both the government and the contractor. This is especially with regards to dealing with red tape, which can be an arduous process though there are various approaches for making the process to go more smoothly.

Over the last fifty years, there has been a growing trend in the US public sector to outsource government services at the federal, state, and local levels. This stands in stark contrast to the traditional model of previous generations. In the traditional model, public services were administered by large bureaucracies consisting of government employees working for the public good. Over the last several decades this trend has increased. Today, nearly every government agency and private sector organization adopts contracting to some extent. From acquiring weapon systems, as with the DoD, or providing government services, as with HUD, contracting has become

Decentralization may not always be efficient, especially for standardized, routine, network-based services. It can result in the loss of economies of scale and control over scarce financial resources by the central government. Weak administrative or technical capacity at local levels may result in services being delivered less efficiently and effectively in some areas of the country. Administrative responsibilities may be transferred to local levels without adequate financial resources and make equitable distribution or provision of services more difficult. Decentralization can sometimes make coordination of national policies more complex and may allow functions to be captured by local elites. Also, distrust between public and private sectors may undermine cooperation at the local

The term is also used in a quite different sense, to mean government out-sourcing of services to private firms. (We are Assist You, n.d.)

In this chapter, the background of outsourcing within government agencies, the role that governmental leadership play in managing projects, and the DoD’s dependency on contract support to accomplish the mission

The idea of fiscal decentralization injecting competition among local governments has an added advantage of making local officials pursue customer-driven investments which are more likely to meet expectations of local people and patronage of services. When local service delivery meet local people expectations, they tend to pay for services and even honor their tax obligations without much coercion because they even appear more willing to do so (Briscoe and Garn 1995, Litvack & Seddon, 1999). Additionally, if what is being supplied meets local demand and associated with the necessary openness or cost recovery, local people and groups have a higher tendency of demanding accountability, closely monitoring local government activities which will reinforce the corruption reduction theme discussed previously. Local monitoring and demand side of accountability help to reduce information asymmetries and corruption tendencies which may have potential to weaken both allocative efficiency and cost recovery. This demonstrates each of the themes are closely interrelated and not mutually exclusive.

Beginning in the 1980s, many jurisdictions started to seek third-party alternatives to provide public service under the pressure for cost savings and the call for government efficiency. Private organizations are known for their expertise in specific fields – if leverage private sector know-how well, it can bring success to public sector – high quality public services can be delivered with lower costs. Therefore, public organizations can concentrate on solving critical tasks when they contract out the mundane work to private sector. Outsourcing waste management is one of the effective privatization solutions for public organizations given its easy-to-measure nature, and it continues to be popular among local governments. Nevertheless, the success of privatizing government services is not guaranteed. If not manage privatization well, it could result in increased costs, organization structure and culture change or legal liabilities. In addition, take advantage of privatizing public services redefines the nature of government service and governance as it creates a partnership between private and public sector. With the rapid pace of technology development and the obligation of government to spend taxpayer’s money strategically, privatizing government services has gained unstoppable momentum.