Public sector outsourcing

Managers in the public sector are increasingly turning to outsourcing at a time when improving efficiency is seen as key. Our team recognises that outsourcing is rarely a simple commodity procurement - increasingly, it is a sophisticated organisational change programme underpinned by a complex transaction.

Successful outsourcing provides a medium to long term solution which can deliver improved operational efficiency, cost savings and access to specialist skills and technology. It can also allow for a stronger focus on core (in-house) activities. However, if badly thought through and poorly managed, outsourcing can require major re-engineering to put it right, and can tie up management resources.

PwC has a track record of assisting its clients in planning, negotiating and implementing successful outsourcing arrangements. PwC brings an integrated approach, using specialist skills combined with private sector mergers and acquisitions disciplines.

Potential issues

• Assessing the feasibility of outsourcing, including assessing in-house service provision and comparing it with alternatives
• Mapping processes to facilitate outsourcing
• Making outsourcing a success for both client and provider
• Deciding on the service standards to be laid down in service level agreements (SLAs)
• Deciding on the best payment mechanism to appropriately incentivise and reward the outsource provider for good service and/or savings achieved
• Structuring tenders to identify the most appropriate (not necessarily the cheapest) outsource provider
• Engendering a team approach with the outsource provider without alienating the existing team
• Maintaining and monitoring performance
• Establishing the best time to consider terminating or renegotiating the outsource contract

PwC services

Strategy

• Assisting in establishing strategic objectives, identifying the options available and developing a robust business case
• Creating the right project team, with clear authority and accountability

Feasibility

• Assisting in building a robust business case, clarifying how activities are performed in-house and the people and assets currently involved, and assessing the outsourcing options available based on existing practices in the organisation

Transaction

• Advising on implementation
• Contract and SLA development, including project management, HR, tax and corporate structuring advice, and regulatory compliance
• Designing and executing procurement processes which ensure that outsourcing providers remain fully focused on clients' needs and maximising benefits

Transition

• Advising on careful human resource change management during the transition to outsourcing, as the well-being of employees is a key to the success of the arrangement

Optimisation/transformation

• Designing arrangements aimed at delivering the desired benefits
• In post-transaction implementation, monitoring and measuring performance to provide objective, evidence-based analysis

Termination/renegotiation

• Using our commercial and negotiation skills and broad experience to advise clients on renegotiation or termination arrangements