External delivery of public services
Business process service company SouthWestern hosted a round table discussion on the issues around public sector reform and the role of outsourcing public services in delivering change.
How is the reform of public services progressing?
Tom Geraghty
I have a personal objection to the term reform, as if there was some inherent deficiency in the Public Service. However, inevitably in the circumstances where the Government has less money to spend on public services, as any other set of organisations would do, it will have to look at how it delivers its services. In particular, how to deliver its services with fewer staff, as part of the programme is staff reduction, and it has done it fairly successfully.
By the time the current Croke Park Agreement expires, there will be 38,000 fewer people working in public services and public services have not collapsed. That is simply because the Public Service has had to re-organise how it delivers its services and that has happened right across the board.
Patricia Byron
I would concur with the progress that has been made and not to “throw the baby out with the bath water”. There has always been a lot that has worked and will continue to work. We have a good change programme and it’s underway. We also need to recognise the goodwill and flexibility of our staff. Although we are all committed to change, I think we need to now look at the process and pace of change. The issue now is really the pace of change.
Kevin Daly
It’s important to recognise that the quantum of reform in the programme is the largest amount of reform undertaken since the foundation of the State. There are very strong governance arrangements with a Cabinet committee dedicated to public sector reform. There is an advisory group of secretary-generals and a Reform Delivery Board which is made up of mainly assistant secretary-generals which meets regularly to drive the reform agenda.
From our experience, getting the governance right is the most important thing for organisational change and that is being done quite well. We have been working with the four largest sectors (health, education, justice and local government) to make sure they have their governance systems right as well.
Jim Costello
Firstly, I would also acknowledge that good progress has been made in terms of the reform of public services. We have been through a number of tough budgets and there are still two to go and that’s where the partnerships need to get stronger, and not just within the public sector but between the private sector and the public sector. That partnership needs to mature and there is a great opportunity for that to happen.
Gary Comiskey
Our view in the Department of Finance, on whether you call it change, transformation or reform, is that you can never do enough. We need to keep working to continuously improve the way we do things and to find greater efficiencies. The large budget deficits have been a real catalyst for change. I have also found that the level of co-operation from staff has been remarkable. Perhaps to illustrate the point (for someone like myself who has come in as an outsider with new ideas), people at the start said: “You will get push back and people are probably not going to listen to someone who is not an established civil servant.” But that has certainly not been the case. Everyone has been extremely co-operative and I think we have benefited mutually. I bring outside ideas and experience and I have learned a lot from the people I work with.
How big a role will external service delivery play in the current transformation programme for public services?
Kevin Daly
Although it is not a panacea for all the State’s problems, external service delivery has a role to play. It is in the Public Sector Reform Plan and there has been a government decision back in July that all new services need to be tested against external service delivery before any new service is approved. This is driving a culture of assessing whether we can do things externally before we do them internally. In certain situations, it will be the right way to go. We are looking at tasks which would be described as ‘low subjectivity, high volume’ and perhaps lower skilled tasks that may be suitable for external delivery.
Tom Geraghty
It is not going to come as a surprise that employees don’t like outsourcing. It makes them fearful in respect of their own jobs. There are also considerations such as this race to the bottom, where you drive down costs irrespective of consequences, and that is something that will always be resisted by trade unions. On the other hand, if you ask me: “Is there no scope ever for external service delivery?” Of course there are opportunities. Inevitably, there are tasks to be performed and the skill set isn’t immediately available in the Public Service. The difficulty has been that the Public Service hasn’t been good at transferring skills.
There appears to be limited outsourcing at present. Is that the case?
Kevin Daly
That was also my misconception before I started in DPER. My first task was to identify what has already been done and I now have a long list of services that have already been delivered externally and some of them for a long time. For example, the Department of Agriculture’s calf registration scheme. There is a myriad of other services delivered externally which are often taken as ‘business-as-usual’.
Jim Costello
I think the intention from the private sector stand point would be to leave as much space as possible available for improving front-line services across the public sector. We believe that there is significant scope in terms of the back office and non-core services. The pace of change in technology and the expertise in the private sector offers a great opportunity to help with the reform agenda.
I would emphasise that this has to be done in a partnership by building trust through collaboration. Any outsourcing should focus on the transfer and training mechanisms, to make it a positive and respectful experience for everyone involved. There is no shortage of respect for the public sector in the work they have done to date.
Patricia Byron
I think we have to go back to the basic principle of deciding what is core and non-core work, and then look at how you manage things. In the public sector, we hire people to very advanced educational standards, with many graduates and post-graduates. Are we making best use of their skills base? For example with the gardaí, should a well-trained Garda be working at a desk taking in an application form or arranging a medical late in the evening or would they be better re-deployed?
The first step is to look at core and non-core and look at how to use the resources on hand. Then look at how you re-deploy, then the use of shared services and in that space you also look at external service delivery.
I don’t think it is an either/or but a better use of current staff, recognising people’s skills. It is probably using the decision-makers on the Public Service side and outsourcing the more routine and high volume matters.
Have we made generalists out of the specialists we hired? We need to awaken the skill base we have and up-skill and motivate them. I see a role for the IPA in that regard.
Is outsourcing just about cost reduction? What about quality of service delivery?
Kevin Daly
We have developed a business case template for looking at areas that are possibly suitable for external service delivery and we have given guidance on what should be analysed. Obviously, cost is included but also effectiveness and quality of service. It is not a simple equation about cost. It has to be about the same level of service or better at a lower cost.
Jim Costello
One of the areas where collaboration between the public and private sectors works very well is in the regulated sectors, such as telecoms and the utilities. That is one area where cost is regulated to ensure the customer is treated fairly and gets a good level of service.
What are the barriers to implementing an outsourcing project?
Jim Costello
There is a requirement for trust to build collaboration. There has been great faith shown in the willingness to work together and to bring in mechanisms to help that collaboration work. That has got to continue and develop. As regards core versus non-core, it is not a panacea and there must be a clear separation as to what is right to do and what is not, and there should be no broad-brush approach to that. There are issues with perceptions such as a race to the bottom. That is not the case. Respect for the person, the employee, is critical.
Reflecting on the opportunities, Irish companies employ between 6,000 and 7,000 people already working in this sector today. There are some great Irish companies providing services as well as international companies bring in experience from elsewhere.
There is also a tremendous export potential with the second biggest market for such services on our doorstep. For example, we are employing people in our company in Cork to deliver services into the UK. Technology is also a major opportunity, particularly in terms of cloud computing. There are also opportunities in the legal sense with allowing data to be shared across the public services.
Kevin Daly
The most obvious barriers are around the existing employees in those roles. The Croke Park Agreement means there are no compulsory redundancies and therefore re-deployment is the obvious answer. If that is not possible they can choose voluntary redundancy or under the TUPE (transfer of undertakings regulations protect employee terms and conditions) arrangements they will be given the opportunity to move to the new supplier if that is what they choose to do. I guess that is the elephant in the room that cannot be ignored and needs to be tackled.
Tom Geraghty
The way the topic is described suggests barriers to outsourcing are bad things and I wouldn’t accept that at all. Undoubtedly the existing employees will always be a barrier to outsourcing. We dealt with that in the Croke Park Agreement in a practical way.
We were never going to agree to compulsory redundancies but the Croke Park Agreement recognises that there will be circumstances where there will be outsourcing, and we will place certain requirements on the employer before we give our acquiescence. Simply because an outside body pays its staff less should never be material in deciding whether a service is carried out inside or outside the Public Service.
Patricia Byron
Where there is outsourcing with a business case, there are very good Irish companies that can provide such services and we should recognise that. We see in the US and UK the reversal of offshoring to onshoring.
As regards barriers and difficulties, we have to be very careful about loss of corporate memory. I have experience of that in the private sector, in financial services, where I saw a drive to bring down the number of providers for a particular service from 20 to four. After a number of years, the four providers controlled the market and were no longer so accommodating. As the purchaser of any outsourced service I would have that in the back of my mind.
In the case of re-deployment, I would prefer to focus on mobility. Working with other chief executives in this space, we feel we should harness all the good specialists that there are and many of them are doing generalist jobs. We should mobilise them and put the right people in the right jobs.
Kevin Daly
Public servants can be risk-averse and often the barriers are more perceived than real. For example, when it comes to data sharing, there is often a reluctance to share, whereas the issues around this are very manageable. Other barriers include the lack of good quality management information. If you want to write a good contract, you need good data on the cost and effectiveness of any service.
Gary Comiskey
The lack of information is a real challenge for us in the Department [of Finance] in trying to understand areas identified for change. We have done a lot in introducing a better intranet to get better sharing of information.
Another challenge is that sometimes in the public sector we perceive some of the work that we do is somehow unique and it couldn’t be replicated. This is a perception and not a reality.
Also some of the processes we have, have been built up over time and have become quite complex and include additional areas that you wouldn’t see in other sectors.
We should build in process change when considering any shared service or outsourcing. Simply replicating what we do and trying to do it somewhere else will not bring a successful outcome.
I agree with Jim, there is a huge opportunity for Ireland to become a centre of excellence for types of activity. That provides a great opportunity for people both in the Public Service and in the private sector.
David Kelly
On the issue of access to information, as someone who deals with various procurement teams across the public sector, there is often a lack of experience and expertise around procuring services in certain quarters.
When it comes to running tenders, I see a role for DPER in ensuring there is a good understanding and knowledge in how to procure services if external service delivery has been decided on.
Jim Costello
There is also an opportunity to create a level playing field around the issue of VAT. The current rules put VAT on private sector providers but not on public sector providers.
Kevin Daly
We have developed a business case template which instructs people not to include VAT when comparing in-house and external providers.
Focusing on the positive side of outsourcing, what have been the good examples?
Kevin Daly
There are quite a few projects underway at the moment, although not yet at the delivery stage. Social Protection are looking at labour market activation services, HSE is looking at payroll and Revenue are looking at customer contact services for the new property tax.
Jim Costello
There are a lot of good examples of existing models. One is in agriculture with the administration of the traceability of food; this protects a €9 billion industry. Another example is the speed cameras which have resulted in the drop in road deaths. By collaborating with the private sector and using their capital to invest, you can affect improvement of services to the public.
Patricia Byron
In the Injuries Board, we have moved personal injuries from the courts to an administrative process. All our staff are decision-makers dealing with core work and then the day-to-day work of handling paper, putting it up on the system, paying doctors and so on is outsourced. That has brought about a saving of €100 million per annum over the past nine years. There is so much more that can be done in this space where we have got adversarial litigious processes dealing with routine issues that should be dealt with in a more administrative way and where we can bring in legislation to say: “These matters will be dealt with in an administrative way.” This model can be adapted to a whole range of activities across the state where disputes arise, not just personal injury. There is a lot of potential for savings but also for improved services to the customers: our citizens.
David Kelly
It is also fair to say that there have be some negative examples but the positives, certainly in our experience, far outweigh the negatives. People are inclined to remember the negative stories.
In Ireland we are a number of years behind other jurisdictions, such as the UK, Sweden and Australia. Here it hasn’t been about a revolution but more about ‘the private sector can help’. One area outsourcing can assist is where there is seasonality in demand. The agriculture case study happens in three months of the year, where you staff up for that short period. That type of employment pattern doesn’t lend itself to the public sector model, where you need that flexibility and intensity.
What would be the one issue to focus on to make any outsourcing successful?
Jim Costello
Trust and collaboration. To create the environment for competitive dialogue to occur because there is significant opportunity for both the public sector employees and for the private sector to gain from that collaboration, whether that is skills transfer, more jobs or better ways of doing things.
Kevin Daly
For me, the key issue is skills development in the Public Service. For the people who are going to be running and managing these processes. It would be a disaster for the reform changes to be implemented poorly. That wouldn’t be good for anyone. That’s a lose-lose situation. So conscious of the skills deficit, we should be working towards up-skilling the public servants.
Gary Comiskey
We have done a lot of the preparation and planning, and have made a good start. What we need to do now is get on and implement and if we make a decision, whether it is outsourcing or shared services, we need to make sure we get those processes rolling and get concrete examples delivered. There are lots of projects underway and we need keep that going.
Patricia Byron
We should keep our eye on the prize which is better services at lower cost. Outsourcing is one of a variety of tools when used appropriately. It is not a panacea and should only be used when there is a solid business case.
Tom Geraghty
I would have a similar view. In public discourse over the past few years, you may have been made to believe that we live in an either/or situation. Public sector bad: private sector good. That’s frankly nonsense. I do accept there are occasions when it is necessary to go out to outsource activity and, provided there is a pragmatic view taken and that it takes account of the fears of the people how work in the Public Service have about outsourcing, it could play some role but you could over-state its significance. It is important that the Public Service itself gets its own act fully in order, so that options like shared services operating within the system are looked at first.
David Kelly
I would mirror just what Tom has said. In our experience, the worst thing to do is to outsource something that is broken. We work across multi-nationals, large corporates, as well as the public sector and it is critical that it is done in a way that a problem isn’t outsourced because that typically spells disaster. So in terms of government policy, external service delivery should be considered for new services and for existing performing services.
The participants
Patricia Byron
Chairperson, Association of Chief Executives of State Agencies
As well as chairing ACESA, Patricia is the Chief Executive of InjuriesBoard.ie, an independent State body. She previously worked in the insurance sector for over 20 years, and also serves on the Board of the Institute of Public Administration.
Gary Comiskey
Chief Operations Officer, Department of Finance
Gary assumed his current position in 2011 on secondment from Deloitte. He is working closely with the Secretary General and his Management Advisory Committee colleagues to drive the department’s transformation programme and to achieve the outcomes set out in the department’s revised statement of strategy.
Jim Costello
Chief Executive Officer, SouthWestern
Before joining SouthWestern in 2003, Jim Costello previously spent 15 years in the IT and outsourcing sectors in Ireland and internationally. He joined SouthWestern as the company moved from IT processing into a full business process outsourcing company.
Kevin Daly
Commercial Delivery Manager, Department of Public Expenditure and Reform
Kevin recently joined DPER from the New South Wales Department of Premier and Cabinet where he led cross-departmental service delivery reform projects in the Strategy and Project Delivery Unit. Prior to this he held management and change focused analytical roles for four years in Australia’s largest food multi-nationals.
Tom Geraghty
General Secretary, Public Service Executive Union
Tom is a member of the Implementation Body for the Public Service Agreement 2010-2014, the so-called Croke Park Agreement. He is also a member of the ICTU Executive Council and Secretary of the Public Services Committee of ICTU.
David Kelly
Chief Commercial Officer, SouthWestern
David Kelly is the Chief Commercial Officer for SouthWestern and has been with the company since January 2011. He is responsible for the commercial development and growth of SouthWestern’s business in Ireland and overseas, and is based in SouthWestern’s offices in Dublin and London.
