Military Outsourcing in the UK - Case Study Example

Military Outsourcing in U.K. By (Name) Institution Instructor: Class/Course City Date Abstract A private initiative within the corporate services of the government is normally healthy for quality services. In this era of attaining better services through advances in intelligence, most governments in t world are outsourcing various activities, especially facilities services among others. This has been a reality in United Kingdom since 1990s with swift public policies approaches that favored the same. Technically, there has been a real impact of outsourcing services, especially in the government institutional cleaning services and has sometimes creates some constant source of tension. According to the military precedence on outsourcing services, outsourcing services in the ministry of defense involves the transfer to private contractors of the activities that were initially undertaken internally by the military personnel and the armed forces. The U.K. outsourcing has traversed various forms such as contracting-out, privatization, and contractorisation, among others. The founding principle, as far as outsourcing services is concerned, is the provision of better services within the ministry of defense. This report outlines the types of outsourcing arrangements available to the Ministry of Defense, the legislation impacts on these contractual arrangements, risks and advice associated with the risks in the suggested approaches to the arrangements, effective management, and better performance on the management of the services provided within the Ministry of Defense pertaining catering and hospitality related services. Introduction In-house public sector activities and organizations can be regarded as public monopolies. Since they are not subject to competition and rivalry, in-house public monopolies will be characterized by monopoly prices, inefficiency, and a failure to innovate. There are reasons why the public sector is likely to be inefficient, especially in matters pertaining to catering and hospitality. In the private sector, efficiency incentives are provided by the profit motive, competition, and rivalry that thrust several take-over mechanisms, thus the will to become efficient. Within this segment of the ministry, several hundred employees of cleaning and catering staff have been directly contracted by the ministry to provide various services. These services include high profile conference meetings, VIP visits, reception services, routine out-of-hours cleaning operations in the various offices among others. The chief role of the catering staff, however, is to provide hospitality services in the meeting rooms and to run the on-site staff restaurants. These services are extensive of the specialization in critical environment management and investment heavily in engineering systems that optimize equipment resilience and prevent service failure. The resilience of the recipients of these services depend on the trust and effectiveness to mitigate downtime and tens of thousands of end users benefit from these service providers’ ability to keep things running smoothly. Based on the standard of work provided by both services, they have been deemed reasonable, although, there have been some complaints recently about the standard of cleaning and quality of food provided. There is a general feeling that quality could be better in such a high profile building. This kind of scenario has been caused by little co-ordination between the services. There has been a recent incident where a meeting room was used, catering provided, and then on completion of the meeting, fresh food was delivered for the next meeting due to take place. The cleaners then arrived to clean the room and contaminated the food provided for the next meeting. Within this perspective, the Ministry of Defense (MoD) is considering entering into a contract with an external service provider with the aim of improving the standards of both services. Security standards are extremely important in this building and budgets are tightly monitored. Thus, this report contains the necessary contractual arrangements that must be considered before application for this segment function of the ministry is done. More importantly to the Head of Property Operations in the Ministry of Defense on their options for outsourcing the cleaning and catering functions Outsourcing Services The principle of outsourcing services relies on the arrangements whereby one institution provides services for another institution that could also be or usually have been provided in-house. The primary implication of these arrangements involves taking control of the service provisions contractually to effectively achieve better performance. In addition, these outsourced services are allocated to specialist external service provider, who will take the sole responsibility of the task and ensure maintenance of the organization’s assets. Some of the advantages associated with outsourcing involves swiftness and expertise, concentration on core processes rather than the supporting ones, risk-sharing, as well as reduced operational and recruitment costs. Military outsourcing has been subject to various definitions involving the transfer to private firms of activities customarily, undertaken ‘in-house’ by the Armed Forces as described earlier. Private contractors undertaking these activities results in the transfer of economic activity from the public to the private sector and the substitution of private firms for ‘in-house’ public sector organizations. Military outsourcing offers further opportunities for efficiency savings. Budget cuts and rising costs mean that the efficiency of existing defense spending cannot be ignored. Genuine efficiency savings will reduce the impact of budget cuts on the UK’s defense capability. Military outsourcing is one policy option that might contribute to genuine efficiency improvements in defense output. A clear focus on an independent economic evaluation of military outsourcing in this regard is prudent in ensuring any contractual arrangement attached to this segment of the ministry (Barrar & Gervais, 2006). In defining outsourcing, a distinction can be made between the equipment supply and equipment support and other support service industries, including estates and facilities management. Some equipment suppliers entering the equipment support sector complicate clear distinctions. A further aspect of the wider privatization debate has to be recognized, namely, the UK’s privatization of its defense industries embracing air, land and sea equipment, together with nuclear and defense R&D activities. Outsourcing Arrangements may be Available to the U.K. MoD According to Laguerre (2009), the United Kingdom’s Ministry of Defense ’s competitive procurement policy was introduced in 1983 as part of the Conservative Government’s defense policy aimed at improving efficiency and achieving value for money. This policy embraced competition for both equipment and support services. Contracting-out support services became part of the ministry’s competition policy where such services could be done more economically in the private sector (offering benefits to taxpayers) without damaging operational capability. As a result, defense support functions were undertaken by the private sector ‘unless it was operationally necessary or more cost-effective to keep the work in-house. The key elements in the arrangement take care of the following components of the arrangement: 1. The outsourcing cleaning and catering functions policy is a co-ordinated policy available in the Ministry of Defense that caters for the much-needed efficiency at the cost agreed upon. Outsourcing is also a transaction cost problem where the limits of military outsourcing arise when transaction costs become ‘too high’ so that further contracting is not worthwhile. In the perspective of the contract, it is important, according to Barrar & Gervais, (2006), to note that the Ministry of Defense support operations are the obvious focus for outsourcing, especially where activities are clearly identified and measurable and can be enshrined in an enforceable contract. Not all Ministry’s support operations will be capable of contracting in the form of a reasonably complete and enforceable contract. The activities in this case are subject to scrutiny by the ministry. The ministry might regard some support activities, as an essential component as is war-fighting capability is essential. 2. The ministry claims a comparative advantage in the ability to use its personnel on various tasks without the need of re-contracting, and thus has an upper hand in the contract. The contracted services must be subject to critical evaluation and the final decision about these functions must compare with the expected efficiency criteria of the Ministry and military effectiveness of the United Kingdom (Laguerre, 2009). With the identified necessity to outsource the catering and hospitality services, pressure amounts on the UK defense ministry to allocate provisions for the same. In this perspective, based on the current budgetary status, pressures amounts on the UK defense budget to provide more opportunities for military outsourcing. Private firms can provide a range of military services often undertaken ‘in-house’ by military units. These comprise equipment support and other support services, including estates and facilities management services. Therefore, in recommending on the outsourcing strategy to manage these services, a new policy initiative on military outsourcing is needed. The initiative needs to comprise private firms and competitive tendering with a greater willingness to experiment with competition. Private firms should be invited to bid for specified and alternative levels of service and be encouraged to submit innovative bids (Barrar & Gervais, 2006). MoD should consider offering to fund feasibility studies to encourage firms to submit new ideas for outsourcing. Within the mainframe argument of involving the private sectors into the public services, especially in the public sector ‘in-house’ solutions, there is no expectation of solving the problem of monopoly. This is in respect to the associated weaknesses of monopoly such as inefficiency, poor quality, lack of innovation and such like problems. However, the main reason for the intended outsource of the catering service in the Ministry of Defense is to solve the problem of inefficiency and under coordination of these services. Therefore, the intending arrangement must involve clear and written long-term contracts (in perpetuity) with a public monopoly and no re-contracting. This would also serve the purpose of accountability. Efficient private sector solutions require market competition or contestability, but with long-term contracts, such rivalry is confined to the initial award stage (Cassia, 2010). In addition, private sector solutions in such forms as catering services involve substantial transaction costs. In defense, catering services must involve long-term contracts that are characterized by incompleteness in their specification, asset specificity, and scope for opportunism because of asymmetric information. As a result, the alternative forms of public and private provision need to be assessed critically and evaluated with evidence on their benefits and costs. Far from the basic business model, that states that a company puts in what it hopes is the lowest priced bid, and with a nodding acceptance that there has to be some form of quality control, these services must be offered with absolute trust and efficiency. In avoiding the risks associated with the above approaches, effective management of the catering services in the ministry will only occur under an empowerment schemes of motivation on the sides of management (Barrar & Gervais, 2006). These schemes have a major drive to better service delivery and better performances in every institution. The service that renders catering and hospitality services to military dignitaries should be attached to higher moral of duty and standards to efficiency of operations. Such services require better training, motivation, and expertise that offer unrivaled services. An outsourcing programme from the private sector will sure offer such service within the contractual considerations. Recommendations Outsourcing the catering services would be effective, most importantly, because it would increase efficiency and decency in service delivery. The Ministry of Defense should outsource the catering services since it also reduce costs, inject new investment, introduce new ways of working and innovation, and in most cases improve quality. It also means that the ministry carries fewer staff on their books, which always looks good to the Treasury, as there is no long-term commitment or hefty redundancy payments and there is greater flexibility due to not having to decide what to do with staff if their function changes or disappears. As the economy increase, many other associated variables increase as well. Advancements in catering and hospitality services increase as well and thus the need to improve such sets of provisions in the ministry. Therefore, the Ministry of Defense (MoD) must adopt a better outsourcing strategy. The Ministry of defense should adopt two sets of outsourcing these services. a. Licensing agreement: In this arrangement, there are forms of out-tasking a private firm and used when sourcing a tangible asset and facilities. Licensing agreements for such facilities usually take the form of service contracts. When the cost of implementation and set-up are high, these deals are often times multi-year. b. Contracting: The second set of arrangement would also be the out-tasking engagements, and the most common form of outsourcing in the various sectors industry. It is contract is based on a particular period after which it can be renewed or not. It is a tactical engagement when the objective is to limit the complexity and breadth of processes the ministry expect the private institution with which it enters contract with to manage (Cassia, 2010). It is transactional, which means the relationship ends when the activity is complete. It is the most flexible, least risky, and easiest to manage relationship. It limits the ministry’s obligations to a supplier and allows MoD to easily terminate a contract when things are not going well. Conclusion The decision to outsource catering services has its risks and rewards at the same time. Thus, the best part involves selection of a better institution, trusted and proven to offer efficient services to the ministry. Critical amount of consultations must be made within the military and ministry ranks in these arrangements and in working through the complexities of sourcing. References Barrar, W., & Gervais, R. 2006. Global outsourcing strategies: an international reference on effective outsourcing relationships. Aldershot, England, Gower. Brown, D. 2010. The development of Britain's defence policy: Blair, Brown and beyond. Farnham, Ashgate. Cassia, L. 2010. Global outsourcing strategies: the internationalisation of the electronics industry. Cheltenham, UK, Edward Elgar. Great Britain. 2006. Smarter food procurement in the public sector: report. London, Stationery Office. Greaver, M. F. 1999. Strategic outsourcing: a structured approach to outsourcing decisions and initiatives. New York, AMACOM. Harrigan, K. R., & Harrigan, K. R. 2003. Vertical integration, outsourcing, and corporate strategy. Washington, D.C., Beard Books. Hartley, K 2011. The Economics of Defence Policy, Routledge, London. Julius, Dr DeAnne 2008. Public Service Industry Review, Department for Business Enterprise and Regulatory Reform, London. Laguerre, C. 2009. Is the defence market contestable? The case of military aerospace, Defence and Peace Economics, 20, 4, 303-326. Louth, J. and Quentin, P. 2014. UK’s Whole Force Concept Not Fit For Purpose, Royal United Services Institute, London. MoD. 1989. Statement on the Defence Estimates 1989, Cmnd 675-1, Ministry of Defence, TSO, London. O'looney, J. 1998. Outsourcing state and local government services: decision-making strategies and management methods. Westport, Conn, Quorum. Sandler, T., & Hartley, K. 2007. Handbook of Defense Economics Defense in a Globalized World. Burlington, Elsevier. http://www.123library.org/book_details/?id=34050. Read More