May 2017 Q1 a(ii,iii)
The current medium term strategic plan of Dumko Municipal Assembly (DMA) has overall objective of improving the performance of the Assembly. One critical strategy towards attainment of this goal is adoption of new public management strategy to increase participation of private sector in the provision of public services without losing sight of the differences between public sector and private sector. In fact, some of these differences are so fundamental that they cannot be washed away any time soon.
The Chief Executive suggested outsourcing as a key strategy in improving the delivery of public services at local level through the private sector. DMA is currently bedevilled with poor revenue mobilisation, lack of proper data on the Assembly’s activities, and poor infrastructure provision. Other supporting activities like cleaning and security are not well performed or performed at very high cost by internal staff. These issues have been tabled at the first strategy meeting convened by the Chief Executive.
Required:
ii) Explain the term ‘outsourcing’ in public sector context and advance TWO arguments for the use of outsourcing by DMA in its operations. (4 marks)
View Solution
Outsourcing refers to the practice where a public sector entity contracts out some of its supporting or non-essential services to the private vendor to perform for an agreed consideration. In outsourcing arrangement, the risk is retained by the contracting entity, which is the public sector entity.
Some argument for outsourcing are that:
- Outsourcing leads to improvement in the delivery of public services through the private sector due to assumed greater efficiency and effectiveness in private sector.
- Outsourcing will enable DMA to focus on its core functions and activities since the supporting services will be taken over by a private vendor.
- Outsourcing serves as a medium through which DMA could involve private sector in the delivery of public services.
- Outsourcing will help DMA to serve cost as it is often cheaper to outsource a service than to provide it internally
iii) Explain THREE factors that the management of DMA should consider in making the decision to outsource some of its functions. (3 marks)
View Solution
- Legal requirement and government policy. DMA must consider the enabling law and government policy carefully to determine whether outsourcing is permitted.
- Cost savings. DMA will evaluate the decision to outsource in terms of cost by comparing the cost of internal provision of the service to the cost of outsourcing. Most often, outsourcing is supported in terms of cost advantage.
- Internal capabilities. The internal expertise and capabilities of DMA should be considered to determine whether the existing capabilities are adequate to perform the service internally. For example, it will be unacceptable for an organisation with very strong human resource function to outsource recruitment and related function.
- Availability of vendors. The availability and willingness of private vendors to execute the function is an important determinant of successful outsourcing.
- Avoidance of conflict of interest. The management should ensure that all issues of conflict of interest is considered in the award of outsourcing contract.