Philip Booth writes for the Spectator Coffee House
In many senses, the obvious failure of contractors in situations such as the G4S Olympic contract, and in the welfare-to-work schemes, is a sign of the success of the whole idea. When government services provided by in-house teams fail, non-delivery is brushed under the carpet. Poorly performing schools linger forever; disorderly prisons fester; job centres do not get people back into work; and so on. When the G4S contract was granted cash was handed over; G4S failed to deliver on the contract; they paid up; and their share price tumbled. Everything was above board and transparent.
Contracting-out can lead to huge efficiency gains, transparency and better performance management. Politicians complain about principal-agent problems between shareholders and directors in companies but the worst principal-agent problems are all in the public sector. If my children’s local state school is not cleaned properly, there is no effective mechanism to hold the people ultimately responsible – the politicians who run the education service – to account. It is too easy for management to let slack practice continue. Contracting-out of a service that can be well defined so that the contract can be easily written and supervised can alleviate these problems and, through the processes of competition and innovation, reduce costs significantly.
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