Ibec urges outsourcing of core public services

employers’ group Ibec has recommended.

In a new report it says the Government should given serious consideration to the potential benefits of making full use of the private sector.

The report says that, based on international comparisons, in the justice area alone services such as prisoner transportation, electronic monitoring of offenders and passport control at airports and others points of entry into the State could be considered for outsourcing.

It also suggests that in the area of policing the provision of additional resources for major crime investigations, such as trained and experienced former gardaí, should be looked at as part of an external delivery programme.

Ibec says the Government should go beyond its stated position in its public service reform plan to examine non-core activities for delivery in partnership with external providers.

“While the major areas of health, justice, education and local government have been earmarked for commencement, Ireland’s fiscal situation necessitates that early action is needed right across the public sector in identifying suitable areas for external service delivery,” the report says.

Core versus non-core
"There is no one-size-fits-all approach to external service delivery. Public bodies should be encouraged to put forward services that could be done more effectively and efficiently in partnership with industry and/or third-sector bodies, going beyond the 'core' versus 'non- core' debate of purely seeing this as a mechanism for achieving solely back-office savings.

“Any area or function for which outcomes or outputs can be specified should be considered for external service delivery, regardless of whether they are seen as ‘core’, or ‘non-core’, ‘front-office’ or ‘back-office’.”

The report says Ireland ranks fourth from bottom in the OECD in terms of availing of the benefits of the partnership approach to public service delivery. It says this trend is to increase across Europe.

Ibec also argues that the Government needs to address “misconceptions” if external service delivery is to be rolled out successfully.

“Outsourcing need not lead to job losses and is not akin to privatisation: public sector control can be maintained and service levels improved; services performed in partnership are not more costly than if delivered directly.”

Differentiation
Among its key recommendations, Ibec urges that government "should differentiate between the categories of services and implement appropriate strategies for external service delivery across four overarching pillars of activity: outsourcing of existing services; shared services with outsourced elements; new services; and short-term/seasonal services".

The report says administrative issues such as compliance with transfer of undertaking regulations – which give staff the right to retain existing terms if transferred to another company – would need to be addressed at an early stage so they do not act as an obstacle to external service delivery. It says this issue has been successfully dealt with in other EU states.

The report also recommends that the treatment of VAT would need to be addressed.

“Currently, if a public body decides to outsource a support service to a private provider, this provider will add VAT to its invoice; VAT that the public body cannot recover. Hence, the economic gains must be exceptional to outweigh the cost of VAT.”

“Eight EU member states have refund schemes in place that allow public entities to recover input VAT when outsourcing support services,” the Ibec report says.