Don't get me wrong - I'm a big fan of contracting out certain government functions to the private sector. However, I've had more than enough experience of doing that to know that if you're not careful, all it leads to is higher costs and lower service levels. The last government certainly fucked it up plenty of times - we just never got to read about it in the papers.
I'm currently dealing with a private company that's outsourced a certain function - they can get bitten just as badly as the government. In fact, big companies and big government are often as bad as each other when it comes to inefficiency, waste and plain silliness. The difference is that if the big company does it for too long, it soon becomes either a small company or a no company.
Anyway, I recently needed the outsourcer to provide us with a new service. The outsourcer doesn't provide that service itself though - it contracts that out to a supplier. That supplier then sub-contracts that out, and the sub-contractor then subs it out to the bloke that actually does the work.
So we outsource to A, who subs to B, who subs to C, who gets D to do the work. In the pre-outsourcing days, I just called D and got the job done.
D charges $100 for the service.
But in the brave new world, D sends his quote to C.
C adds 15%, making it $115.
C sends the quote for $115 to B, who also adds 15%, making it $132.25.
B sends the quote to A, who being a big international outsourcer, adds 20%. We get a quote for $158.70.
That process now takes about a month - by the time we get the final quote from A, the original quote from D is passed its 30 day time limit.
We now have to raise a purchase order for A, who then has to raise one for B, who has to raise one for C, who has to raise one for D.
"A" doesn't raise their purchase orders onshore - that's been outsourced to another company "E" overseas. The country that E is based in had problems last year - a bit of civil strife. They couldn't raise orders for weeks as their staff couldn't get to work.
So it took us a month to get a quote, and two months for all the POs to be raised so that D could finally start work.
When it comes to arranging the work, I can't contact D directly any more - I have to email A, who emails B - you get the picture.
You have to factor my time into this as well, and my time is definitely money.
I'm not sure where they're making savings in all of this - I know that when the smart sales people from A sold this to the executive, they promised bucket loads of savings. However, they forgot to add that almost every service that we require costs extra money - lots of money. Need to have an onsite meeting with D to discuss getting this thing done? You can rent a tiny meeting room - for $100 an hour. Tea and biscuits are extra. At least they supply chairs. Funnily enough, the cost savings don't seem to have allowed them to reduce their budget at all. They saved a lot up front, but they then get gouged a thousand times on the little things, and if you get lots gouged often enough, it soon adds up to a whole lot of money.
1 comment:
The corporate manageralist name for this practice is "contestability". It's justified by the mantra that it increases efficiency and effectiveness. It doesn't work. It's one of the reasons why energy bills are skyrocketing.
It continues as a practice because it gives the accountants who run everything in both private and public sectors a reason for their existence. They've locked it in. The lunatics have taken over the asylum.
Post a Comment