Care services in private hands as local authorities increase use of outsourcing

The last strongholds of public services in Denmark seem to be falling to the continued use of outsourcing of tasks to private enterprises by municipalities, and this development will continue. These are the findings of a study carried out by the municipal sector employers' organisation, KL, and published in June 2000. The study - which is the first of this type - confirms that a growing number of local authorities want to use outsourcing in politically sensitive sectors such as care for children and elderly people.

Outsourcing, or contracting-out, of tasks to private enterprises has been expanding rapidly among local authorities and this development will gain increasing momentum, according to a new study carried out by the municipal sector employers' organisation, the National Association of Local Authorities (Kommunernes Landsforening, KL) concerning the scope of tendering and outsourcing activities in local authorities. The report was published in June 2000.

The study finds that, more frequently than before, local authorities are deciding to outsource tasks to private enterprises in order to have them performed as well and cheaply as possible, and there is nothing which seems to indicate that this trend has yet peaked. Many local authorities are planning to let private firms take over a growing number of tasks in the future - including so-called "soft" fields such as childcare and care for elderly people, where the opposition has so far been strongest.

Outsourcing of public services

This is the first time that the extent of the disputed practice of outsourcing, or contracting-out, of public services has been mapped out in Denmark. From 1994 to 1999, the local authorities made more than 1,800 calls for tenders for services. As 71% of these tenders took place for the first time, it is clear that a far greater number of tasks are being outsourced today. Most tender procedures took place in fields such as cleaning, transportation, catering services, auditing and sanitation - ie tasks which have long been outsourced by municipal technical administrations, along with areas such as maintenance of parks. However, it is also clear that local authorities will in future use outsourcing in connection with the operation of childcare institutions and home-help services. This is one of the conclusions drawn by the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO), which calls this a dramatic development. The KL study also shows that the decisions to involve private firms are based on a "pragmatic" approach", and not ideological attitudes. In about half of all cases, outsourcing has led to savings without reducing the level of services. If changes have occurred, they have typically been for the better, according to the study. Although the local authorities go for "best and cheapest", they maintain political responsibility for the quality of the services."

This comes as no surprise to the chair of the State Board for Outsourcing (Statens Udliciteringsråd), Allan Andersen: "This confirms our sense of a strongly increasing activity level in recent years. Earlier, this field has been characterised by taboos and prejudices, but I am convinced that we will see an acceleration of activities in this field - also in the soft fields," he stated.

The growth in the use of outsourcing in the municipal sector coincides with the recent takeover by the Danish-based multinational services group ISS of its competitor Jysk Rengøring. One of the most important activities of the ISS group is cleaning, which is one of the activities most often outsourced by the local authorities. According to an ISS vice-director, Eric Rylberg, this new study confirms the ideas underlying the takeover of "Jysk Rengøring". The new giant company will focus especially on tasks in the field of operating child care institutions and care for the elderly. "On the basis of our experience from, for instance, Sweden I believe that we will see a positive development in outsourcing of tasks in this field. And this is actually confirmed by this study", said Mr Rylberg.

Commentary

Privatisation and outsourcing are words ring badly in the ears of traditional social-democratic local councillors or trade unionists. Despite the substantial publicity, it should be noted that not all local authorities are enthusiastic about the idea of outsourcing in the field of childcare, care for elderly people etc. A recent call for tenders in the county of Ribe showed that the bids received could not compete with the county's own services. In the new KL study, the local authorities point to the process of calling tenders as one of the biggest obstacles to the use of outsourcing. The study also shows that it is the very large local authorities which use outsourcing the most, while some local authorities do not use it at all. Just 28% out of 237 local authorities account for half of all tenders. Arne Toft, mayor of the small town Arden, is the chair of the association "A distorted Denmark" (Det skæve Danmark) which has 110 small local authorities as members. In these municipalities and many similar councils, no tasks have been outsourced in the field of childcare and care for the elderly. Nor will they be so in the future. "Outsourcing is a sign of defeat. It is the same as admitting not being competent enough as a local authority," he argues. The Danish Confederation of Municipal Employees (Det Kommunale Kartel, DKK) - which represents 400,000 members in the county and municipal administrations - also has a sceptical and critical attitude to the alleged wave of outsourcing (DK9908143N).

Nevertheless, it may turn out to be necessary for the small local authorities to transfer more tasks to private hands in the future - among other considerations, because it could be economically advantageous for small municipalities to cooperate in connection with major outsourcing operations which often require huge resources. A follow-up study carried out by the newspaper Børsen at the start of July 2000 indicates that more and more Danes are interested in private firms taking over the operation of public tasks. According to this study, the interest is mainly growing in such "hard" fields as the operation and maintenance of roads and railways, while there is still a considerable amount of scepticism when it comes to "soft" fields such as private operation of schools, care for the elderly and hospitals. (Carsten Jørgensen, FAOS)

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