This paper is a general overview of outsourcing. It explores when to outsource and what advantages and disadvantages a public manager may face when deciding whether to outsource.
I have chosen references to support this text that are both academic and colloquial. Indeed it was a discovery to learn that "Outsourcing" had become a well-developed academic area of study. My prior study of the subject revolved around personal conversations and non-academic magazine articles.
It may be interesting to note that an internet search using key words, "privatization + government" in both Yahoo and Dogpile failed to bring up a specific government agency devoted to outsourcing or privatization. In the private sector there were many web sites particularly devoted to this topic. One of the most developed was at: http://www.outsourcing-research.com. The lack of existence of a central public agency specifically designed to deal with this issue may be a result of a failure to fully recognize this as an aspect of modern government activity.
"Outsourcing," "privatization," and "contracting out" have a similar meaning. "Outsourcing" may be defined as: [The process by which] "an organization turns over the complete ownership and control of a particular business process or function to the supplier. The buyer determines what results it wants from the supplier, and the supplier determines how to achieve the results." 1
In this sense, "outsourcing" may be synonymous with "privatization" because it implies the turnover of "ownership and control" from one organization to another. "Contracting out" may be a subcategory of outsourcing/privatization. As one reference2 puts it, "Contracting Out" [is] the most common form of privatization: shifting the provision of a good or service to the private sector by putting it out for competitive bid. Examples: everything from construction of aircraft carriers and management of nuclear weapons facilities to provision of landscaping services."
Thus "outsourcing/privatization" may be considered broad encompassing terms while, "contracting out" may be a variant and subcategory in the sense that the goods and services may still be owned by the parent organization. For example, The Navy may have contracted out XYZ Iron Works to build an aircraft carrier, but the Navy still owns it. The Post Office on the other hand is a quasi-independent organization, formerly run by the government but is now privatized.
At other times the "privatization/contracting out" distinction is more apparent. "The researchers found that successful state and local government reform plans seek to eliminate or privatize functions that are not essential. Where privatization is not practical, they introduce competition by contracting out the service."3 In other words, a task is either wholly turned over to a private organization to run or is given partly to a private agency to run for a set period of time. I will explore both...