The danger of outsourcing

Last updated 10:01 14/01/2013

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According to free market advocates, the contracting out of central and local government services to private providers is all but bound to produce better and less costly outcomes.

OPINION: Reality can differ though, as the Novopay teacher pay fiasco indicates.

Certainly, there was time aplenty to get it right. Australian firm Talent2 won the Novopay contract back in 2005. The new system was budgeted to cost $189.5 million over 10 years, and in effect, a four year run-in time existed for the project proper.

Evidently, all of this was to no avail. Figures released in the New Year show that so far 7899 people had been underpaid or not at all, 6000 were overpaid and 581 paid on behalf of schools for which they did not work.

Not counting the costs involved in trying to cope with the error-plagued system, schools have had to advance $560,000 from their own reserves to cover the mistakes.

To date, neither Talent2 nor the government have indicated what percentage of error with the new system would be regarded as inevitable, or acceptable.

Wellingtonians will have the Novopay example fresh in their minds as they contemplate the arrival of Kevin Lavery, the city council's new chief executive.

Lavery, a 52-year-old Englishman of Irish descent, was formerly chief executive of Cornwall Council in England.

When headhunted, Lavery was on the losing end of a local dispute over Cornwall Council's plans to privatise some services, including IT and libraries.

In fact, the Wellington opportunity arose the day after Cornwall Council had voted to remove its Conservative leader, Alec Robertson. He had been Lavery's chief ally in the battle over plans to create a joint venture with a private company to provide council services.

"I wasn't really looking to leave ... it kind of came out of the blue," Lavery told the Cornwall media a couple of weeks ago.

"If I'm honest about it, I got an approach from a headhunter the day after Alec Robertson was ousted, so probably they caught me at a time that I was feeling a bit unsettled."

Since his appointment as Wellington's chief executive was announced in mid-December, Lavery has been at pains to stress that many of the controversial initiatives in his old job had been virtually forced on him by cutbacks in council funding initiated by the Conservative-led government of British Prime Minister David Cameron.

"It's not me trying to be theological about outsourcing," Lavery told the Dominion-Post.

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For some, such a comment would be far more re-assuring if Lavery hadn't published a book in 1999 called Smart Contracting for Local Government Services that zealously sings the praises of competitive outsourcing.

In practice, any appetite that Lavery may have for contracting out council services - with all the related job implications for council staff - may have been less crucial to him landing the job in Wellington than some of his other skills.

On his arrival in Cornwall in 2008, Lavery was thrown in the deep end of creating and managing a new unitary authority that replaced the former Cornwall County Council and six district councils.

It seems reasonable to expect a super-city amalgamation (and associated job cuts) could be on Lavery's agenda here, as well.

- The Wellingtonian


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