High Peak Liberal Democrats

NHS - Remembrance of the things past (in search of lost time)

The current discussion about NHS , standards and outsourcing, is very political and concerning itself mainly with the question 'Is it right to do so?'. In relation to outsourcing of various NHS activities I would like to introduce an additional question: Will it work?

Outsourcing has been the mantra of the right since Margaret Thatcher. She, in turn, took the idea from industry. Industry is now re-evaluating its position to outsourcing, having learnt that outsourcing initially leads to cost reduction only to bounce back as the 'outsourced' costs increase uncontrollably and 'outsourced expertise' is lost. Most importantly, industry learnt that it cannot outsource responsibility - just think of Gulf of Mexico spillage cost to BP (the client) and not to Halliburton (the outsourced contractor) who run the rig.

The inspiration for this article came from my recent attendance of International Petroleum (IP) Week where Claudio Descalzi,COO at Eni (Italian oil company better known as Agip) addressed the delegates during their annual IP Week Dinner. The following is a quotation from his speech. The parallel and the dangers to the NHS which is embarking on this way now are obvious:

Under the heading Lessons learned Claudio said:

…. Independent Project Analysis' statistics say that the average upstream project is 22% late and 25% over budget and these figures are getting worse as projects get larger and more complex. …This issue is causing higher costs of supply, continued delay and overruns in production targets

…., one fundamental cause of the industry's weakening performance, and the issue I would like to address today, has been outsourcing, …..

This practice [of outsourcing] emerged from what was originally a genuine need. Through time, it became a philosophy, an industry trend that was based on the misguided assumption that it creates efficiency and optimises the overall costs.

Initially…... the industry still had the know-how to keep control of its developments, even through "turn-key" contracts that delegated full authority to contractors. As time has gone on, things have changed. Firstly…… some specific inhouse competences have thinned out. And secondly, we now outsource more. On top of that, contractors themselves started outsourcing significant portions of their contracts, making the supply chain longer and less effective and efficient.

In applying this model to project after project, the company eventually became weaker in some of its key project competences…... Consequently, this had a detrimental effect on costs and quality control.

And from this we believe we have learnt some crucial lessons. We understood that to drive results, we must be in charge directly through our people, ….., we have started a campaign of "insourcing" ….. of the activities that we want to control and perform in-house.

I hope the political powers to be, and especially Liberal Democrats will learn the lessons without going through the mistakes. I hope where the industry leads now, i.e. in-sourcing, the political thinking will follow as was the case 30 years ago with "out-sourcing".

Just to drive home the point that we, as taxpayers and voters, cannot discharge the responsibility for outsourced contract: I've just learnt that East Midlands Trains received £110 million of taxpayer monies because the passengers' numbers (and therefore revenues) dropped. Or is it another example of socialising loses and privatising profits?

PS: I signed a petition 'to stop the NHS privatisation' which is a political shorthand for where out-sourcing will lead (https://secure.38degrees.org.uk/nhs-section-75#petition). The result of the petition was a meeting with Minister Norman Lamb (http://blog.38degrees.org.uk/2013/03/22/meeting-with-health-minister-norman-lamb/)

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