If the federal government wants to get serious about spending controls, it needs to look critically at its ballooning outsourcing costs, according to a new study by the Canadian Centre for Policy Alternatives (CCPA).
The growing and concentrated nature of outsourcing has created a shadow public service that works alongside the real public service — but without the same hiring practices or transparency requirements, said David Macdonald, author of the study and a CCPA research associate.
“Over the past five years, personnel outsourcing costs have risen 79 per cent. While federal departments have had their budgets capped, expenditures on outside consultants have not been touched and remain above $1 billion a year,” said Macdonald.
“Outsourcing isn’t what it used to be. Contractors aren’t coming in for a week to do some filing — they are now being hired on contract for years at a time to work beside regular employees,” he said. “This system of parallel HR is where government managers are turning after last year’s departmental caps.”
Four large departments — Public Works and Government Services Canada, National Defence and Canadian Forces, Human Resources and Skills Development, and Public Safety and Emergency Preparedness — make up one-half of all federal government outsourcing. Their payrolls increased by only nine per cent since 2005-06 but personnel outsourcing costs rose by 100 per cent.
“Without prompt corrective action, outsourcing costs will continue to soar,” said Macdonald. “With the federal government running a significant deficit, it is more important than ever to examine measures that offer potential savings while maintaining services.”
The study, The Shadow Public Services, recommends the hiring mechanism for the federal public service be reformed, with clear goals that include cutting the average hiring time from six months to three.
“The time lag in hiring for critically needed personnel frustrates managers and makes the relatively simpler and faster option of outsourcing such work difficult to resist,” it said. “At the same time, the government should make hiring contractors an option of last resort, rather than the go-to alternative promoted by Public Works. Limits need to be placed on standing offers so that they are used to meet legitimate short-term and specialized needs rather than as a way to circumvent hiring rules.”
While the federal government announced it intended to cap departments’ operational budgets, projections of outsourcing spending in 2010–11 show departments have not cut outsourcing spending at all, said the study. Reduced outsourcing spending should be pursued by the federal government as an ideal way to contain costs while maintaining services, said Macdonald. However, this is only possible with top-down direction from Parliament or the Treasury Board of Canada Secretariat.
“Only hard upper limits on outsourcing expenditures will force recalcitrant managers to work with the resources they have instead of turning to outside firms and driving up outsourcing costs,” he said in the report.
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