Four reasons why governments outsource to the private sector

10 August 2021 3 min. read

In a bid to bolster the agility and quality of public services, governments in the Middle East are increasingly turning to strategic partnerships with private sector organisations. Experts from Serco – a large player in the government services landscape – outline four factors driving this trend. 

Cost efficiency

The commercial nature of outsourcers means there is a requirement for efficiency. Often this means there is a greater imperative to drive cost efficient and effective practices when compared to the public sector. In a competitive market, this is coupled with a pressure to deliver the best quality services at the lowest possible price.

With many outsourcers, they are also able to draw on existing operations, meaning there are economies of scale that are not always accessible to public providers – specifically if they are seeking new capabilities or high-value service solutions, where a government does not have the existing experience, expertise, workforce or assets required to deliver a service.

Four reasons  why governments  outsource to the  private sector


Companies providing services to government can often operate with greater flexibility; such as having the ability to more easily scale-up and down operations through the movement of staff between contracts. Experienced contractors also have mature and responsive supply chains, which can facilitate the flexible delivery of services. 

Therefore, by using contractors, governments have the opportunity to retain a capacity to respond to a changing policy context, bringing outsourced resources on-line only as and when necessary, at the scale that is required – this, in-turn, also leads to cost efficient savings. 

Innovation and Expertise

Drawing on international expertise and cutting-edge practices, outsourcers are well-placed to capitalise on innovation in their delivery of public services. The incentives to innovate are also significantly greater for commercial organisations, both as a result of the need to attract new customers and as a means of reducing unnecessary costs. 

Competition is also a driver for innovation, as other organisations who are able to offer better, more cost-effective services will drive companies that do not develop their offer out of the market. Governments can directly benefit from innovation (and the associated cost efficiency reductions) through engaging contractors to support the delivery of services, and by using the innovation generated by contractors and transposing it to other services.

Quality and Accountability

Clearly delineated quality expectations, performance indicators and competition all push up quality in the delivery of services. Fundamentally, organisations which provide services to or on behalf of government are answerable to that government. If they fail to deliver – by not meeting quality expectations – they will face financial penalties or even lose a contract and the associated revenue. 

Furthermore, organisations which fail to deliver quality services face reputational damage, which in turn could reduce their commercial viability. This makes suppliers to government acutely aware of the need to maintain quality. 

It also ensures that a high-level of accountability is retained by the contracting government, arguably more than it might have over in-house service providers, particularly as there is the option to choose alternative providers – in other words, the threat of competition.