Local government outsourcing market jumps by a quarter

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Contract values and time periods are going up shows new arvato/analyst research

The local government outsourcing market saw substantial growth in 2015, with the total value of contracts signed by councils up 23 percent year-on-year, according to the arvato UK Outsourcing Index.

The research, compiled by business process outsourcing (BPO) provider arvato, in partnership with industry analyst NelsonHall, found that deals worth £756 million were signed by local government organisations last year, accounting for 13 percent of the total value of outsourcing agreements signed in the UK in 2015.

According to the findings, local government contracts increased in size and length last year as the sector continues to face mounting efficiency challenges. Average contract values grew by 30 percent year-on-year to £37.8 million, with deal lengths rising to an average of 66 months, representing a 29 percent increase over the same period.

OutsourcingThe trend in local government is the opposite seen in central government, with the government continuing to renegotiate existing contracts and proclaiming that it is seeking to tender for smaller contracts over shorter periods.

The arvato data revealed a surge in new work in local government, with new agreements accounting for 55 percent of deals signed last year, up from 38 percent in 2014.

Three quarters of the deals covered BPO services, with councils mainly procuring HR, revenues and benefits and multi-process customer services.

Debra Maxwell, CEO, CRM & public sector, arvato UK & Ireland, said: “Authorities really focused on transforming their services to meet citizen demands and deliver new savings in 2015. In the wake of major welfare reforms, and with new funding reductions announced in last November’s Spending Review, councils need to fundamentally re-think the way they work.”

She said: “We expect to see more new approaches to transformation in 2016, such as moving services entirely online, sharing services virtually and introducing robotic process automation. Private sector partners will continue to play a key role by bringing in expertise and technology to help make those changes.”

The research is based on an analysis of all outsourcing contracts agreed in the UK market during 2015.

@AntonySavvas