6 Examples That Explain Government Outsourcing

How Government Outsourcing Has Succeeded and Failed

Government outsourcing has become a big topic. Reoccurring budget crises at every level of government make outsourcing a frequently-debated solution. These seven examples will help you to understand why outsourcing is proposed, which services are likely to be outsourced, and some of the mistakes that have been made.

A Small Town Teaches Us a Big Lesson

Storefront buildings in a small town
Benjamin Rondel / Getty Images

The overwhelming majority of people would say that we need a government, but the town of Maywood isn't so sure. This small town has an ambitious idea: Not every town needs its own government. Maywood has scaled back to just a mayor, a lawyer, and a controller, and outsourced everything else. The Maywood experiment started as a cost-control measure, but Maywood has also raised a question about the quality of services. We've all seen the news stories about false arrests, poor schools, and members of the city government taking bribes or other forms of corruption. Finding other ways to deliver municipal services, including outsourcing, can help solve this.

Small Cities Outsource to Solve Budget Issues

Across the nation, but especially in California, dozens of small cities have declared bankruptcy because they cannot afford to run their cities the way they used to; they need to downsize, automate, and outsource. Outsourcing is just one tool, but if it is properly applied, it may solve the problem of the high cost of government services, while also dealing with poor services. 

Outsourcing at the London Olympics

During the London Olympics, one of the biggest security contracts in the history of outsourcing was won by G4S. This multi-billion-dollar company needed to source, train, and manage 14,000 guards. Two weeks before the Olympics, G4S contacted the government and informed them that they would not be able to meet their obligations, falling short by 4,000–7,000 guards.

In the end, the police and Army filled in, and the Olympics were safe and successful. In fact, the Olympics were the most secure public event in British history, with the most complex security plan. This proved again that if you've never done something before, there is no process map to train the outsourcer. If the project is mega-sized, outsourcing is not ideal.


Back in the day of Margaret Thatcher, the Prime minister of U.K. in the 80s, there was a government emphasis on privatization. This meant taking public services and selling or spinning them off. Today, privatization in the U.K. and U.S. has changed a bit and looks more like outsourcing. Instead of selling the service—with the government owning some shares or having seats on the board of directors—the service is provided by a private company, and the government manages the contract. 

Privatization had some big successes, with the government letting go of state-owned enterprises in industries where private businesses were well developed. This included British Petroleum, British Steel, British Telecom, British Gas, and British Airways. Outsourcing is now reaching into areas that are the core of government: police services, jails, education, military support.

Outsourcing Law Enforcement

The most basic service of the small town is law enforcement. In the U.S., police officers are given a specific "beat" to patrol. Outside of town, the Sheriff and their deputies are responsible for enforcing laws in the county or state. On the boundaries of major cities, like New York, for example, you see a complex and overlapping map of town police, state patrols, county sheriffs, and other law enforcement agencies.

There is a lot of redundancy between these agencies and opportunities to consolidate services. Small towns around the U.S. that do not orbit a major city often share services with other towns in their area. They are actively pursuing innovative opportunities to improve services and cut costs.

Mega-Contracts, Micro Results

State governments have been aggressively pursuing mega-contracts to cut costs and improve services. Mega-contracts are very attractive because they can have a big impact, and one big contract should have a much lower cost of management than multiple contracts assigned to many vendors. However, these contracts tend to fail. The pursuit of the "big win" often blinds both the client and the vendor to the dangers of a big, single contract.