Finland: Many municipalities are reclaiming outsourced services

15 July 2013
The outsourcing of social services is not working in practice as it should according to the theory. Many municipalities are taking back the once outsourced services. It is not sure either whether buying services from private providers will save money for the municipalities at all.

This can clearly be seen from the Social Barometer 2013 published by Soste, the umbrella organisation of some 180 associations in the social sector. The Barometer is based on a questionnaire made for top-rank employees in the mainly municipal social and health care sector.

They were asked to estimate how buying services from private companies has affected costs over the last four years. More than half (52 per cent) of the directors of municipal health care centres said the costs have been rising. And 45 per cent of municipal social care directors said the same.

Only 12 per cent of social sector directors and 14 per cent of health care centre directors believed that costs have been reduced due to the use of private services. This result is similar to the previous Barometer from 2011, the most common answer then, also, was that outsourcing has raised costs both in the short term and in the long term.

Some 13 per cent answer that outsourced social and health services were initially offering lower cost options but later raising the cost of services.

Whereas many of those who replied see the quality of private services as quite good, more than half mention problems with quality. This seems to be more common in municipalities with more than 30,000 inhabitants, where three out of four reported problems.

More than one third of those replying say that during the last two years their municipalities have been taking back some outsourced services. The most common reasons for this are the benefits to be derived in terms of price and quality. Services provided by the municipal themselves are seen as better than private services especially when it comes to the customers' rights, and in knowing the needs of customers and developing services.

Municipal work guarantees citizens' right

The same kind of replies come out of the questionnaire conducted by the Trade Union for the Public and Welfare Sectors JHL in 2011 for their activists representing 140 municipalities and 47 joint municipal authorities or public companies.

One out of five said that their municipality is going to reclaim some privatised services. The main reason behind this remunicipalisation is the high price of private services. Problems to do with quality were also commonly cited.

"What is driving this remunicipalisation is the fact that services provided by municipalities themselves is often the most economical way of doing things", says Päivi Niemi-Laine, the Chief Executive Officer of the major municipal union JHL.

"The quality of services, effectiveness of the service chain, ecology and ethical sustainability of the work are also important reasons to prefer municipal work."

"Work done by the municipality is also easier to monitor and thus a barrier to the black economy. It is also a good way to block taxpayers money being transferred to foreign capital investors and tax paradises."

Private service providers can also find themselves in economic difficulties or facing other problems, which may force a company to fold. That means the responsibility once again falls back on the municipality, Niemi-Laine says. "In any case the municipality has to provide the services prescribed by law."

Source: http://www.jokinen.kaapeli.fi/index.php/en/trade-union-news-from-finland/158-many-municipalities-are-reclaiming-outsourced-services

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