28 | OUTSOURCING
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Outsourcing: softening the blow of the Spending Review
George Osborne has now revealed more than £81 billion worth of public spending cuts through the changes laid out in the Government’s Comprehensive Spending Review (CSR). Many see the announcement as the trigger to cut public sector jobs – as many as 490,000 in the next 24 months. These changes will have an impact on every part of the emergency services sector. So decisions now have to be made and changes must be implemented. The sector must adjust and look for new ways to save money.
The overarching view seems to be that that the CSR represents financial cuts that will reduce the quality of emergency services. I beg to differ. When combined with the Coalition’s core principles of localism and the Big Society, it will certainly spark a fundamental shift in the way emergency services are managed and delivered, but not necessarily their scale nor the quality of service. In fact, the CSR should be a catalyst for the reinvention of blue light services and the establishment of new, more efficient approaches that maximise operational capability while reducing risk and cost.
One of the most effective ways to achieve this is by outsourcing asset management to private partners – a practice that can deliver financial savings of up to 20 percent. So in this article I will outline what outsourced asset management is, how it works, and what benefits it offers the emergency services.
What is outsourced asset management?
Outsourced asset management is when the responsibility to ensure the operational capability, availability and maintenance of high-value assets is transferred to an external private sector partner that specialises in managing those assets efficiently. The definition of assets is wide and can include vehicles, marine vessels, and aircraft (mobile assets) as well as the workshops, depots and storage facilities often associated with their maintenance (fixed assets).
Babcock uses its relationship with an accredited dealer network across the UK to carry out maintenance and repairs.
that can reduce costs by up to 20 percent and free up capital to re-invest elsewhere.
“Get it right and you have a solution that shares the risk and reduces the total cost of ownership.”
The customer can also go a step further, entering into an availability-based contract with the private sector partner. Under this arrangement the partner takes responsibility for ensuring not just the operational capability of the assets during the contract period, but also their availability as and when required. The emphasis is then on the supplier to develop a management programme that ensures the most efficient use of the assets to deliver the service required, to the highest quality.
The benefits
There are seven important benefits of this approach for blue light authorities:
The assets covered under such contracts typically require maintenance throughout their operational life and so the partner takes on some or all of the risk of ownership as part of the contract. The customer relinquishes the burden of managing the assets and, in doing so, also pushes the responsibility for finding more innovative ways of delivering savings to the outsourcing partner. Utilising their experience, external outsourcing partners can quickly assess the true requirement for customer assets and help them implement changes
1. A focus on frontline delivery Partnering with a private outsourcing partner enables organisations to concentrate on their core activities. This is because organisations whose core business is asset management are well placed to take on the risks and responsibilities associated with procuring and maintaining assets. With an experienced outsourcing partner and Service Level Agreement (SLA) in place, emergency services personnel have the reassurance of knowing that their assets are being both well managed and
Emergency Services Times November 2010
maintained, fully supported in the delivery of frontline services.
2. Better optimisation of resources
There are significant long-term financial benefits from the outsourced asset management model because it promotes the optimisation of resources and the removal of waste from the system. Savings are generated by reducing the size of fleets, reducing maintenance costs, instigating better procurement processes, resource sharing, and ensuring the most efficient use of current assets including vehicles, facilities, people and systems. How does this work in practice? Let’s take vehicles as an example. Many organisations have the opinion that there is nominal spare capacity within their fleet, and that this capacity is very difficult to access. The response is often to develop ‘shadow fleets’ to ensure 100 percent availability. This results in pools of spare vehicles – duplication of assets and therefore duplication of maintenance costs. Under the outsourced asset management model, experienced asset managers can interrogate the existing approach, accurately identify the assets required to deliver against requirements, and quickly remove duplication. This offers (on average) a 10-15 percent reduction in assets throughout the organisation and is subject to any geographical constraints. When combined with an availability-based contracting model this translates into an average cost saving of 20 percent.
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