How should we make sense of the tenacity of the idea that basic public services should be provided by private actors via contract? It is not popular with the public. It has not engendered government that ‘works better’ and ‘costs less’. Stories of failure, unaccountability, public de-skilling, economic waste, social harm and cost-shunting have infused the history of outsourcing since competitive tendering was coercively imposed on UK local councils in the 1980s. Yet, more than a decade and a half after the global financial crisis, adherence to the outsourcing paradigm has only deepened, with public spending on privately provided goods and services rising from 11.8% of GDP in 2008 in OECD nations to 12.6% of GDP in 2019.
Scholars have long recognized that it is important to go beyond purely ideas-centred approaches to understanding neoliberalism and its strange non-death. Neoliberal rationality is not simply in people’s heads, it is embedded in society’s institutions, laws, financial practices, political practices and technologies. Whether a particular person happens to hold convictions that human beings really are best understood as homo economicus, or that competitive markets are the best way to ensure fairness and freedom, is largely irrelevant to functioning of these systems.
In this blog post, I want to consider the role played by the outsourcing contract itself as a contributor to neoliberalism’s durability. Contracts necessarily abound in any neoliberal order of public governance. What happens if we think about them as something more than just legal connective tissue that links the ‘brain’ of the state with the ‘limbs’ of private firms that deliver services? What if they are more like DNA, bundles of code that not only provide instructions for how activities are to be performed, but for how the organs of the state should transform, grow and reproduce themselves? We can fruitfully consider these questions by examining the history and activities of Serco, an iconic multinational outsourcing company.
What’s in an outsourcing contract?
Serco holds (at the time of writing) 500 contracts in so-called ‘citizen services’ in criminal justice, immigration, defence, health, education, transport, property services across more than 20 countries. These contracts are generally confidential, nevertheless from the handful that have been made available publicly (such as Serco’s Immigration Detention Facilities and Detainee Services Contract) we can discern some shared features.
Public service outsourcing contracts are putatively agreements for the ‘delivery’ of so-called ‘citizen services’, that is, activities that involve engagement with the members of the public on terms that resemble those that might historically have been undertaken by state actors pursuant to public power. Crucially, the services contemplated by such contracts are not only undertaken by private actors, they are also conceived in a highly codified way which differs significantly from the way in which public functions are conferred on public actors through legislation. Consider, for instance, laws governing a public service such as the police force. Acts such as the New South Wales Police Act 1990 lay out broad and temporally open-ended purposes that concern relationships with citizens. Sections 6(3), for example, requires the police force to provide ‘the protection of persons from injury or death’, inter alia. The Serco Immigration outsourcing contract, by contrast, establishes a series of schedules, codes and guidelines that prescribe the conduct of persons in great detail and well in advance. The Serco Contract Statement of Work, for example, includes matters such as ‘the Menu Plan for any given 28 day period will repeat no more than 50% of the Menu Plan for the immediately preceding 28 day period’ (Clause 2.2(h)(v), p.167) – just one of 161 pages of detailed rules.
Outsourcing contracts also necessarily contemplate an economic transaction, the fee that is paid by the state for the services provided. In the case of the Immigration Detention contract above, this fee is monthly and its amount is confidential, but estimated at 1.9 billion Australian dollars over five years. Rules establish how activities are to be performed and assessed, that are linked with abatement and incentive regimes that increase or reduce fees depending on the nature of the performance. Contracts also provide for schedules of meetings and establish the arrangements for contract termination.
How do outsourcing contracts re-shape the state?
It is commonly observed that public service outsourcing de-skills the state. As private actors assume long-term responsibility for public functions, in-house competency decreases, leading to a paradigm of co-dependency between states and outsourcing firms.
That co-dependency, though, is not simply a matter of an absence of sufficiently skilled public employees. Outsourcing contracts themselves reconfigure the state, because they require multiple anchor points for their administration and financing. It is not the state in general that is responsible for complying with state obligations under an outsourcing contract, but (usually) a sub-section of the Ministry of Finance, operating according to internal government compliance norms which exist with, and contribute to, a body of general procurement rules that establish ‘standard’ measures of quality in individual and future contracts. On the company side, contracts similarly do not exist in isolation, but are executed as part of an ecosystem of compliance that connects each contract with bodies of contracts in the past and future, via the use of contract templates, bodies of standards, and procurement bids.
Foundational assumptions about what it means to provide a public service on contractual terms are baked into these processes. Whether on the state side or the firm side, a commitment to codification, closed temporality, predictability and control are assumed.
A contract’s exchange value is similarly anchored in institutions that link it to budgetary cycles and financial obligations on both the firm and state side. These, too, have a distinct temporality that demands precise and advance quantification. In the case of firms, the setting of terms and compliance is also shaped by obligations to shareholders grounded in Corporate Law. As Julie Froud and others have observed, individual contracts do not stand alone from the point of view of profit for outsourcing multinationals. They rather exist as units within wider contract portfolios, which collectively reflect different risk profiles, multiple sectors and different locations. By aggregating contracts together, and using financialized techniques, companies are thus able to spread risk and maximise profit.
Both states and firms use signs and symbols of public governance to engender legitimacy for outsourced government, despite its deep conceptual differences with publicly-provided services. Serco, for instance, describes itself as providing ‘citizen services’ in an open-ended way (despite the highly codified and temporally closed nature of activities contemplated by contract). On the State side, the separation of contracted activities from directly performed public services enables governments to de-politicise their activities and shift blame and attention from controversial domains such as criminal justice and immigration. Contract-based legal normativity (such as ‘risk rating’ instruments) have also, in turn, been observed by scholars such as Louise Boon-Kuo to flow into other domains of public power entirely.
The production of indifference
It perhaps goes without saying that it is inherent to the concept of an outsourcing contract that ‘the public’, itself, has no direct standing as a contracting party. While the subject matter of a contract will necessarily contemplate people to the extent that they appear as users of the service (as, for instance, ‘hospital users’ or ‘detainees’), the public itself is de-constituted by outsourcing contracts. To the extent ‘the public’ exists in the worlds of the contract, it is as a non-participant to whom a posture of categorical indifference, on behalf of the parties, is appropriate.
We should, accordingly, be unsurprised when it observed that outsourcing employees tend to be guided by the ‘reality’ of the contractual terms that codify their obligations, rather than the cues of their senses or emotions concerning the needs of citizens and people in their care. A sense of indifference to the interests of non-parties is inherent to private contracting norms. It is through this lens that Serco’s decision to staff breast cancer screening hotlines with employees with no medical qualifications and just one hour of training was made. Or its decision to leave wheelchair users waiting for hours when hospitals were busier that predicted. Or its choice to continue to charge the Ministry of Justice for ankle security tags for prisoners who were dead, in prison, or did not exist. This latter decision was, in the words of a Serco representative, based on a contractual entitlement that was fairly and reasonably ‘open to interpretation’. Such outcomes are an exemplification of a system working smoothly according to its own design. Unwinding it will necessarily require far more than regulation or inquiries geared to increasing transparency or competition. It will rather require grappling with the normative foundations of private law itself and its place within public institutions. Models such as community wealth-building and the Foundational Economy, which are anchored in wholly different, and non-contractual, normative foundations, provide more promising approaches if we want to arrest neoliberalism’s apparently unstoppable momentum.
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