Assessing outsourcing potential in a state dot
| DOI | https://doi.org/10.1108/JOPP-04-01-2004-B002 |
| Published date | 01 March 2004 |
| Pages | 22-42 |
| Date | 01 March 2004 |
| Author | Chester G. Wilmot,Donald R. Deis,Rong Xu |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 4, ISSUE 1, 22-42 2004
ASSESSING OUTSOURCING POTENTIAL IN A STATE DOT
Chester G. Wilmot, Donald R. Deis and Rong Xu
ABSTRACT. The purpose of this project was to develop a systematic,
objective procedure to evaluate the potential to outsource functions and
activities currently performed by the Louisiana Department of Transportation
and Development (LaDOTD). A computer-based model was developed which
evaluates the qualitative and cost aspects of contracting out activities and
functions. The model was applied to three activities in the LaDOTD; highway
markers, highway striping, and maintenance of rest areas. The results were in
line with the expectations of officials who have experienced actual outsourcing
of these activities. The model was constructed so that the perspectives it
considers and the criterion on which outsourcing is assessed may be altered by
the user to allow its use in a variety of settings.
INTRODUCTION
A study conducted for the Transportation Research Board’s National
Cooperative Highway Research Program (NCHRP) in 1997 showed that
outsourcing by state highway departments had increased more than
tenfold since 1950 (Witheford, 1997). This increase responds to political
pressure to downsize government and the need for public agencies to
accommodate peak demands and access specialized skills and services
because as outsourcing has increased, development of the model
described in this paper is timely and useful.
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* Chester G. Wilmot, Ph.D., is an Associate Professor in the Louisiana
Transportation Research Center and Department of Civil and Environmental
Engineering, Louisiana State University. Dr. Wilmot’s research interest is in
transportation financing and planning. Rong Xu is a Ph.D. candidate in the
Department of Petroleum Engineering, Louisiana State University. Donald R.
Deis, Ph.D., is Professor and Joseph A. Silvoso Distinguished Director of the
School of Accountancy at the University of Missouri-Columbia. His research
interest is in governmental accounting and privatization.
Copyright © 2004 by PrAcademics Press
ASSESSING OUTSOURCING POTENTIAL IN A STATE DOT 23
Outsourcing is often perceived as a means of reducing costs resulting
from efficiencies brought about by competition. Private companies must
be efficient in order to survive in a competitive environment. Public
agencies, on the other hand, do not face the same challenges and, indeed,
those within public agencies are often evaluated in terms of the number
of people they supervise and the size of their budget. However, public
agencies, having to contend with only one set of regulations and
standards, and being able to call on outside assistance through
outsourcing when required, develop their own efficiencies through
specialization. It is also generally accepted that public agencies are best
suited to provide so-called ‘public goods and services’ or administer the
‘core competencies’ of a public agency. Public goods and services are
goods and services consumed by society collectively without distinction
of the sectors of society (Poole, 1991). Examples of public goods are
national defense, public parks, libraries, and education. Public goods and
services are usually funded through taxation. Core competencies, on the
other hand, are specialized technical or scientific activities that must be
conducted by an organization in order to fulfill its mission and execute
its responsibilities (Office of Management and Budget, 1996). Examples
of core competencies in a state Department of Transportation are the
overall planning of the highway system, setting of priorities in
maintenance and construction, establishing and maintaining standards in
road construction, and responding to queries from the government, the
public, and other agencies regarding the state’s transportation system.
A position taken by the proponents of outsourcing is that many of the
activities conducted by public agencies today are neither public goods
and services nor core competencies, so there is no reason to reserve them
for public agency execution. Outsourcing proponents suggest such
competencies could be executed more efficiently by the private sector. If
this is true, the question becomes, “Which of the activities currently
conducted by public agencies could be performed better within the
private sector?” The Louisiana Department of Transportation and
Development (LaDOTD) addressed this issue by commissioning the
Louisiana Transportation Research Center (LTRC) to develop a model
which objectively evaluates the outsourcing potential of any activity or
function within the department. This paper reports on the development
of the model produced to provide this capability.
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