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INFRASTRUCTURE OUTSOURCING

Part 3

Policy Issues of Infrastructure Outsourcing

T he public debate over outsourcing often revolves around whether outsourcing saves money. Costs are easy to grasp, the figures are usually large, and other issues are more subtle and less sensational for proponents or critics to use in arguments. But cost alone is rarely used to determine whether design, engineering, or construction work should be outsourced. Council of State Governments data indicate that flexibility, access to personnel or skills not available in-house, increasing political support for outsourcing,

and tapping of private-sector innovation are all important drivers of outsourcing.43

Indeed, best practices for

government procurement and service contracting are steadily moving toward “best-value” techniques, where, rather than selecting a private partner based on low cost alone, governments choose the best combination of cost and quality.

Governments are starting to realize what every shopper knows—sometimes if you pay more, you get more; that is, the best value is not always the cheapest. Indeed, the idea that selecting firms to provide complex services or projects should be based on qualifications and technical merits, as long as the price is a value for

what is promised, is becoming mainstream.44

The Federal Acquisition Regulations were amended in 1996

(FAR 2.101) to allow best-value source selections in outsourcings. Federal Acquisition Regulations define “best value” as “the expected outcome of an acquisition . . . providing the greatest overall benefit in response to the requirement.” And the American Bar Association’s revised Model Procurement Code incorporates best-value procurements as the standard.45

This is not an entirely new concept. In a 1984 Transportation Research Board survey of all state transportation departments, two-thirds of the respondents said they did not use or only occasionally used design cost as a factor in deciding whether to contract for design work.46 The respondents indicated that design cost is not a major factor when compared to other factors and that cost data for internal operations, especially overhead charges, are not sufficiently accurate to make meaningful comparisons.47

43

Chi and Jasper, Private Practices, p. 8.

44

Associated Soil and Foundation Engineers (ASFE), Establishing the Cost of Public-Sector Design, ASFE White Paper No. 2 (Silver Springs, Md.: ASFE, 1999), p. 14.

45

web.mit.edu/civenv/idr/MPCPage.htm. K. E. Cook, “Use of Contract Services by State DOTs,” TR News, no. 121 (November–December 1985), pp. 24–29.

46

47

Chester Wilmot, Donald Deis, Helmut Schneider, and Charles Coates Jr., “In-House Versus Consultant Design Costs in State Departments of Transportation,” Transportation Research Record 1654, Paper No. 99-1403, p. 158.

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