Introduction
Performing core functions of the government requires a historical perspective and understanding of the interwoven complexity of the various constituting elements that have traditionally been the forte of permanent civil service. However, outside agencies are increasingly partnering with the government to deliver public goods and services, and as a result, the steel frame of governance structure is gradually becoming malleable. This accelerating pace of outsourcing in industrialized nations (Jensen and Stonecash Reference Jensen and Stonecash2004) is relatively well documented. Still, a mixed picture emerges from analyzing recent data. For example, Organisation for Economic Co-operation and Development governments spent 8.8% of Gross Domestic Product on outsourced expenditure in 2019 compared to 10% in 2011, though again, there is a perceptible rise in 2020 (OECD 2013, 2021).
This transformative shift toward outsourcing has highlighted the government’s need for new managerial capacities and resources. (Brown and Potoski Reference Brown and Potoski2003, Noordegraaf and Abma Reference Noordegraaf and Abma2003, Breul Reference Breul2010, Carboni and Milward Reference Carboni and Milward2012, Brown, et al. Reference Brown, Potoski and Van Slyke2017, Taponen Reference Taponen2017, Taponen and Kauppi Reference Taponen and Kauppi2017)This necessity becomes more profound as professed benefits like cost savings and performance improvements due to outsourcing are not universally proven, and determinants and sources of cost savings are hotly contested. (Megginson and Netter Reference Megginson and Netter2001, Jensen and Stonecash Reference Jensen and Stonecash2004, Eckersley and Ferry Reference Eckersley and Ferry2020) A nascent developing trend of moving away from outsourcing among some public authorities (Wollmann Reference Wollmann2018, Eckersley and Ferry Reference Eckersley and Ferry2020) points to some degree of rethink among decision-makers.
In addition, the lack of effective performance management and the availability of performance data make comprehensive and comparative service evaluation challenging. (Pina, et al. Reference Pina, Torres and Yetano2011, Torres, et al. Reference Torres, Pina and Yetano2011). Inevitably, the quality of performance management, whether in public or private sector organizations, is a fundamental determinant of successful outcomes (Trivedi Reference Trivedi2003), and outsourcing relationships between governments and private actors are no exception. It can be argued that public servants often outsource public functions to non-state organizations to circumvent accountability rules, creating “shadow” state capacity that may explain pockets of effectiveness in government social programs, but ultimately limits overall state capacity in the long run (Rich Reference Rich2023). Therefore, a performance management framework that encompasses all the differentiating attributes of the outsourcing arrangements is a necessary precursor for successful implementation.
Developing countries also increasingly resort to outsourcing to improve efficacy and better cost management. For example, the policy think tank of the Government of India, NITI Aayog, has suggested large-scale outsourcing of public services to private hands to reduce dependence on the government and administrative machinery (NITI-Aayog 2017). However, this move towards outsourcing in developing countries (Bishop Reference Bishop and Heeks2001, Golooba-Mutebi Reference Golooba-Mutebi2003, Smitha and Sangita Reference Smitha and Sangita2008), where the existing performance monitoring and evaluation systems are weak, can lead to prioritization of profit-seeking over public service values and result in unclear accountability (Kakabadse and Kakabadse Reference Kakabadse and Kakabadse2001, Heeks Reference Heeks2006, Auriol and Picard Reference Auriol and Picard2009).
The recent pandemic has further encouraged technology outsourcing as a vital tool for improving public service delivery worldwide. This trend has further emphasized the need to augment the government’s capacity to absorb technology for managing outsourcing (Reis, et al. Reference Reis, Espírito Santo and Melão2019, Patterson, et al. Reference Patterson, McIntyre, Clough and Rushton2021).
Consequently, a systematic effort to understand the fundamental features of outsourcing and build an adaptable performance management framework (McIvor Reference McIvor2000) has acquired criticality. This need for a structured analysis is felt more intensely in developing countries like India, as few accurate nationwide databases or academic studies on government outsourcing are available.
The subsequent discussion focuses on studying the theoretical constructs of outsourcing and devising a conceptual framework that is further explained and validated with the help of two case studies from India. The objective is to understand the contours of an effective performance management system in the different types of government outsourcing arrangements.
Outsourcing in the government
Various researchers agree that outsourcing in the government is challenging to define and thornier to measure (Eckersley and Ferry Reference Eckersley and Ferry2020). At a meta-level, outsourcing involves contracting public services or providing goods previously done in-house to the business, social, or voluntary sectors (Gupta and Gupta Reference Gupta and Gupta1992, Willcocks, et al. Reference Willcocks, Fitzgerald and Feeny1995, Aulich and Hein Reference Aulich and Hein2005). Most of these contracts are for a fixed term, and overall control and direction are in the government’s hands (Porter Reference Porter2011, Tizard Reference Tizard2015).
To better appreciate the concept, it is essential to differentiate the terms like “privatisation,” “outsourcing,” and “contracting out.” In cases of both “outsourcing” and “contracting out,” the government buys goods or services from another public or private entity, but in outsourcing, governments usually maintain regulatory and policy control, and the conditions of the contract specify a defined timeline, whereas “privatisation” is a permanent transfer of government asset or service (Jensen and Stonecash Reference Jensen and Stonecash2004, Fernandez and Smith Reference Fernandez and Smith2006, Bradbury and Waechter Reference Bradbury and David Waechter2009). Furthermore, the government may implement the outsourcing arrangements through several other options that can vary in scope and degree of involvement of non-government partners (Brooks Reference Brooks2004, Wu, et al. Reference Wu, Pan and Zhang2015).
At a broader level, outsourcing in the public sector entails the government engaging external organizations to provide public services, with the government assuming the role of purchaser while the external entities act as service providers. (Argento Reference Argento2023).
Triggers
It is widely recognized that the common triggers for outsourcing in government are cost efficiency (Farneti and Young Reference Farneti and Young2008, Marques and Berg Reference Marques and Berg2011) and lack of expertise or ability to recruit competent staff (Taponen Reference Taponen2017). A significant push toward outsourcing came with the introduction of “New Public Management” concepts into the government’s functioning over 30 years ago, which has translated into broader adoption of market solutions in the government (Kuziemski and Misuraca Reference Kuziemski and Misuraca2020).
Additionally, a neo-liberal agenda, driven by political goals like vote banking, opposition to unions, corruption, or career enhancement, is also seen as a trigger by many researchers for outsourcing in the government (Lacity and Hirschheim Reference Lacity and Hirschheim1993, Peled Reference Peled2000, Lakin and Ravishankar Reference Lakin and Ravishankar2006, Heeks and Arun Reference Heeks and Arun2010). Finally, the bandwagon effect and longer-term ideological agenda to change the government’s structure towards a “contract state” are identified as significant motivations for increased outsourcing (Lacity and Willcocks Reference Lacity and Willcocks2008, Willcocks, et al. Reference Willcocks, Cullen and Craig2011, Cordella and Willcocks Reference Cordella and Willcocks2012).
Initially, public services, where the outputs were relatively easy to measure, were the primary candidates for outsourcing (Milne and McGee Reference Milne and McGee1992, Reeves and Barrow Reference Reeves and Barrow2000, Dijkgraaf and Gradus Reference Dijkgraaf and Gradus2014). However, two opposite trends are emerging in recent times. On the one hand, governments increasingly outsource more complex services like tax administration, for which traditional explanations like competition and ownership are inadequate (Jensen and Stonecash Reference Jensen and Stonecash2004, Warner and Hefetz Reference Warner and Hefetz2012). On the other hand, some studies have also pointed out the trend of reverting to insourcing among some public authorities (Wollmann Reference Wollmann2018, Eckersley and Ferry Reference Eckersley and Ferry2020) (Figure 1).
Figure 1. Government Outsourcing Performance Matrix.
Theoretical underpinning
Outsourcing has been seen through several theoretical lenses despite a lack of conceptual clarity on precisely what it is (Stark et al. Reference Stark, Arlt and Walker Derek2006). The idea of “the contract state” (Mintzberg Reference Mintzberg1996, Dunleavy, et al. Reference Dunleavy, Margetts, Bastow and Tinkler2006, Lacity, et al. Reference Lacity, Khan and Willcocks2009, Le Grand Reference Le Grand2009, Cordella and Willcocks Reference Cordella and Willcocks2010) is a boundary-setting concept to understand the limits of outsourcing in the government. Cordella and Willcocks Reference Cordella and Willcocks2012 refer to the contract state as:
“contracting between public service organisations and their users/members of the public; contracting with external providers; or contracting between different parts of the public service to produce better services to citizens.”
From economics and public administration literature, the most popular explanations for outsourcing in the government are based on transaction cost theory (Holcomb and Hitt Reference Holcomb and Hitt2007), new public management (Savas Reference Savas2005, Warner and Hefetz Reference Warner and Hefetz2008), agency theory (Eisenhardt Reference Eisenhardt1989) and the public value concept (Moore Reference Moore2000, Benington and Moore Reference Benington and Moore2010).
Transaction cost economics rationalizes outsourcing non-core services to improve cost efficiencies (Nordigården, et al. Reference Nordigården, Rehme, Brege, Chicksand and Walker2014). However, many researchers question the relevance of this differentiation between core and non-core in contemporary times (Harland, et al. Reference Harland, Knight, Lamming and Walker2005). Overall, the transaction cost explanation of outsourcing focuses on competitive tendering procedures, mitigation of increased risks, management of the transition phase, and establishing contract management practices to maximize cost advantage. (Girth, et al. Reference Girth, Hefetz, Johnston and Warner2012, Hefetz and Warner Reference Hefetz and Warner2012).
Agency theory puts “contract” between “principal” and “agent” at the heart of the outsourcing relationship (Simonsen and Hill Reference Simonsen and Hill1998). Significantly, principals’ ability to hold agents accountable depends on access to real-time information and contract management skills (Eckersley and Ferry Reference Eckersley and Ferry2020). Invariably, this information is not always available, and public servants often do not have the skills to process this information (O’Neill Reference O’Neill2009, Eckersley and Ferry Reference Eckersley and Ferry2020) or are willing to game the performance targets.
New Public Management (Hood Reference Hood1991) focuses on running governments on private business principles like “core competence” (Hood Reference Hood1991, Cordella and Willcocks Reference Cordella and Willcocks2012, Kuziemski and Misuraca Reference Kuziemski and Misuraca2020). In government, this core competence would mean the different strategic skills embedded in the institutional structure of public organizations to deliver public value. (Benington Reference Benington2009).
In a nutshell, proponents of outsourcing claim that benefits from outsourcing in the government include reduced costs, access to new technologies, and more attention to the core activities (Bel, et al. Reference Bel, Fageda and Warner2010, Boardman, et al. Reference Boardman, Vining and Weimer2016, Alonso, et al. Reference Alonso, Clifton and Díaz-Fuentes2017) and can potentially enhance government fiscal conditions, with contextual factors significantly moderating this impact (Wei and Chen Reference Wei and Chen2024).
Outsourcing organizations may also be able to circumvent human resources and labor problems and improve efficiency, as political actions are less prevalent in private firms (Jensen and Stonecash Reference Jensen and Stonecash2004, Doellgast and Gospel Reference Doellgast and Gospel2013). Here, the argument of Benson Reference Benson1990) that outsourcing can create new interest groups and lead to a more equitable distribution of benefits provides a contrarian perspective.
Clearly, everybody does not agree with the beneficial thesis of outsourcing. (Florio Reference Florio2014, Alonso, et al. Reference Alonso, Clifton and Díaz-Fuentes2017). Many see any benefits only as transitory and negatively impacting workers’ interests (Megginson and Netter Reference Megginson and Netter2001, Jensen and Stonecash Reference Jensen and Stonecash2004, Brown and Potoski Reference Brown and Potoski2005, Hefetz and Warner Reference Hefetz and Warner2012, Florio Reference Florio2014) and scant evidence of the consistent form of “good outsourcing” (Goodair and Reeves Reference Goodair and Reeves2024).
Therefore, Farneti and Young Reference Farneti and Young2008 have concluded that public officials must be selective about outsourcing and vigilant to inherent unknowable risks. Hence, governments must retain and augment their preparedness to revert to insourcing if private service providers fail to meet expectations. (Bradbury and Waechter Reference Bradbury and David Waechter2009).
Strategic challenges
An important guiding principle for effective outsourcing is contextual astuteness and adaptation to provide public value, as a one-size-fits-all approach is often ineffective (Aulich and Hein Reference Aulich and Hein2005, Cordella and Willcocks Reference Cordella and Willcocks2010, Reference Cordella and Willcocks2012). Simply focusing on imperfect short-term cost-benefit analysis without strategic thinking about enhancing public value can lead to unwanted consequences. For example, before deciding on outsourcing, the question of whether certain functions are distinctly public and must remain in-house for the public interest to be genuinely served has to be answered first. (Peters Reference Peters1996).
Another important factor is that the long-term dependence on outsourcing for complex and wide-ranging contracts leads to situations where replacing the existing contractor becomes very difficult (Sclar Reference Sclar2001, Aulich and Hein Reference Aulich and Hein2005). Solutions like breaking a large contract into smaller parts and encouraging sub-contracting create another set of problems, like the demarcation of different service providers’ roles, accountability, and control (Goodsell Reference Goodsell2007).
Operational challenges
At the operational level, a lack of real-time flow of information has significant implications for accountability, risk management, and policy-making (Eckersley and Ferry Reference Eckersley and Ferry2020). Other challenges that can hamper the smooth operationalization of outsourcing arrangements include inadequate analysis of cost savings (Hodge and Bowman Reference Hodge and Bowman2006, Bel, et al. Reference Bel, Fageda and Warner2010), uncompetitive market (Brown and Potoski Reference Brown and Potoski2003, Caldwell, et al. Reference Caldwell, Walker, Harland, Knight, Zheng and Wakeley2005, Marvel and Marvel Reference Marvel and Marvel2007, Girth, et al. Reference Girth, Hefetz, Johnston and Warner2012), undemocratic decision-making (Andrews and Entwistle Reference Andrews and Entwistle2010, Dannin Reference Dannin2011, Warner and Hefetz Reference Warner and Hefetz2020) and poor contract management skills of the civil servants (Heinrich Reference Heinrich2007, Heinrich and Choi Reference Heinrich and Choi2007, Amirkhanyan Reference Amirkhanyan2011, Warner and Hefetz Reference Warner and Hefetz2012, Hefetz, et al. Reference Hefetz, Warner and Vigoda-Gadot2014, Taponen Reference Taponen2017, Gradus and Budding Reference Gradus and Budding2020).
As all contracts are inherently incomplete (Broadbent and Laughlin Reference Broadbent and Laughlin2003, Jensen and Stonecash Reference Jensen and Stonecash2004), political will and administrative competence to enforce a complicated contract (Freeman and Minow Reference Freeman and Minow2009) are the prerequisites for efficacious operationalization. Moreover, interweaving the traditional hierarchical structure of the government with the network model required for outsourcing (Cooper and Cooper Reference Cooper and Cooper2002) further underlines risk transfer and accountability concerns, especially if the private service provider fails to meet the obligations (Walker and Tizard Reference Walker and Tizard2018).
Performance management for effective outsourcing
The plethora of challenges identified earlier clearly points out the need for a new performance management framework distinct from the earlier systems to manage the coordination and network of various stakeholders in the outsourcing arrangements. A seamless transition to outsourcing in the government requires regular performance evaluation to alert about issues in quality and accessibility. An essential precondition for this is an effective performance management system. Unfortunately, this kind of sophisticated performance management system having qualitative and quantitative parameters with a focus on citizen welfare is largely absent in public organizations (Noordegraaf and Abma Reference Noordegraaf and Abma2003, Bradbury and Waechter Reference Bradbury and David Waechter2009, Cohen and Eimicke Reference Cohen and Eimicke2011, Torres, et al. Reference Torres, Pina and Yetano2011, Cohen, et al. Reference Cohen, Eimicke and Heikkila2013, Taponen and Kauppi Reference Taponen and Kauppi2017). Instead, performance management is confined chiefly to tools like service level agreements with outsourcing agencies that align with the contemporary wisdom of identifying quantifiable performance norms in the government. Unfortunately, this emphasis can cause more harm than good if implemented without understanding the embedded contextual nuances and limitations (Kravchuk and Schack Reference Kravchuk and Schack1996, Radin Reference Radin2000).
Additionally, dispersed accountability in the outsourcing model (Dannin Reference Dannin2011) necessitates citizen engagement in service delivery, planning, and design, especially in local governments (Forester Reference Forester1999, Denhardt and Denhardt Reference Denhardt and Denhardt2003). To achieve this, the government must encourage openness and transparent communication (Smitha & Sangita, Reference Smitha and Sangita2008). Hence, performance management should also be able to address social inclusion concerns and stakeholders’ priorities (Yang and Holzer Reference Yang and Holzer2006).
Government outsourcing in India – performance management perspective
As a fast-developing country with the highest population in the world, India is an excellent case to study the qualities of a performance management system for effective outsourcing in the government. Outsourcing in India is getting increasing traction from management and ideological points of view (Datta Reference Datta2009, Hans Reference Hans2017). Public-private partnerships are the preferred medium for these outsourcing efforts, and such initiatives abound in infrastructure, education, skill development, health, water, sanitation, technology, and social services (Devkar, et al. Reference Devkar, Mahalingam and Kalidindi2013, Luthra and Mahajan Reference Luthra and Mahajan2013, Maclean, et al. Reference Maclean, Jagannathan and Sarvi2013, Ponnusamy Reference Ponnusamy2013, Parvez and Kumar Reference Parvez and Anil Kumar2020). Some specific examples of outsourcing in public service delivery are telecenters (Madon Reference Madon2005, Kuriyan and Ray Reference Kuriyan and Ray2009), passport issuing, National ID, police modernization, land record management, taxation, and birth and death registration (Chanana Reference Chanana2007, Datta Reference Datta2009).
These outsourcing arrangements in various sectors follow different collaborative models with varying scopes. For example, the choice of outsourcing in school education may vary from a single public school to an entire public school district run by private organizations or contracting out specific instructional and non-instructional activities (Luthra and Mahajan Reference Luthra and Mahajan2013). In agriculture, these outsourcing arrangements may involve cooperation in research and development, quality enhancement, crop production, extension, and marketing (Ponnusamy Reference Ponnusamy2013). Similar models exist where responsibilities and cooperation duration differ in infrastructure development (Parvez and Kumar Reference Parvez and Anil Kumar2020) and technology outsourcing also (Datta Reference Datta2009).
Success stories like E-Seva, in the state of Andhra Pradesh, where in one place citizens can access various government services (Kuriyan and Ray Reference Kuriyan and Ray2009), BATF12 in Bengaluru in the state of Karnataka, consisting of 15 member organizations representing government, corporate sector, and civil society collaborating for the city development (Raghunath and Sen Reference Raghunath and Sen2003, Heitzman Reference Heitzman2004, Smitha and Sangita Reference Smitha and Sangita2008), Kudumbashree in Kerala equipping self-help groups to provide IT service to the public and private organizations (Heeks and Arun Reference Heeks and Arun2010), have built a positive halo around government outsourcing.
Many of the challenges these partnerships face have much in common with the other countries. However, issues related to inadequate management competencies directly impacting performance management are particularly highlighted in the Indian context (Post, et al. Reference Post, Broekema and Obirih-Opareh2003, Gupta Reference Gupta2008, Devkar, et al. Reference Devkar, Mahalingam and Kalidindi2013).
Further, there is a shortage of comparative studies in the international context, and those available are primarily focused on technology outsourcing in developed countries. Studies of developing countries, including India, are rare and often narrowly focused on specific cases and examples than theory building. The increasing adoption of outsourcing in developing societies demands nuanced attention on the interplay of context and general principles for effective performance management. Therefore, academicians and practitioners must build a multidisciplinary perspective (Sullivan, et al. Reference Sullivan, Williams, Marchington and Knight2013) to develop a complete understanding of outsourcing in the government.
Salient findings from literature review and research questions
In the literature and among practitioners, most of the discussion about outsourcing focuses on identifying triggers and theoretical explanations for outsourcing rooted in politico-economic factors, and empirical research on the role of performance management is limited (Henderson and Bromberg Reference Henderson and Bromberg2015). However, to take full advantage of the outsourcing model in the government, implementing a strong performance management system to improve citizen experience and provide timely feedback is paramount.
Therefore, the present study focuses on answering the following questions:
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(1) What are the differentiating dimensions to classify outsourcing services in the government based on their nature and scope?
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(2) How does performance management differ in different types of government outsourcing?
In the previous section, we have looked at outsourcing through several theoretical lenses from multiple disciplines. These include transaction cost theory, new public management, agency theory, contract state, public value, and general principles of government performance management to identify key dimensions and thematic frameworks for outsourcing decisions. From this discussion, the four common differentiating attributes of outsourcing arrangements that have relevance for ensuring desirable outcomes are identified as,
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1. Context-driven role boundaries of the outsourcing agency and the government
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2. Classification of the service as distinctly more public or private
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3. Probability of monopolization by the outsourcing agency
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4. Limited or enhanced scale of the service in terms of last-mile delivery
Further, four systemic requirements are identified for effective performance management. These requirements are- (1) contract design and management skills, (2) the ability to identify performance gaps, (3) dealing with internal and external resistance, and (4) ensuring citizen participation.
These differentiating attributes and systemic requirements are further analyzed and consolidated to build a structured matrix to help answer the research questions. The same is presented in the subsequent discussion.
Methodology
We have combined positivist and interpretive approaches to answer the research questions. Our main contention is built on the existing theory with the help of observations and cases (Dubois and Gadde Reference Dubois and Gadde2014). The study is conducted in three phases-(i) review of the existing theoretical framework, (ii) building on the theory to develop a two-dimensional matrix encompassing “depth” and “breadth” of outsourcing, and (iii) explaining and validating the matrix through exploratory case analysis.
As theory is the starting point of this study, the deductive research process is found to be the most suitable (Kovács and Spens Reference Kovács and Spens2005) for testing and building on existing concepts.
We have looked at outsourcing through several theoretical lenses from multiple disciplines. These include transaction cost theory, new public management, agency theory, contract state, public value, and general principles of government performance management to identify key dimensions and thematic frameworks for outsourcing decisions. The four common differentiating attributes of outsourcing arrangements and four critical requirements for effective performance management are summarized from the literature and form the bedrock of the proposed Government Outsourcing Performance Matrix (GOPM). These differentiating attributes and competencies are conceptualized as a two-dimensional GOPM and four pillars of effective performance management, explained in detail in the next section.
This matrix was further evaluated through semi-structured interviews to arrive at the definitive postulates of the conceptual model. Interviews were conducted using an interview guide to collect comparable data and provide cohesion and interpretive rigor (David and Sutton Reference David and Sutton2004, Holloway and Wheeler Reference Holloway and Wheeler2010). In all, we conducted 25 interviews. The interviewees included ten retired civil servants, four serving civil servants, six representatives of non-governmental organizations, and five academicians working in public policy in India. Interviewees were pre-selected to get diverse opinions from people closely associated with the study and practice of outsourcing in the Government of India. The interview schedule is given in annexure 1. It had thirteen questions designed to probe the respondents’ experience and opinion about outsourcing in the government, of which eleven were retained for analysis. Item numbers 8 and 11 did not get clear and usable responses. Data was cleaned to identify the central message emanating from the answers. Questions were coded against the four common differencing attributes and critical requirements for effective performance management as derived from the theoretical framework.
A comparative analysis of the respondents’ comments was done to ensure data consistency (Yin Reference Yin2003, Reference Yin2011). A thematic study of the documents and interview data was conducted to find meaningful patterns (Braun and Clarke Reference Braun and Clarke2006). Responses were summarized to narrow down the thematic patterns and tested against the pustulates of the proposed GOPM. The interviewees were also invited to give their perspectives on the identified case studies of outsourcing that were used to explain and validate the model.
To further explain and validate the GOPM, we have used the case study approach (Yin Reference Yin2003), encompassing the GOPM and the performance management framework. We have also used documents like minutes of meetings, media reports, government public records, and books and brochures (Bowen Reference Bowen2009) to get a complete picture of the context and actors in the identified cases. The outsourcing cases were selected based on three criteria. These criteria are large scale of operations, significant time elapsed to review the performance of the outsourcing arrangement, and considerable contact with the common citizens. The case studies were tested against the conceptual understanding presented through GOPM to synthesize the conclusions (Baxter and Jack Reference Baxter and Jack2008).
Government Outsourcing Performance Matrix (GOPM)
The GOPM captures many complications and interactions among relevant issues that affect the success of outsourcing in the government and provides a prescriptive framework to researchers and practitioners. Answers to research questions I and II are derived from this conceptual framework, analysis to interview data, and validated through two case studies from India.
Rationale
Once the government decides to outsource a specific service, steps toward creating a service specification, provider selection, contract management, and monitoring and evaluating outsourcing outcomes are obligatory (Van der Valk and Rozemeijer Reference Van der Valk and Rozemeijer2009). The difficulty of transitioning from government provisioning to outsourcing depends on the contract value, duration, and complexity of the contract between the government and the service provider (Jiang and Qureshi Reference Jiang and Qureshi2006). Standard ex-ante triggers of outsourcing like projected cost efficiency, lack of expertise, or ideological bent of the government do not credibly assure ex-post benefits without conscious and discreet handling of the whole process by public officials.
Identifying and understanding the pertinent variables that ensure a smooth transition to outsourcing will help develop a prescriptive framework to equip public managers with needed tools and reorient the performance management system within the government to this new role.
Development of Government Outsourcing Performance Matrix (GOPM)
As derived from the literature review, four differentiating attributes and four requirements form the substratum of the proposed GOPM. The following four differentiating attributes indicate the complexity and differentiation among outsourcing arrangements.
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Context-driven role boundaries of the outsourcing agency and the government
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Classification of the service as distinctly more public or private
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Probability of monopolization by the outsourcing agency
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Limited or enhanced scale of the service in terms of last-mile delivery
The two factors that underlie these common differentiating attributes are the nature of the relationship and accountability for outcome. These factors manifest as the scope or “breadth” and intensity or “depth” of the relationship between government and outsourcing agencies and constitute the two proposed dimensions of the GOPM.
The nature of the relationship can range from purely advisory to the complete execution of the government’s agency mission, which is characterized as “depth” of the relationship. The degree of involvement can vary from no participation to full responsibility for the outcomes (Datta Reference Datta2009, Parvez and Kumar Reference Parvez and Anil Kumar2020). Hence, this aspect is characterized as the “breadth” of the relationship.
As the next step in building an evaluative model, the four common differentiating factors presented in the earlier section were evaluated against the interview responses. Mapping of the common differentiating factors and performance management system requirements to the questions is detailed in the Table 1 and Table 2 respectively.
Table 1. Mapping of the common differentiating factors to the interview questions
Table 2. Mapping of the performance management system requirements to the interview questions
Identification and evaluation of thematic patterns
An evaluation of the responses has found that the respondents have largely expressed support for outsourcing arrangements and have experienced different outsourcing arrangements. Following common themes have emerged from the answers:
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• Outsourcing arrangements require a different level of involvement from the outsourcing agency and government officials based on the nature of the outsourcing arrangements. These arrangements include the different levels of accountability for the various stakeholders, socio-political context, role of technology, innovation, and need for integration with the other public systems.
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• Key responsibilities and authority for sovereign and unique functions of the state must remain with the government authorities, and the selection of outsourcing agencies and their role domain should be aligned with this.
These conclusions are well aligned with the dimensions of GOPM and further clarify that the combination of the nature (breadth) and intensity (depth) offers a comprehensive plane for classifying the outsourcing arrangements in a meaningful way for descriptive and prescriptive purposes.
Four pillars of performance management
As highlighted in the previous sections, outsourcing in the government has necessitated a new performance management paradigm to ensure effectiveness and efficiency (Noordegraaf and Abma Reference Noordegraaf and Abma2003, Liu, et al. Reference Liu, Love, Davis, Smith and Regan2015a, Liu, et al. Reference Liu, Love, Smith, Regan and Palaneeswaran2015b). As a result, factors like contract management, objective performance parameters, capacity building, stakeholder communication, proper monitoring, and evaluation have come into sharper focus (Holzer and Kloby Reference Holzer and Kloby2005, Warner and Hefetz Reference Warner and Hefetz2012, Doellgast and Gospel Reference Doellgast and Gospel2013).
Stemming from this discussion, four important competencies that denote the contours of effective performance management in the context of outsourcing arrangements are identified as (1) contract design and management skills, (2) the ability to identify performance gaps, (3) dealing with internal and external resistance, and (4) ensuring citizen participation.
Based on this approach, we have proposed four pillars of performance management in government outsourcing for meaningful assessment and evaluation. These pillars are (1) robustness and granularity of performance parameters, (2) systematic monitoring and evaluation, (3) capacity building of the public servants, and (4) stakeholder communication. Questions were mapped against the four effective outsourcing management requirements emanating from the literature to further validate these categories through semi-structured interviews. The emerging themes from this analysis were compared with the proposed four pillars.
Identification and evaluation of thematic patterns
Respondents have unequivocally emphasized the need for a robust performance management system and systematic acquisition of the relevant competencies by government officials for effective outsourcing management. The summary of responses is given below:
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• Outsourcing arrangements require public servants to upgrade their managerial skills, especially in contract management, monitoring and evaluation, and human resource management.
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• Outsourcing arrangements must integrate and respond to the existing systems and deal sensitively with the culture, technology, and social legacy issues.
These conclusions establish the need and framework of the proposed performance management system. The four proposed pillars are in sync with the central message from the interviewees’ responses.
Details of Two-dimensional Government Performance Outsourcing Matrix (GOPM)
The interaction of “breadth” and “depth” of an outsourcing relationship between the government and the outsourcing agency is presented through the 2x2 GOPM. In this matrix, “depth” is represented on the X-axis and “breadth” on the Y-axis. Combining these two dimensions creates four quadrants that help classify different outsourcing activities based on operational requirements and assess the contours of an effective performance management system (Figure 1).
Activities in the first quadrant involve the execution and implementation role of the outsourcing agency, with the responsibility to ensure defined outcomes. This quadrant corresponds to the “building” role. Outsourcing activities focused on execution and having a lesser relationship with the overall results are part of the second quadrant.
These activities are synonymous with a “plumbing” role. Outsourcing activities that are primarily advisory with less participation in ensuring outcomes will lie in the third quadrant and are analogous to a “consulting” role. Finally, the fourth quadrant consists of outsourcing activities that are advisory and directly linked to the outcomes. These activities are synonymous with a “coaching” role.
In the ensuing discussion, the characteristics of the four quadrants and their relation to the four performance management pillars for effective outsourcing are explained in detail.
Quadrant I - building
In quadrant I, the outsourcing agency’s role is to execute and own full responsibility for outcomes, as outsourcing arrangements require high involvement. This role is akin to a “builder” who is responsible for planning and building the proper infrastructure and ensuring outcomes for the citizens. Many outsourcing arrangements like tax administration, social services, and infrastructure development fall in this quadrant. A common characteristic of these outsourced activities is that the government lacks relevant expertise but needs to innovate and improve efficiency for better citizen satisfaction and administrative convenience.
Two critical challenges for evaluating these services’ amenability to outsourcing are their highly contextual nature and the non-availability of off-the-shelf solutions. Lack of mitigating measures to address these challenges will lead to monopolization as the vendor becomes entrenched and finding replacement becomes impossible because of legacy issues and accumulated expertise.
For the successful execution of this partnership, performance parameters need to be highly robust and granular. Robustness must be assured by identifying valid, clear, and unambiguous measures and granularity by breaking down the performance parameters into quantifiable components so that any deviations can be observed in real-time for taking corrective actions. To ensure this, highly systematic and concurrent monitoring and evaluation are required. Dashboards, Geographic information systems, and other technological tools and comprehensive evaluation studies can be ingredients of this agile framework.
As the execution is the outsourcing agency’s responsibility in this quadrant, public servants mainly focus on managing the contract and monitoring the performance. The need to build public officials’ contract management competencies is a common feature of all four quadrants. However, as in quadrant I, technical expertise is the preserve of the outsourcing agency, and capacity-building requirements of the public officials are deemed low to moderate. Stakeholder communication is a high priority as the relatively independent role of outsourcing agencies requires continuous dialog and contact with the citizens. Therefore, transparent, timely, and widely disseminated stakeholder communication is essential in this quadrant.
Quadrant II – plumbing
Next, quadrant II is best represented by the “plumbing” metaphor. A plumber is responsible for keeping the water supply running and attending to various continuous and periodic maintenance tasks, similar to an outsourcing agency’s role in this quadrant. In quadrant II, the outsourcing agency is responsible for executing the work but is confined to a defined part of the whole function. Effectively, the outsourcing agency is not responsible for the overall outcome of the process. Most service enhancement initiatives like telecentres, IT-based self-help tools, and e-governance are part of this quadrant. The two most commonly quoted examples of these outsourcing services in India are E-Seva, which started in the unified state of Andhra Pradesh to provide services like ration cards, voter cards, land papers, and driving licenses in one place. The other is the highly successful Ministry of External Affairs (MEA) initiative to automate the administrative part of the passport-issuing process through Passport Seva Kendras (PSKs) (Chanana Reference Chanana2007, Datta Reference Datta2009). These services are more readily amenable to outsourcing as they are relatively not core to the function of the public agency, and often, a competitive outsourcing market is available.
Because in quadrant II, the role is to execute a part of the bigger function, performance parameters must be moderately robust but highly granular. Valid, clear, and unambiguous outcome measures may not be possible to arrive at for the services in this quadrant. At the same time, the delegated part of the job needs to be carefully executed by the outsourcing agency. The monitoring and evaluation framework must be moderately well structured to capture concurrent data. This data is mainly generated and stored synchronously along with the service delivery; hence, the need for post-facto evaluation studies is limited.
Government servants’ capacity-building requirements are low to moderate as their role is mainly confined to contract management and monitoring. In addition, stakeholder communication need not be pervasive as interactions between citizens and the outsourcing agency are mostly one-time and limited to a specific scope.
Quadrant III - consulting
Quadrant III is named “consulting” as the role of an outsourcing agency is to provide advice, and they are not accountable for the outcomes. Outsourcing agencies face reputational and legal risks in case of poor results. Financial planning, human resource and organization development consulting, policy advice, and third-party evaluation of programs and schemes are examples of the services related to this quadrant. These services are easy to outsource, but judging their quality is difficult. Here, the performance and role of credit rating agencies in the 2008 financial crisis is a cautionary tale (Lang and Jagtiani Reference Lang and Jagtiani2010).
Here, performance parameters need to be as valid and unambiguous as possible. Still, the expected robustness will vary from moderate to high based on the subject and context of the advice given by the consultant. Moreover, having granularity built-in performance parameters in this quadrant is difficult as outsourcing agencies’ work concludes mainly before the implementation or follow-up action. Structured monitoring and evaluation are also tricky to implement in this situation.
Capacity building of government servants is highly prioritized as objective measures are complex, and implementation is the government’s responsibility. Public servants should be able to filter and evaluate consultants’ advice. They should have the intellectual and technical wherewithal to adapt and screen the various options. Stakeholder communication also requires to be exhaustive. The need to build consensus around the course of action means that transparency and consultation should be the bedrock of communication strategy.
Quadrant IV
In Quadrant IV, the role of the outsourcing agency is that of a “coach,” who is not really on the playing field but is equally held responsible for results. Various technical consultants, advisors, and other non-governmental organizations often play this role. This role requires a high degree of involvement, though the outsourcing agency is not responsible for the execution but for providing detailed advice to the government. Outside advisors are brought in to provide the necessary guidance in activities where the government does not have expertise, but outsourcing the whole function is impossible because of sovereignty, political, or regulatory issues. Many technical consultations on financial investment, disinvestment of public sector entities, lobbying in foreign countries, and infrastructure planning do fall in this quadrant. For example, in recent years, consultants have also provided various services in the signature programs of the Government of India, like Clean India, Green India, and Digital India (Jain Gupta and Suri Reference Jain Gupta and Suri2017). These services are amenable to outsourcing in those situations where public officials are clear about the goals and have the necessary expertise to evaluate the quality and credentials of the outsourcing agency.
As the role is advisory but fundamental to the government agency’s mission, performance parameters must be robust, as mission clarity is essential for performing the “coaching” role. However, granularity will vary from low to moderate as this is an advisory role. The monitoring and evaluation will be primarily ex-post and with some degree of concurrent monitoring.
The capacity-building requirements of public officials would be high as the consultant’s role is mainly advisory. Enhancing public servants’ technical capabilities and contract management skills is necessary to bridge the conceptual and implementation gaps and give the outsourcing agency usable feedback. Stakeholder communication is of moderate to high priority depending on the work area, as the complexity of the context may require simplified articulation of the ideas to the stakeholders.
In conclusion, the performance management system needs to be adapted according to the characteristics of the outsourcing relationship between the government and the outsourcing agency. Table 3 summarizes the prescriptive relationship between the performance management system’s pillars and the four quadrants of the GOPM.
Table 3. Four pillars of performance management
Case studies
The premises of the government outsourcing performance management framework are validated through two extensive case studies – the Akshaya Patra Foundation’s mid-day meal scheme and the PSK operated by Tata Consultancy Services (TCS). These nationwide initiatives have been operational for over a decade, serving millions of beneficiaries across multiple states in India. While Akshaya Patra is a nonprofit organization, PSK is a commercial partnership that provides insights into managing different outsourcing models. Significantly, these cases represent critical government responsibilities of providing nutrition support to children and issuing passports to citizens. Effective performance management is crucial for outsourcing services that impact education, food security, and citizen rights. Both initiatives have received national and international recognition for their scale and operational excellence, further reinforcing their credibility as case studies.
Moreover, these long-running programs encompass diverse stakeholders, including government agencies, private partners, beneficiaries, and society. Managing such varied stakeholder expectations is a crucial challenge that tests the robustness of any outsourcing performance framework. With over a decade of implementation data available, comprehensive analysis can be conducted to evaluate performance metrics, strategies adopted to overcome challenges, and the overall trajectory of these projects. Investigating these contrasting yet critically important case studies allows for a holistic validation of the proposed government outsourcing performance matrix (GOPM) and its four pillars of performance management. The insights have the potential to shape practical recommendations for enhancing outsourcing policies and governance mechanisms.
Akshaya Patra Foundation
School feeding programs are used worldwide to address nutrition issues, ensure better educational outcomes, improve health and hygiene, and promote social inclusion (Subbarao, et al. Reference Subbarao, Bonnerjee, Braithwaite, Soniya Carvalho, Graham and Thompson1997). India’s mid-day meal scheme is the world’s largest such program (Alim, et al. Reference Alim, Khalil, Mirz and Khan2012), covering about 118 million children studying in 1.2 million schools during 2020–21, with cumulative spending of Rs 244 billion (equivalent to USD 3.25 billion) by the Government of India (PM-Poshan 2022). The scheme was recently relaunched as Pradhan Mantri Poshan Shakti Nirman (PM Poshan) in 2021 with broader coverage (PM-Poshan 2021).
Starting in the southern state of Tamilnadu, these programs are now implemented in most Indian states following a ruling by the Supreme Court of India in November 2001 (Porter, et al. Reference Porter, Singh and Sinha2010, Kantawala, et al. Reference Kantawala, Iyer, Dhruv and Gandhi2013). Various independent evaluations have found significant gaps between the promise of these programs and actual outcomes. For example, the Comptroller and Auditor General of India has commented that despite mid-day meal provision, enrollment in government schools has declined from 146.9 million to 138.7 million between the fiscal year 2009–10 and 2013–14 but increased by 38 % in private schools during the same period (CAG 2015). This trend proves that merely the mid-day meal is not a sufficient incentive to keep children in school. Regarding the content and quality of meals, CAG has recommended.
“MDM Scheme could be variegated in nature and can be made flexible by making provisions for alternate nutrition, local produce instead of dry ration-based meals to lessen monotony, keeping in view regional variations of taste and availability.” (CAG 2015)
One of the critical issues the mid-day meal scheme faces is the logistics of onsite cooking and feeding that requires cooks, utensils, procurement, and distribution at each school. These challenges have triggered the development of program models that include taking benefits of economies of scale to ensure efficient delivery of meals to the children (Banerjee Reference Banerjee2019). Therefore, since 2000, the Government of India has experimented with outsourcing by involving private partners from the not-for-profit sector in mid-day meal schemes (Naidu, et al.). Other countries have also undergone similar evolution of the mid-day meal programs to augment the capacity and improve efficiency (Rose Reference Rose2009, Symaco Reference Symaco2016).
An example of this partnership is the agreement between the national government of India and the Akshaya Patra Foundation. This prominent non-governmental organization focuses on the nutrition requirements of the underprivileged sections of society (Banerjee Reference Banerjee2019). This partnership aims to improve the efficiencies in the delivery channels by using a centralized kitchen and enhancing the quality of food to match local taste to improve nutritional and educational outcomes. Akshaya Patra started its program in June of 2000 in Bengaluru, Karnataka. It now provides services in 12 states and two union territories with 1.8 million beneficiaries (Akshaya-Patra 2018–19), conforming to government-mandated guidelines and priorities.
The critical aspect of this model is a centralized kitchen and transportation of the cooked food to the schools within four hours of cooking in sterilized vessels at a minimum temperature of 65 degrees. The government provides food grains through the Food Co-operation of India, eliminating intermediaries. Initially, Akshaya Patra only served urban locations, but the partnership has expanded to rural areas since 2017 with increased rural road connectivity (Banerjee Reference Banerjee2019).
The government makes 55% to 60 % of the total expenditure, and Akshaya Patra generates the rest through donations and other sources. They have provided a good substitution for earlier school cooking-based models without any additional financial burden on the government (Naidu, et al.). The performance of Akshaya Patra has been generally applauded for providing hygienic, fresh, and nutritious food transported in sterilized vessels (Kantawala, et al. Reference Kantawala, Iyer, Dhruv and Gandhi2013). However, there have been criticisms about the financial irregularities and nutrition value of food in recent years (Srinivasaraju Reference Srinivasaraju2020). Moreover, they provide only vegetarian food, leading to a heated debate on cultural linkages of food habits and imposition by the state. A mid-day meal is “not only meal” but relates to educational, health, and social inclusion outcomes in India, requiring outsourcing decisions to be sensitive to the community’s requirements.
Akshaya Patra and Government Outsourcing Performance Matrix (GOPM)
The “Building” quadrant of the GOPM can appropriately describe this partnership between the Government of India and the Akshaya Patra Foundation. The outsourced agency must be highly involved and responsible for outcomes and execution. We have assessed the case in terms of the four pillars of performance management – performance parameters, monitoring and evaluation framework, capacity-building needs, and stakeholder communication – and compared them with the characteristics of the “building” quadrant.
The responsibility to deliver the outcomes rests on the outsourcing partner, so performance parameters must be clearly defined at a granular level, ideally quantitatively. However, it is brought out in interviews with the stakeholders and literature that mid-day meal schemes have objectives beyond tackling mal-nutrition to improve educational and health outcomes and improve overall social inclusion (Naidu, et al., Kantawala, et al. Reference Kantawala, Iyer, Dhruv and Gandhi2013, Banerjee Reference Banerjee2019). However, an analysis of the conditions prescribed in the standard MoU between the government and the Akshaya Patra Foundation reveals that the quality of food and delivery time are the only parameters by which the performance of the outsourcing agency is judged. An excerpt from the MoU between the Akshaya Patra Foundation and the Puducherry Government, which is based on the model MoU provided by the Government of India (Model-MoU 2017), is quoted below:
“The Second Party shall deliver the cooked meal at schools in such a manner that the time between the completion of the cooking process and delivery (including packing and despatch) to the schools shall always be less than four hours and the temperature of food at the time of serving shall be at or above 65 “C.” (GoP 2018)
On the second pillar, concurrent and regular monitoring and evaluation are necessary for successful outcomes as the role of government is limited after the signing of the contract. In the present case, monitoring and evaluation are limited to sampling foods at regular intervals. The agreement between the government and the outsourcing agency mentions the following:
“Designated Authorities from the Department of Health/Food and Drugs/Officers of the First Party Head of the School may pick up sample of cooked meal, at any time out of the supply being made at the school and get them tested for ascertaining the energy and nutritive value of the food.” (GoP 2018)
In addition, a National Steering-cum-Monitoring Committee is established to provide policy advice to Central and State Governments and prepare an annual work plan. Similarly, steering-cum-monitoring committees are also set up at a state level to monitor the program, and nodal officers are appointed for each district and block level to oversee the effective implementation of the program (MDM-Guidelines 2006).
However, India’s Comptroller and Auditor General have found these measures highly inadequate and usually inoperative (CAG 2015). Monitoring and evaluation should focus not only on the quality and nutrition of food but also on education and health outcomes. These objectives require high robustness and granularity in the performance parameters.
The capacity building of the public servants is moderately important in this quadrant as they are not involved in direct execution. However, they need to acquire management skills and understand comprehensive socio-economic dynamics around the program. The scantiness of this understanding is highlighted by sustained criticism of the partnership in some media sources (Srinivasaraju Reference Srinivasaraju2020). Inescapably, public servants will have to acquire contract management skills for handling these types of outsourcing arrangements, and in the present case, supply chain management skills will also be value-additive (Mahadevan, et al. Reference Mahadevan, Sivakumar, Dinesh Kumar and Ganeshram2013, Roy, et al. Reference Roy, Charan, Schoenherr and Sahay2018).
On the fourth pillar of stakeholder communication, this outsourcing arrangement requires an intense engagement with teachers, parents, and society. The issue of food culture and other societal concerns need to be tactfully handled. As the accountability of the outsourcing agency is very high, mandating transparent and effective communication with internal and external stakeholders is necessary.
A senior official of the government of the state of Chhattisgarh has commented on the need for precise performance evaluation during the interview:
“Outsourcing mid-day meals to Akshaya Patra has improved the efficiency but also made government officials complacent as if they feel that they are not responsible for administering the scheme anymore.”
Another official of a national-level NGO who was interviewed opined:
“In my experience of nutrition initiatives, the outsourcing model is only good if it is embedded in the social milieu of the area and there is an attempt to involve teachers, parents, and other opinion leaders in consultations and decision-making. Otherwise, it can create resentment and may also not have any impact on educational outcomes.”
In conclusion, outsourcing for providing mid-day meals provides benefits of scale and improved efficacy. These findings reinforce the dominant research strand that outsourcing reduces government expenditure and improves efficiency (Jensen and Stonecash Reference Jensen and Stonecash2004, Taponen Reference Taponen2017). However, as the tasks involve multiple stakeholders and there is a necessity to influence outcomes in education, health, and social inclusion areas, the performance management framework needs more sophistication and strengthening of the four pillars in line with the stipulations of the “building” quadrant of GOPM.
Passport Seva Kendra (PSK)
In India, many government services still require the physical presence of citizens, as well as long queues and visits to multiple government officials. These interactions are often perceived as bothersome by the citizens and amplify the perception of inefficiency, lethargy, and indifference to the government systems. Therefore, transforming service delivery through e-governance initiatives is a practical and cost-effective solution to promote citizen-centricity. Toward this end, information technology (IT) enabled service delivery not only has the potential to improve efficiencies by quality improvement and cost management but also contributes to the vital objective of enhancement of public value and trust between the government and the citizens (Yang and Holzer Reference Yang and Holzer2006, Jain Gupta and Suri Reference Jain Gupta and Suri2017). These initiatives also positively impact social inclusion, fulfilling a key demand of citizens by exponentially increasing the reach of government machinery and services (Calista, et al. Reference Calista, Melitski, Holzer and Manoharan2010).
Given this, in 2006, as part of its National e-governance plan, the Government of India modernized 31 public services in mission mode. Re-engineering the passport issuing process through information technology in partnership with the private sector was one of the main initiatives envisaged in this plan (Agarwal Reference Agarwal2016). The citizens have generally praised this initiative (Saxena, et al. Reference Saxena and Popli2021), and it is often showcased as the success of outsourcing and integrating information technology in public service delivery.
In India, issuing the passport is the Ministry of External Affairs (MEA) function that runs 37 Regional Passport Offices and a central passport printing facility. However, the process was highly cumbersome, with long delays and multiple checkpoints. Therefore, as part of the national e-governance plan 2006, the Government of India partnered with a private IT consultancy-TCS, to streamline the process. In this case, absolute control and accountability remain with the government as passport issuing is a sovereign function done in the name of the President of India. TCS was assigned responsibilities related to infrastructure, human resources, IT applications, and primary citizen interface (Agarwal Reference Agarwal2016).
The change required re-engineering the whole process instead of simply substituting the existing process with technology. The vision for this transformation is stated as
“To deliver passport services to citizens in a timely, transparent, more accessible, reliable manner and a comfortable environment through streamlined processes and committed, trained and motivated workforce.” (MEA 2010).
TCS has established 93 offices known as PSKs across India to realize this vision, attached to the 37 regional passport offices. These PSKs have a modern infrastructure with citizen-friendly services and helpful staff (Agarwal Reference Agarwal2016, Saxena, et al. Reference Saxena and Popli2021).
Passport issuing in India requires coordination among multiple agencies, including local police, to verify the applicant’s antecedents. This process has always been a significant challenge in the legacy system, requiring the police officer to visit the residence of the applicant. This issue has been addressed in the revamped process by using technology and providing mobile applications with the hardware to the police department for ready application processing, substantially reducing time delays. PSKs also provide real-time information, online slot booking, electronic queue management, and services for processing and filing documents. Passport camps and Passport Adalat (Passport Court) are some initiatives that have made the process hassle-free (Agarwal Reference Agarwal2016). One unique feature of PSK is that government officials and TCS employees work together in the same physical space. After initial documentation, government officials are responsible for checking and deciding on the application almost immediately. This collaboration and speed were new to the government employees and required many adjustments from both parties.
As one of the government employees who worked in PSK commented during the interview:
“The big challenge was that government officials must work closely with TCS staff. This needed a shift in attitudes and took some time.”
In January 2022, the government signed a contract with TCS for the second phase of the Passport Seva Program (PSP- V2.0) with further augmentation of the digital eco-system, process overhauling, and integration among various stakeholders and databases, improving the citizen interface and strengthening data security (MEA 2022).
A senior retired civil servant who was part of the initial proposal for the outsourcing commented during the interview.
“Passport Seva has been commended universally, though expanding reach to the rural areas has been challenging. When it started, people were so startled and thought that it would never work in the government.”
Passport Seva Kendra (PSK) and Government Outsourcing Performance Matrix (GOPM)
Passport Seva project finds its place in the IInd quadrant, named as “Plumbing” of the GOPM, as the role of the outsourcing agency is mainly the execution of a significant part of the process, and accountability rests with the government. The service level agreement requires the outsourcing agency to provide infrastructure and manage and maintain the process from documentation to the delivery stage, with the authority to issue or reject applications lying solely with the Government of India. Consequently, initiation and maintenance roles are with the Tata Consulting Service, with the decision role remaining with the government. In this arrangement, TCS is not responsible for the outcome.
In the second quadrant of GOPM, performance parameters need to be moderately robust but, at the same time, highly granular to capture the whole system’s performance. For example, to have this comprehensive view, the service level agreement between Tata Consultancy Service and the Government of India (SLA) has 27 criteria in all (CAG 2016). These are distributed in three categories. The first ones are eight efficiency parameters (Baseline Score = 45) and are sub-distributed in external and internal efficiency. The second category has eleven effectiveness parameters (Baseline Score = 35) sub-distributed into external and technical effectiveness. Finally, the third category has eight criteria to measure customer-friendliness (Baseline Score = 20) sub-distributed in environmental and customer relations parameters. These parameters measure timely service, response quality to citizens’ queries, and availability of efficient online services objectively. Thus, this framework aligns well with the requirements prescribed for quadrant II outsourcing services in GOPM.
Monitoring and evaluation are based on defined baseline performance indices. Evaluation frequency and methods are web-based, and the vendor provides IT tools that use the system’s actual data. In this case, technology is used more to facilitate decision-making than to substitute decision-makers. Therefore, human intervention for monitoring and evaluation by public servants and other stakeholders has not been considered essential, and a moderately sophisticated and automated system is considered sufficient. Further, payment of the quarterly transaction charges to the service provider by the government is linked to compliance with the service level agreement metrics, with 100% payment assured for meeting baseline performance targets (CAG 2016). The Empowered Committee and Program Management Committee are constituted to manage the relationship between the Ministry and the service provider for overall monitoring.
Commenting on the efficacy of these mechanisms after a performance audit, the Comptroller and Auditor General of India has pointed out:
“It was seen that in actual implementation, top-level governance and monitoring was largely absent.” (CAG 2016)
Capacity-building requirements of public officials are also moderate and mainly revolve around contract management. Easy-to-use front-end processes make stakeholder communication highly structured, and technology solutions eviscerate the need for detailed interpersonal communication among users and service providers. Therefore, these two pillars of the performance management system have low to moderate emphasis in this case.
Most users agree that outsourcing parts of the passport issuing process has transformed service delivery and improved citizen satisfaction. However, in quadrant II, the government needs to be conscious of the “function creep” phenomenon often used to describe how uses of public sector technologies may expand beyond their original purposes, mainly when such expansion happens without open debate or acknowledgment (Koops Reference Koops2021) and may also result in locking of the partner (Miraftab Reference Miraftab2004, Ashton, et al. Reference Ashton, Doussard and Weber2012). Reassigning the contract to TCS by the Government of India in 2022 for ten years reinforces the experience of other countries that once a service provider is selected, changing it becomes difficult because of legacy issues and accumulated expertise. Government officials need better contract design, management, and coordination skills to avoid this trap.
Conclusions and implications
Governments worldwide are depending more and more on outsourcing to improve efficiency and reduce expenditure. This trend is gradually percolating to many core governance functions for reasons other than cost and efficiency. The justifications for the enhanced scope of outsourcing are often couched in ideological, political, and management terms. However, the growing dependence on outsourcing directly relates to the structure of public systems and the role of public servants. As profit motive cannot be the sole guiding principle of these interventions, public servants must act as the guardian of public interest in partnerships between the government and the outsourcing agency.
This challenge requires a reorientation of the government systems and skill enhancement of public servants as diminished administrative discretion and the lag in information sharing in outsourcing relationship hampers the ability to take corrective measures in time. Moreover, as these relationships are often technology-driven, the need to develop in-house capacity within the government to monitor and supervise cannot be over-emphasized.
Therefore, a robust performance management system must be put in place focused on taking the best from outsourcing arrangements. Traditional performance evaluation methods of the outsourcing agency on narrow criteria will not suffice to achieve this goal. Furthermore, this performance management framework must be adaptable and flexible, as all outsourcing arrangements do not follow the same template.
Our study identified the “breadth” and “depth” of the relationship between the government and the outsourcing agency as the key differentiators in evolving these templates. Combining breadth and depth generates four generic types of outsourcing arrangements. These are - (1) “building,” which is a combination of execution and high accountability; (2) “plumbing,” which is a combination of execution and less accountability; (3) “consulting,” which is a combination of an advisory role and less accountability and (4) “coaching” which is a combination of an advisory role and high accountability.
These four generic types represent different performance management contexts. Therefore, built-in flexibility based on the relative importance of various constituting elements can contribute to effective outsourcing. Key pillars of such a performance management system are robust and granular performance parameters, systematic monitoring and evaluation framework, capacity building of the public servants, and transparent communication with the stakeholders. Governments can adjust the measures of these four pillars per the nature and type of outsourcing relationship.
To conclude, public servants and policymakers must go beyond the traditional evaluation methods and develop a targeted performance management system that suits the requirements of the particular outsourcing arrangement. This study has contributed by identifying critical factors to classify outsourcing arrangements and developing general principles for managing performance. The recommendations from this study provide governments with a structured basis for analyzing outsourcing choices, understanding challenges in managing them, and facilitating the design of an effective performance management system.
Limitations
Despite a multi-dimensional perspective, this study has a few limitations that future research can address. We have not looked into the strategic choice aspect of outsourcing decisions that can impact the performance management system. In addition, the precise negotiation mechanisms that lead to the selection of outsourcing over insourcing also need a fair understanding. Further, quantitative research may help to detail performance parameters in line with general performance management principles in the government and different approaches taken by various nations and their impact.
Supplementary material
To view supplementary material for this article, please visit https://doi.org/10.1017/S0143814X24000205
Data availability statement
This study does not employ statistical methods, and no replication materials are available.
Acknowledgments
Author is thankful to the reviewers for the helpful and insightful suggestions that have helped to improve the paper.
Dr. Harsh Sharma is a Professor and Director of the Centre for Public Policy, Governance and Performance at the Administrative Staff College of India. His research interests include public policy and technology, performance management in the government, innovations in public systems, and institutional strengthening for SDGs. He has extensive experience working with the government and other stakeholders on governance issues.
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