First, government did not always engage with the market early in running procurements or establish a sufficient understanding on both sides about the service that were being outsourced. This often led to problems over the lifetime of a contract, such as disputes and cost overruns.Second, an excessive focus on the lowest price and an insufficient assessment of quality in selecting bids undermined many contracts. While outsourcing can reduce costs, government must balance this against the minimum level of quality it needs in a service. Too often, it has outsourced services in pursuit of unrealistic savings and without a realistic expectation that companies would deliver efficiencies.Third, large contracts have failed when government has transferred risks that suppliers have no control over and cannot manage, rather than those which suppliers can price and manage better than government. Government should also not think that it has outsourced risks that will revert to it if a supplier fails – as the provision of public services will always do.

It must also understand why different outsourcing projects succeed or fail. The Institute for Government has previously showed that there are several conditions that make outsourcing more likely to succeed.2 Above all, these include: •the existence of a competitive market of high-quality suppliers•the ease of measuring the value added by the provider •the service not being so integral to the nature of government as to make outsourcing inappropriate.*