Criteria for Outsourcing of Facilities Management Functions by the United Nations
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Course
Research Studies
Institution
University Of Pretoria (UP)
ABSTRACT
Purpose of this paper – Outsourcing of non-core functions is a viable business strategy for any company, including international public-sector organizations like the United Nations. Such organizations, however, typically have non-profit objectives and therefore have limited experience...
Purpose of this paper – Outsourcing of non-core functions is a viable business strategy for any
company, including international public-sector organizations like the United Nations. Such
organizations, however, typically have non-profit objectives and therefore have limited experience
in and use for outsourcing criteria developed for commercial enterprises. The UN’s experience in
outsourcing, for example, is mainly limited to peacekeeping. The purpose of the paper is to develop
outsourcing criteria suitable for use by international public-sector organizations like the UN.
Methodology/Scope – Forty national and international organizations were surveyed: fifteen Third
Party Logistics Service providers; fifteen private sector manufacturing firms and ten UN
peacekeeping missions. The survey was carried out through on-site personal interviews, telephone
interviews, and structured electronic and written questionnaires.
Findings - Risks, the establishment of goals and objectives, barriers to outsourcing, the use of
experts, benchmarks, and the evaluation of a service provider’s performance are indicated as
important criteria for developing an outsourcing relationship, as is the establishment of appropriate
policies and procedures. The research further indicates that service provider selection is influenced
by criteria such as operational excellence and reputation, strategic direction and compatibility,
financial stability, costs, and political considerations. Lastly, it was ascertained that although the
cost of a provider is important, cost should be considered in the light of satisfaction of the criteria
outlined earlier as well as efficiency and effectiveness.
Practical implications - The criteria identified by the research form the basis for the development
of a decision-making scorecard.
Value - The paper presents the first large-scale survey of outsourcing criteria applicable to the UN
and should be useful to similar international organizations.
Keywords: Outsourcing, decision-making criteria, service provider selection, international
organizations.
1.0 INTRODUCTION
Global economic stagnation has had a rippling effect on nations’ ability to provide resources for
their people and international organizations that depended on funding from these nations have to
look elsewhere and/or identify solutions to maximize available resources. In addition, increased
competition among international organizations for donations has led them to react positively and
seek alternative solutions to continue operating efficiently and effectively. By outsourcing as many
non-core functions and activities as possible they would be able to reduce costs of operations and
create funds for vital, but non-funded activities. However, international organizations like the
United Nations typically have non-profit objectives and therefore have limited experience in and
use of outsourcing criteria developed for commercial enterprises. The UN’s experience in
outsourcing, for example, is mainly limited to peacekeeping. The purpose of the paper is to
develop outsourcing decision-making criteria suitable for use by international public-sector
organizations like the UN
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, The decision to outsource non-core activities should be arrived at by answering several important
questions about the organization’s core competencies and policy goals, coupled with the availability
of service providers, contract negotiations, and other considerations. Decisions regarding
outsourcing by international organizations have in the past, been handed down from headquarters
and head offices. Therefore, to ensure that outsourcing engagements are achievable, decisions
should have local input and the local political dispensation should be taken into consideration. The
reason is that when decisions are made far from where they would be implemented there is always
the tendency that such decisions would not be sensitive to the local environment. For example,
decisions on outsourcing made at the local level would tend to encourage outsourcing to local
service providers, while headquarters level made decisions would agree on contracting larger and
international service providers.
Outsourcing decision-making should include identifying an organization’s needs, strategic interests,
and goals, in addition to computing all costs associated with the outsourcing process. The extensive
experience and practices of the private sector should be compared with the political, legal, and
economic considerations that must be made when applying these lessons to international public
sector organizations. Thereafter, appropriate criteria should be employed in all decision-making to
ensure that planned objectives are achieved.
1.1. Decision-making Criteria
Generally, economic reasons are vital criteria for outsourcing since they save costs for
organizations. However, financial gains (profit) are not regarded as criteria for outsourcing by
international (non-profit making) organizations, although, low priced providers are considered if
other selection criteria are met. Therefore, for international organizations, the decision to outsource
is not completely dependent on economic reasons. Political and strategic reasons are some of the
criteria that may have to be considered. Other criteria include risks, the establishment of goals and
objectives, barriers to outsourcing, the use of experts, benchmarks, and the evaluation of a service
provider’s performance. Additionally, establishing appropriate policies and procedures may also be
considered. Efficiency and effectiveness are also very important criteria. In addition, qualitative
criteria such as time, staffing, and business value may also be considered. For example, the time
available to complete a project is an essential factor in the decision on what type of resources to
employ as well as the availability of skilled labor.
In essence, the criteria used to reach a decision invariably determine the selection of service
providers. Therefore, the decision-making criteria should be flexible, realistic, and applied on a
case-by-case basis. The application of appropriate decision-making criteria enables organizations
to assess the capabilities of potential outsourcing partners. This is because organizations have
recognized that selecting the right outsourcing partner is a key to maximizing the effectiveness and
value of the relationship, hence outsourcing success. Proper decision-making criteria assist in
prioritizing and developing successful outsourcing projects. Decision-making criteria are essential
elements that have to be considered before a decision to outsource non-core functions is reached
and constitute a basis for developing an outsourcing relationship and thus an outsourcing decision-
making scorecard. Lastly, the criteria identified by the research form the basis for the development
of a decision-making scorecard. Additionally, the research established that successful outsourcing
could provide international organizations with several benefits, most of which result from improved
efficiency and savings in costs.
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