Cheap and Dirty: The Effect of Contracting Out Cleaning on Efficiency and Effectiveness

Published date01 March 2019
Date01 March 2019
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited
Abstract: Contracting out of public services, especially ancillary services, has been a key feature of New Public
Management since the 1980s. By 2014, more than £100 billion of U.K. public services were being contracted out
annually to the private sector. A number of high-profile cases have prompted a debate about the value for money that
these contracts provide. Value for money comprises both the cost and the quality of the services. This article empirically
tests the contestability and quality shading hypotheses of contracting out in the context of cleaning services in the
English National Health Service. Additionally, a new hypothesis of coupling is presented and tested: the effect of
contracting of ancillary services on patient health outcomes, using the hospital-acquired infection rate as our measure.
Using data from 2010–11 to 2013–14 for 130 National Health Service trusts, the study finds that private providers
are cheaper but dirtier than their in-house counterparts.
Evidence for Practice
• Contracting out of public ser vices, especially auxiliary services, is a key component of New Public
Management because of the belief that it will lower costs and possibly increase quality.
• Economic theory predicts that when quality is hard to measure ex-post or hard to define ex-ante, suppliers
may reduce quality to maintain their own costs, as they are the residual claimant on any profit.
• We find evidence to support the quality shading hypothesis and the coupling theory. Hospitals contracting
out cleaning services had lower levels of cleanliness and worse health-care outcomes as measured by hospital-
acquired infections.
• Public service managers must be very careful when outsourcing services— even auxiliar y services; some
performance indicators should reflect aspects of the quality of the core service.
Shimaa Elkomy
University of Surrey
Graham Cookson
Office of Health Economics
Simon Jones
New York University School of Medicine
Cheap and Dirty: The Effect of Contracting Out Cleaning on
Efficiency and Effectiveness
Simon Jones is research professor in
the Department of Population Health,
Division of Healthcare Delivery Science,
New York University School of Medicine.
From 2002 to 2005, he was head of health
informatics and operational research at
Bromley Hospitals NHS Trust in the United
Kingdom. He became a research professor
at the University of Surrey in 2011. In
2012, he was appointed chair in Healthcare
Management and Policy at the University
of Surrey.
Graham Cookson has been chief
executive officer of the Office of Health
Economics since leaving INRIX Inc. as chief
economist. He is a fellow of the Royal
Statistical Society and visiting professor
at the University of Surrey, where he was
professor of economics of public policy
and head of the Department of Healthcare
Management and Policy. He holds a PhD in
econometrics and a master of science from
Imperial College London and a master’s
degree from the University of Oxford in
philosophy, politics, and economics.
Shimaa Elkomy is research fellow in
the School of Economics at the University of
Surrey. She is interested in the field of public
policy and the implications of the economic
analysis in the public sector. She has been
working on a series of research papers
that empirically examines the performance
and productivity of health-care units. She
joined the research team in the School of
Economics from Lancaster University, United
Kingdom, where she completed her PhD.
Research Article
Since the 1980s, New Public Management
(NPM) has been the dominant paradigm in
public service management in the United
Kingdom, as well as in numerous other countries.
A key feature of NPM was the introduction of
competitive forces, with the aim of lowering costs
and improving service quality. Contracting out
refers to the provision of a public service by a private
service provider, and it is an important element of
the exposure of public services to competition. By
2014, the U.K. government was contracting out
approximately £100 billion of public services annually
(House of Commons Committee of Public Accounts
2014). Yet there have been increasing concerns over
whether these contracts offer value for money for the
taxpayer and/or deliver high-quality services to users.
A number of recent high-profile contract failures
in the United Kingdom, including G4S’s poor
performance in supplying security guards for the
London 2020 Olympics, Serco’s misreporting of
GP out-of-hours services, and the overcharging for
electronic offender tags by Serco and G4S, have raised
further questions about the principle of contracting
out public services. However, there is little robust
evidence to inform the debate—something this article
seeks to address. Further, while most of the public and
political criticism of contracting out has focused on
lower quality—so-called quality shading—when core
public services are contracted out to the private sector,
we present and test a new hypothesis that contracting
out of ancillary services may also lower the quality of
patients health outcomes even when the core service
remains under public provision.
There are strong theoretical reasons to support
contracting out. Motivated by competitive forces and
profit-maximizing behavior, private sector firms drive
down costs because their shareholders are the residual
claimants on any profit. By focusing on the provision
of core services, public institutions can enhance
service delivery and service quality while outsourcing
other activities (Barney 1991; Domberger, Hall,
and Li 1995; Quinn 1992). At the same time,
Public Administration Review,
Vol. 79, Iss. 2, pp. 193–202. © 2019 The
Authors. Public Administration Review
publishedby Wiley Periodicals, Inc. on
behalf of American Society for Public
Administration. DOI: 10.1111/puar.13031.

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