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

• Published date: 01 March 2019
• DOI: http://doi.org/10.1111/puar.13031
• Date: 01 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

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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.

E-mail: simon.jones@nyumc.org

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.

E-mail: gcookson@ohe.org

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.

E-mail: s.elkomy@surrey.ac.uk

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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