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When is outsourcing a good idea?

Aarhus University must work to ensure that the decision to outsource always takes employees into consideration – and with an eye towards the best and most efficient solution for the university. The senior management team has adopted a strategy on competitive tendering of operations to support this aim.

2018.10.31 | Arnold Boon

In June, the senior management team adopted a strategy on competitive tendering of operations. The new strategy was adopted to help us make well-founded decisions about when to outsource business functions – and when not to. 

We administrative employees perform the university’s technical and administrative functions. This means that we play an important role in relation to creating the best possible framework, support and conditions for education and research – the university’s core tasks in relation to our society. 

And we must allocate the greatest possible proportion of our resources, both money and time, to these core tasks. This is a constant challenge in an organisation such as ours, which is affected by externally imposed cutbacks on research and education. We must use our resources wisely. 

We are also under an obligation to comply with relevant legislation in this area. Business functions performed by a state sector organisation such as AU which an external supplier would be able to perform must be subject to competitive tendering, or have their market valuation assessed in some other way, at appropriate intervals. 

The administration contributes to this financial prioritisation and complies with the government’s legal requirements by regularly assessing whether we should perform a specific operational business function ourselves – or whether it makes sense to transfer it to external suppliers. 

We have performed such an assessment in relation to functions including security, waste collection, auditing, window cleaning, construction and maintenance, postal services and legal assistance. 

We have adopted a new strategy for competitive tendering of operations because we want to ensure an even more systematic and strategic approach to outsourcing at AU – and not least because we want to ensure that the employees affected by possible future outsourcing are heard and included in the process. This is a major concern of mine, so I’d like to explain what I mean in greater detail before I go on to address why the senior management team has adopted the strategy and what its major strategic priorities are. 

Prior to putting an operations business function to competitive tendering, AU will place a major emphasis on involving and informing relevant employees. The employees’ perspectives will be included in the management’s final decision through the liaison committee system. 

If the decision is made to outsource, the university will require that the affected employees are transferred to the external supplier along with the business function. In such cases, the employees will be transferred to the external supplier under their current pay and employment conditions, in accordance with the principles in the Danish act on the transfer of undertakings. 

When we consider whether or not to outsource a business function, we will examine such factors as whether there exists a genuine market for the function with an appropriate level of competition, whether AU might have difficulty attracting the necessary skills for the performance of the function, and whether other public sector institutions have experience with outsourcing the function in question. 

Another tool we can use to assess whether to outsource an operations business function is a so-called reference bid, whereby we carefully calculate the costs associated with continuing to perform the function in house (labour costs, other operations, depreciation on equipment, etc.) And of course, overhead reflecting indirect costs related to administration and management will be included in the calculations. 

Outsourcing operations is not a goal in itself. But outsourcing may take place if we in the management conclude that it is the best decision for AU. 

As always, I would like to encourage you to ask questions about the strategy for competitive tendering of operations. You can either speak to your immediate supervisor, or you are welcome to add your questions or comments here in the comments field or send me an email.  

Fællesadministration
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