Outsourcing

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There is a close correlation between how much public infrastructure projects cost — in the case of mass transit the cost per km of the system — and the degree to which the mandating government has outsourced its project management and infrastructural expertise. The more ideological its commitment to outsourcing, the greater the cost.

It has little to do with the general cost of living in the area: the index cost per km of infrastructure in Vietnam (which has a 50% tunnel ratio), was 425, while Switzerland, with 73% tunnels, was well under half that at 173. Portugal (60% tunnels) was the most efficient at 96, and most expensive, with 1037 (although a 100% tunnel ratio) was not Hong Kong, Singapore or even the UK but good old free market New Zealand!

The Enotrans study concluded:

Our study found successful project delivery in countries with strong public institutions with the capacity to manage megaprojects, smart approaches to contracting, coordination of complicated processes, and standardization of redundant project components. Insights from this data analysis and research interviews also underscore the importance of strong public sector staff capacity and management skills, close collaboration between stakeholders, and the ability for planners to make prompt, firm decisions about projects.

This is another way of saying outsourcing — shedding metis — A great boon for management consultants, but a chocolate starfish for anyone else.

Management consultancy textbooks will glowingly quote Anthony Burgess: “A sure sign of an amateur is too much detail to compensate for too little life”.

Management consultants aren’t generally very good with literature. Much less detail. This they take as a mandate to ignore the messy intractable details of a business process, and instead look at the big picture. A good rule of thumb, they say, is Pareto's 80/20 rule: 20% of the activities will consume 80% of the costs. 80% of the revenue will come from 20% of the clients. And so on.

Step one — undoubtedly right — leads to step 2: if we could only identify what that 80% is, we could relocate it to a cheaper means of production and bingo — easy cost savings.

What this misses

• it's low value, not no value.

See also

• Outsourcing
• Service level agreement
• Management consultant
• Subject matter expert
• Metrics
• ClauseHub: theory
• Ignorance