The city of Varkaus made a diagnosis of its financial situation and chose the strongest of remedies for treatment: the complete exclusion of technical works. Savings came and the quality improved.
Text: Hanna Moilanen
First, the coloring and the name on the side of the machines changed. Gradually, newer vehicles began to appear on the street scene. Then positive feedback started coming from the townspeople.
"Outsourcing technical services brought savings of 600 euros to the treasury on an annual basis. At the same time, the quality level improved", Technical Director of Varkaus Arto Lehtonen summarizes in the Infra magazine published on November 24.11.2016, XNUMX.
The saving is significant in relation to the total scope of the contract, i.e. 3,8 million euros. The resources needed to supervise the external producer have also been taken into account. The improvement in quality is explained by the accurate review and documentation of the city's services during the tendering phase.
The decision to outsource was already made in 2007. The economy of the city, which relies heavily on the wood processing industry, had drifted into a downward spiral. The new mayor Hannu Tsupari obliged the municipalities to prepare a large savings program.
Outsourcing was carried out through a competitive negotiation procedure: the city invited companies interested in the contract to workshops to formulate the content of the request for tenders together.
Since cheap offers were wanted, the city was ready to share the risks. For example, it was decided to tie the contract price to the civil engineering cost index. The city also pays equal monthly amounts for the contract, even though summer maintenance is cheaper than winter maintenance. The collateral was set to be moderate. The city-owned depot was rented to a contractor. Fixed assets were sold at book value.
At the heart of everything is trust
Outsourcing of public services has traditionally been difficult for the political left. In Varkaus, the left blessed the outsourcing of technical services, which is rare on a Finnish scale.
At the time of handover, the city's employees transferred to the company that won the contract. The contract secured the employment security of the personnel for two years.
The key to engaging the staff was to include the chief shop steward in the negotiations with the contractors.
"We authorized the chief shop steward of the technical personnel to negotiate together with the city on personnel matters with the future employer. With the city engineer, we focused on negotiating technical issues," Arto Lehtonen tells Infra magazine.
The most important lesson
What is the most important lesson learned from outsourcing? Lehtonen is the first to highlight building mutual trust. By searching, the customer is not looking for an opportunity to scold the contractor. Accordingly, the contractor does not seek loopholes in the contract.
The detected problems have been solved locally at the grassroots level in regular site meetings. It has not been necessary to invest as much in the supervision of the contract as one might have expected.
Lehtonen has been lecturing and consulting his municipal colleagues all over Finland. In his experience, civil servants understand that outsourcing services could often make sense.
However, the matter usually stops at political decision-making. You don't dare to go for outsourcing, even though expensive studies have been carried out about their benefits. Municipal personnel or local companies may see outsourcing as a threat.
"There are also negative examples of outsourcing. In such a case, the decision-makers and officials must look in the mirror and ask whether the outsourcing was done correctly."
"I don't know if we were lucky or skilled, but as far as municipal engineering is concerned, I think we succeeded," sums up Lehtonen.
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