Cost benefit analysis of outsourcing initiatives/strategy at water utilities corporation (Botswana)

Abstract

After the Water Utilities Corporation adopted outsourcing as a policy initiative and operational directive various non-core functions were outsourced. This raises obvious questions as to why the Corporation suddenly decided to do this. Does the Corporation indeed benefit in terms of value addition from outsourced functions? Some of the pertinent questions include: To what extent did policy guidelines and operational measures govern the said outsourcing initiatives? What are the costs and benefits of the following: fleet management, IT/functional/Technical/and Infrastructure support? This paper argues that Public Utility Companies such as the WUC are not implementing outsourcing initiatives the right way. As a result, outsourcing at WUC is ridden with more costs than benefits. Using multiple data collection methods thirty respondents, employed at various WUC work stations completed the questionnaires. The results from the questionnaire suggest that outsourcing is the right business decision to be made, but cost benefit assessment must be undertaken in order to derive more benefits from outsourcing initiatives. In tackling the problems of the predominance of costs versus benefits an overhaul of the policy and implementation framework needs to be done. In carrying out a cost benefit analysis of outsourcing initiatives at Water Utilities Corporation, a three-tier dimensional model in which quantitative data, qualitative data and cross quantity-quality data was analysed and tabulated. According to the cost benefit analysis variant model, a negatively discounted cost benefit ratio indicates more costs over benefits for any particular analysis of data. While measures of non-monetary outsourcing costs are improving, at least four other key areas warrant more attention: First, routine savings derive from routine precautions to determine an efficient working model of outsourcing. Second, models of vendor (provider) and the Corporation (service provider) and the Corporations' clients (consumer) are underdeveloped in this field . Third, outsourcing externalities occur when entities (such as the Corporation, Premises Managers, some persons and environments) produce targets and situations that provide outsourcing opportunities. These entities externalise or do not bear the outsourcing costs to the corporation and society that they produce. This can be explained by the convergence of qualitative responses from respondents, the efficiency and effectiveness of the vendors and the overall saisfaction of the Coporation of the services provided by the vendors. This report has been conducted on Water Utilities Corporation ,Botswana. Data has been collected by observing total outsourcing process, taking personal interviews, analysis cost and revenue data and searching through data archives.