Improving the Efficiency of Public Service Delivery through Outsourcing and Management

Research output: ThesisDoctoral ThesisCollection of Articles


The current scarcity of public funds has inflicted strict deficit objectives at both the national and local government level for public service delivery. The pressure to deliver more for less has steered public management focus towards the objective of improving the efficiency of public service delivery. This objective has resulted in the growing popularity of different options of separating the service purchaser and provider: service outsourcing. Regardless of the popularity of public service outsourcing, a debate remains about the best way to achieve the benefits of outsourcing in a public context and whether there is a trade-off between improved cost efficiency and service quality. The increase of public service outsourcing has altered the role of public organisations from service providers to managers of service provision. The altered nature of public management and increase in outsourcing inspired this interdisciplinary study combining the disciplines of purchasing and public administration. This study has set out to determine the means to improve the efficiency and effectiveness of public service delivery through service outsourcing and management. This dissertation consists of four papers which investigate this phenomenon of public service outsourcing and the challenges of public service management. The research aim is divided into more specific research objectives investigated and discussed in the papers. Case study and a focus on qualitative data are chosen as the methodological approaches for each paper as these approaches enable an in-depth investigation of the research objectives. Paper I set to study and empirically analyse the bases for make-or-buy decisions in private and public service organisations. The main contribution to both theory and practice is the make-or-buy process framework, building on empirical analysis, and previous literature. The phases of the framework include regular evaluation of service functions, market analysis, cost analysis as well as benchmarking and evaluating relevant service activities. The aim of Paper II was to investigate and empirically analyse the most effective public service management approaches for outsourced services with a focus on the phases of transition and service management post provider selection. The findings indicate that managing an outsourced service should not be a separate area of public management research nor practice, but rather a part of service management overall. Paper III identified the most significant risks of outsourcing a public health service function and the management means to mitigate them. The most significant risks are political, service quality and market risk. To mitigate these risks: i) the procurement unit should engage with the market, ii) risk management focus should primarily be on service quality risk, and iii) service specification and contract terms should be created through an open dialogue with the tenderers in the negotiated procedure.Finally, Paper IV investigated cooperation models between the service purchaser and provider within the context of health care delivery by applying agency theory. We identified: i) the control mechanisms the purchasers use to facilitate purchaser-provider cooperation (and explored if these have an impact on patient care), and ii) best practices for managing cooperative care development. Examples of best practice include relying on social controls by the involvement of clinicians in service development as well as using the contract as a primary process control method to ensure service development needs are met.The conclusions of each individual paper were drawn together to achieve the overall research findings contributing to existing theory on public service management. Additionally, practical guidelines for managing public service delivers were developed. The overall contributions of this dissertation assist in establishing the goal of increasing the efficiency and effectiveness in public service delivery.
Translated title of the contributionJulkisen palvelutuotannon tehokkuuden parantaminen ulkoistamisen ja johtamisen keinoin
Original languageEnglish
QualificationDoctor's degree
Awarding Institution
  • Aalto University
  • Kauppi, Katri, Thesis Advisor
  • Tinnilä, Markku, Thesis Advisor
Print ISBNs978-952-60-7316-3
Electronic ISBNs978-952-60-7315-6
Publication statusPublished - 2017
MoE publication typeG5 Doctoral dissertation (article)


  • services
  • outsourcing
  • public sector
  • public service delivery
  • service management

Fingerprint Dive into the research topics of 'Improving the Efficiency of Public Service Delivery through Outsourcing and Management'. Together they form a unique fingerprint.

Cite this