Tuesday, 20 January 2015

A contradiction in make/buy theory

Most of us would agree that, when carrying out an options appraisal as part of the make/buy decision, the theory says retain in-house strategic services which are critical to delivery of the core business. That theory seems to have been turned on its head with the water service to the west of Northern Ireland, where last night almost 8,000 properties were without water. Many have not had water for days and had to resort to melting snow and fetching water from rivers in a scene more akin to third world services.

The problem all revolves around work-to-rule as part of a decision to change the pension rights of NI Water employees (at some stage I may discuss my abhorrence at trying to change pension rights which employees signed up to many years previously). However, some repair work is the responsibility of NI Water employees, while other work is governed by a PPI arrangement with treatment plants contracted out. If there's a problem with the 'contracted out' (buy) treatment plant, the staff responsible for repairs are the contractors as opposed to NI Water and the work is completed. However, where the fault relates to the remit of NI Water staff, i.e. 'make', it is subject to the work-to-rule and that's where the water service has collapsed.

This is a remarkable exception to the theory of make/buy where the in-house delivery is adversely affecting core services as opposed to the 'buy' service!


  1. What hope for all the public sector services going to the private sector then?

    1. Thanks Paul, you pose an interesting question. My view is that this example is a quirk but should serve as an lesson learnt. Who delivers public services is both a political and economic debate but fundamentally the accountable organisation needs to manage the risks, which in this case it seems to have been a weakness. I would not advocate outsourcing core services but I hope those in NI Water can give a good account for their management of this obvious public service failure.