Contras
Balanced Scorecard
Comparing costs
of in-house services to those of outside suppliers can produce
important information even when the decision is not to outsource the
services in question. The information might indicate service areas
where the agency can improve its efficiency. Of course, the analysis
can also identify areas suitable for outsourcing. The outsourcing
decision should be made with consideration given to the following
five factors:
·
Economic impact,
·
Vendor service reliability and service
quality,
·
Legal ramifications,
·
Impact on strategic core competencies, and
·
Sociological factors.
To consider
these factors adequately, a comprehensive approach to outsourcing is
preferable to a piecemeal one.
The final model
is based on a combination of three models in use by state agencies
(in Arizona, Texas, and Pennsylvania) and the balanced
scorecard approach used by business entities. The following six
qualitative “perspectives” are evaluated in the model:
·
Customers (focusing on the interests of
citizens, legislators, public officials, and special interest groups
and compliance with laws and regulations),
·
Internal business (focusing on agency core
competencies, technology, and human resource expertise),
·
Innovation and control (focusing on
monitoring and control, the divisibility of the activity, and
effects on other governmental agencies),
·
Financial (focusing on costs, economic
impact, and timeliness),
·
Employee (focusing on sociological factors
related to employees such as morale, retraining, and relocation),
and
·
Contractor market (focusing on
characteristics of the potential private contractor vendor market
including quality, reliability and number).
Contras
Balanced Scorecard in Pennsylvania Contractibility Model: The
Pennsylvania DOT (PennDOT) developed contractibility ratings systems
(CONTRAS) to use to rate routine maintenance activities for
contracting out potential. The model contains the following eight
decision criteria and scoring schemes:
1. Unit cost
comparison (multiplier weight=5)
a. 0 = State
cost is less
b. 1 = no cost
difference
c. 2 = Private
contractors are 0.01 to 9.99% less
d. 3 = Private
contractors are at least 10% less
2. Degree of
labor intensity (multiplier weight=4)
a. 1 = Less
than 40% of the cost is labor
b. 2 = 40 to
59.99% of the cost is labor related
c. 3 = At least
60% of the cost is labor related
3. Existence of
critical time constraints (multiplier
weight=2)
a. 1 = Time
constraints are not critical
b. 2 = Time
constraints are critical
4. Contractor
availability (multiplier weight=2)
a. 1 = Low or
no available private contractors
b. 2 = Good
availability of contractors
5. Work volume
(multiplier weight=3)
a. 1 = $0 to
$99,999 contract size
b. 2 = $100,000
or more contract size
6. Planning
difficulty levels (multiplier weight=1)
a. 1 = Not
easily planned
b. 2 = Easily
planned
7. Requirements
for special equipment or skills (multiplier
weight=4)
a. 1 = None
required
b. 2 =
Required
8. Amount of
inspection required (multiplier
weight=1)
a. 1 = High
inspection required
b. 2 = Low
inspection required
Each of the
factors in Contras Balanced Scorecard in Pennsylvania
Contractibility Model has a predetermined weighting multiplier
assigned to it ranging from five (cost comparison) to one
(inspection) as shown in the listing above. To complete the model,
each of the eight are scored by the evaluator according to the
scales provided in the instrument. The scores vary from factor to
factor. Cost comparison, for example, has four possible scores–0, 1,
2, or 3–while Inspection has two possible scores–1 or 2.
The total
CONTRAS score in Contras Balanced Scorecard in Pennsylvania
Contractibility Model can range from a minimum of 17 to a maximum of
53, with higher scores indicating more potential for contracting out
than lower scores. Compared to the Arizona qualitative model, the
PennDOT model appears to have several advantages. First, the PennDot
model incorporates a cost comparison factor that was absent in the
Arizona qualitative model. Second,
since the weights were predetermined, the evaluator’s task is
simplified to focus solely on scoring the individual factors for
contracting potential. Third, the CONTRAS model is easier to explain
to users.
