The principles of ‘externalisation’

back officeThe UK Government is encouraging public services to ‘externalise’ aspects of service provision and support.  ‘Externalisation’ is considered, politically, to be completely different from ‘privatisation’ since, crucially, the ownership of the service remains with the State, which simply funds the service as opposed to providing it.

It may be surprising to some people in the UK that this principle is well-established in the public sector, not least, by the General Practitioners’ contract (General Medical Services); GP’s are not employees of the NHS, rather independent contractors to the NHS.  This fact is often overlooked by those who campaign to ‘save the NHS from privatisation’!


Externalisation, therefore, means that aspects of a public service can be provided by organisations not directly controlled by the State, such as:

  • Commercial companies
  • Voluntary groups
  • Charities
  • Other parts of the public sector not normally involved in a particular sector or area

The scope of externalisation can vary from joint enterprises, through to partial or full outsourcing.

The aim of externalisation is to produce:

‘A vibrant, dynamic and innovative service sector, which provides customer focused support and choice to CCGs and the NHS CB and helps them to go the extra mile, by supporting the local focus on improving outcomes and increasing value (outcomes per healthcare pound spent) on behalf of their population’. 

(Developing commissioning support: Towards service excellence, Feb 2012)

A guiding document regarding externalisation is ‘Building high quality commissioning: What role can external organisations play?’  (Kings fund, July 2010).  It concludes that:

  • Providers of external support add most value when:
    • they are used proactively to help commissioners develop towards a long-term strategic vision of how their organisation should function in the future
    • they bring something new – by introducing new skills, tools and processes or by supporting transformational change in terms of organisational structure and culture.
  • As far as possible use external organisations to support strategic development rather than in response to short-term imperatives [and should have] a vision for how commissioning should function in the future
  • External organisations seem particularly well placed to provide support with the analysis and application of data
  • Use external support to do more than increase capacity to do routine tasks.  The goal should usually be to add something new to develop capabilities or to transform the culture or structures of the organisation. Consider entering into longer-term arrangements to achieve more fundamental change
  • Choose the right model for external support on a case-by-case basis, with reference to the different merits and challenges of consultancy, joint delivery and outsourcing models
  • Avoid using external support for long-term substitution of manpower or to cover vacancies
  • Avoid thinking only in terms of technical fixes or silver bullets – external support can also help with the fundamentals, for example the more relational aspects of commissioning.

NHS England, formerly the NHS Commissioning Board, emphasises that support services:

  • need to be reshaped to enable rapid transition and to aid their future sustainability
  • should aggregate demand
  • should work across cluster boundaries to achieve economies of scale where possible as part of developing viable models of commissioning support
  • must be headed up by good leaders and have an articulated plan for delivery
  • are sensitive to local needs
  • think about partnerships that may radically enhance the offer to commissioners, particularly in helping the system move from input/output management to commissioning for outcomes.

Externalisation in the public sector of the UK offers great opportunity for the IT industry.

Further reading:

British Standard 11000 ‘Collaborative business relationships – a framework specification

Building high quality commissioning: What role can external organisations

play?’  (Kings Fund, July 2010)


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