Cost savings in contracting out when a contract fails: some Australian evidence

Ahmed, Rafiuddin (2008) Cost savings in contracting out when a contract fails: some Australian evidence. International Journal of Accounting Information Science and Leadership, 1 (2). pp. 75-88.

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Literature on contracting out in public sector contexts reports cost savings as the main driver behind contracting-out decisions. Few studies have examined the post contract realised cost savings. This study reports the findings of a case study of a public sector organisation which experienced an insourcing-outsourcing-insourcing loop in a contracting-out situation. Comparisons of pre-contract cost savings estimates and post contract realised cost savings are made to appraise the impact of the cost savings argument behind a contracting-out decision. The study finds that failure to achieve estimated cost savings due to contract failure may impose huge penalty on an organisation; realised cost savings are different from estimated savings, the difference between the realised and estimated cost savings is even greater if an organisation falls within the vicious circle of an insourcing-outsourcing-insourcing loop. The findings provide an insight into capturing the cost of non-financial information, cost of contract failure, used in contracting- out decisions.

Item ID: 6425
Item Type: Article (Research - C1)
ISSN: 1940-9532
Keywords: cost savings; contract failure; post audit; options value; single cost stream; non-fictional information
Date Deposited: 27 Jan 2010 23:00
FoR Codes: 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1501 Accounting, Auditing and Accountability > 150105 Management Accounting @ 50%
15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1503 Business and Management > 150399 Business and Management not elsewhere classified @ 50%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9199 Other Economic Framework > 919999 Economic Framework not elsewhere classified @ 100%
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