Service Development in Outsourced Public Service Networks: A Study in the Public Transport Sector

When public-sector services are outsourced to private commercial operators, the issue of new-service development can become problematical because the political/social objectives of the controlling authority are often different from the commercial imperatives of the private operator. These (often conflicting) imperatives can cause difficulties in new-service development with regard to both: (i) deciding what new services are required; and (ii) deciding how the service-development process should proceed. This study takes a qualitative approach in investigating what happens during the development of new services in the Swedish public-transport sector, in which services are contractually outsourced from public authorities to private commercial operators by public tender. The results of the study show that: (i) the development of new services in this context is especially challenging; (ii) conflicts do arise between public and commercial interests; (iii) collaborative service development is significantly hampered by the regulatory framework and contractual arrangements; and (iv) the contracts themselves actually represent an important aspect of the overall service-development process. The implication for managers is that the formulation of tendering documents and contracts must be seen as an important determinant of service development, often for many years in advance.