RESEARCH ARTICLE
A Comparative Analysis of the Costs and Benefits of Outsourcing . Insourcing Cleaning Services in a Rural Hospital in Uganda

This study estimates the net cost benefit of outsourcing cleaning services in a hospital in Uganda. The aim is to demonstrate an approach that can be applied by hospital managers using readily available data to conduct a cost benefit analysis as part of pre-sourcing evaluation.

A before and after design was used to analyze, from the hospital manager’s perspective, the impact of outsourcing cleaning services on the hospital’s costs. Cost and service quality data was collected for the pre- and post- outsourcing period. Net costs of outsourcing were determined using a total cost pre- and post-out-sourcing approach. Benefits were monetized by comparing the costs of outsourcing with the theoretical in-sourcing costs that would be required to achieve the same quality as outsourced cleaning services. The theoretical in-sourcing costs were estimated by weighting the actual insourcing costs by a quality factor based on the hospital manager’s rating of service quality pre- and post-outsourcing. The outcome measures were the net total cost and cost per square meter cleaned for a one-year period.

Before adjusting for quality, outsourcing cleaning services were more costly than insourcing, with an annual cost of UGX 644.35 ($ 0.25) and UGX 568.07 ($ 0.22) per square meter cleaned, respectively. After adjusting for quality, outsourcing is cost-beneficial, providing a cost saving of UGX 372.20 ($ 0.14) per square meter cleaned. Sensitivity analysis indicates that cost of the outsourcing contract and manager’s quality rating of outsourced services have the greatest impact on value for money from outsourcing. An annual contract cost above UGX 1000 ($ 0.38) per square meter cleaned makes outsourcing less beneficial, keeping all other factors constant. An average quality rating below 5 for the outsourced service makes outsourcing less beneficial cost wise.

Outsourcing resulted in additional hospital expenditure compared to in-sourcing, but also resulted in better quality service. Adjusting for quality makes outsourcing more cost beneficial. The magnitude of the cost benefit is sensitive to the contract value and the managers’ quality rating of the outsourced services.