Unit cost behaviour in public sector outsourcing

Purpose – The aim of this paper is to create a framework in which the behaviour of unit costs in public sector outsourcing situations can be analysed.

Design/methodology/approach – Explorative case study concentrating on theory building.

Findings – Public sector organisations have not concentrated on analysing or modelling the unit cost behaviour in outsourcing situations. The lack of systematic cost management tools seems to lead to poorly managed and non‐profitable outsourcing projects or ignorance of the possibilities of outsourcing.

Practical implications – By utilising the results of the study, decision making regarding outsourcing in public sector could be based both on forecast cost development and on political judgement instead of relying only on political judgement without understanding cost behaviour.

Originality/value – The paper introduces a new framework to be used as a tool in practice and to be validated in further studies.