highly critical. It is the final opportunity to test the operational feasibility and safety
in future operation by identifying and fixing all remaining deficiencies and errors
[6]. Successful commissioning involves managing a whole range of boundaries, i.e.
organisational, occupational and temporal [15]. Several authors have highlighted the
role of boundary work [3] supported by actors or objects, but rarely in the context
of high-risk IOPs and in relation to safety. In addressing our theoretical concerns,
we develop the following research question to guide our empirical study: *how and
under which conditions can boundary work contribute to safe performance during
the commissioning phase of projects?*

To answer the research question, we investigate the commissioning of a new
facility at a nuclear waste storage site. This enables us to draw attention to the
specific difficulties encountered by the actors in this transition phase but also the
socio-technical arrangements that are negotiated throughout this phase to manage
boundaries and overcome these difficulties. Finally, we discuss the important lessons
at the organisational and contractual dimensions.

## 8.2 Outsourcing, Projects and Safety

In the literature, outsourcing has been described as “the practice where a public or private organisation contracts another organisation or individual—usually through a process of competitive tendering—to undertake specified tasks, such as cleaning, transport or maintenance or even provision of a product” [7, p. 284]. Over the last 30 years, these practices have developed in high-risk organisations, mainly for economic or strategic reasons. It was seen by industries as a way to reduce labour costs and often driven by a strategy that focused on the core competences and/or sought enhanced organisational flexibility.

Outsourcing has often been identified as a causal factor of accidents. Some studies have highlighted the adverse effects on process and occupational safety, by highlighting the associated socio-technical risks (e.g. loss of internal know-how and competences for the principal) and organisational risks (e.g. excessive dependency on subcontractors with rare competences). Very recently, researchers have made the link between outsourcing, inter-organisational complexity and safety more explicit. Outsourcing can increase economic pressure, disorganisation and dilution of abilities [5]. In a context of high competition, contracting companies may take safety shortcuts and transfer risks to the lower supplier in the supply chain [4]. But this does not have to happen; under certain organisational conditions, outsourcing may foster operational safety and reliability. For example, long-term organisational relationships can contribute to development and maintenance of good social interactions between the different companies and groups of workers involved [5].

In line with these works, our research aims to better qualify organisational and
professional conditions that may affect safety in IOPs, where work is distributed
between multiple organisations and disciplines and performed in temporary settings.
In the literature on complex projects, the links between performance, safety and inter-
face management are a strong and recurrent issue [2, 9, 12]. The many boundaries
(organisational, occupational, temporal, spatial) that generate several major prob-
lems in terms of communication and knowledge sharing [2, 14], role distribution
and articulation work among various project phases and stakeholders or power and
occupational jurisdictions [1]. Depending on the project and how it interacts with
permanent organisations, the more problematic boundaries are not necessarily the
ones between organisations but rather between occupational groups within a single
organisation [12]. In enhancing coordination, many authors have highlighted the role
played by specific individuals, known as boundary-spanners [14], who contribute to
project performance through their ability to improve the sharing of information and
knowledge [2] between the different organisations or professional groups within
these projects. Boundary objects [8] appear to be just as important for transfer-
ring and translating knowledge in fragmented organisational contexts. They support
ongoing negotiation between the various actors while acknowledging the specifici-
ties of each actor's activities, rhythms of work and skills [13, 16]. But, as shown by
[1], artefacts may also reinforce boundaries and impede coordination when they are
used to reassert authority and legitimacy over tasks.

We draw on this literature to investigate the case of a high-risk inter-organisational
project carried out in a nuclear waste storage plant.

8.3 A Safety-Critical Project: Building and Operating a New Facility at NucStor Plant

Our study focuses on the 18-month commissioning phase of an ongoing IOP that
aims at designing a new installation that will be dedicated to the reinforced control
of nuclear waste packages. The plant in which the project takes place is operated
by NucStor,<fnref n="1" /> an organisation specialising in nuclear waste storage. As such, it is
responsible for the safety of the storage facilities and supervises the whole range
of activities at the site. But most of the latter, including production, is outsourced.
Production, which consists of the reception, control, conditioning and storage of
waste packages, is entrusted to WasteCorp, an external company specialising in the
construction and decommissioning of nuclear facilities. The course of the project has
followed the classical steps described in the literature, i.e. design, construction and
commissioning, each being led by a specific actor. NucStor's headquarters led the
design phase, the construction was managed by a contractor under the supervision
of NucStor's project team on site, and the commissioning was performed conjointly
by the project team and WasteCorp. Our study focuses on this last phase, which is
highly critical, due to the many socio-technical and organisational interfaces that are
brought into play. The new unit will be integrated into the existing production process
and, in line with the current situation, operated by WasteCorp. Its incorporation into

<footnote n="1">¹ For confidentiality reasons, all company names are pseudonyms.</footnote>
the existing socio-technical system is crucial for future safety. In completing this project, NucStor and its contractors are confronted directly with occupational and process safety issues since operating the facilities (both current and future) involves manipulating radioactive nuclear materials. Defining the future organisation of work requires cooperation and coordination between members of NucStor and contractors, notably during the commissioning phase. This requires articulating both current practices and knowledge, and those necessary to operate the future plant. In doing this, the tests performed during commissioning are crucial.

To understand how boundaries are managed to ensure safe performance, we draw on interviews with NucStor's project team, WasteCorp's operators and the project pilot.<fnref n="2" /> We also observed tests and project meetings during the commissioning phase. Data were collected from September 2018 to July 2019 and followed by a qualitative analysis of interview transcripts and observation notes. Data coding was carried out manually and followed an iterative analysis process based on the comparison of field data with existing literature.

## 8.4 Challenges Encountered in the Commissioning Phase

As the future operator, WasteCorp, along with NucStor, plays a key role in the commissioning phase, which constitutes a test for the future operability and safety of the new installation. This involves facing emergent and often unexpected technical events that require specific technical and social skills to manage. From the very beginning of the commissioning phase, WasteCorp operators express difficulties in taking ownership of the facility and operating it as originally defined by the NucStor design team at headquarters.

### Example of Unexpected Problems Encountered During an Inventory Test

An inventory test is carried out on an insulating box containing several waste packages. As the operator tries to move the packages from the box to the sorting area, he faces two problems. Firstly, the remote-control arm is not easy to manipulate and the clamps cannot pick up parcels that are too small (Fig. 8.1a). Secondly, when moving an oversized package, the package collides with the wall that separates the box from the sorting area, because the ceiling is too low (Fig. 8.1b).

<footnote n="2">² The project pilot is employed by WasteCorp. Her role is to monitor the operators' commissioning work in the new installation and to support inter-organizational coordination between WasteCorp's operators and NucStor's project team.</footnote>
<figure><img src="image_18.png" /><figcaption>**Fig. 8.1** Illustration of problems encountered during an inventory test</figcaption></figure>

These problems arise from errors in the design and construction of the inventory room, which turns out to be too narrow. Alerts issued by operators regarding the handling of packages and the size of the room were not taken into account during design and construction. As a result, the operator has to enter the box to manually retrieve the parcels, which is theoretically forbidden.

Three main socio-technical issues are revealed, i.e. poor ergonomics of the installation, poor training of operators and poor communication between headquarters and the site, all having potential safety implications (Table 8.1).

Firstly, the operators complain that the work areas are too tight: once equipped with the regulatory protective suits, they lack adequate space to move around and properly handle the various tools and machines, which leads to additional handling

<table><caption>**Table 8.1** Socio-technical problems and implications for safety</caption><thead><tr><th>Main challenges</th><th>Potential safety implications</th></tr></thead><tbody><tr><td>Ergonomics of the workplace</td><td>Imprecise handling of waste<br>Contact with radioactive packages<br>Handling time too long in contaminated areas</td></tr><tr><td>Training of operators</td><td>Partial knowledge of risks and preventive measures<br>Lack of monitoring and traceability of control activities</td></tr><tr><td>Communication</td><td>Poor management of key interfaces for future process safety<br>Little reactivity in the face of emergent technical issues<br>Potential lack of transparency</td></tr></tbody></table>
time. Some tools are poorly designed and unusable as built. More importantly, this compels operators to develop deviant practices (some of which are theoretically prohibited) which leads to unexpected occupational and process safety issues.

Secondly, the operation of the new facility requires developing new skills associated with the new techniques and activities. The operators feel they are left to themselves in the process of acquiring these new skills and so must learn by trial and error on the job. Several reasons are advanced: lack of dedicated training times because of production pressures and insufficient support from hierarchy, principal and suppliers, non-recognition of the increased technical complexity and difficulties in complying with regulatory work (fulfilling the new operating procedures provided by design teams).

Finally, communication difficulties between headquarters and the site are revealed during commissioning. On the one hand, the design team is critical to the on-site project team and operators, who, according to designers, do not fully comply with their technical directives and requirements. Concretely, this is reflected in the imperative tone of their e-mails, their attitude of "principal" and their indifference to the technical constraints experienced by the operators in the field. On the other side, both the NucStor project team on site and WasteCorp operators express difficulties in communicating with headquarters members who are accused of having too abstract a vision of the installation, of not taking into consideration the technical feasibility of the current tools and of not visiting the site often enough. These attitudes, added to the geographic distance, tend to reinforce within NucStor the fault lines between the "people on the spot" and "the people at headquarters".

These problems have safety implications that can be observed in the case of projects involving workers belonging to the same company. But they tend to be reinforced in the face of outsourcing due to the multiplicity of interfaces.

In the face of these difficulties, NucStor and WasteCorp employees have conjointly and progressively developed and refined structural and operational local arrangements to manage interfaces and pursue their activities during the commissioning of the new installation.

## 8.5 Boundary Work for Improved Reliability

Early in the commissioning phase, the actors have engaged in intense boundary work, defined as all the socio-material arrangements and devices carried out to manage the many interfaces and associated risks during the commissioning phase. It relies on three key levers: individual, material and temporal.

At the beginning of the commissioning phase, a project team was set up on site to enhance integration and coordination between steps and stakeholders. It gathers NucStor representatives with specific key expertise and a project pilot from WasteCorp at the interface between the organisations. The analysis shows that the project pilot acts as a boundary spanner between the NucStor project team and the WasteCorp operators. Thanks to her "double hat", the project pilot benefits from
the confidence of both companies, which enables her to easily communicate the instructions coming from the client and the requests and needs formulated by the operators. Her position supports inter-organisational coordination by allowing fluid and rapid interactions between the NucStor project team and WasteCorp operators. As contractors, WasteCorp operators must not receive direct instructions from the NucStor project team, so by integrating the project pilot with the project team, NucStor can also indirectly transmit instructions to operators, while avoiding perceptions of interference. As a trained engineer and manager of the operators in charge of commissioning, the project pilot also shares a professional experience on the ground with the WasteCorp operators, which is very valuable to the project team. During the project meetings, she is considered to be a fully fledged member capable of understanding the theoretical operation of the installation's different processes. At the same time, her daily involvement in the commissioning activity and her ability to provide permanent support for the operators' work enables her to develop strong expertise in the materiality of the installation and its constraints and to acquire professional legitimacy in the eyes of the operators.

Throughout the commissioning phase, the installation itself constitutes a boundary object between two occupational groups that each have different visions of the commissioning's times: NucStor engineers and WasteCorp production operators. While for the project team, commissioning is the end of the project; it represents for the operators the beginning of their new production activity. The materiality of the installation helps operators and engineers in managing and solving together the various problems encountered during commissioning (Box 2).

## The Installation as a Boundary Object Between NucStor and WasteCorp

11:00am: During a technical test, the operator in charge of piloting the installation notices a design problem: a sensor is incorrectly positioned, blocking the operation of the monorail. He shares the problem with the project pilot who calls the NucStor maintenance manager to inform him of the problem.

3:30pm: The maintenance manager joins the operator on the installation. Together, they inspect the sensor problem: the operator explains that the sensor is malfunctioning because it sometimes rubs against the wall, blocking the operation of the monorail; the maintenance manager suggests unscrewing the sensor and positioning it in another place.

4:00pm: They agree that a modification must be made. The maintenance manager leaves the installation. He plans to make new supports for the sensors. The operator goes back to the control room and informs the project pilot of the decision. The project pilot integrates this modification request and modifies the test schedule accordingly.

By discussing the same object and confronting its materiality, NucStor project members and WasteCorp operators come to a better understanding of their respective problems. While each develops its own vision of the project and its constraints, the installation and the performed tests support the discussions on their respective roles regarding the commissioning and facilitate the cohesion of the different actors around
the same objective. The installation helps in revealing the work carried out by the
operators: by making their contribution in enacting the different processes visible
to the engineers, the operators legitimise their role in the project and reaffirm their
technical expertise vis-à-vis NucStor engineers.

Finally, our study reveals the positive contribution of the contractual relations established between NucStor and WasteCorp over almost 30 years due to the cooperation between both entities throughout the course of the project. These long-term relationships have allowed them to act jointly in the face of the many difficulties encountered during commissioning. The project has strengthened trust-based relationships between engineers and operators from both organisations engaged in the project. WasteCorp's operators have developed a sense of belonging to the project, which goes beyond their initial organisational affiliation. But paradoxically, the inter-organisational cohesion within the project has created fault lines and reinforced the boundaries between the local and global levels, partly due to a lack of devices and tools to support communication and coordination.

8.6 Discussion and Conclusion

Literature on IOPs describes the challenges in terms of knowledge sharing and coordination between distinct stakeholders, with a strong focus on inter-organisational boundaries. As a transition between project and operation, commissioning is viewed as a crucial step for the success of a project and future safe operations, involving temporal boundaries. In this chapter, we have discussed the challenges collectively faced by actors during this transition and the many boundaries involved. In particular, we highlighted how a lack of involvement of the future user during the design and construction phases undermined the ability of operators to quickly learn how to operate the new installation and manage commissioning. But we have also shown the role played by boundary-spanners and boundary objects in overcoming these obstacles and successfully completing the commissioning. These arrangements supported boundary work, which was particularly efficient at the inter-professional and inter-organisational levels. In our case, the existence of long-term contractual relations between client and contractor [9] also helped in managing these boundaries within the project, thanks to inter-individual relationships at the local level.

Finally, evidence from our research suggests that interfaces between the principal and its contractors are not necessarily the most problematic. When they are not considered, discussed and equipped throughout the project course, and notably in the final transition phase, intra-organisational and geographical boundaries prove to be just as crucial as inter-organisational ones for ensuring safety and performance of IOPs.

**Acknowledgements** This work was supported by the RESOH Chair. We are very grateful to NucStor and WasteCorp workers for their time and information.
**Ethical Statement** This work adhered to the research ethics that are stipulated in the “RESOH Chair convention” that complies with relevant legislation regarding ethical conduct of research. Informed consent was obtained from participants, and all data has been anonymised.

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<figure><img src="image_19.png" /></figure>
<figure><img src="image_20.png" /></figure>

Chapter 9

# Outsourcing Risk Governance: Using Consultants to Deliver Regulatory Functions

Jan Hayes, Lynne Chester, and Dolruedee Kramnaimuang King

**Abstract** The Australian gas supply industry provides a case study of outsourcing by economic regulators. These regulatory agencies rely on the engagement of external consultants for technical expertise who are effectively tasked with finding ways to reduce proposed expenditure, even for safety-related items. Empirical evidence shows that economic regulators uncritically accept this advice. Such outsourcing raises the possibility of significant impact on technical regulatory outcomes.

**Keywords** Economic regulation • Gas industry • Expert consultants • Public safety • Risk management

**9.1 Introduction**

Since the early 1990s, there have been significant changes to the governance of utilities such as electricity and gas, communications and transport which were owned and operated by government. These previously vertically integrated monopolies have undergone restructuring with segments being privatised and subjected to competition. Where such segments have natural monopoly characteristics, they continue to be subject to government control in the form of economic regulation. Each sector is also subject to technical regulation to ensure that safety and quality standards are maintained. Both kinds of regulation have been influenced by another significant public policy change. Deregulation, or ‘red tape reduction’, has meant effectively a move from prescription towards goal-based regulation combined with forms of

J. Hayes (✉)
RMIT University, Melbourne, Australia
e-mail: jan.hayes2@rmit.edu.au

L. Chester
The University of Sydney, Sydney, Australia

D. K. King
Massey University, Palmerston North, New Zealand
self-regulation governance. This has occurred across a range of sectors, including the technical and economic regulation of utilities.

Concurrently, an increased reliance on competitive market forces has resulted in a progressive rise in outsourcing and contracting-out across the private sector. This chapter considers one form of outsourcing adopted in the regulatory environment, that is, the use of contractors to perform assessments and evaluations to assist an economic regulator to perform its functions. We believe the use of contractors and consultants by regulatory agencies is not uncommon; yet it has received little academic attention despite the potentially significant implications. We address this issue by drawing on our empirical research regarding the impact on technical compliance, and thus safety, of the economic regulatory regime for the Australian gas pipeline and distribution network (gas supply) sector.

## 9.2 Effective Regulation and Effective Regulators

Proponents of a market-based approach to regulation emphasise that, in addition to state regulation, industries 'self-regulate' using industry standards, norms established by industry associations and similar. Ayres and Braithwaite [1] support the need for responsive regulation, i.e. to use a mixture of state regulation and self-regulation, and a range of strategies from encouragement to sanctions to ensure compliance. Policy regarding responsive regulation has been influential although it 'has been joined ... by "risk-based" regulation' [2, p. 65]. In risk-based or goal-setting regulation, the regulations require that companies use a risk-based process to ensure that outcomes are adequately addressed, rather than prescribing detailed measures that companies must take.

The change in regulatory policy and frameworks has led to change in the day-to-day practices of regulatory agencies. Regulators are now required to assess such questions as 'how *well* the duty holder has carried out the risk management process and how *effective* its controls are' [8, p. 210]. They may also seek to influence duty holders to comply by interacting with a broad range of stakeholders including company executives, extending well beyond the skills of many traditional inspectors [4].

The subject of our empirical research, the Australian gas supply sector, is subject to goal-based technical regulation that seeks to ensure public risk—as a result of pipeline failure—is reduced to a level that is as low as reasonably practicable. Questions of regulator capacity are key to the integrity of outcomes.

## 9.3 Outsourcing of Regulatory Functions

The privatisation and deregulation agenda has seen many formerly government operations move to the private sector. Most commonly, these have been service delivery
operations. Of interest here are a different set of government operations linked to regulatory oversight. In such cases, public good outcomes do not necessarily align with the commercial imperatives driving private sector providers.

The building construction sector in the UK provides one example of the possible link between privatised—outsourced—regulatory functions and public safety outcomes. Regulations address a range of requirements for the quality of building works. A key regulatory function is building inspection to check that work has been done to the requisite standard before permits are issued. Part privatisation of this function has raised concerns about the extent to which the actions of inspectors are driven by commercial pressure from clients, rather than a desire to enforce compliance with relevant standards [6].

The UK is not alone in this style of building control regulatory enforcement. Changes to privatise building control came about through a combination of both top down and bottom up pressures. Introducing private sector inspectors in several countries, including Australia, has been driven by government policy in the search for greater efficiency and effectiveness. One study of private sector involvement in building control in three Australian states found that it had ‘resulted in more technical efficiency and effectiveness of regulatory enforcement’ [9, p. 206]. Private sector involvement was seen to increase the skill level of inspectors overall. On the other hand, there are also negative effects. Private sector involvement is seen to have an adverse impact on accountability as conflicts of interest and weak auditing can result in lack of effective oversight. Similar results were found in building inspection practices in several Canadian states [10].

## 9.4 Economic and Technical Regulation of Gas Supply

Our case study focuses on the interaction of economic and safety/technical regulation. Utilities such as the supply of natural gas are considered natural monopolies. Economic theory assumes that the prices charged by a monopolist will be set at a level that generates excessive profit, and thus, there is a need for economic (price) regulation in the absence of the pressures of market competition.

Textbook theories of optimal pricing for regulated businesses assume that regulators are fully informed about costs, technology, and consumer demand and can therefore impose cost minimisation obligations on the regulated business. In reality, regulators have imperfect and less information than the regulated business. Consequently, issues of relevant experience and expertise on the part of economic regulators are critical as we will show.

A key consideration for economic regulation is the need to balance the interests of investors wishing to make an adequate return, with the interests of consumers who many be subject to exploitation in monopoly conditions [3]. This objective acts in tension with technical regulation to encourage expenditure on items such as maintenance and inspection to ensure public safety is maintained. In summary, the interaction between company and regulatory practices operates as follows:
1. A need for physical system changes is identified by a regulated business in accordance with the risk management processes of technical legislation and standards.

2. The business submits a safety case update to the technical regulator who assesses it inhouse and ultimately grants approval.

3. The regulated business then submits a proposal to the economic regulator which contains risk-based arguments for expenditure to comply with its approved safety case.

4. The economic regulator assesses the proposed safety expenditure using external consultant advice which interprets and applies technical regulatory requirements that commonly differ from that of the regulated business.

5. The economic regulator does not consider a regulated business' compliance with a safety case to be tantamount to a regulatory obligation of the economic regulatory regime.

6. The economic regulator determines, based on the advice of its external consultants, that a regulated business can spend less than it has proposed for safety purposes.

7. The regulated business, in light of the economic regulator's decision for approved expenditure, reviews its asset management strategies which may include revision of asset risk profiles.

8. Should a regulated business decide to spend more than that approved by the economic regulator for safety expenditure, there is no guarantee that this additional expenditure will be approved by the economic regulator.

These steps demonstrate the convoluted decision-making process regarding safety expenditure that the dual regulatory regimes impose on regulated businesses.

## 9.5 Method

Our empirical study collected qualitative information through semi-structured interviews, and conducted a document analysis, to gain an understanding of the economic and technical regulatory frameworks and how they operate in practice.

Forty-nine semi-structured interviews were conducted with senior employees of: the Australian Economic Regulator (AER); the Economic Regulation Authority of Western Australia (WAERA); the technical regulators from four Australian states (New South Wales, Victoria, South Australia and Western Australia); eight companies with majority ownership interests in six Australian gas transmission pipeline and eight distribution networks (in all Australian states and territories except Tasmania) subject to full economic regulation; peak industry bodies; and, current or former consultants to the gas sector.

The document analysis included the determinations of economic regulators, proposals submitted by companies to economic regulators, the performance reporting of technical regulators, and annual company reports (including financial statements).
We also examined in-depth five case studies from AER and WAERA decisions that directly related to proposed company expenditure for safety and asset integrity purposes.

## 9.6 Findings

Our analysis found that the technical and economic regulatory regimes are in signifi-cant tension [7]. The amount and timing of expenditure on projects linked to pipeline integrity is impacted by the decisions of the economic regulator. This is not to suggest that, despite decisions by the economic regulator, we found any regulated gas busi-ness would fail to spend money on something that they considered to be an immediate safety problem. The impact is far more subtle.

The safety of gas supply systems is 'a dynamic non-event'. For low frequency events such as major pipeline failures, the past is not a good predictor of future performance. It is easy to become complacent given that the warning signs of failure can be hard to spot. In this operating environment, significant investment in both time and money is required to ensure that the state of the system, including all risk controls, is well understood, and small problems are identified and monitored or fixed to prevent a catastrophe in the future. The technical regulatory regime is designed with this in mind but the economic regulatory regime takes a very different orientation towards all expenditure, even that which is safety-related.

One key factor uncovered by our research is the use of technical consultants by the economic regulator and the influence that consultant advice has on determina-tions. Many gas company participants expressed criticisms and frustrations about the consultants engaged by the economic regulator. Limited availability of exper-tise, poor choices, questionable independent advice, and conflicts of interest were consistent themes in the comments of company participants.

On the subject of expertise, company participants were particularly critical of the lack of specialist knowledge in the consultants engaged by the economic regulator, emphasising that consultants often had no relevant gas industry experience at all.

If the issue was simply lack of expertise, we might expect a variation in the assessment of company expenditure proposals with consultants suggesting either more or less expenditure is warranted. In fact, we found the proposed variation is always in one direction. The economic regulator's consultants are always of the view that the proposed expenditure is too high. According to some company interviewees, this reflects the implicit scope of consultants' work set by the economic regulator. In their view, the consultants are effectively paid to make the argument that the cost information provided by companies is inflated.

The consultants' task includes the provision of significant expert judgement, and company interviewees were of the view that consultants have a conflict of interest.
There are financial and reputational benefits in working for the economic regulator. As a result, consultant advice tends to support the economic regulator's position that companies overestimate necessary expenditure and so consultants typically 'conclude' that proposed expenditure is more than required to ensure system safety.

Gas supply companies also use external expertise, and this limits the consultant pool for the economic regulator due to conflicts of interest in that consultants cannot take on work reviewing regulatory submissions written by companies that are their clients. Both gas companies and regulators agree that this creates difficulties, effectively excluding many experts from working with the economic regulators due to conflict of interest issues.

Our study also included an in-depth review of five case studies of economic regulatory determinations which show the very influential role that external consultants play in forming the economic regulator's understanding of safety and its subsequent decisions. In all cases, the economic regulator accepted the expert consultant's assessment and recommendations.

In one case study, the regulated business proposed expenditure for modifications to the pipeline system to allow comprehensive integrity testing. The AER's consultant concluded such testing was not required and negotiation between the economic regulator and the regulated business moved to known failure mechanisms versus unknown failure mechanisms that inspection is designed to find. This demonstrates poor risk management practices on the part of the economic regulator's consultant and a very different orientation towards risk than that adopted by the regulated business. The expenditure proposed by the regulated business was largely disallowed.

Two other similar case studies illustrated very different interpretations between a consultant's understanding—accepted by the economic regulator—and a gas supply company's understanding of the requirements of the risk assessment frameworks of the relevant industry standards.

The case study of mains replacement programs for three gas distribution networks demonstrated that the economic regulator's decision to approve less capex than proposed by the businesses rested upon an interpretation of mandatory safety expenditure. The economic regulator concluded—based on its consultant's advice—that the volume of mains replacement specified in a safety case is indicative rather than mandatory (in fact, discretionary), and there are alternatives to mains replacement. This means the economic regulator considers that because there are options to manage mains risk, and the past volume replacement rates were well below forecasts, a company has discretion to manage mains risk.

Why does an economic regulator use external consultants? The answer lies in resourcing. Company interviewees were consistently critical—and often quite strongly—of the capacity and expertise of the economic regulator. Inexperienced staff, understaffing, high staff turnover, and poor operational and business understanding of analysts were constant themes in company interviewee comments who considered that these factors negatively impacted company processes and outcomes.

In summary, the economic regulator makes extensive use of external technical expertise because there are no equivalent internal resources. The availability of these specialised consultants is limited and many work for the gas supply companies which
precludes them from providing expert advice to economic regulators due to the potential conflict of interest. For those consultants engaged by economic regulators, a different conflict of interest arises. These consultants are acutely aware of the economic regulator's position that a company's proposed expenditure should be reduced and produce advice to that effect. This situation is confirmed by our interview data and in-depth case studies of approved expenditure for regulated gas supply systems.

## 9.7 Discussion

Modern corporate regulation includes self-regulatory mechanisms that draw on private sector expertise. Peer pressure can provide an enforcement mechanism that may encourage and persuade industry actors to meet established norms and ensure that some companies that would otherwise have lower standards operate closer to what is typical [1, 2]. Despite this possibility, we see that use of consultants by economic regulators is not providing such a mechanism.

The two state-based regulatory mechanisms—economic and technical—are in conflict given their different objectives—lowest consumer price in one case and acceptable risk to the public in the other. This is problematic in its own right. What we have seen, however, is that use of consultants is exacerbating this division. As technical experts, consultants have the potential to contribute to resolution of the appropriate balance between these multiple objectives but they do not act in this way. Rather, we see them adopting one side of the conflict—that of the economic regulator—which aligns with their own financial interests. Such market-driven behaviour is to be expected, but it is not in the interests of the best regulatory outcomes overall. Compared to the handful of studies of similar arrangements [5, 9, 10], the benefit of increased economic regulatory expertise is not being seen but the downside of conflict of interest is certainly apparent.

Despite this, the economic regulator relies on the advice of external consultants over the expertise of the regulated businesses. Economic regulatory determinations over the last ten years or so have seen the views of consultants prevail over the views of the regulated businesses and even the technical regulator. In 50% of cases,<fnref n="1" /> we found that the economic regulator approved significantly less or no safety-related capex proposed by the regulated business. This puts companies in the position of deciding whether or not to go ahead with safety-related expenditure.

In summary, the use of consultants by economic regulators has brought an imbalance between technical and economic goals as a result of the advice of consultants with insufficient expertise and/or a desire to support the economic regulator's position. This matters because, although neither the expert consultant nor the economic regulator have accountability for technical safety decisions, the economic regulator

<footnote n="1">¹ 50% of 24 economic regulatory determinations for gas supply businesses from 2010 to 2017.</footnote>
unequivocally accepts the external consultants' advice and their views thereby can
influence safety expenditure by gas industry duty holders.

9.8 Conclusion

Regulatory research has generally focused attention on the moves to risk-based regulation and forms of co-regulation. This includes some cases where regulatory functions are moved to the private sector exemplified by inspectors in the building construction sector. In this chapter, we have discussed a different category—where regulatory functions are retained by public agencies, but the actual delivery of those functions depends on the outsourcing of advice to private sector consultants.

Evidence from our research suggests that use of consultants by an economic
regulator can create significant tensions with technical regulation compliance. In
this case, the economic regulator's use of consultants is publicly available knowl-
edge because the economic regulatory process produces large volumes of publicly
available documentation including consultant reports. Use of consultants in other
regulatory contexts is less visible, and so the impact on regulatory integrity is not as
open to scrutiny.

**Acknowledgements** This work was funded by the Energy Pipelines Cooperative Research Centre, supported through the Australian Government's Cooperative Research Centres Program. The cash and in-kind support from the Australian Pipeline Industry Association Research and Standards Committee is gratefully acknowledged.

**Ethical Statement** This work was approved by the University of Sydney Human Research Ethics Committee (Project no. 2016/948). Informed consent was obtained from participants, and all data has been anonymised.

References

1. I. Ayres, J. Braithwaite. *Responsive Regulation: Transcending the Deregulation Debate* (Oxford University Press, New York, 1992)

2. R. Baldwin, J. Black, Really responsive regulation. The Modern Law Rev. 71(1), 59–94 (2008)

3. R. Baldwin, M. Cave, M. Lodge, *Understanding Regulation: Theory, Strategy and Practice*, 2nd edn. (Oxford University Press, Oxford, 2012)

4. N. Gunningham, Safety regulation and mining inspectorates—lessons from Western Australia. *J. Occup. Health Safety, Australia New Zealand* **21**(4), 299–309 (2005)

5. J. Hackitt, *Building a Safer Future Independent Review of Building Regulations and Fire Safety: Final Report* (2018)

6. J. Hackitt, *Building a Safer Future Independent Review of Building Regulations and Fire Safety: Interim Report* (2017)

7. J. Hayes, L. Chester, D. Kramnaimuang King, ASME transactions, in *Proceedings of the 12th International Pipeline Conference (IPC 2018), Calgary, Alberta, Canada, 24–28 Sept. 2018*

8. A. Hopkins, Beyond compliance monitoring: new strategies for safety regulators. Law & Policy **29**(2), 210–225 (2007)
9. J. van der Heijden, On peanuts and monkeys: private sector involvement in Australian building control. Urban Policy Res. **28**(2), 195–210 (2010)

10. J. van der Heijden, Smart privatization: Lessons from private sector involvement in Australian and Canadian building regulatory enforcement regimes. J. Comp. Policy Anal. **12**(5), 509–525 (2010)

**Open Access** This chapter is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

The images or other third party material in this chapter are included in the chapter's Creative Commons license, unless indicated otherwise in a credit line to the material. If material is not included in the chapter's Creative Commons license and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder.

<figure><img src="image_21.png" /></figure>
<figure><img src="image_22.png" /></figure>

# Chapter 10
## Outsourcing in Theory and Practice: Insights from Nuclear Risk Governance

Jérémy Eydieux

**Abstract** This chapter examines two cases of risk governance in which actors interpret outsourcing as a possible source of operational vulnerability while using it to strengthen safety governance. We propose to study this discrepancy through the lens of organisational hypocrisy, suggesting a pragmatist approach as a means of analysing hypocrisy in day-to-day managerial situations.

**Keywords** Outsourcing · Risk governance · Pragmatist approaches

### 10.1 Introduction

This chapter examines the “technical dialogue” used in France to govern nuclear risk.<fnref n="1" /> In order to secure authorisation for the decommissioning of a nuclear facility, a nuclear operator (NO) has to produce a safety demonstration.<fnref n="2" /> This document is assessed by the regulator’s technical support organisation (TSO), and then the regulator decides how decommissioning should be carried out.

We study two cases related to two decommissioning projects in which (1) the decision on whether to outsource or internalise part of the decommissioning operation is seen as significant and (2) each organisation—the NO and the TSO—outsources part of its contribution to the technical dialogue. The presence of outsourcing in both cases leads to a discrepancy between the words and deeds of field actors. Both the

<footnote n="1">¹This dialogue is a key process in nuclear risk governance in France, consisting of an exchange of documents, information and ideas between experts from a nuclear operator and the technical support organisation. Authorisation requests are one application of this process.</footnote>

<footnote n="2">²In line with French regulations on the matter, this chapter uses “safety demonstration” to denote an exhaustive collection of the safety guidelines scheduled by an NO for a project. It is often communicated in digital format, as full demonstrations would often require a large cupboard if stored in paper format. More generally, the word “safety demonstration” is often used to refer to the entire process culminating in the regulator’s decision.</footnote>
NO and the TSO interpret outsourcing as a possible source of vulnerability for the safety management of the decommissioning operations, while simultaneously using it to strengthen safety governance through the technical dialogue.<fnref n="3" />

We propose to study this discrepancy through the lens of organisational hypocrisy (OH), a process through which organisations satisfy their stakeholders with their discourse when they cannot do so with their actions. The literature on the subject does not clarify how OH works in day-to-day managerial situations, and we aim to fill this gap. Furthermore, prior research on OH has not yet looked at the issue of outsourcing, even though this is a controversial topic; we aim to focus on how OH works in situations involving outsourcing. Our intention in so doing is to help practitioners avoid the pitfall of OH through a better understanding of its mechanisms.

## 10.2 Organisational Hypocrisy: A Definition and Two Gaps

OH, which is often also referred to as “organised hypocrisy” [3], describes a process that enables organisations to survive when they are subjected to conflicting forces trying to affect their work. Hypocrisy allows organisations to satisfy all their stakeholders through their discourse by engaging in doublespeak, whereby their actions do not match their words. For example, an automobile manufacturer such as Volvo, “whose production seriously pollutes the environment”, secures its own survival when it “proclaims the importance of working for a good environment and claims that its goal is to do so”, rather than “preaching that pollution is necessary, that it is not dangerous, or even that it is something which we must accept” [4, p. 9].

OH is an interesting concept when considering the consequences of outsourcing. Indeed, outsourcing is likely to amplify any discrepancies between an organisation's discourse and its contractor's actions. OH becomes even more interesting when that discourse and those actions are related to industrial risk. For example, some construction companies are seen to promote their safety policies while failing to ensure safe working conditions for their contractors, or, even worse, while asking their contractors to downgrade their safety policies in order to reduce costs.

The literature on OH has not investigated the issue of outsourcing even though it is a controversial topic, as we can see in risk governance. In that field, practitioners have to determine the strengths and weaknesses of outsourcing specifically in relation to safety and risk. Since the 1970s, risk governance researchers have participated in lively academic debate around outsourcing. In addition, Brunsson [5, p. 124] observes that OH is “a way of handling situations when what is said cannot be done and when what is done cannot be talked about”. However, the literature on OH does not clarify how this process can be observed in day-to-day managerial situations.

<footnote n="3">³ We use the term “risk/safety management” to refer to the management of risks inherent to risky activities, and “risk/safety governance” to denote the management of risks inherent to risk/safety management.</footnote>
In order to fill these two gaps, we aim to answer the following question: *How does OH translate into managerial situations, and to what extent does it explain the discrepancy between organisational discourse and actions in the context of risk management in cases of outsourcing?* Dualisms such as ideology and action, politics and action, or thought and action underlying Brunsson's reasoning around OH [7] are obstacles to the understanding of hypocrisy in managerial situations. We therefore propose an approach based on the pragmatist philosophical trend, which tends to move beyond dualisms.

## 10.3 Situated Organisational Hypocrisy and Outsourcing

For two decades, a wide array of disciplines has been reinterpreting the century-old philosophical trend of pragmatism in order to study real-life situations [16]. Pragmatism proposes an understanding of situated action that has been historically marginalised and that remains far from the mainstream in management science [13]. From a pragmatist standpoint, it makes little sense to rely on the dichotomy Brunsson draws between talk and actions [3–5, 7], as every statement made is a discursive activity and “action is a form of discourse” [13]. In order to simplify our reasoning, we therefore look for discrepancies between actions. As we study OH, we seek to identify discrepancies between actions connecting actors with an organisational practice—in our case, risk governance actors and the practice of outsourcing.

Dewey identifies a few ways by which actors may engage in an organisational practice—in our case, in outsourcing. First, they may rationalise how the outsourcing is supposed to work (beforehand or afterwards). Dewey identifies two types of rationalisation [9]. On the one hand, actors may overemphasise the fact that outsourcing creates social asymmetries, which they then attempt to eliminate. This is what we call the “social approach”. In this approach, outsourcing is experienced as creating and maintaining power relations between groups, as side effects of organisational processes or intentionally aimed at by actors; these asymmetries in turn create operational problems. On the other hand, actors may overemphasise the successes obtained through outsourcing. In this approach, which we call the “economic approach”, actors engage in outsourcing as if it were solely driven by economic forces. Here, the purpose of outsourcing is to improve the whole organisation's economic performance through an adjustment to the distribution of operations management—in other words, through the make-or-buy decision.

According to Dewey, actors may also engage with outsourcing by making inquiries about it. Inquiries are sequential processes. First, actors experience an uneasy feeling about the outsourcing relationship, and transform it into a question such as “is outsourcing useful here?”, in particular, “what do we learn from it?”, “how can I better contribute to outsourcing?”, or “why don’t we involve this or that actor in the organising of outsourcing?” Then, they change their own contributions to the conversations and texts forming the outsourcing relationship, in order to fully interact with it. After reflecting on their experience, actors come to engage with outsourcing in a
way that is more nuanced and “again … integral and vital” [9, p. 136]. We call this the “pragmatist approach”, as, according to Dewey, it leads to the beliefs that are best aligned with actual situations [9]. In this approach, outsourcing is experienced as a means for organisations to access more verifiable facts through interorganisational communication [14].

The literature on organisation studies that draws on pragmatism describes some of the resources needed to make inquiries. Actors first need resources associated with themselves: mandates (or at least authorisations) from their organisation, genuine doubts they themselves have experienced, and time to finish their inquiries [12]. Actors also need resources associated with the richness or scarcity of their connection with the outsourcing relationship [17]. On the one hand, they need to access the field in which outsourcing occurs and to participate in the conversations involved in the organising of outsourcing. On the other hand, they need to access the texts used to make outsourcing happen (e.g. contracts, purchase orders, memos, and emails) and to participate in the drafting of new texts of this kind.

We thus define situated OH as a situation where in some circumstances actors have the resources to make inquiries about outsourcing, while in other circumstances, the same actors have limited means to do so. We will answer our research question by tracing each approach in the actors’ behaviour related to outsourcing. We explain it through actors’ wealth or lack of resources to lead inquiries, in other words the richness or scarcity of their connection with the outsourcing relationship.

## 10.4 Research Settings and Cases

In France, in order to secure authorisation for the building, operating, or decommissioning of a nuclear facility, every NO has to produce a safety demonstration. This document should prove that the NO has thought of all necessary measures to ensure nuclear safety, consistent with the latest scientific and technological developments and within economically viable conditions. The safety demonstration is submitted to the regulator, which submits it to its TSO for assessment. There is then a technical dialogue between the TSO and the NO consisting of document collection, interviews, and activity observations of operational activities. At the end of the dialogue, the TSO produces an evaluation report summarising the NO’s design choices, makes any necessary observations, and suggests further measures to be taken by the NO to ensure safety. The report is sent to the regulator, which finally decides how building, operating, or decommissioning should proceed.

We study two cases involving decommissioning projects. The first mostly follows the internal processes of a NO and is related to a technical dialogue prior to the production of a safety demonstration. The other mainly tracks the internal processes of the TSO and is related to a technical dialogue prior to the production of a safety assessment report. In both cases, the decision on whether to outsource part of the decommissioning operation is a significant one. Also, each organisation—first the
NO and then the TSO—outsources part of the technical dialogue and the production of the document resulting from it.

In the case relating to the NO, we address the topic of “specialty outsourcing” (*sous-traitance de spécialité*). The decommissioning operations call for highly specialised workers—rope access technicians—and the NO decides to internalise them in order to ensure their compliance with nuclear safety standards. At the same time, however, the NO project managers are not concerned by the decision to outsource part of their design work to rope access technician providers. Meanwhile, in the case relating to the TSO, we look at “capacity outsourcing” (*sous-traitance de capacité*). Here, the NO outsources a significant part of the decommissioning opera- tion. That is something of a problem for the TSO’s human and organisational factors (HOF) department, as the NO delegates not only the operations but also part of its nuclear safety management. At the same time, the HOF department has no problem with the fact that it outsources part of its investigation and writing to a freelance HOF expert.

In both of these cases, field actors interpret outsourcing as a possible vulnerability for the decommissioning operations but at the same time they use it to strengthen the technical dialogue. Brunsson would analyse this as a discrepancy between discourse on risk management and action on risk governance. Conversely, we feel that, in the context of risk governance, actors have resources to make inquiries about the outsourcing relationships they can access directly, while their inquiries are limited when they experience the decommissioning operations' risk management.

**10.5 Data Collection and Analysis**

The data consists mainly of working documents collected from field actors’ archives [2]. We collected emails, meeting minutes, proof documents, interview records, analysis texts, and slideshows, and complemented these with interviews. For the first case, we collected 47 documents (30 related to operational outsourcing and seven to risk governance outsourcing) and conducted eight interviews (lasting 12 h 45 min in total). For the second case, we collected 357 documents (240 related to operational outsourcing, 12 to risk governance outsourcing) and conducted three interviews (lasting 5 h 5 min in total).

Our study is based upon the technique of narrative analysis [8] using the framework proposed by Burke [6]. Instead of analysing the narratives through their common thread or structure, Burke proposes to analyse their ingredients: who (agent), what (act), how (agency), where and when (scene), and why (purpose). In this study, we analyse the use, as a method, of (a) the “pragmatist approach”, where outsourcing is a means to share verifiable facts between several organisations; (b) the “social approach”, where outsourcing is a means to create and maintain power relations between groups; and (c) the “economic approach”, where outsourcing is a means to improve firms’ economic performance.
## 10.6 Organisational Hypocrisy in Action

Our results reveal how OH works in managerial situations, where outsourcing is present in the context of risk governance. The findings are outlined in Table 10.1, which shows that, in both cases, actors face very similar situations, typical of our proposed definition of OH. When dealing with the outsourcing of part of their contribution to the technical dialogue, actors have resources to make inquiries, while these are limited when dealing with the decision on whether to outsource or internalise part of the decommissioning operation.

In the first case, where we look at the NO, designers realise in the early phases of the project that using 80 rope access technicians would be the best solution for disassembling the facility's equipment. However, the NO, although highly competent in decommissioning projects, has no experience in the personnel management of this type of worker. In order to assess the feasibility of the solution, the NO seeks advice from two companies managing rope access technicians. Their discussion reveals that the solution is feasible, but that maintaining the workers' skills can be a problem. Thus, the NO selects one of the two companies to take the discussion further, in order to improve its design of its disassembling operations and how these operations are explained in the safety demonstration. In these circumstances, the NO is in genuine doubt regarding its make-or-buy decision; it is able to access and participate in the conversations involved in the organising of outsourcing and to access and contribute to the texts used to make outsourcing happen. Thus, it makes inquiries about outsourcing and experiences them as a means to verify more facts. The NO practices the economic approach by going outside of its internal network—its industrial group—and the social approach by using power asymmetries to select one of the two initial contractors.

<table><caption>**Table 10.1** Situated OH as a discrepancy caused by circumstances</caption><thead><tr><th rowspan="2">Circumstances of the relation to outsourcing</th><th rowspan="2"></th><th colspan="2">Engagement in outsourcing</th></tr><tr><th>Rationalisation: social or economic</th><th>Interaction: making inquiries</th></tr></thead><tbody><tr><td rowspan="2">Activities underlying risk governance</td><td>Indirectly done</td><td>Done</td></tr><tr><td>Done</td><td>Not done</td></tr><tr><td>Future risky activities, as formalised in texts</td><td></td><td></td><td></td></tr></tbody></table>
The NO's stance towards outsourcing is different regarding the rope access techni-
cians in the safety demonstration. The NO chooses to internalise these in the hope of
securing a stable, skilled workforce, because of the large number of workers involved
and the mobility these workers usually exhibit within the nuclear sector. Outsourcing
is seen as bad for safety in this situation. In its safety demonstration, the NO portrays
the rope access technicians as the core of the disassembling operation and therefore
critical for safe execution. While a lot of heavy-handling operations are involved, e.g.
for slewing and depositing the heavy equipment, the HOF's analysis of disassem-
bling focuses on rope access technicians. They are even the subject of a postulated
worst-case accident scenario. In the circumstances of the demonstration (the text),
the NO has limited opportunities to interact with the future rope access technicians.
Thus, it focuses its management of outsourcing on its economic and social effects,
internalising the technicians to ensure they are well covered by the HOF analysis.
But at the same time, because it renders heavy-handling workers invisible, the safety
demonstration portrays heavy-handling workers and rope access technicians as not
interacting with each other.

Here, we have our first OH situation. In the way the design process is set up,
NO actors have resources to make inquiries about the outsourcing of part of their
design work and use them as a way to verify more facts. Their actions suggest that
outsourcing can be positive. Yet, under the circumstances of the safety demonstration,
actors are limited by the text-based medium. Thus, they play safe and internalise rope
access technicians in order to limit what they say are the harmful structural effects
of outsourcing.

In the second case, which focuses on the TSO, the NO anticipates that it will
outsource a large part of its decommissioning operations. This is an important issue
for the regulator, which asks its TSO to carry out an investigation into this issue;
this is then delegated to the specialist HOF department within the TSO. The depart-
ment's resources are limited and the topic is vast, so the expert associated with the
investigation calls upon the services of a freelance HOF expert. The freelance expert
helps design the questionnaire (to be sent to the NO), organise the fieldwork at the
NO's site and collect documentation alongside this, write interviews and meeting
minutes, and write a first draft of the analysis. Throughout the investigation, the TSO
and the freelance expert interact as peers; for example, they deal with deliverables
informally, considering a deliverable to be the document most recently produced by
the freelance expert. In these circumstances, the TSO's HOF expert is able to access
and participate in the conversations involved in the organising of outsourcing and
to access and contribute to the texts that are used to make outsourcing happen. The
TSO's expert also has incentives to organise the outsourcing from her organisation.
This outsourcing helps the TSO to verify more facts, and the social and economic
aspects of outsourcing are dealt with indirectly. To reduce asymmetries, HOF experts
interact as peers, and to optimise the TSO's economic performance, the outsourcing
is limited to the temporary need for another HOF expert.

As one might expect, the HOF experts, and thus the TSO, do not have the same
position on the outsourcing anticipated by the NO for its decommissioning project.
Thanks to the significant amount of evidence they collect, the HOF experts identify
five harmful consequences of outsourcing. At the global level, they find it potentially
dangerous that the site is simultaneously in production and in decommissioning and
that it could become difficult in the future to maintain the skills needed. Regarding
the effects of power asymmetries, they find that the HOF and ergonomic require-
ments are not discussed by the NO with its contractors and thus are not found in the
contractors' documentation, and they find that supervision solely relies on checking
documentation. The HOF experts focus their analysis on the harmful structural effects
of outsourcing, thus contributing to risk governance with a helpful alternative view-
point to that put forward by the NO. However, they are limited by the risk governance
context, that is, by the questions asked by the regulator and within the TSO, and thus
do not extend their criticism to the point of how the NO and its contractors will learn
from each other, such as through meetings.

Here, we find our second OH situation. As part of the HOF investigation, the TSO's HOF department uses outsourcing positively to bring in external specialist expertise. In contrast, for the purposes of the safety assessment report, HOF experts are limited by the specifications initially outlined for their investigation and do not venture beyond the structurally harmful effects of outsourcing.

10.7 Normal Organisational Hypocrisy and Outsourcing

Throughout this chapter, we show how OH works in day-to-day managerial situ-
ations, especially within a context of risk governance and related to outsourcing.
OH is a type of situation that connects actors to an organisational practice—in our
case actors contributing to a specific type of technical dialogue and the practice of
outsourcing. When the actors outsource part of their own contribution to the technical
dialogue, they have resources to make inquiries about outsourcing, and use them as
a way to verify more facts and indirectly manage the global structural effects of this
practice. When the actors demonstrate or assess the safety of a decision related to
outsourcing, their inquiries are limited and they only address the structurally harmful
effects of outsourcing. In other words, in some circumstances, actors are able to expe-
rience the “pragmatist approach”, while in others, they are limited to the “social” or
the “economic” approaches.

We can therefore see how these actors specifically and involuntarily conform to
the injunction to “do what I say, not what I do”. However, as we define situated OH as
a discrepancy between actions regardless of their discursive nature, we can account
for discrepancies among discourses or among actions, while in Brunsson [3–5], OH
is understood only as a discrepancy between talk and action. Conversely, we do
agree with Brunsson’s acceptance of OH, which is sometimes viewed as fatalistic
[7, p. 295]. In our cases, actors do not *choose* to be hypocritical; they are *made*
hypocritical by their circumstances, i.e. by the fact that they cannot be everywhere
while outsourcing is everywhere. Hence, our understanding of OH cannot account for
situations in which actors deliberately choose to lie and another pragmatist approach
may be useful on this subject. This philosophical trend defends an instrumental
understanding of truth, as shown by its utilisation in the study of the production,
maintaining, and removal of ignorance [11].

We draw four conclusions specifically about outsourcing. First, our understanding of situated OH as arising from circumstances suggests that OH about outsourcing is a threat indicator for risk governance activities. If actors deal with potentially dangerous outsourcing through the “economic” or “social” approaches, the governance of risk is probably hindered by the ignorance of risk expertise [15] or by the actors’ “pretence of knowledge” [10]. OH should be used as a magnifying glass to better govern risk, by directing attention to the potentially dangerous uses of outsourcing. Second, we observe through our cases that outsourcing is so controversial that, when actors have to write a text that is binding upon their institution, it can lead them to produce rationalisations that do not tally with their real-life experiences (such as declaring that outsourcing is a bad idea when in fact they use it successfully). This should invite practitioners of risk governance to carry out comparative analyses between what they write and what they do, which would be an interesting process to observe for research purposes. Third, we observe that outsourcing is contentious enough to prompt risk governance actors to produce or collect a vast quantity of documents about it. However, these documents do not compensate for the actors’ lack of possible live interactions with practices that are yet to come, which pushes them to rationalise how outsourcing will work. This is an invitation for more informal communication within risk governance, involving experimental trials integrated within the process of the technical dialogue. Finally, these two episodes of technical dialogue show that the authorisation request neutralises the asymmetry relating to who has access to the reality in the field. When future activities only exist on paper, the NO, the regulator, and the TSO are all ignorant of “the field”. Since they all have to “talk about places they have never been” [1], perhaps they can co-construct those places, thus benefiting from the expertise of each organisation.

**Acknowledgements** My best thanks go to the editors, especially S. Tillement who helped me a lot in clarifying my ideas and in making a sharper contribution to the debate about outsourcing from a fieldwork which was not on outsourcing per se. Thanks a lot to the field actors who granted me access to their activity and helped me in contextualising my observations.

**Ethical Statement** This work adhered to the research ethics that are stipulated in the “RESOH Chair convention” that complies with relevant legislation regarding ethical conduct of research. Informed consent was obtained from participants, and all data has been anonymised.

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**Open Access** This chapter is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

The images or other third party material in this chapter are included in the chapter's Creative Commons license, unless indicated otherwise in a credit line to the material. If material is not included in the chapter's Creative Commons license and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder.
<figure><img src="image_23.png" /></figure>

# Chapter 11
## Outsourced Enforcement: Improving the Public Accountability of Building Inspectors

Nader Naderpajouh, Rita Peihua Zhang, and Jan Hayes

**Abstract** Regulatory enforcement of building safety and quality has been outsourced with a move to partially privatised building inspectors in both the UK and Australia. The Grenfell Tower fire and other near misses in Australia highlight the problems this has introduced. This chapter reviews the role of building inspectors using a public administration accountability framework and recommends structural changes to improve safety for occupants of high-rise buildings.

**Keywords** Public accountability · Building inspection · Building regulation · Privatisation · Grenfell Tower

### 11.1 Introduction

The high-rise building construction sector has seen several high-profile accidents in recent years in the UK, Dubai, China, France, South Korea and Australia. The consequences of these events (both realised and potential) demonstrate that high-rise buildings are effectively a kind of hazardous infrastructure and yet regulation of safety in high-rise construction has more in common with domestic building construction than with regulation of safety in other hazardous industries. Along with trends to performance-based regulation, a recent key factor has been privatisation of building inspection activities where inspection has been effectively outsourced from government to the private sector. Multiple accident investigations and industry reviews have noted this as a problem and yet solutions remain elusive.

This chapter draws on theories of public sector accountability to show that the issues are structural and so not amenable to solutions simply targeting skills and competency of building inspectors individually as has typically been the case.

<footnote>N. Naderpajouh (✉) · R. P. Zhang · J. Hayes
RMIT University, Melbourne, Australia
e-mail: nader.naderpajouh@sydney.edu.au</footnote>

<footnote>N. Naderpajouh
The University of Sydney, Sydney, Australia</footnote>
## 11.2 Effective Regulation and Effective Regulators

The building sector is controlled by regulations which are legal instruments intended to ensure provision of socially acceptable levels of health, safety and welfare of building occupants and users [7]. As such, building regulations specify regulatory controls over the design, construction, operation and demolition of buildings, addressing various aspects such as structural integrity, fire safety, heating, lighting, ventilation, sanitary facilities and indoor air quality [7]. Traditionally, building regulations were prescriptive and expressed as detailed descriptions of how each building component or system must be constructed.

Many countries have transitioned from a prescriptive-based building regulatory regime to a performance-based building regulatory regime [13]. A performance-based building code specifies the criteria to be achieved as an outcome, rather than prescribing the specific manner in which a building is to be constructed. Parallel to the common justifications of efficiency in neoliberalism, the underlying motivation of such changes in the building industry included “reducing regulatory burden, reducing costs to the industry and public, increasing innovation and flexibility in design and construction, and being better positioned to address emerging issues” [6].

Regulated standards for construction are one thing, but in a competitive environment, regulation is of limited effectiveness without some degree of common oversight and enforcement activities to provide construction companies with an incentive to comply. As has been found in other industries, moving to performance-based regulation requires highly skilled and motivated regulators, given the changed role of regulatory enforcers from inspecting specific items to certifying performance.

The move to performance-based regulations has often come about in parallel with changes to the system for appointing building inspectors who are responsible for certifying firstly that the building design meets code requirements and secondly that the building is safe to be occupied once it is constructed.<fnref n="1" /> What was once a function of government employees, building inspection has been privatised as a profession despite inspectors themselves retaining public accountability for building quality. This change has occurred in multiple jurisdictions including Australia and the UK as we will describe further below.

## 11.3 Public Accountability

Accountability is fundamental in public administration. Public servants are answerable for their performance, but questions arise as to which stakeholders are legitimate sources of control and what are legitimate performance expectations. Traditionally,

<footnote n="1">¹ In some jurisdictions, these tasks are performed by a building surveyor (rather than inspector). Interim physical inspections during the construction process may be performed by a contracted building inspector working for the surveyor. We use the term “inspector” to mean the person with the legislated responsibility for checking compliance and issuing permits.</footnote>
public servants were answerable to parliament and the courts, but this is no longer the case. It has been pointed out that "in a complex administrative state, characterised by widespread delegation of discretion to actors located far from the centre of government, the conception of centralised responsibility upon which traditional accountability mechanisms are based is often fictional" [10, p. 38].

To address this complexity, Romzek and Ingraham [9] propose a four-factor typology of public accountability that supports investigation of regulatory action through an accountability lens. The public administration accountability framework comprises legal, bureaucratic, professional and political accountability. Building inspectors are no longer public servants; i.e., they are not employed by government, and yet they fulfil a statutory function, enforcing the building regulations by certifying firstly, that the design and later, the building itself, meet the relevant codes. As such, the public interest is fundamental to their activities and the public administration accountability framework provides a useful perspective on how their role is defined and how it works in practice. Note that in the context of building inspectors, the framework is being applied to study the inspectors' accountability for their actions, not the compliance of industry with regulations which is a separate issue.

Legal accountability describes how the work of the building inspectors is driven by statutory rules defining their role, responsibilities and mandated qualifications. Bureaucratic accountability is concerned with other sets of rules that are used by the building inspectors in carrying out their work. These are the regulations and codes that the building sector must comply with. Building inspectors draw on these in assessing compliance and so issuing permits. Professional accountability drives building inspectors to exercise their professional judgement in the regulation implementation process in accordance with professional norms. Examples of mechanisms to ensure professional accountability include codes of conduct.

Finally, political accountability is the responsiveness of building inspectors to political constituencies which may include the general public, building occupiers, the construction sector generally, elected officials, statutory agencies or other arms of government, future generations and of course their client who is funding their inspection services. Political accountability aims to ensure participation and approval of those who are regulated and society at large as a form of feedback to the regulatory system [1]. As Romzek and Dubnick point out, "while political accountability systems might seem to promote favoritism and even corruption ... they also serve as the basis for a more open and representative government" [8, p. 229]. In the context of building inspectors, their private sector status brings a strong implication that political accountability to their clients is significant as we shall see.

The process of assessing accountability performance requires three phases: (1) provision or obtaining information (the accountable party reporting on their actions), (2) review and assessment (discussion and/or evaluation of actions taken) and (3) consequences (reward or sanction based on performance) [1]. Whilst the forum that deals with these phases may vary according to specific circumstances, all three are required and a culture of accountability may fail in the absence of established information provision processes, credible and ratified review process, as well as lack of consequences if accountabilities are not executed appropriately.
## 11.4 Grenfell Tower

On 14 June 2017, a fire broke out in the 24-storey Grenfell Tower building in West London, resulting in 72 deaths and more than 70 injuries. Investigations revealed that the fire started with a malfunctioning refrigerator on the fourth floor, but it spread quickly to the entire building as a result of recently retrofitted combustible cladding on the building exterior [3].

In the UK, compliance with the relevant building regulations is primarily the duty of the person carrying out the building work, but, unless the work is defined as low risk, independent building control oversight is required. This was the case for the Grenfell Tower modifications to install new cladding. This service can be provided in two ways. The duty holder can either approach their local authority (i.e. local government) and have them provide the building control service for a fee or choose the approved inspector route. In the second case, a private sector practitioner is hired to provide inspection services on a commercial basis. The inquiry into the UK construction regulation following the Grenfell Tower disaster highlighted that “part privatisation of this regulatory function has created a unique competitive environment and has introduced unintended consequences” [4, p. 54]. Most authorised inspectors work for small organisations that rely on their relationships with builders and building construction companies for their ongoing work. The accountability framework discussed above provides a way to examine these arrangements.

Legal accountability is weak with no oversight of the quality of inspectors' work in place and “no legislative requirements that set standards of competence or training for building control inspectors” [4, p. 55], either in the public or private spheres. Bureaucratic accountability is facilitated by the large volume of codes and standards and the drawings submitted to inspectors for review, so in most cases there will be large volumes of data available for them to consider. However, the lack of any checking or audit mechanism for inspection activities means that there are typically no consequences for building inspectors if they fail to correctly consider this information. Professional accountability is also weak but increasing, with efforts afoot to professionalise these workers, including development of professional standards and formal tertiary qualifications. Professional standards would not only clarify for building inspectors exactly what is required; they would provide the basis for auditing building inspection activity and so enable consequences of accountability failings to be instituted.

Currently, building inspectors are largely driven by political accountability, i.e. direct consideration of stakeholder interests. This is not necessarily problematic, depending on whose interests prevail. The inquiry into UK building regulation post-Grenfell [4] found that, while introduction of this arrangement had driven down costs, inspectors have a conflict of interest and experience a “difficult trade-off”, failing to gain work if they do not approve more risky designs. Inspectors no longer act as impartial checkers of building safety, but rather “become far too embedded in supporting the building design process rather than being an impartial rigorous verifier of buildings safety” [4, p. 54]. The inquiry also reported “repeated concerns
expressed about the commercial pressures associated with rigorous enforcement of fire safety requirements” [4, p. 55]. In summary, in many cases, the inspectors are effectively accountable to the very parties whose work they should be checking for compliance and face significant consequences if they fail to act in accordance with this accountability. This is not consistent with the best public safety outcomes and is an indicator of a systemic accountability gap in the sector.

Outsourcing of building control and other systemic inspection problems contributed significantly to the loss of 72 lives at Grenfell. The modifications to Grenfell Tower that covered the refurbished building in flammable cladding were approved by a building inspector working for the local authority. In evidence to the ongoing formal inquiry into the circumstances of the disaster, the inspector has admitted that his work fell below the standards of a reasonably competent inspector,<fnref n="2" /> yet he pointed out that at the time he was responsible for reviewing up to 130 projects.<fnref n="3" /> Site inspections were carried out on behalf of the local authority by a contracted inspector who said his remit was not to check whether work met regulations<fnref n="4" /> or matched architects’ drawings but rather to check that the work was neat and tidy.<fnref n="5" />

At the time of writing, the Grenfell Inquiry is ongoing. Privatisation of building inspection is only one of the weaknesses in the existing UK building quality control framework that has been revealed by the disaster. One key structural improvement is the imminent move of regulatory responsibility for buildings to the UK Health and Safety Executive which successfully performs this function for many other hazardous industries. It can only be hoped that this heralds a significant cultural and structural shift in public accountability for building quality in the UK.

## 11.5 Incidents in the Australian Building Sector

There have been two significant fire events in Australian high-risk buildings in recent years. No fatalities or injuries have resulted, but these are all near miss incidents that could have had much more serious consequences similar to the Grenfell case. The Lacrosse Building fire in Melbourne in 2014 affected hundreds of occupants who needed immediate evacuation and accommodation [2]. In early 2019, fire spread along the side of the Neo200 building (also in Melbourne) which used combustible cladding similar to the material used in the Grenfell Tower. Problems are not confined to Melbourne or to cladding. In 2018, hundreds of residences of the 36-storey Opal

<footnote n="2">² Transcript of Proceedings, Grenfell Tower Inquiry (Day 46, Sir Martin Moore-Bick, October 1 2020), 100 (J. E. Hoban).</footnote>

<footnote n="3">³ Transcript of Proceedings, Grenfell Tower Inquiry (Day 45, Sir Martin Moore-Bick, September 30 2020), 111 (J. E. Hoban).</footnote>

<footnote n="4">⁴ Transcript of Proceedings, Grenfell Tower Inquiry (Day 42, Sir Martin Moore-Bick, September 24 2020), 153 (J. White).</footnote>

<footnote n="5">⁵ Transcript of Proceedings, Grenfell Tower Inquiry (Day 42, Sir Martin Moore-Bick, September 24 2020), 171–172 (J. White).</footnote>
Tower apartment building in Sydney were evacuated on Christmas Eve because structural cracking was observed in the building [12].

Building regulation is a state responsibility in Australia so there are variations in the details between states, but the states where the above events occurred operate systems that are very similar to that in the UK described above. Regulations are performance-based, and building inspection has been partly privatised. Building inspection can take two routes at the discretion of the builder, and certification is required, covering both the design and the completed building. Furthermore, increasing privatisation of regulatory enforcement has been found to result in a decline of accountability [13]. Following the Lacrosse fire and in the knowledge of other problems regarding counterfeit materials in the building supply chain, a national review of compliance and enforcement systems in building and construction was instigated in 2017 [11]. The review found multiple issues with the building inspection system that can be usefully summarised using a public accountability framework.

Shergold and Weir highlighted major problems with the legal accountability of private building inspection activities saying, “it is not just the conduct of private building surveyors that contributes to the problems, but also the lack of regulatory oversight of their conduct and, more importantly, the absence of a cohesive and collaborative relationship between state and local government and private building surveyors” [11, p. 14]. When it comes to bureaucratic accountability, they reported that decisions are based on documentation provided but, in practice, preparation of as-built plans is far from the norm and, as such, occupancy permits are often granted on the basis of out of date information. This means that changes to the approved design occur frequently without independent certification.

Professional accountability has also been weak. The review noted that “[m]any private certifiers are individuals of high integrity” [11, p. 14]. But they have acted as individuals with little support provided by the system. They face political accountability in addressing “the conflicting demands they face from their clients, the regulators and the insurers” [11, p. 14]. The review was told that when inspectors try to undertake enforcement action they are not supported by government and “on occasion, attention turns to their own conduct and they find themselves the subject of complaint and criticism” [11, p. 14].

With the strongest accountability being to their clients who they depend on financially, it is hardly surprising that investigations into specific incidents reveal a lack of regulatory enforcement. Following the Lacrosse apartment fire mentioned earlier, the building surveyor was referred for disciplinary action to the Building Practitioners Board on the basis that he could not have been satisfied that the building work met the relevant regulatory requirements when he issued the building permit. After various legal proceedings, he was found to be liable for the cost of repairs to the building, along with the architect and the fire engineer.

To address these issues, the review recommended statutory controls to mitigate conflict of interest, development of a code of conduct for building inspectors, mandatory reporting obligations regarding regulatory breaches and increased collaboration between building agencies and privatised inspectors on enforcement matters.
Changes are being made in these areas in various states including new bureaucratic accountability support by issuing templates for inspectors to use, a new code of conduct providing not only professional norms but also a basis for enforcement, i.e. consequences for accountability failure. It is too soon to be able to assess the impact of these changes, but viewed through the framework of accountability types and processes, they are moves in the right direction.

## 11.6 Discussion

As we know from studies of regulation in other sectors, having skilled and competent regulators is critical in successfully enforcing performance-based regulation. In the building sector, we find that despite its criticality in ensuring public safety in high-rise apartments, building inspection is not a popular career choice. In Australia and the UK, the average age of building inspectors is over 50 and there is no adequate career pathway leading to this important role. Given the current arrangements, it is easy to see why this is not a popular career choice within the construction sector. This needs to change to attract the best people to this critical role.

Too often in the wake of accidents, the focus has been on building inspectors themselves as we see with the liability findings in the Lacrosse case. Our analysis suggests that the problem is more structural. If building inspectors are to successfully take on the challenge of their important role, they must be better supported. There is a need to create a simple structure of public accountability for building inspectors that draws on all four public accountability types.

From a legal accountability perspective, the place of the building inspectors needs to be reinforced in legislation, including their authority to take appropriate enforcement action. Bureaucratically, there must be procedures in place for government agencies to support their frontline enforcement representatives, i.e. building inspectors, in doing their job. If local government is not able to provide such support, then there is a case for larger structural changes as we have seen in the UK with building regulation moved to an agency with more experience in regulating system safety in hazardous industries. In addition to support, comes the need for formal auditing of performance in some way to ensure that enforcement standards are maintained.

When it comes to professional accountability, improvements are also needed including articulation of a clear set of professional standards and expectations and a system of peer support so that building inspectors are encouraged to act in a way consistent with the standards set. Specific training and licensing arrangements linked to professional standards would allow the costs associated with building inspection work to be linked to specific requirements and defended in the case of commercial pressure.

Since privatisation, building inspectors' primary political accountability has been to commercially focused building sector stakeholders. The changes suggested above are designed to rebalance the system. The safety of high-rise building occupants must play a stronger role in driving day-to-day activities of building inspectors. This
will only happen if the work of building inspectors is overseen more closely by
government, so the necessary political accountability is in place.

These problems have arisen in parallel with the part privatisation of building
inspection, but if sufficient support and oversight is provided to ensure that enforce-
ment standards are being maintained, there is no inherent reason why these inspection
activities cannot be outsourced to the private sector. When it comes to enforcement,
low-level activities such as persuasion and issuing notices can be done by licenced
private sector professionals but strong links are needed into government to deal with
cases that require escalating enforcement action and to ensure standards of inspection
are met.

The justification for such changes is not only safety-related. When we look at
building quality more broadly, the building sector as a whole is riddled with prob-
lems. A recent study of 212 residential multi-occupant building audits in Australia
suggested a staggering 85.7% of the buildings had at least one identified defect with
an average of more than 14 identified defects per building [5]. Reform is needed
across the sector, but a strong enforcement system is a key part of any overall plan
to lift building quality for both safety and commercial reasons.

11.7 Conclusion

The Grenfell Tower disaster must be a turning point in raising awareness about the problem of building safety. This case highlights many weaknesses in the sector, but here we have focused on outsourcing of the regulatory function of building inspection using the theoretical lens of public accountability. In effect, the building sector in both the UK and Australia has operated with little regulatory oversight and little enforcement since building inspection activities were partly privatised several decades ago. The reason lies not so much in the skills and competencies of individual building inspectors, but in the structure of the system that drives them to consider political accountability to other building industry stakeholders above all else as a result of weaknesses in other mechanisms for ensuring public accountability. This occurs despite clear evidence (in the form of accidents and near misses) that this approach is not adequate, particularly in relation to high-rise buildings. Building inspectors are left to work within a system in which weak public accountability mechanisms are inherent in the structure of the system itself.

As a result, there is a need to provide structural changes that ensure public account-
ability, with a focus on the end-users. This includes addressing factors linked to all
four facets of public accountability—legal, bureaucratic, professional and political.
Providing the necessary support and oversight mechanisms, via legal, bureaucratic
and professional means, can serve to rebalance the political accountability of building
inspectors away from commercial building sector interests and further towards the
health and well-being of building occupants and users. While outsourcing has signifi-
cantly contributed to the current situation, if government processes can more strongly
support and supervise private building inspectors, this aspect of the structure does
not have to be inherently problematic.

References

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2. G. Genco, *Lacrosse Building Fire 673 La Trobe Street, Docklands on 25 November 2014* (2015)

3. GTI, *Report of the Public Inquiry into the Fire at Grenfell Tower on 14 June 2017* (2019)

4. J. Hackitt, *Building a Safer Future Independent Review of Building Regulations and Fire Safety: Interim Report* (2017)

5. N. Johnston, S. Reid, *An Examination of Building Defects in Residential Multi-owned Properties* (2019)

6. B. Meacham, *Toward Next Generation Performance-Based Building Regulatory Systems* (2016)

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8. B.S. Romzek, M.J. Dubnick, Accountability in the public sector: lessons from the challenger tragedy. Public Adm. Rev. **47**(3), 227–238 (1987)

9. B.S. Romzek, P.W. Ingraham, Cross pressures of accountability: initiative, command, and failure in the Ron Brown plane crash. Public Adm. Rev. **60**(3), 240–253 (2000)

10. C. Scott, Accountability in the regulatory state. J. Law Soc. **27**(1), 38–60 (2000)

11. P. Shergold, B. Weir, *Building Confidence: Improving the Effectiveness of Compliance and Enforcement Systems for the Building and Construction Industry Across Australia* (2018)

12. Unisearch, *Opal Tower Investigation Final Report* (2019)

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**Open Access** This chapter is licensed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Chapter 12
# Implications for Safe Outsourcing

<figure><img src="image_24.png" /></figure>

Check for
updates

Stéphanie Tillement and Jan Hayes

**Abstract** This chapter describes some of the lessons highlighted by the different authors of the book. By assessing the different contributions, it discusses the main research and managerial challenges related to the nexus between safety and outsourcing practices. Two main issues are considered: (1) the implications of fragmentation and (2) the importance of addressing the temporal dimension and transience.

**Keywords** Outsourcing · Safety · Fragmentation · Temporalities · Transience

**12.1 Introduction**

This book was born out of the observation that in the face of an increased use of outsourcing in high-hazard organisations in a more and more varied range of activities, the effects of contracting on system safety were still little addressed. More importantly, looking at the debate and theory development in safety studies, we observed that the relatively few studies addressing this link were quantitative, rather static and distant from work situations and emerging and evolving collective practices. This is surprising given the recent developments of practice-based approaches in the field of safety [4, 5]. As such, we perceived that there is a need for research that is more empirically grounded, reflecting on and through practices, beneficial to both academics and practitioners and resulting from close collaborations between these actors.

All the chapters presented in this book rely on an in-depth understanding of the empirical field they are studying, while investigating very diverse outsourcing situations and thus each tackling specific issues. The chapters describe ten case

S. Tillement
IMT Atlantique, LEMNA, Nantes, France
e-mail: stephanie.tillement@imt-atlantique.fr

J. Hayes (✉)
RMIT University, Melbourne, Australia
e-mail: jan.hayes2@rmit.edu.au
studies regarding use of contracting in sectors from nuclear waste management to railways and the building sector and in lifecycle stages from design and construction to decommissioning and even regulation.

All cases suggest that the structure imposed by classical contracting (including separate organisations, fixed responsibilities and well-defined tasks) creates problems for those whose professional practice occurs in this environment. Operating a very hard line based on predefined definitions about who does what and who is responsible for what creates safety problems. This volume, focused on situations where part of the work is contracted out, uncovers problems that concern process and workplace safety more globally. Such issues deserve attention both from researchers and from practitioners. These problems arise in two interrelated areas: (1) the fragmentation of work and introduction of multiple boundaries and (2) the temporary nature of contracting arrangements and the significant dynamic, temporal dimension that is introduced. Given the relative lack of safety theory on which to draw, chapter authors have turned to various theories from other domains such as Science and Technology Studies (STS) and organisation studies to frame their work to bring answers to these problems and contribute to the literature. Examples include Russel and Tillement's use the concept of boundary objects [10], Naderpajouh et al.'s use of a public accountability framework [9], Eydieux's consideration of organisational hypocrisy [3] and Griegel and Gould's use of theory of temporary organising [6]. Some of these can illuminate aspects of the fragmentation issue, while others highlight the transient nature of outsourcing arrangements.

## 12.2 The Problem of Fragmentation

In this book, safety is conceived as the product of actions and interactive dynamics between various stakeholders, including clients and (sub)contractors. These dynamics are affected by the structures and socio-material entities in place. The fragmentation of work in the contracting environment challenges many of the organisational preconditions for excellent safety performance. Fragmentation narrows the focus of those down the contracting chain in ways that may mean that safety outcomes no longer receive sufficient attention. The cases regarding use of outsourcing in regulation show this. Hayes, Chester and King demonstrate that the narrow interests of consultants can jeopardise a focus on long-term safety outcomes in the field of energy regulation. Similarly, Naderpajouh, Zhang and Hayes show that outsourcing the role of building inspectors has contributed to deterioration in building quality.

In many of the case studies included in this volume, we see that informal practices have grown up to compensate for the boundary between organisations to try to meet work requirements in practice. In some cases, these are not good for safety. Dechy and Largier's case shows work being done in some cases by people without the necessary qualifications in response to late changes in resourcing requirements. At the other extreme, Hara's chapter describes the case of bullet train construction in which case boundaries between contractors have essentially been collapsed.
The accident case reviewed by Hara suggests that ignoring interfaces might have downsides too if responsibilities become opaque. The best response for safety would appear to be moving towards a sensible mid-point as is proposed by Gotcheva et al. in the context of nuclear power station construction. They propose use of alliance contracting where the contract provides a framework for cooperation, rather than a way of transferring risk to others. These new forms of contracting favours co-creation and joint cooperation.

But outsourcing does not only involve inter-organisational boundaries: the use of (sub)contractors, whether for permanent activities (e.g. maintenance) or for temporary projects, always requires important reorganisation by the principal which may affect internal boundaries. Russel and Tillement show that a lack of understanding across intra-organisational boundaries can make effective temporary organising even harder. Interfaces defined by people who do not understand the work activity, often because they are distant from it, can be a major problem. We see this in the outsourcing of nuclear power plant operations or in managing turn arounds. It may also affect planning and the maintenance of well-informed, adapted knowledge and skills (both for in-house and for external personnel).

In the face of fragmentation and the resultant multiplication of boundaries, the chapters highlight practices observed in the field that go some way to compensating for the negative effects on safety. This includes restructuring activity to provide more integrated work scopes, appointing specific boundary-spanning agents, e.g. “utility coordinator” (olde Scholtenhuis) or project leader (Russel and Tillement). Other potential solutions are mentioned, which should be the subject of further studies, such as aligning payment structures with desired behaviours (not just minimising time spent), establishing contract styles to combat the side-effects of price competition or strong institutional devices to support inter-organisational coordination.

Many authors also insist on the importance of building and sustaining long-term relationships between clients and contractors as a possible answer to the issue of fragmentation. This leads us to our second main point, the importance of transience and temporalities when it comes to understand and managing the nexus between outsourcing and safe industrial performance. As implicitly described in this section, the temporal dimension is key in understanding and managing the consequences of fragmentation such as shorter-term focus, mismatched or conflicting timing norms between stakeholders (e.g. contractor and principal or several contractors) or a focus on efficiency rather than long-term outcomes such as safety, sustainability or learning. This is discussed in more detail in the next section.

## 12.3 Transience and Temporality

Time has become a subject of scrutiny in the field of organisation studies [2], notably in so-called process studies, but is still largely ignored in the safety literature. Yet, as emphasised in many chapters in this book, the issue of time is crucial when it comes to understanding safe industrial performance. This is even more true when
outsourcing becomes central in the way of organising work. This volume, through the empirical studies on which it is based, encourages reflection on the temporal dimension of outsourcing. Outsourcing is studied as a dynamic process, which involves actors and relationships that evolve over time. Either explicitly (e.g. Tillement and Leuridan; Helledal and Pettersen) or implicitly (e.g. Hara; olde Scholtenhuis), all the chapters focus on temporally evolving phenomena, whether they be the emergence and normalisation of outsourcing practices (Tillement and Leuridan), the temporary nature (or not) of relationships in project-based organisations (Russel and Tillement), temporariness or transience of work structures (olde Scholtenhuis; Helledal and Pettersen), the long-term or short-term temporal orientation of actors and its effect on the quality of interactions and trust relationships (Hayes et al.; Dechy and Largier).

The chapters highlight several temporal orientations or foci associated with outsourcing that tend to hamper safety. Many organisations tend to focus on clock-time emphasising schedules and delays, resulting in increased temporal constraints and production pressures all long the supply chain (olde Scholtenhuis; Dechy and Largier). Many contractors consider that the client is mostly attentive to direct and short-term goals such as efficiency and pays less heed to longer-term imperatives such as safety. Contractors describe having little support when it comes to ensuring such long-term outcomes and, in some cases, even see consideration of such long-term goals as beyond their remit. This finding is not specific to situations where part of the work is outsourced but appears exacerbated in that case. It is observed in classic activities such as maintenance or construction but also, more surprisingly, in regulation and governance activities (Hayes et al.; Naderpajouh et al.). This last element is made worse by transience and the temporary nature of relationships between actors, which complicates the establishment of informal arrangements negotiated to deal with immediate contingencies. This is despite such arrangements being necessary for effective learning and the establishment of clear jurisdictions. Paradoxically, the temporary forms of organising that often accompany outsourcing tend to reinforce bureaucracy with its well-known effects on strict reliance on rules and rigidity.

The chapters sketch some practices that may help in resolving the temporal tensions with which organisations are confronted. First, in the face of transience, establishing long-term relationships between contractors and clients reinforces trust along the supply chain, supports the building of shared and negotiated practices to face unexpected events, and sustains the transmission and maintenance of skills. Contracts have also a key role to play and are clearly related to the first point. The chapters in this volume advocate for less rigid forms of contracting, such as alliance contracting (Gotcheva et al.). The main idea is to build contracts that are negotiated locally and so are more able to take into account the specificities of the activities that are contracted out, notably the level of complexity (olde Scholtenhuis). Such arrangements can include performance indicators, penalties and incentives that go beyond economic performance and short-term results by including long-term goals. Finally, all that precedes also shows the importance of setting institutions or institutional arrangements, such as regular review meetings to make sure that these
"ways of doing" remain robust and can be discussed and renegotiated to adapt to any contingencies of the "reality of the field" (Tillement and Leuridan, Hara).

## 12.4 Taking Stock and Looking Forward: Advancing Safety Theory

Since the late 1990s, an organisational view of accidents has become common thanks to the seminal research from James Reason regarding the Swiss cheese model and also the work of the high reliability researchers. Despite the focus moving from individuals to organisations, few researchers have acknowledged that, as a result of changing work practices, Rasmussen's nested levels of decision-making no longer apply [8]. There is no longer a neat, linear progression in the social organisation of safety from individuals and staff, to management, company, regulators and government. New approaches are needed to deal with the higher level of system complexity.

The cases taken collectively progress the debate about the link between structure and culture. Hopkins argues that structure creates culture [5]. His thesis is that decentralisation in the way organisations are structured allows cost to take precedence over safety. He contends that centralised structures where safety information is valued and can readily travel up to the levels at which key decisions are made lead to the most informed senior managers and the best safety decisions.

Hopkins' work is grounded in the study of large corporations but is silent on the subject of contracting. Contracting could be seen as an extreme form of decentralisation and therefore subject to all the associated problems for safety that he highlights. In the case of contracting, the financial performance of the entire chain is still linked and yet each organisation manages their work, including safety implications, independently (at least in theory). In this way, Hopkins' theory predicts that outsourcing will create safety problems and indeed this is the case. Looking for the practical implications, improved communication of safety issues across organisational boundaries and aligning the interests of all parties are broadly consistent with his recommendations on effective structures for individual organisations.

All chapters in this volume offer situated visions and results of the outsourcing–safety nexus, which make it impossible to qualify it simply as being always positive and negative. As discussed, this conclusion depends on many factors linked to the characteristics of the organisations and of work activities. Taken together, the collection of chapters identifies several key organisational features that are useful in assessing the forces and vulnerabilities of a network of organisations in terms of safety and organisational reliability. The conclusions proposed in this book are in line with previous work that has paved the way for the identification of key criteria for defining "safety regimes" [1]. They complement them by adapting them to more distributed and temporary settings in which the issue of outsourcing is central. Three major characteristics can be distinguished, which overcome the specificities of each industrial
sector or activity, and which are tightly connected to the two main issues discussed in previous sections, i.e. fragmentation and also transience and temporalities.

The first issue concerns the formalisation and control of practices, jurisdictions and relations through contracts, rules, procedures and standards. Outsourcing leads to more decentralisation, which makes direct control more difficult. As Perrow underlines, "increasingly privatised and deregulated systems [...] can evade scrutiny and accountability" [7, p. 379]. Formalising, at least partially, expectations, roles and practices through contracts and rules is thus necessary. Yet, it is of major importance that these documents are aligned with the reality of the work that is being outsourced. This brings forward key questions that involve different actors and concern different steps in the outsourcing life cycle. The first series of questions relate to the very beginning of the life cycle, the decision to contract out: do the decision-makers have a precise knowledge of the activity being outsourced? How has this activity been described in tenders? Does it correspond to reality? The second series of questions can be asked once an activity is outsourced: how are contingencies, unexpected events managed? Do field actors know to who they should report anomalies once they are discovered? If contracts and rules appear ill-adapted to the activity to be performed, can contractors quickly report the problem and modify the rules/contracts?

The second issue relates to coordination and the management of boundaries and interstices. As we have seen, outsourcing increases "the volume of interactions that the system is forced to monitor", with the danger that it "exceeds the organisational capacity to anticipate or comprehend" [7, p. 363]. The chapters revealed key boundaries that need to be diligently managed when it comes to ensuring long-term safety between organisations: some are inter-organisational (between contractors and the principal or between (sub)contractors) but intra-organisational boundaries must be considered too. Among the latter, the boundary between the "elites" [7] (top managers, decision-makers) and field workers is particularly critical. Empirical work reported in this book has described well the difficulties that may arise from the very beginning of outsourcing and throughout its life cycle when organisational elites make decisions about contracting with little knowledge of the reality of the activity, its constraints and the resources (including knowledge) that it requires. In particular, this may complicate the definition of the scope of action of each actor and lead to tensions or conflicts. This relates to the importance of being able to define and then constantly redefine the lines of responsibility and accountability between organisations, especially when it comes to safety. This includes regulators, whose responsibility and accountability has also to be defined. In the case of outsourcing, the issue of coordination seems particularly sensitive to the question of power, and balancing power between organisations and between the elites and those who really operate the system is even more important. Key questions include: who has the power to impose goals on whom? Is the coordination process supported by institutional and socio-material devices? Do mechanisms of coordination and negotiation exist, and do they involve all concerned actors? Is the organisation able to identify the key boundaries that can impact safety performance and how they might evolve over time?
The third issue has to do with knowledge, skills and learning. Inter-organisational boundaries, added to transience, requires re-thinking and re-engineering of learning programmes and practices. When part of the work is outsourced, knowledge issues are particularly critical for four reasons: (1) the necessary skills to perform an activity safely may be unclear: (2) part of the knowledge may be tacit; (3) the contractor or the client may be reluctant to transfer part of the knowledge when it represents a commercial advantage; and (4) the temporary nature of organising may reinforce phenomena of loss of knowledge or organisational forgetting. It is thus important that all organisations along the chain reflect on the following: Are the skills and knowledge necessary to perform the work precisely defined? Do the principal and the clients participate in this definition? What learning devices are implemented to enable knowledge transmission and learning? Are these devices adapted to the nature of knowledge and skills to be learned and transferred? What incentives exist to facilitate knowledge transfer while protecting each organisation's interests?

Finally, we hope that this volume and its conclusions will pave the way to future research that could usefully complement existing literature in safety by further considering the effects of new, yet nearly ubiquitous, forms of organizing that accompanies outsourcing practices. This work does not intend to reduce the complexity of current work situations and to prescribe a "one best way" but rather to acknowledge complexity and manage it better thanks to reflexive practices. The key features and the associated questions, which take the form of an analysis grid, intend to go some way to help all those interested in reflecting on and managing the effects of contracting on safety. It invites researchers and practitioners to engage in further research and fruitful discussions so as to develop innovative practices to manage the outsourcing-safety nexus in new ways.

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