When outsourcing became popular, the appeal was to outsource your non core operations to specialised professionals. Focus on your core. For Schools that is education. For FMCG retailers like Coles you would think retail environments (and associated logistics) and transactions.
In our experience there is a fallacy that once contracted out, the principle can absolve themselves of any responsibility or concern of their service provider.
Why is this a fallacy? Two key fundamentals exist that are major concerns for any high level manager; corporate governance and due diligence.
Firstly what is corporate governance?
'Corporate governance is a broad-ranging term which, amongst other things, encompasses the rules, relationships, policies, systems and processes whereby authority within organisations is exercised and maintained'
'The governance attributes of an organisation are shaped by a variety of factors, both "internal" (e.g. constitution, organisational policies) and "external" (e.g. laws, regulations, community expectations). A board of directors plays a pivotal role in influencing an organisation's governance environment' (Companydirectors.com.au)
Clearly corporate governance covers key constitutional matters along with legal and moral dilemmas.
Moving back to our example earlier, Coles focus on retail environments, not trolley collection services? So if there was issues with the contractors and subcontractors not paying appropriate wages, can they (Coles) simply say it's NOT their problem?
According to the Coles and the Fair Work Ombudsman, absolutely it is their problem.
Go to http://www.fairwork.gov.au/about-us/news-and-media-releases/2016-media-releases/march-2016/20160310-compliant-supply-chain-op-ed
Secondly, lets consider due diligence.
Within the Work Health Safety body of literature there is a requirement for Officers of the PCBU (for those following The Model WHS Act) to exhibit due diligence (Section 27) with regard to WHS matters. Under the WHS Act an officer of a PCBU must exercise due diligence to ensure the PCBU complies with its health and safety duties. Work health safety duties pertain to creating and maintaining a safe working environment for all workers, including contractors and sub-contactors.
To avoid any confusion 'a duty cannot be transferred to another person' (Model WHS Act, 2011).
For our School example, specialists in education, not specialists in cleaning. However a duty of care is owed to these contractors and the function of cleaning. There are risks, and hazards you must manage and monitor. You cannot say, 'I've got contractors, its not our problem.'
Simply put, it is your problem. The rise of contracting and subcontracting poses new risks, new concerns and the astute business manager or director should be actively managing these issues.