Outsourcing or ‘Out of sight, out of mind?’

I was having a lunch meeting with a project manager, and the topic of outsourcing came up. Specifically, outsourcing the manufacture of a particular machine that would form part of a larger vehicle system. I asked him why he was doing this, particularly when for many years the predecessor to this machine was very successfully manufactured in-house. His answer was simple.

It was to transfer risk to a supplier.

There are many problems with this answer (and no - there weren’t too many more layers to his response). His organization was trying to drive down (perceived) internal project risk by transferring (perceived) risk to a supplier - all through making them responsible for creating said machine. If the supplier didn’t meet deadlines, then there were compensatory clauses in the contract that would effectively mean that the supplier would be fined substantial amounts of money.