Local governments across numerous jurisdictions have experienced a substantial increase in expenditures since the onset of the COVID-19 pandemic.

This trend began with the suspension of fiscal rules and allowances to utilize surplus funds, followed by the arrival of European Union financial support.

From 2019 to 2024, local government spending on intermediate consumption rose by nearly €8 billion, representing 44% of all new current spending within the subsector and 36% of total new expenditures, despite significant support from European funds.

A considerable portion of this increased spending has been directed toward contracting external companies for public service provision.

Based on liquidated data for 2023, municipalities expended €10.64 billion on outsourcing services, an increase of €2.05 billion compared to pre-pandemic levels.

This rise can be partially attributed to population growth and inflation; however, even when correcting for these factors, total spending increased by 5%, equating to nearly €300 per resident.

Notably, it is smaller municipalities that have driven the aggregate data change.

Per capita growth reveals that municipalities with populations between 1,000 and 2,000 inhabitants increased their outsourcing by 14%, while those with populations between 2,000 and 5,000 saw a 17.5% rise.

Conversely, larger municipalities, particularly those with over 500,000 inhabitants, have reduced their outsourcing expenditures by 1.5%.

The outsourcing of public services—excluding construction or supplies—has faced considerable scrutiny.

However, for smaller municipalities, it presents several advantages.

While a portion of services is commonly shared with neighboring municipalities via provincial councils, counties, or metropolitan areas, independent contracting allows smaller municipalities to efficiently manage services such as technology, cleaning, or construction without needing to hire additional public employees.

Analysis of municipal service outsourcing from 2013 to 2023 shows a narrowing gap between smaller municipalities and larger ones.

In 2019, per capita spending in large municipalities was almost three times that of their smaller counterparts, with a 186% difference, which decreased to 147% over four years.

A reduction in standard deviation indicates a convergence among municipalities at various levels.

Factors contributing to this increase in outsourcing include a possible lack of staffing resources in smaller municipalities and a drive for greater efficiency in public spending, as noted by Victor Rodríguez, president of the State Association of Inspectors and Auditors.

He highlights that both the Public Sector Contracts Law and Budgetary Stability Laws enforce a commitment to employ public resources more effectively.

As competition in the marketplace has increased, municipalities have established more rigorous budgeting and expense control procedures, leading to a significant rise in contract bids and collaborations with companies or social entities.

Rodríguez notes, however, that municipal administrations retain the ability to maintain or potentially re-municipalize services should competition be insufficient or if they wish to manage the services directly.

Under the current regulatory framework, outsourcing initiatives are categorized into seven distinct types, including cleaning, security, evaluations, storage, electoral expenses, certain tax collection services, and technical studies.

This accountability is particularly evident in smaller towns, which often face challenges in having sufficient technical staff.

In 2023, technical work or statistical analyses performed by independent contractors accounted for an increasing share of municipal outsourcing expenditures.

In the context of the capital, expenditure on public services, particularly cleaning, has doubled over the past decade.

Between 2021 and 2023, significant enhancements to contracts have been made to improve service provision quality, according to the local council.

Despite some variability in reporting practices, data reveals that in Madrid, €740 million was attributed to cleaning services, whereas Barcelona reported only €22 million, underscoring the complexity of categorizing service expenditures.

Such discrepancies reflect differing municipal definitions of service responsibilities.

Thus, examining the outsourcing landscape among municipalities remains challenging.

As municipalities evolve in their service delivery models, the growth of outsourcing may necessitate enhanced oversight to ensure competitive procurement processes.