This is a fascinating article, albeit one that comes from  a specific political perspective.  There are for me a number of key issues we need to consider that play out in a local government context.  

Firstly, and this is a really important point, we only hear about failing outsourcers and failing councils.  The majority of councils are very well run. The majority of outsourcing contracts deliver what the contract says it should.  

Secondly, this should all be considered through the lens of austerity.  Councils facing the impact of austerity have had to pass those costs onto all their contractors. Contractors will make lesser returns as their income is down and their costs are up.   This means that newly outsourced contracts have been subject to a new normal in price reduction.   

Thirdly, outsourced services tend to be subject to higher staff turnover.  This is a mixed blessing but its downside is that continuity and the commitment to public service could be lost. 

Finally, the public sector's much fabled "poor contract management" is very much a doubled edged sword.  If executed in a adversarial, contract compliance sort of way, it allows outsourcers to make excess profits in poorly written contracts, but also means that where the relationship is solely based on contract compliance, it can push contractors to the wall.   

The 2018 political narrative suggests that large scale outsourcing in local government has had its day and politicians want more controls over the levers of state.  It's wrong to demonise all outsourcing but any future processes need to be carefully thought through and focus on the full panoply of risks and rewards rather than short term savings.