Asides

When reviewing services, alternative models for delivering the services may be explored to ensure the most appropriate methods are employed. Effort should be focused on key opportunities that have the potential to generate significant service improvements, savings or income. The range of methods that are available for councils include:

• Shared services or resources – typically with other councils or regional organisations of councils (ROCs)
• Strategic relationships – with other levels of government or non-profit organisations
• Use of ‘arms length entities’ to manage the service e.g. the corporatisation of parts of Council’s operations, or external boards for managing community facilities
• New entrepreneurial ventures or enterprises – delivering services as an income source
• Joint ventures or public/private partnerships – with external enterprises
• Community run enterprises – including social enterprises such as charities
• Outsourcing – through the use of external contractors.

Shared services and resources

The potential use of shared services has been considered in a number of national and state inquiries into local government. All identify that shared service models play a useful role in improving the financial sustainability of local government. They can be a cost-effective way for councils to share resources, tackle common tasks, or take advantage of economies of scale.
Many different kinds of shared service arrangements have been implemented across Australia. This includes a regional approach through the use of Regional Organisations of Councils.

As a guide, services meeting one or more of the following criteria may be suitable for service sharing:

• Require high degree of expertise
• Largely self-contained
• Can realise economies of scale
• Non-strategic, low risk, rule-based services
• High volume transaction processing
• Services requiring access to the latest technology
  

It is also useful to consider shared services where one council is unable to attract or retain staff skills in a particular discipline and another council has spare capacity, such as in engineering design or development assessment.

Strategic relationships with government or non-profit bodies

Research indicates that delivering services through a strategic relationship with other government or non-profit bodies is not regularly considered in service reviews. One reason for this may be that candidates for this type of arrangement tend to involve significant pieces of infrastructure, such as regional sporting or cultural facilities. The opportunities for these types of projects tend to be identified outside the service review process.

That said, there are opportunities that are worth exploration, particularly where additional or improved services are being considered. As with shared services, the key to the development of a successful strategic relationship lies in there being an opportunity where both parties are able to extract a benefit.

Arms length entities

Arms length entities are established with a clear separation from the council. An advantage is the increased opportunity to operate outside the local government framework and constraints associated with legislation. It is a method of reducing conflicts of interest between the regulatory and provider roles of a council. It may also reduce financial risk to public funds, and enable the engagement of the necessary commercial and corporate expertise.

Property leasing and land development are good examples where the establishment of an arms length entity can deliver an alternate income stream for a council. It is common practice for local authorities to place their commercial activities under separate companies that are controlled by external Boards.

When considering opportunities for the establishment of an arms length entity, the focus is generally on obtaining a commercial return on the investment, and does not necessarily rely upon expertise within the council.

Business enterprises

The consideration of opportunities for new council owned business enterprises may be included in service reviews where one of the objectives is to seek alternate sources of income to contribute to the council’s financial sustainability. As distinct from the arms length entity approach, these types of enterprises generally stem from the provision of an existing community service that is provided by the council.

When considering options for a new business enterprise, a feasibility assessment should be undertaken. Examples of criteria that can be used are provided below:

• Is there a niche or emerging market with limited competition? Is the service different and easy to distinguish from what others provide? Does the council have a significant competitive advantage over other businesses such as technical expertise, or economies of scale?
• Is it relatively easy and low cost to establish the business activity and enter the market? Are there minimal political barriers, low regulation, low capital outlay?
• Is the business aligned with current council operations? Are there existing available council resources, for example facilities, property, skilled & experienced personnel, plant & equipment, systems?
• Is the business likely to be financially sustainable? What are the long-term prospects of the business, taking into account future market potential and the impact of external factors?
• Does the business provide an overall community benefit for the local government area (economic, social, environmental, wellbeing)? Does it support the area’s strategic objectives? Does it add value to services the council provides (expansion/improvement)?
• Is there a relatively favourable level of risk exposure in entering or trading within a market e.g. technological, insurance, and legislative?

Public private partnerships (PPP’s)

PPP’s usually involve a partnership between the public sector and private sector for the purpose of designing, planning, financing, constructing and/or operating projects that would traditionally fall within the remit of the public sector (council). Infrastructure projects are prime examples.

Research has identified examples where service reviews have identified opportunities from PPP’s that are not as reliant upon the delivery of expensive infrastructure. As an example, one council was able to dispose of its sewage effluent through a PPP with an adjoining landowner who committed to reusing the effluent for irrigation.

Opportunities for efficiency improvements can arise from service reviews through exploring a joint venture approach. Viable opportunities tend to be borne from the ability of joint venture arrangements to deliver benefits from economies of scale, and examples have included:

• Regional waste collection contracts (where neighbouring councils partner in a single contract)
• Cooperative, joint tendering contracts

Community run services and enterprises

A community enterprise is a business owned, controlled and used by the people who live in a particular geographic area. Many community enterprises in Australia are incorporated as co-operatives. Membership of a community enterprise is voluntary and usually open to the general public.
Community enterprises have seen a resurgence in recent years. A growing number of rural towns across Australia are turning to community enterprises to provide new services, or to save an existing service that can no longer be supported by the council.

Examples of community run services include community gardens, nurseries, festivals, sports facilities, and cemetery operation. Often there are untapped commercial skills within a community that could be utilised to add value to council activities. Profits from community enterprises may also be ploughed back into the local community or reinvested in the businesses.

Outsource to external providers

There are internal and external influences when considering a viable outsourcing option, and these include: the senior management and political appetite for outsourcing, whether the council is a major employer in the community, the availability and competitiveness of external service providers, and the level of control that is required over the service, amongst others. These factors will determine whether ‘outsourcing’ can be genuinely considered in a service review.

The following criteria can be used as a guide when assessing the suitability of a service for outsourcing:

• Largely self-contained – services not closely linked to other services or functions;
• High economies of scale – services with high production volumes and highly standardised;
• Non-strategic or ‘non-steering’ – services that do not have a high impact on strategic direction;
• Low complexity and rule-based – services that are easy to specify and monitor;
• Changing or specialised technology – services involving high capital and ongoing technology costs;
• High supplier availability – services with large numbers of potential suppliers or contractors;
• Cost competitiveness of the service.

Before making a decision to commit to outsourcing a service, consideration should be given to any social responsibility the council may have as a major employer in the community. This is particularly evident in remote and regional centres. The long-term costs and benefits should also be carefully considered, along with any loss of control (over future costs or quality) that may come once you have sold off assets and shed associated staff resources.

The SmartGov Team

This article explores the process for considering alternative levels of service (LOS) and comparing them with existing levels. LOS are the measures of outputs a customer receives from a service. Defining and measuring LOS are integral to a council’s performance management and strategic asset planning processes.

The first step is to understand and document the existing LOS. This may be expressed in terms of quantity, quality, timeliness, reliability, responsiveness, and accessibility. An example is ‘how long does it take to deliver the output and how long do people wait?’

When reviewing LOS, it is important to consider community and customer needs. As an example services rated by the community as high satisfaction and low importance may be candidates for reducing LOS.

The fundamental question that is being considered is: ‘what level of service should be provided by the council?’ This is separate to the question: ‘how is the service to be delivered?’ which is covered in a future article. The broad options to consider are:

• Provide no service (i.e. discontinue the service)
• Provide a lower LOS (eg reduce frequency of outputs)
• Provide the same LOS
• Provide a higher LOS (eg increase quality of outputs)

The LOS is expressed under each of these options, to enable a comparison to be made and selection of an optimum LOS for each service.

Research has shown that it is a very difficult for service review teams to consider and justify reductions in service levels. The natural tendency is to retain or increase service levels due to the constant demands for improved services. To help drive the assessment of the lower LOS option, a target reduction in the service annual expenditure may be set (eg 20%).

The following are examples of issues and implications to consider for each option:

• What will be the effect on meeting statutory or regulatory requirements? Are there alternative ways of meeting these requirements?
• What will be the effect on community outcomes, eg average grass length may increase and affect sporting events?
• What would be the likely community reaction to the change in LOS? Reference should be made to previous community surveys and feedback to gauge the reaction.
• Will there be long-term consequences in relation to the council’s strategic directions, eg environmental, economic, and social wellbeing? What will be the effect on meeting the identified strategies, actions, objectives and targets identified in plans?
• Are there feasible alternative non-council means for meeting the community’s needs?
• Could community members efficiently make their own arrangements, taking into account the cost and complexity involved with private arrangements?
• Are there other agencies authorised to provide the service? Do authorised agencies currently provide the service?
• Are there alternative private providers eg privately owned pools and carparks?
• Are there commercial reasons for providing the service, eg income generation? Would a reduction in service level and expenditure lead to an adverse effect in terms of income generation?
• What will be the effect on council resources? Will there be changes in staff positions and potential industrial relations issues? Will there be a change in asset usage or a need to dispose of assets? Will there be an effect on other support functions?
• What will be the financial implications?

The SmartGov Team

This article provides guidance for identifying and prioritising candidate services for review.

Service identification

Prior to conducting individual service reviews all council services and subservices should be identified, categorised and defined. This may be done by referencing existing documents such as:

• Strategic plans
• Operational plans
• Policies and procedures
• Service level agreements

Research has identified that the interpretation of the term ‘service’ for the purpose of reviews varies considerably between councils. Some councils define services at a broad level and select about 40 service groups or packages. Others break them down into as many as 200 to audit and analyse their services at a detailed level.

Services are typically separated into those that exist to serve internal customers, such as human resources and finance, and those that provide direct outputs for external customers, such as road maintenance and development application processing.

Some councils find it useful to further categorise their services into those required due to a legislative or statutory obligation (non-discretionary), and those where there is some discretion over their provision. It may be appropriate to group the services under themes used in strategic and corporate plans. Examples include governance, infrastructure, social, cultural, recreational and environmental services. The services can also be linked to the council’s key strategic directions. For example, waste management can link to community wellbeing or park maintenance can link to environment.

Service prioritisation

As there are typically many services for councils to review with limited resources, they should be prioritised for review. The prioritisation assists with the scheduling and resource allocation for the individual reviews.

The means for prioritising each service varies significantly amongst councils, depending largely on the aims of the review being undertaken. Where financial savings is a primary focus of a review, services tend to be prioritised primarily based on a ‘high-level’ assessment of saving or income generation potential. This approach is attractive if there is a desire to take some ‘quick wins’ during the review process. The size of the budget for each service may be used as a simple means of prioritisation as this usually reflects the opportunity for savings.

For a more comprehensive approach, it is recommended that a priority rating is assigned to each service. Consideration may be given to previous community feedback, to gauge the likely reaction to cutting or reducing services. This includes community surveys, strategic plans, and feedback received through community groups.

The following are examples of criteria used for rating each service. Weightings are usually assigned for calculating overall ratings.

• Overall budget for service or net cost of service (after income is subtracted)
• Service levels – potential to reduce service levels without generating significant community dissatisfaction (e.g. services with low importance & high satisfaction in community surveys)
• Service delivery – potential for improvements &/or savings through alternative delivery models (e.g. service sharing, outsourcing, partnerships)
• Internal operations – potential for improvements, efficiencies &/or savings through reviewing internal operations (e.g. changes to structure, resources, assets, processes, work practices)
• Revenue generation – potential to generate additional revenue (e.g. increase in user charges, grants, new business enterprises)
• Degree of discretion over the service (statutory / non-statutory)
• Potential to generate expenditure savings
• Potential for review to improve environmental outcomes
• Potential for review to improve social outcomes
• Potential to reduce duplication of services or activities
• Potential to grow or commercialise the service

Services with built assets that have been identified as being in poor condition may also be given priority to ensure appropriate risk management strategies and decision-making processes are in place.

The SmartGov Team

This article looks at various options for engaging with stakeholders affected by the service review process and/or its outcomes. Stakeholders should be involved throughout the review to provide information, analyse data, make decisions and evaluate success.

Key stakeholder groups can include:

• Councillors
• Management
• Workforce
• Community (residents, business and facility users)
• Current service providers, and
• Other councils or levels of government.

The form of engagement depends on the information required. Planning for service reviews should detail when and how the various stakeholders will participate during the review and what information will be shared.

Workforce engagement

Effective engagement with the workforce is critical for the success of a service review program. Gaining support and trust ensures constructive participation throughout the process.

The methods that councils use to facilitate staff engagement usually depend on the size of the council and the number of staff involved with each particular service. For a large organisation-wide review, a workforce engagement team may be established to assist with the internal communication and consultation throughout the program. The members should have excellent communication and facilitation skills, and be highly regarded by their peers.

Workforce engagement covers a range of information sharing and consultation activities such as:

• Staff forums and presentations
• Workshops
• Newsletter articles
• Feedback and suggestion boxes
• Brainstorming sessions
• Breakfast meetings
• Lunchtime briefings
• Internal surveys
• Individual interviews

At the commencement of the service review program, it is recommended that the CEO or a delegate hold staff information sessions to outline the proposed approach and seek preliminary feedback. As the service reviews progress, further sessions can be held to reinforce the reasons for the review and provide opportunities for comment.

A successful way of communicating with all staff is through written updates in staff newsletters and/or fact sheets, outlining progress and providing key messages on how staff can be involved in the process. Councils can also utilised their intranet or blog space.

Elected members

Elected members can provide important input into scoping, community views, decision-making, review of recommendations and implementation of change. Involving the elected members, not only in the decision to undertake a service review, but also in the process to be followed, is essential for an optimum outcome.

Holding one or more workshops for the elected members is recommended to help identify key opportunities for a number of key services. Councillors are encouraged to think ‘outside the square’ and consider alternative options. The workshop outcomes can provide the service review teams with an indication of what the elected members would support in terms of reduced service levels.

The recommendations from the service reviews should be reported to Councillors for endorsement or for information. This may be incorporated into other standard reporting and approval processes, for example the annual budget or management plans.

Key internal stakeholders

For each individual service review, it is important to identify and consult with key internal stakeholders. This is a narrower perspective then the broader workforce engagement. These are specific staff who have a stake or interest in the service under review and who may be involved in or directly affected by the review. This includes subject experts who have a good working knowledge of the service.

Stakeholders are given the opportunity to participate in the review by providing suggestions, raising issues and discussing options. They may also assist with gaining efficient access to information such as current outputs, service levels, legislative requirements, constraints, historical information, etc.

Current service providers

Current service providers for individual services should be engaged as appropriate to ensure they:

• Are aware a review is being planned
• Can provide important information on the demand and costs of their services
• Can respond to suggestions made by other stakeholders
• Can provide their view of whether their service is valued by the community

Community engagement

Understanding the community’s needs is a prerequisite to effective service provision and delivery. Community includes individuals, community groups and business owners who use local government services or own property.

Community engagement is conducted to incorporate community needs in the review program, and to promote community understanding and ownership of the pressures that the council faces. Councils that engage with the community generally view this as integral to the entire process. The engagement does not replace, but rather complements, other forms of consultation with the local community.

A range of methods is used for consulting with the community including contact with key external stakeholders, user groups, interest groups, and online surveys. Where a council chooses not to directly engage with the community during the service reviews, community needs may still be taken into consideration when formulating recommendations. This can be based on staff experience, interactions with members of the public, past customer satisfaction surveys, and previous consultation when developing strategic plans.

The SmartGov Team

This article explores options for setting up teams for managing a service review program. The team structure and individual roles will differ depending on the size of the council. Below is a typical team structure for managing and resourcing an in-house service review program.

Steering group

Under this sample structure a Steering Group is assigned responsibility for providing overall direction and leadership for the service review program. It typically approves priorities and schedules, provides strategic input into service reviews, and endorses the final reports and recommendations. The Steering Group usually comprises members of council’s Executive Leadership Team. Other possible members include an elected representative, the chairperson of the Consultative Committee, and managers of core services such as human resources, corporate planning and financial management.

Project team

A Project Team may be established to coordinate the service review program across the organisation. This usually consists of two or three staff members, depending on the number and rate of reviews that are planned. The role of the Project Team usually includes prioritising and scheduling service reviews, establishing service review teams, providing guidance and support for the teams, checking service review reports, and monitoring and reporting on progress.

Service review teams

The Service Review Teams run the individual reviews on a day-to-day basis. There are various approaches to setting up review teams. Some councils use one team to review all services. This achieves a high level of consistency and is generally an efficient method. However, it requires a high commitment of full time resources, and can be onerous for the team members. It can also lead to general staff dissatisfaction and non-acceptance of outcomes.

Another option is for line managers and their teams to undertake the service reviews within their areas of responsibility. This is generally expedient; however it can lack independence and objectivity. An effective approach is to establish service review teams comprising representatives from across the organisation. This is generally more difficult to coordinate and requires a higher commitment to training. However, it usually achieves a higher level of staff involvement and ownership across the organisation.

Each Service Review Team is assigned one or a number of reviews. The teams are responsible for various activities including engaging with stakeholders, gathering information, benchmarking, exploring and analysing options, and preparing recommendations.

Review panels

An effective method for achieving independency and consistency is to establish one or more review panels. Each panel is usually chaired by a member of the Steering Group from outside the area being reviewed, and comprises two other senior staff. For smaller councils this could be performed by one person.

The service review teams present their data and findings to an assigned review panel. The panel is charged with challenging the service information provided, and identifying other options and opportunities for improvement.

A variation on this approach is to engage an external review panel from outside the organisation to provide a greater level of independence, and fresh input and advice to staff. The panel can assist with generating new ideas and innovative solutions, reviewing the work undertaken by staff, and challenging the thinking and views of staff.

Each Service Review Team is assigned one or a number of reviews. The teams are responsible for various activities including engaging with stakeholders, gathering information, benchmarking, exploring and analysing options, and preparing recommendations.

Review panels

An effective method for achieving independency and consistency is to establish one or more review panels. Each panel is usually chaired by a member of the Steering Group from outside the area being reviewed, and comprises two other senior staff. For smaller councils this could be performed by one person.

The service review teams present their data and findings to an assigned review panel. The panel is charged with challenging the service information provided, and identifying other options and opportunities for improvement.

A variation on this approach is to engage an external review panel from outside the organisation to provide a greater level of independence, and fresh input and advice to staff. The panel can assist with generating new ideas and innovative solutions, reviewing the work undertaken by staff, and challenging the thinking and views of staff.

The SmartGov Team