Report of the Local Government Efficiency Review Group

8.2.6 Many parts of the United States also have a tradition of special-purpose
bodies or joint cooperative arrangements between neighbouring local
authorities. These include special-purpose districts that have been
established to provide services such as education, water and sewerage
services, fire services, parks and recreation, libraries, housing, roads and
healthcare. Usually, members of the boards of such organisations consist
of council members from the authorities involved. Other forms of
coordination include contracts between local authorities, whereby one
authority agrees to provide a service on behalf of others.
8.2.7 Since 2002, all New Zealand local authorities have been obliged to
negotiate a Triennial Agreement for each region. This is a statutory
agreement that acts as a basis for dialogue around shared services and to
encourage attention to regional policy issues that transcend local
boundaries. Areas where a shared service approach has been pursued
include waste management facilities, fire services, library services, building
control and economic development and tourism promotion, very often on the
basis of the lead authority model. There has also been some contracting
between local authorities to share technical and engineering staff to operate
infrastructure facilities and specialist planners to work on urban design.
While these services can be formalised through contracts for complex
activities, sometimes they are undertaken jointly through semi-formal
arrangements. There is also increased joint procurement in areas such as
energy and road maintenance.
8.2.8 Some of the suggested benefits of shared services include:
• Reduced operating costs through standardising, streamlining,
automating and sharing back office processes and standard software
systems;
• Reduced requirement for administrative support;
• Lower accommodation costs;
• Fewer management overheads;
• Greater specialisation and skills levels amongst employees through the
pooling of resources;
• Greater consistency in service levels; and
• Other staff able to focus on the core business of the local authority.
8.2.9 International experience also shows, however, that shared services can
produce mixed results. Hard evidence of actual savings achieved through
shared services do not always live up to the expectations of original
assessments (which can be over-estimated). Research suggests the need
to examine each proposal for shared services on its merits, as well as an
assessment of the transitional and start-up costs of moving to a shared
service arrangement (which can be under-estimated). Advice from the New
Zealand Controller and Auditor-General to local authorities in this area
suggests that the costs, potential financial and non-financial benefits and
risks of moving to a shared service model should be contrasted with other
options, such as in-house provision and outsourcing. Different cost-benefit
analyses that have been conducted show that it can take a number of years
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