Better Public Services Advisory Group Report - November 2011

• Regional offices: Rationalising office space in Wellington and the regions could also
save money. There is potential for agencies to reduce their collective footprint,
improve mobility and co-locate with non-government organisations. Unnecessary
cost, for government agencies and those who interact with them, could be reduced by
requiring all agencies to use consistent regional boundaries. Currently these are
defined variously, undermining the opportunities for cooperative use of resources and
confusing service delivery organisations, citizens and businesses.
• Front line offices: For example, the Ministry of Social Development’s Community Link
consolidation is expected to save the Housing New Zealand Corporation over
$0.5 million a year.
• Agencies: The optimal size of state entities is debated, but evidence, including from
the Better Administrative and Support Services programme, indicates that having
many small agencies generates diseconomies of scale. The gains from consolidating
go beyond efficiencies in running costs: they include more co-ordinated activity,
pooled expertise, lower transaction costs and fewer and easier points of interaction for
citizens and businesses. Whilst the Advisory Group does not advocate a first
principles machinery of government review, its judgement is that there is opportunity
to realise worthwhile gains from practical, considered steps to:
- better align agencies around results
- reduce duplication and fragmentation 41 , and
- re-assess whether Crown entities can be incorporated back into the core Crown, in
some cases as executive agencies; and
Back-office operations: There is already a drive for smarter and leaner back-offices,
through initiatives such as the Better Administrative and Support Services project 42 .
The 33 agencies surveyed in 2010 reported spend of $1.85 billion on administrative
and support services, representing nearly 10% of organisational running costs. The
breakdown of costs by activity is set out in the table below. Whilst considerable
variation between agencies was apparent, there is a clear conclusion that economies
of scale drive down costs with smaller agencies being the least efficient: although, as
the bulk of costs are in medium to large agencies, they provide the opportunity for the
greatest cost reductions. The Ministry of Economic Development and Department of
Internal Affairs’ consolidation of procurement is expected to generate savings of more
than $500 million over the next five years. The leadership changes in Chapter 5 will
drive this faster.
41 Refer Annex 6 for a list of current agencies.
42 See the Treasury, Administrative & Support Services Benchmarking Report for FY 2008/09 and FY 2009/10, April
2011, available at: www.treasury.govt.nz/statesector/performance/bass/benchmarking/2008-10
43