Cost reduction is a priority for local government, but it must not lose sight of future goals and challenges. If town halls take care of the long term, then the short term should take care of itself
I read with interest the news story from Public Finance’s recent round table debate on local government outsourcing. While we await the full findings in next month’s magazine, the conclusion reached by the group highlights just how tough a challenge it is for councils to identify measures that will reduce budgets over the short term, yet ensure stability into the future.
Councils and local authorities face a plethora of options including outsourcing, shared services, partnerships with the third sector and employee-owned mutuals, to name a few. However, while each can generate savings, this is not a given and there is no certainty that any savings generated will be seen in the immediate term.
Thus, while the agenda of cost cutting is forever present, there remains a need for future clarity. The decision to transform an organisation or service should be based on a strategic analysis of goals. And today, the right decision is far less about the immediate money saved and far more about the measurable benefit for future community gain – especially given the growing agenda for transparency. To do this successfully, though, councils need to invest in a rigorous decision-making and risk management process.
When considering partnership arrangements and shared services, councils must be clear of the long-term shared goals of both organisations and their communities. Likewise, clear service-level agreements and coordinated expectations and goals are important for outsourced contracts. By removing a function from within the remit of an organisation, councils rely on extended supply chains that can in some cases bring increased risk.
As Chris Buss, Wandsworth’s finance director, states: ‘If you outsource a problem, it is still there’. It is therefore important that councils know they may still be held accountable and required to step in when things go wrong.
Practically, councils should also be aware of the compatibility of software, systems, contracts and suppliers and how to communicate and manage any implications for employees. The resilience for organisations to withstand such change is also vitally important and a well thought out exit strategy should not be overlooked.
Local councils and authorities who embark on these alternative methods for service delivery need to approach their decision from an angle removed from short-term financial gain. Instead, their approach should be focused on identifying what future success looks like and if an arrangement fits the strategic and long-term vision of the organisation.
As the National Outsourcing Association’s Paul Robb notes, local authorities should view outsourcing as ‘one of the tools, but not the tool’ available to them.
Andrew Jepp is the director of public services at Zurich Municipal
