Source: https://oag.parliament.nz/2004/working-together/part3.htm
Timestamp: 2020-07-02 18:48:41
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Part 3: Selecting Joint Arrangements — Office of the Auditor-General New Zealand
Local Authorities Working Together
Part 3: Selecting Joint Arrangements
Part 2: The Environment for Working Together
Part 4: Management of Joint Arrangements
Part 3: Selecting Joint Arrangements Local Authorities Working Together. https://oag.parliament.nz/2004/working-together/part3.htm https://oag.parliament.nz/@@site-logo/logo.png
Local Authorities Working Together.
How Do Joint Arrangements Come About?
Analysis of Opportunities for Working Together
Use of the Business Case
Joint arrangements can come about in two main ways – as a response to an identified need or as the result of a systematic analysis.
Timing, and support from councillors and local authority managers, can be important to the success of a joint arrangement.
Regional forums can be a useful way for local authorities to jointly consider a range of opportunities and proposals for working together.
A business case should be prepared, appropriate to the size and scale of the proposed joint arrangement, to analyse costs, potential financial and non-financial benefits and risks, and compare options.
Working together can bring a range of gains for local authorities, including economies of scale, additional resourcing, technical expertise, the ability to meet statutory requirements, improved policies or standards, and better services.
The likely costs and benefits of joint arrangements are often uncertain, and can be difficult to identify and quantify. Inevitably, once the relevant issues have been fully examined, some ideas for possible joint arrangements will be abandoned. Many of the joint arrangements that we examined were successful, but some had failed to proceed.
In our view, consideration of joint arrangement proposals should take account of factors that are likely to lead to success, making it more probable that a selected joint arrangement would proceed and produce net benefits for the participants.
Joint arrangements can consume a lot of time and resources, which may add to staff workloads. A selective approach to joint arrangements will help to ensure that council resources are used in the most effective and efficient way.
We expected that local authorities would have followed a rational process when selecting joint arrangements. We examined the case studies to find out:
how the joint arrangements came about;
whether the joint arrangements were the product of a systematic analysis of possible opportunities; and
whether the local authorities had compiled a business case to support a joint arrangement, drawing on a detailed analysis of costs, benefits, risks, and options.
Joint arrangements can come about in two main ways – as a response to an identified need or as the result of a systematic analysis. Figure 3 below illustrates some of the factors that can lead to a joint arrangement.
Factors That Can Lead to a Joint Arrangement
Most of the joint arrangements that we reviewed – 8 out of the 12 case studies – came about as a response to an identified need. Factors that prompted local authorities to consider working together were, in particular:
the requirement to meet statutory obligations or standards;
potential benefits from aligning council objectives and activities;
timing and the right environment; and
the need to build capability.
Meeting Statutory Obligations or Standards
Changes in legislation can be a strong incentive for local authorities to work together and pool their resources. For example, the Act requires all local authorities to identify community outcomes for the future of their regions, and to use those outcomes as the basis for an LTCCP. Four Southland local authorities (Southland District Council, Environment Southland, Gore District Council, and Invercargill City Council) agreed in April 2002 to undertake the LTCCP process together under the brand Our Way – Southland in order to meet the requirements of the Act more effectively and efficiently.
Local authorities may also decide to share resources in order to meet increasingly stringent standards for the performance of their functions or responsibilities. This was a contributing factor in the decision by Southland District Council, Invercargill City Council, and Gore District Council to form a single Southland rural fire authority.
The Rural Fire Management Code of Practice sets standards for the operation of a rural fire authority, including minimum numbers of staff who must meet the competency requirements of the New Zealand Qualifications Authority unit standards. The Code of Practice standards were to be met by all local authorities from October 2003.
Local authority staff with responsibilities for managing local rural fire districts in Southland needed training to meet those standards. The training requirement was one factor leading the three councils (along with Southern Plantations and the Department of Conservation) to amalgamate their separate rural fire districts under a single rural fire authority. This included creating a single full-time Principal Rural Fire Officer position, and centralising management of training.
3.11 Among the potential benefits of amalgamation, the participating authorities expect that they will:
avoid incurring in-house costs of training for their rural fire staff to meet NZQA unit standards;
enhance compliance with the standards imposed by the National Rural Fire Authority; and
strengthen the pool of expertise for fighting fires in the region.
We concluded that this joint arrangement was an effective means for local authorities to meet statutory obligations and standards.
Aligning Objectives and Activities
Working together can help neighbouring local authorities to align their objectives and activities. For example, the contract for servicing the Opotiki District Council’s information technology infrastructure has given Environment Bay of Plenty useful assurance about the security of rating and valuation data for its own statutory purposes.
Working together can also be a way to overcome conflict where council policies differ or are inconsistent. For example, Wellington Regional Council was motivated to participate actively alongside the three district councils in the region to prepare the Wairarapa coastal strategy, in order to promote compliance with its own coastal policy and with the New Zealand Coastal Policy Statement.
In this case, conflict had been growing between the regional council, the district councils, prospective property developers, and the community, about the desired nature of development along the Wairarapa coast. The Wairarapa Coastal Strategy, prepared in consultation with the local communities, is expected to:
lead to more consistent planning decisions by the district councils, and a better informed community;
save the local authorities time in processing applications or making submissions; and
improve environmental outcomes.11
Timing and the Right Environment
To become successful, opportunities for working together need to arise at the right time and in the right environment. A variety of factors can influence whether the timing is appropriate for entering into a joint arrangement. These can include:
the local government election cycle;
capital investment requirements;
contract renewal dates and whether harmonisation of dates between local authorities is possible; and
the availability of key staff.
A joint arrangement that arose because of opportune timing was when it became known that the library management systems of five Auckland local authorities were due to be upgraded or replaced within a similar timetable. With the knowledge that all five libraries were facing a similar investment, the librarians were able to explore options for a common library management system to meet their shared needs.
A common time for opportunities to emerge was when local authorities had undertaken strategic reviews. For example, strategic reviews of future information technology requirements by some regional councils, was one factor that led them to join the Regional Council Information Technology Consortium.
Similarly, the Opotiki District Council’s review of its future strategic information technology needs in 1997 (which pointed to high future costs of supporting an information technology infrastructure in-house) was one factor leading the council to seek the support of its regional council. This was done through existing channels of communication between the respective chief executives and other senior managers.
Building Up Capability
Capability shortfalls take different forms, including:
a shortage of necessary in-house skills; and
limited access to appropriate services in the open market.
Smaller authorities with limited resources may, from time to time, need to draw on specialist expertise, but unlike their larger counterparts may not be able to justify employing staff with the required skills. Hurunui District Council and other smaller Canterbury local authorities have entered into flexible agreements to draw on technical energy management advice from a staff member employed by Christchurch City Council. The arrangement has proven affordable for the smaller local authorities, giving them access to expert consultancy services, and producing useful energy savings as a result of applying the advice.
In another example, Opotiki District Council was concerned about the quality of service from its existing information technology contractor, but was unable to justify or afford dedicated in-house support. The council needed to replace its ageing computers within a limited information technology infrastructure, so it approached its regional council for support. As a result, Environment Bay of Plenty now services the information technology requirements of Opotiki District Council, and provides the smaller local authority with computers.
The outsourcing arrangement has enabled Opotiki District Council – a small, isolated local authority with limited resources – to take advantage of the expertise and resources of a well-established information technology group in a much larger local authority. The joint arrangement has provided benefits to both parties by giving Opotiki District Council a reliable and affordable service contract and by strengthening Environment Bay of Plenty’s support capability, and giving broader experience to its staff.
Some local authorities within a region have analysed the potential for working together. In Auckland and Southland, working parties have served as useful forums for local authorities to jointly consider a range of opportunities and proposals. Four of the 12 case studies were the result of a broad assessment of possible opportunities for local authorities to work together.
The Auckland Shared Services Representatives Group
Preliminary analysis by the local authorities in the Auckland region identified corporate support functions (such as human resources, information technology, and finance) as potential opportunities for making gains by sharing resources or combining functions. However, little progress was made in identifying feasible options, for a number of reasons:
the local authorities had little enthusiasm for such a merger, and there was no agreed direction and vision for such an arrangement;
most local authorities already had in place complex, integrated systems which would be difficult to dismantle;
investment cycles differed, and local authorities were reluctant to write off sunk investments; and
funding was not available for what would have been a major evaluation project.
We understand that the proposal also raised issues of autonomy and control for the smaller local authorities.
Different approaches within each local authority to working together, the complexity of existing systems, different stages of development within the local authorities in areas such as e-government, and limited resources available to project teams, have influenced the approaches taken to working together in the Auckland region.
In some areas, a number of opportunities arose. One example was in relation to activities associated with Geographic Information Systems (GIS), which were identified from analysis of different local authority GIS systems and associated information technology platforms. It has taken time for the Auckland Shared Services Representatives Group to identify a small number of key, discrete projects for more detailed investigation by the GIS regional working group.
Without strong business imperatives from within the Auckland local authorities to build up capability, enhance service delivery, or strengthen their ability to carry out their functions, the Auckland Shared Services Representatives Group has explored other ways to deliver benefits through working together.
The Auckland regional forum has subsequently re-directed some of its focus toward aligning standards between the local authorities (and in some cases, with central government), as a way to build a culture of working together between the local authorities and to create a basis for possible joint arrangements in the future. A GIS Working Group has established a single standard for aerial photography within the Auckland region, in order to provide more consistent data for users such as utility operators, and as the basis for working together in the future to align purchase contracts.
Similarly, the Auckland E-Local Government Working Party has adopted standards and guidelines as best practice – such as standards for metadata and web sites, drawing on standards promulgated by the E-Government Unit of the State Services Commission. The Working Party played an important role in co-ordinating the directory of local government services for the New Zealand Government Portal on behalf of the Auckland local authorities.
The Auckland E-Local Government Working Party has promoted collaboration among staff, enabling local authorities to work on joint initiatives, and has served as a regional technical resource to investigate opportunities for shared development activity and to undertake pilot projects. The Working Party has also given the Auckland region a single voice on matters affecting the local authorities, such as development of the Government portal and the introduction by Land Information New Zealand of Landonline.12
While the two Working Parties – the GIS Working Group and the Auckland E-Local Government Working Party – perform a number of useful roles, progress on their work programmes has been limited by various factors:
the time taken for local authorities to reach a shared understanding of the issues;
the need for dedicated resourcing to ensure progress with work programmes;
the absence of a business case (and associated cost/benefit analysis) to support a proposed project; and
a limited ability to influence practices in individual local authorities.
These factors have limited progress in realising measurable benefits through the region’s joint arrangements. Much of the GIS Working Group’s activity to date has not involved clearly defined opportunities. However, despite making limited progress in implementing specific projects, the Auckland Chief Executives Forum and the Auckland Shared Services Representatives Group have played a role in directing debate on options, and have made local authorities in the region more aware of the potential benefits of taking a common approach to common services.
The Southland Shared Services Forum
Set up in 2000, the Southland Shared Services Forum has been involved in a range of projects undertaken jointly by the four local authorities13 of the Southland region. The forum has endorsed and overseen a range of projects including:
establishing common advertising and collection dates for rates;
the formation of a single regional rural fire authority; and
the Our Way – Southland project.
Members have found the forum to be useful as it has:
provided a strong project management discipline with regular reporting to the forum;
helped to overcome rural/urban distinctions;
created trust; and
established a culture of working together at senior manager level.
Other Approaches to Working Together: the Taranaki Region
Local authorities may adopt their own policies of systematically identifying possible opportunities for entering into joint arrangements. In its Annual Plan 2003-04, the South Taranaki District Council records its intention to explore areas of potential joint benefit with Stratford District Council, New Plymouth District Council, and Wanganui District Council.
As part of this strategy, South Taranaki District Council has reviewed all its contracts for the potential to make savings through joint management. The shared staffing agreement between South Taranaki and New Plymouth District Councils is one of a number of joint arrangements in the Taranaki region.
A number of factors make some joint arrangements more likely to be successful than others. These factors can be used to select the most promising opportunities, and include:
a requirement to meet statutory obligations or standards;
the need to perform common functions and meet statutory responsibilities; and
net benefits for all participants.
There are some good reasons for local authorities to work together, such as when:
they can respond to the requirements of legislation or standards more cheaply or effectively;
sharing resources will bring about economies of scale, and help build capability;
common information sets or shared customers means that they can deliver services more efficiently or consistently;
staff have close professional relationships and carry out similar tasks; and
functions and responsibilities overlap or are complementary.
Although, as noted above, some regions were analysing a wide range of options, none of the joint arrangements that we examined was the product of a systematic approach to consider the factors that would make the success of joint arrangements more likely. Such consideration can avoid time and effort pursuing unproductive opportunities, and make it more likely that joint arrangements will produce net benefits.
We believe that, in some instances, resources could have been used more economically – and productive opportunities taken – had proposals been assessed at the outset, taking into account those factors that are more likely to make a joint arrangement successful. A more considered approach to exploring and identifying opportunities for working together, based on a detailed business case analysis, and taking into account success factors, would assist all local authorities to select joint arrangements to meet their objectives.
A business case presents a detailed explanation of the purpose and objectives for a joint arrangement, with a particular focus on the financial and non-financial costs, benefits, and risks, and an analysis of those options. This assessment is particularly important where local authorities are considering making a significant investment in a partnership.
Only 4 of our 12 case studies were based on a formal analysis of costs and benefits. In other cases, it was put to us that benefits were so obvious that a cost/benefit analysis was unnecessary.
A key to any business case is comparing the financial and non-financial costs and benefits of working together with those of acting alone. In considering the feasibility of a joint community outcomes process, Southland local authorities prepared a cost/benefit analysis that identified the costs of completing the required community consultation separately and together.
In some cases, the net benefits were seen to be so obvious as to make any formal assessment unnecessary. For example, councils involved in the Regional Information Technology Consortium, told us that, given the clear benefits of joining the consortium, they had seen no need to undertake a formal cost/benefit analysis.
Similarly, the decision by Opotiki District Council to enter into an agreement with Environment Bay of Plenty for servicing of its information technology infrastructure, and the arrangement between the South Taranaki and New Plymouth District Councils to share staff, were both concluded in circumstances where alternative options were not readily available.
We remain of the view that local authorities should thoroughly examine the financial and non-financial costs, benefits, and risks of involvement in any proposed joint arrangement before committing resources. The business case should reflect the scale and complexity of the proposed joint arrangement and associated resource commitment.
All business case cost assessments that we reviewed excluded in-house staff salaries, as these were viewed as a fixed cost. However, staff costs can be high, and should therefore be clearly identified so that additional resources can be assigned where necessary. In some cases, staff were spending – or had spent – a high proportion of their time on joint arrangements, with one local authority recording some 5000 hours of direct staff time on a regional project (the equivalent of one person working for a total of almost two and a half years).14
For completeness, cost/benefit assessments should recognise the amount of in-house resources required. Full information on resourcing commitments is needed to provide an accurate and reliable basis for evaluating the viability of a given proposal.
Are Joint Arrangements Delivering Value for Money?
The joint arrangements that we reviewed were likely to be providing net benefits to the local authorities involved. However, as noted below, a number of factors make a definite assessment of outcomes difficult.
In some circumstances, expected non-financial benefits (such as the provision of better, or more co-ordinated services to the public) may outweigh the higher financial costs. For example, the proposal for amalgamating rural fire authorities in Southland identified set-up costs for the new organisation. Outweighing the initial establishment costs were the projected savings in council administration, better services to the public, a wider pool of trained staff, and rationalisation of plant and equipment.
Working together can produce a range of gains for local authorities, such as economies of scale, additional resourcing, technical expertise, the ability to meet statutory requirements, improved policies or standards, and better services. We sought to compare actual benefits with projected benefits but we could not do this in some cases for reasons such as:
no formal cost/benefit analysis had been undertaken;
benefits were sometimes not able to be quantified, such as the provision of better services; and
some of the joint arrangements were at an early stage with benefits not yet apparent.
Despite these limiting factors, where possible we gathered information to assess the likely net benefits of joint arrangements. For example, smaller local authorities were able to join the Regional Council Information Technology Consortium because of the low entry cost for access to shared software, compared to the estimated cost for individual councils to create their own stand-alone technical database applications. Another important benefit was the ease with which the Consortium’s applications could be incorporated into an integrated information technology system.
Our analysis of Opotiki District Council’s estimated costs to service its future information technology needs showed net benefits from its contractual relationship with Environment Bay of Plenty. Significant factors were the growing servicing demands of the District Council’s information technology infrastructure over time, and the avoided costs of engaging its own in-house information technology support.
A factor influencing local authorities to work together was the affinity between their functions and responsibilities, business needs, and systems. A common understanding of needs, along with a shared purpose and experience, also contributed to the success of arrangements between local authorities to share staff or systems.
We identified financial and non-financial gains from most joint arrangements in the form of:
avoided costs – for example, by joint development of systems or standards, saving individual local authorities expenditure on staff or capital;
compliance with standards or statutory obligations;
savings in administration – eliminating duplication and rationalising resources;
establishing trust between local authorities, creating the foundation for working together more often;
strengthening capacity through access to skills and expertise – by combining or transferring staff resources; and
improved services to the public and improved community outcomes – for example, by creating a single point of contact, simplifying procedures, and consistent policy-making.
In some cases, however, local authorities had not assessed possible joint arrangements for their immediate positive benefits to local communities. For example, no business case was prepared to support a proposal to establish a portal (a common point of access to individual web sites) for the Auckland region.15
Nor have direct benefits for local communities been identified, in the short term, from the preparation of an aerial photography standard for the Auckland region.16 In both cases, the participating local authorities were anticipating longer-term benefits for the region as a whole from the early products of working together, such as future public access to common data from local authorities in the Auckland region.
11: The objectives of the agreed coastal strategy may be given regulatory effect in the form of rules contained in a District Plan or Regional Plan adopted under the Resource Management Act 1991. Net benefits will be determined by trade-offs between factors such as compliance costs for applicants, the practicality of agreed policies, changes in administrative costs for the District Councils and Wellington Regional Council as a result of giving effect to the strategy, and impacts on the coastal environment and Wairarapa communities.
12: Landonline is Land Information New Zealand’s electronic database of land title and survey information.
13: Environment Southland, Southland District Council, Invercargill City Council, and Gore District Council.
14: This figure excludes “front office” and management time.
15: The regional portal project was devised to establish an early success for working together at low cost and within a short time, to provide evidence of the ability of the Auckland local authorities to work together, and to help identify issues to be addressed with further improvement of electronic service delivery.
16: The preparation of a common standard is seen as a first step towards aligning contracts for the purchase of aerial photography, with the potential for contract savings through collective purchasing.
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