Exploring the Key Issues
Graham Sansom
LGNSW Regional Collaboration and Shared Services Roundtable March 2015
Current contextImmediate need to address FFTF ‘scale and
capacity’ criterionParticular challenge for some smaller (in
population) rural-remote councilsFederal and State grants to councils likely to
decline in real terms:Federal deficit and pressure in turn on
StatesFAGs freeze means permanent 13% cut,
could be moreContinuing shortages/high cost of skilled and
experienced personnel
Councils exist in systems of governmentLocal government is government:
Not just service deliveryAdvocacy, planning, community and economic
development, environmental management etc are crucial
Complexity and changing functions are inevitableOrganisation frameworks need to adapt
Inter-government relations are fundamentalLocal leaders must understand state and federal
systems and learn how to manage relationshipsRegions offer a meeting place and platform for
collaborative relations:Amongst councilsWith State and federal governments; other
stakeholders
Many years and many models‘Core’ NSW models are County Councils and
ROCsROCs since 1970s; County Councils long before that
Variations:Alliances promoted strongly post 2004 forced
amalgamationsWellington-Blayney-Cabonne (shared services focus)Lower Macquarie Water Utilities (special purpose)
‘Overlays’:Various State regional/strategic planning committeesRegional development bodies – State and federalTourism boards/associations; regional libraries etc
Multiple models often co-exist in one regionBut overall, lack of a consistent, concerted
approach to regional collaboration (often ‘stop-start’ initiatives)
County CouncilsLong history across a range of joint activities:
Electricity, planning (Cumberland), flooding, weeds etc
Now only 145 water (one also sewerage0, 8 weeds, 1 floodplain
management‘Councils’ under LG Act (exempt from some
provisions); formed by Minister (but councils can initiate); separate proclamation for each
Member councils elect delegates, but then County operates largely independentlyLack of formal governance/decision-making links
Other relevant examplesNZ Council Controlled Organisations
Voluntary but formal company structure with separate board; annual operating agreements with shareholder councils
Victoria Regional Management Forums8 regions; State agency heads plus council CEOs,
other stakeholders; wide brief to promote collaboration; no Act or dedicated
Queensland Regional Roads and Transport GroupsState department-LGAQ agreement; network
planning; allocate State funding for regional roads
Expected benefitsRegional collaboration/shared services typically
undertaken to achieve one or more of:Economies of scale – combining requirements for
resources, products and services Economies of scope – working together achieve a
critical mass in order to provide a wide range of services
Improved service quality – through greater expertise, improved access and specialisation
Organisational development – sharing of staff skills and expertise
Increased strategic capacity – a higher level of capability to plan and act more strategically and effectively
Stronger regional advocacy – strategic plans, policy issues
Increased funding support – for major services/infrastructure or regional ‘special projects’
Reviewing the evidenceWhat works and why – or why not?Do regional collaboration and shared services
offer a viable alternative to amalgamations?What are the pre-conditions for success?What are the concerns and risks that have to be
addressed?
Gooding Davies report on ROCs (2012)
“….[ROCs] are the primary form of multi‐purpose shared services provision by local government…
Nevertheless, the delivery of shared services by ROCs remains patchy and uneven. This reflects the disparate size, number and wealth of participating councils, as well as variations in factors such as the level of commitment and institutional leadership involved. These factors apply to all forms of shared services activity…
“… the key factor was a fear that by greatly
expanding their role ROCs could become or be perceived as either a ‘fourth tier’ of government or even a replacement for their member councils.”
Shared services (Dollery et al)
“…given that scale and scope economies do exist in some specific local government services… the best way to achieve larger scale economies in these selected functional areas is for councils to enter into collaborative shared services agreements…” (2012)
[But] “… it is important not to ‘oversell’ this message by way of exaggerated claims for what shared services models can realistically achieve … shared services models have their limitations which must be recognised.” (ibid)
[And] “… there are often significant barriers to the implementation of shared service arrangements, which are difficult to overcome, including the loss of ‘local identity’, the complexity of the processes involved, conflicting objectives between participating councils and uncertainty surrounding potential benefits.” (2011)
NB: Failure of New England Strategic Alliance
Critical dimensions (Somerville and Gibbs 2012)
Organisational culture - shared services development requires strategic thinking, a careful approach to risk taking
Leadership - building trust amongst the partners, a clear vision and a commitment to communication.
Flexibility - to move away to a provider/producer split between the council and the shared service entity.
Existing relationships - building a foundation for the development of shared services
Strong change management process - to overcome any institutional obstacles.
‘Joint Board’ model (Dollery and Johnson 2007)
Draft paper prepared by Shires AssociationIdea that two or more councils would fully share
their administration, overseen by a Joint Board of councillors
Findings:“… constituent councils would each retain their
current political independence, thus preserving extant local democracy, while simultaneously merging their administrative staff and resources into a single enlarged bureau, in an attempt to reap any scale economies, scope economies, or other benefits that may derive from a larger aggregated administration.”
Could achieve savings of 10% or more
Amalgamation Shared ServicesRegional
Collaboration
Efficiency and Economies of Scale
Strong link Strong link Weak link
Strategic Capacity
Strong linkMedium-strong link subject to governance
Weak link
Service Improvement and Innovation
Strong linkStrong link for services that are effectively shared
Depends on nature and scope of collaboration
Potential Diminution of Local Democracy
Distinct risk, but can be managed
Risk where decision-making is ceded to joint agency
Little or no risk
ACELG ‘Consolidation: A Fresh Look’
ILGRP ToR and objectivesOptions for governance models, structural
arrangements and boundary changes:To improve the strength and effectiveness of
local governmentTo drive key strategic directions in
‘Destination 2036’ and the NSW 2021 State Plan
Goal:A more sustainable system of democratic local
government that has added capacity to address the needs of local and regional communities, and to be a valued partner of State and Federal Governments
Focus on building ‘strategic capacity’
‘Strategic Capacity’… coping with complexity, uncertainty and change
Relevance• Places and
communities• Valued
partner in government
• Role in wider agendas
• Innovation and creativity
Credibility• Improved
political governance
• Role of mayors• Comparative
benchmarking• Leadership by
larger councils
Resources• Finance/asset
management• Rates revenue• Skills (inc
strategy, policy, IGR)
• New ways of working
• Productivity
Logic of Joint OrganisationsPart of a package to enhance strategic capacity
Offer an alternative to amalgamations (provided obstacles to robust shared services can be overcome)
Offer support to small rural-remote councils Flexible model tailored to different needs
Decisive move away from ‘one-size-fits-allBuild and improve on established practice
NSW ROCs, County Councils, alliancesRelated models inter-state and overseas
A vehicle for effective collaboration with State agenciesLocal government would have ‘critical mass’ and
cloutMergers and Council of Mayors (SEQ model)
preferred for metro Sydney – sheer number of councils is a fundamental issue
Defining regionsNot a ‘deal-breaker’ provided structures are
flexible:There can be sub-regional clusters and different
‘interest groups’ with a wider region (eg WBC in the Central West)
One region can have a service agreement with another (eg water utilities)
ILGRP achieved broad agreement amongst key agencies, but momentum seems to have been lost
Key factors for ILGRP:Building on current arrangements, especially ROCsAlignment with State and federal agencies for
strategic planning, program coordination Viability of a regional alliance of water utilities (at
least 10,000 connections)A regional centre with capacity to ‘anchor’ the JO and
to assist smaller member councils where required.
Proposed Non-Metro Regions
Proposed Metro Sub- Regions
Proposed governance frameworkNew provisions in LG Act to replace County
Councils Mandatory active membership by councils in
regionSeparate negotiated proclamation for each JO to
establish governance/financial arrangements, plus agreed functions
Governing body of mayors, but proclamation could allow additional council representatives and observers/advisers (including from outside member councils)
JOs can establish subsidiaries with skills-based boards
Subsidiaries have annual operating agreement with JO governing body
AGMs open to all councillors and to the public for accountability and discussion of future activities
Proposed core functionsStrategic regional and sub-regional planning
Integration with State regional coordination system
Regional advocacy and inter-governmental relations
Collaboration on key infrastructure (water utilities, road network planning, major projects)
Regional economic development a nd environmental management
Library services‘High level’ corporate services (including
procurement)Other shared services as agreed (but expected to
be substantial)
Suggested Structure for Joint Organisation
SA Local Excellence Panel proposal
ConclusionLocal government faces an uncertain future in
difficult timesIt needs greater capacity and credibility as
government Reform must be multi-dimensional:
A mix of mergers, shared services and other forms of regional collaboration – there is no single ‘right’ approach
Objectives vary and any approach may ‘succeed’ or ‘fail’ depending on the circumstances
Regional collaboration is tricky – especially building trust
Purely voluntary (opt-in/opt-out) regional collaboration doesn’t deliver solid, long-term gains
Mandatory or durable, far-reaching shared services is in many ways little different from mergers
We need to review past experience, look at a range of current arrangements, and develop new models if necessary