Research Paper on Shared Services and Local Governments

Introduction

Local governments are always tasked with the duty of providing a wide array of services to the public (Cooper & Timmer, 2015). Some of these services are complex, costly, labor-intensive and time-consuming. Some of these services include but are not limited to the development of recreational sites, public infrastructure development, and maintenance, communication, public health and education. The sharing can be implemented as joint ventures, public-private partnerships, contractual agreements or special purpose vehicles. This implies that any local government cannot comfortably provide all services without considering the option of sharing roles and responsibilities. In the arrangement of shared services, local governments increase their capacity to offer better services, reduce the overall cost incurred in offering the services, cut down the overall response time, eliminate instances of duplicate services, promote equality and enhance interactivity (CGI Group Inc, 2015). Local governments also find it easy to make a quick decision and informed policies in situations where service delivery is shared. This literature review will delve on the various reasons that compel local governments to consider sharing services.

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Legality of the Process

It has been established that the US government adopted the option of shared services in the 1980s (CGI Group Inc, 2015). The administration needed to solve critical issues related to administration and payroll through inter-agency cross-servicing initiatives. This was accompanied by gradual acceptance in the form of franchise funds which prompted the enactment of the Government Management Act of 1994. The main goal of this legal document was to provide a framework through which administration can enhance competition and cut down operational costs by inviting business entities to provide services on behalf of the government on a reimbursable basis. In 2013, a shared service implementation guide was developed by the government.

In recent years, the U.S government has shared services related to IT and technology. In 2012, Obama's administration developed a strategy for shared services regarding IT services and products. It is evident that the government has been at the forefront of promoting the ideology of sharing services by actively enacting laws and implementing similar strategies. In 2002 the government enacted the e-government act and rolled out the e-government initiatives. In 2006, sharing services were considered for delivery of services in the line of business. In 2009 and 2014, payroll consolidation and Federal financial shared services, respectively, was rolled out (CGI Group Inc, 2015). The trend has trickled down to the local government, and sharing services has been considered a beneficial strategy for dispensing public good within the law and established a legal framework. In New York, Article 5-G of the General Municipal Law, under section 119-m through 119-00 provides legal approval for the municipal government to adopt sharing of services. The legal framework provides thresholds that must be considered before engaging other entities in sharing services.

Cost Savings

The need to save costs is one of the primary reasons that push local governments to consider sharing services. Existing literature reveals that shared service can minimize the administrative cost and the overhead costs in local governments (Dollery, Kortt, & Drew, 2016). Similar results have been obtained in Australia through the adoption of a common service model by the rural and remote councils. Cost avoidance is a critical consideration for local governments (DiNapoli, 2009). Some venture may produce immediate benefits while others have long-term benefits. It is also evident that success stories from similar approaches have helped administrations to save costs (Burns & Yeaton, 2008). In addition, risk associated costs are transferred to the partner involved in the project. Consider the situation where a local government intends to implement a new technology whose outcomes are uncertain, and the risks are significantly high. Sharing services would imply that the burden is shifted from the administration to the contractor who will bear the cost of risks and uncertainties. Studies have revealed that the aggregate saving in UK ranges between 10 to 35 percent; 10 to 25 percent in the US; 10 to 20 percent in Canada and; 30 to 50 percent in the Netherlands (Drew, 2011).

Fiscal stress is an important motivator for local governments to consider sharing services (Sipple, n.d). An example can be established from New York where schools and municipalities have encountered fiscal stress, reduction in federal aid, high pension, property tax cap and increased healthcare costs (DiNapoli, 2017). These conditions have made the New York unable to meet its revenue goal; which demands optional strategies to fund services such as education. In New York, The fiscal stress is widely experienced by cities and districts. Sharing services provide the administration with an avenue of saving the municipal schools through inter-municipal arrangements. Social services and recreation are other forms of services that are shared in New York. Municipalities in the state have taken the initiative to share services with other municipalities and non-profit organizations to cut down the cost of service delivery.

Nature of Services

The simplicity, complexity, magnitude, and cost of a service delivery project are significant considerations for local governments whenever deliberating on the benefits of shared services (Australian Institute of Management, 2012). Services that are characterized by complexity in implementation, labor, and technology intensive and high risks can translate to high costs. These issues justify the need for local governments to opt for shared services. The local administration has to research and establish a realistic business case to convince the politicians and other stakeholder to consider alternative implementation strategies. A comparison between the human resources and experience of the local government staff may not match that of the private sector regarding delivery of specific services. This means that some private entities can comfortably offer quality services compared to the local government. For example, a private IT firm may provide better technology and services on behalf of the local government. Alternatively, a construction company may possess advanced technology and equipment to complete infrastructure projects on behalf of the local administration within a specified time and budget. Therefore, shared service allows specialized private entrepreneurs to offer quality services in their areas of specialization. Not all approaches to sharing services have monetary value for the entity involved. For example, the provision of emergency services can be shared by organizations such as the Red Cross. In New York, the law provides for Municipal Corporation which may include counties outside the city, villages, towns, fire districts and cooperative educational services.

Political Factors

Local governments are headed and controlled by political leaders; a situation that incorporates politics in most of the procedures and decisions made at this level. Political leaders often play a crucial role in determining the services that should be shared and the organizations that qualify to offer the services (Hepburn, LeSage, & McMillan, 2004; DiNapoli, 2009). Another study in Australia also reveals the significance of political sponsorship in sharing services that involve several agencies and departments (Australian Institute of Management, 2012). The US democratic system of governance provides an opportunity for the minority to have a say while the majority have the way. The opposition can support or jeopardize any efforts by a local government to involve the private sector in sharing services. Therefore, support from political icons can greatly influence decisions made by any local government. Politicians play an important role in the establishment of by-laws that can affect the sharing of services; where they can adopt or reject the sharing option. It is essential to note that the involvement of politicians can promote public or personal interest.

Efficiency and Effectiveness

A review of shared services as applied in countries such as United States, United Kingdom, Australia, and other parts of Europe reveals that the process often guarantees efficiency and effectiveness (Drew, 2011). In the UK, the program is rolled out by the Department for Communities and Local Government (DCLG) strategic Partnering Workforce (Drew, 2011). The program has proven to be successful in different parts of England (McKinlay, 2011). The Bromley shared service center involved back office support and ICT function which resulted in reduced processing and collection time, and excellent customer services. A joint venture in Birmingham was established to provide ICT systems, procurement, and customer services; this resulted in the development of an integrated system. It is also revealed that the UK adopted the sharing of services as a way of inviting creativity and innovation in service delivery. Similar results have been obtained from case studies conducted in Australia where services such as record management, ICT system development, training provision, planning, and procurement have been shared. In return, Australia has witnessed improved project outcomes, public confidence, quality services, and creativity.

Technology and Innovation

In most cases, local governments are motivated by the opportunity of acquiring the latest and most efficient technology through sharing of services. Technology innovation and development is diverse and subject to competition; this means that private entities have adequate capacity to produce efficient technologies especially in the ICT sector; which can be tapped by contracting the services of the innovators. Sharing services further provide an avenue for the local government to access the skills and expertise of professionals.

Sharing of services has been supported as a primary tool for promoting sustainability in service delivery. A study conducted across Pennsylvania revealed that shared services are always beneficial in policing, fire, streets, roads, emergency medical services, waste collection, sewerage services, and water supply. (Delaware Valley Regional Planning Commission, 2013). So far, the approach has been able to provide the locals with excellent services. It is also elaborated that sharing services allow local governments to easily introduce and implement new services where they have never existed. Cases of duplication are also minimized, and the administration can save costs. In addition, local governments trigger competition and aggressiveness which can encourage outside funding. It is important to note that the benefits vary from on local government to another depending on the type of services. Different local administration may have varying drivers for considering the option of sharing costs with the community, non-profit organizations or entrepreneurs.

References

Australian Institute of Management. (2012). Shared service in the public sector: A triumph of hope over experience? White Paper August 2012, Retrieved from https://managersandleaders.com.au/wp-content/uploads/2016/12/AIM-Research-Shared-Services-Public-Sect...