Making local government more workable through shared services.

• Author: Ruggini, John
• Position: Successful intergovernmental partnerships

In this era of "permanent fiscal crisis," local governments have no choice but to seek out new and better ways of providing the services citizens demand within the constraint of available resources. (1) This may explain why nearly twice as many (58 percent to 31 percent) local governments in 2002 as in 1992 contemplated alternative service delivery methods such as privatization. This article examines one particular method that has long been used by governments but receives much less public discourse than privatization--shared services. Based on interviews with jurisdictions with established shared service arrangements as well as a thorough review of the literature, this article will define shared services, including a continuum of arrangements; discuss the advantages and disadvantages of this form of service delivery; and present lessons learned from successful intergovernmental partnerships.

DEFINING SHARED SERVICES

For the purposes of this article, the term "shared services" refers to "intergovernmental cooperation at the local level either by formal written contracts or by informal verbal agreements [which] often provides a workable method of meeting particular problems." (2) This is how shared services was defined by the Federal Advisory Commission on Intergovernmental Relations in a 1961 report. According to the 2002 ICMA survey, 17 percent of all local services nationwide are delivered through some type of cooperative arrangement. This is the third most popular form of service delivery behind local employee delivery (52 percent) and privatization (26 percent).

In practice, shared services reflects a continuum of arrangements ranging from a handshake agreement between two villages to share equipment to the complete consolidation of cities and counties. Most examples fall in between these two poles and represent nearly every service provided by local governments--from human resource administration to public safety services.

As shown in Exhibit 1, at one end of the spectrum are the simplest and most common cooperative arrangements, handshake agreements. These are essentially informal agreements between jurisdictions that only require interaction on an as-needed basis. They are used to produce operational efficiencies for both parties without impacting the operational structure of either party. At the opposite end of the spectrum is consolidation. Through these arrangements, service provision and delivery responsibilities are unified under one entity.

Between both poles are service contracts and joint agreements. Under a service contract, one jurisdiction contracts with a second for service delivery. In the case of joint agreements, both entities share responsibility for service delivery. In both cases, participating jurisdictions maintain responsibility for service provision. The main differentiator between the two is that in the case of joint agreements, a new functional entity is created to deliver a service to participating jurisdictions; this might be a special district to provide for sewage treatment or a jointly operated dispatch center. Participating jurisdictions are required to develop common goals for service delivery and often a new governance structure for that service. The new service may supplement each entity's existing service, such as joint purchasing, or supplant it altogether, such as in the case of a regional police agency.

While service contracts typically result in one jurisdiction giving up service delivery responsibilities through contracting, this is not typically the case for mutual aid agreements among emergency responders, shared facilities, or joint ownership of equipment. Such arrangements are categorized under service contracts because of the degree of formalization and ongoing joint coordination required (as opposed to handshake agreements) and because they typically do not involve the creation of a new entity (as opposed to joint agreements). (3)

As one moves along the continuum, the service environment becomes more complex and the associated risks for failure grow larger; however, the potential return on investment also increases, in both financial and service quality terms. At this end of the spectrum, critical success factors become increasingly important. For example, the primary reason few merged government proposals succeed is because of the high degree of political support and trust required. These components are not absolutes nor are they comprehensive--there are clearly more success factors required. For example, timing tends to be critical--the retirement of personnel can open up opportunities for a joint agreement that were not previously possible. Nevertheless, these factors are important to consider when developing a process for implementing shared service agreements.

WHY SHARE...