Best Value and Performance Management: Lessons Learned from the United Kingdom.

• Author: Harris, Jody L.

In 1999, the United Kingdom introduced a new agenda aimed at modernizing local government. At the heart of this agenda is the British government's new performance management initiative--"Best Value." Local governments in North America can take some of the early lessons learned from Best Value and adopt them to their own governments.

In 1999, Britain's Labour Government introduced an agenda to modernize local government. It is a far-reaching program designed to enhance democratic governance and improve the quality of services. It includes five key commitments, three of which are particularly relevant to the performance of local government services:

* forward-looking policy-making: policy-making needs to be more 'joined-up' and strategic; not reactive to short-term pressures;

* responsive public services: public services should be responsive to the needs of citizens, not to the convenience of service providers; and

* quality public services: public services must be efficient and of a high quality.

The program laid out for 'Modernising Government' is the basis on which the Labour party's re-made performance measurement effort, Best Value, is built.

Best Value is the term used by the United Kingdom's (UK) national government for its performance management initiative. Broadly defined, it is an ongoing process of assessment and improvement involving stakeholders throughout. It is broader than performance measurement, but performance indicators are at its heart. The focus is clearly on changing the culture of organizations and assessing the overall performance of local governments in providing services.

Local Government in the UK

Local governments in the United Kingdom provide the following local services:

* social services,

* housing services,

* land-use planning,

* economic development,

* transport and roads,

* local environment,

* trading standards,

* leisure and recreation,

* fire service, and

* voter registration and elections.

City and county local authorities do not provide education or police services, rather these are provided by independent education and police authorities. Health care (including ambulance services) is a national program administered by the National Health Service.

A major responsibility of UK local authorities is the provision of housing services, including acting as major landlords for nearly five million housing units nationwide, both subsidized and nonsubsidized rental properties. They are responsible for collecting rents and maintaining and repairing properties, as well as playing a strategic role in assessing local housing need. Many of the national performance indicators are geared toward this housing function.

A Strong Central Government. UK local authorities derive their authority from parliamentary legislation. As a result, the Central Government has significant control over their internal affairs. In addition to determining which services it will provide, the salaries and wages of local authority staff are negotiated centrally to provide some uniformity among wage rates nationally. More important, the Central Government provides more than 80 percent of the revenue that local authorities collect to fund their services. Further restrictions apply in the form of a cap on how much Council tax (i.e., a local revenue based on the value of domestic property) it can raise. The formula for business property tax also is set by the Central Government.

In its oversight role, the Department of the Environment, Transport, and the Regions (DETR) not only imposes a system of measurement on local authorities, but also specifies performance indicators and targets. It assesses local performance and takes remedial action where necessary to ensure high-quality local services. It also requires local authorities to publish their results.

"The sheer extent of control cannot be underestimated." An article by one commentator on local government finance was headlined, "Stalin would have been impressed. Even he could not have established such detailed control over local programmes as Whitehall has achieved."

Performance Measurement in the UK

UK local authorities have been tracking and reporting on a set of national performance indicators since 1992, but the roots of this national measurement effort go back farther. The earliest genesis of performance measurement in Britain was Compulsory Competitive Tendering (CCT); a mandatory competitive bidding program for local services that was enacted under Britain's former Conservative Government. CCT was designed to root out inefficiencies in local government services and to privatize as many of those services as possible.

The Conservative Party government of Prime Minister Margaret Thatcher put great faith in the ability of the private sector to provide local government services. Under CCT, the government set out a specific set of local government services that had to be bid out. In fact, the Local Authority could only provide the service in-house if it won the work as a bidder in the competitive process.

The effect of CCT on local government services was generally good (i.e., generating cost savings with no detrimental impact on quality), although some local authorities argue that CCT costs more to administer than is gained in efficiency savings. Researchers attribute the stated benefits of CCT to the process of competing rather than to the fact that services are provided by a superior private-sector vendor A significant result for performance measurement has been that the cost of providing specific local government services is well understood.

In 1991, under Prime Minister John Major, the government went a step further, desiring to improve public services in addition to making them more efficient. Citizen's charter legislation set out the standards of service that consumers could expect from government. 'Charter marks' were to be awarded to the most successful providers of public services. Citizen charter performance indicators were developed and it was then that, for the first time, local authorities were required to measure and publish their performance against a set of nationally defined standards.

The Labour Party who were 'in opposition' during this time (i.e., not in the majority ruling party), were severely critical of CCT. Conservatives, they said, were wont "to know the cost of everything, but the value of nothing." Following their election in 1997, the Labour Government moved to repeal CCT and replace it with Best Value; a more rounded regime. The Local Government Act 1999 received Royal Assent and abolished CCT. It was replaced on April 1, 2000, with best value.

Best Value

Best Value encompasses three crucial elements: economy, efficiency, and effectiveness. Economy relates to how much a government service costs and whether it can be done more cheaply. Efficiency refers to whether 'better' service can be achieved with the same amount of money. And effectiveness refers to the achievement of proper outcomes. The focus on effectiveness (outcomes) is a significant addition to UK's overall measurement system.

Best value replaces the prescriptive requirements of CCT with a duty for local authorities to get 'best value' for tax money spent, and it allows decisions about service provision to be made at the local level.

The Four Cs of Best Value. The Best Value legislation has four principles which require local authorities to ask themselves some hard questions.

* Challenge--Why are we providing this service? Should we be providing this service? Could we achieve our objectives another way?

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