Shared Services: Cost Savings Through Economies of Scale

There has been much talk lately about information technology "shared services" between the Plainfield Board of Education and the City of Plainfield. The last time this was done or attempted, the City paid over $100,000 to the BOE and, to this date, the City has not been able to show the consideration received in exchange for the dollars handed over. As of this writing, I have yet to see an analysis of the benefits derived by the City as a party to that agreement.

Shared services must be more than the signing of an agreement and having one party turn over a check to the other--there must be some tangible measurable benefits derived by all parties to the agreement. There must be savings and or quality improvements!

The New Jersey Division of Local Government Services (DLGS) has been, since 2006, encouraging governmental entities to enter into shared services agreements where it makes sense to do so, and it has published a SHARE (SHaring Available Resources Efficiently) "best practices" handbook to guide municipalities interested in exploring shared services with neighboring municipalities, local school districts, or with county government. The theory of sharing services is simple: cost savings through economies of scale. Click below to download:

SHARE BEST PRACTICES HANDBOOK

The DLGS in the Department of Community Affairs has also made grants available as a means of encouraging the pursuit of shared services agreements. Known as "SHARE," this program provides grants for feasibility studies, implementation, and for county and regional coordination.

One thing that is very clear to me: before taking the plunge into shared services there should be “estimates of cost savings and/or quality improvements.” It should not be about stroking egos, or covering up for shortcomings. It must be about the best interests of all parties.

I am opposed to any shared services agreement that simply takes money from one side of the taxpayer’s ledger and moves it to the other side without a clear articulation and demonstration of cost savings and/or quality improvements. I am for shared services agreements that would result in the delivery of services in a more cost-efficient and effective manner.

The attached handbook provides a plethora of ideas for shared services agreements and cost savings. All these ideas should be evaluated with a view towards embracing those that would deliver real savings. Municipalities should approach the shared services waters with cautious optimism and must avoid testing the depth with both feet; it might be more than they bargained for.

The SHARE best practices handbook should be read by all governmental entities before they take the plunge into the shared services waters in search of savings. The savings must be identified before the plunge is taken. Remember the old adage: “Only fools test the depth of the water with both feet.”

Regards,

Adrian