Making service delivery more efficient by working together. Spanish experience

Measuring the efficiency of public sector service delivery has attracted increasing attention and is a major concern among many public authorities worldwide. Many governments place focus on assessing and monitoring the efficiency and effectiveness of the actions and services provided by public authorities. In a context of limited resources, the challenge for public authorities is to ensure that public service delivery remains as unchanged as possible. This can be done by minimizing expenditure overruns caused by inefficiency thanks to adapting the level of production of local authorities providing services. In Spain, Law 27/2013, of December 27, 2013, on the rationalization and sustainability of Local Administration modified how the provision of public services by municipalities was organized, encouraging collaboration among them, with other levels of government and private organizations.

As a part of our research within TROPICO WP9: Effects of Collaboration for Government Efficiency, we look into efficiency of the waste collection sector. We chose this type of service because it is a typical public service provided by local authorities all over the world and, together with urban transport and street cleaning, is the most resource-intensive service at local level. For this service, Law 27/2013 determined that small (less than 5,000 inhabitants) and medium-sized municipalities (between 5,000 and 20,000 inhabitants) must collaborate to provide the waste collection service. The municipalities can only provide this service individually if they demonstrate that it is less cost-effective.

In our research, we analyzed the efficiency of Spanish municipalities in the provision of waste collection services in 2018. Our goal was to find out whether there are differences in the levels of efficiency, management and scale of the service, between municipalities:

• of different sizes (small, medium and large) and
• between those that provide the service individually or in collaboration.

We also looked at other factors connected to the context of the collaboration that can affect the efficiency of this type of services: the population density in the municipality and the ideology of the governing political party.

We used the DEA (Data Envelopment Analysis) methodology to evaluate efficiency. This methodology assesses municipalities’ efficiency by comparing their results with the so-called efficient frontier. In this methodology, the efficient frontier is constructed based on the relationship between inputs and outputs of the provided service. We use the total cost of the service as an Input to carry out the DEA and the tons of waste collected annually, number of containers and frequency of waste collection as outputs. This method is especially suitable to evaluate the efficiency of non-profit organizations that operate outside the market. This is because traditional measures of efficiency (like income, profitability) do not work satisfactorily in this framework as such organizations are not focused on obtaining profits. Moreover, their main sources of financing do not come from the sale of goods and services.

In our analysis, we looked at 608 municipalities: 303 small, 164 medium and 141 large municipalities. Most of these municipalities provide the service through some type of collaboration. Such collaborations  are more common in small and large municipalities than in medium-sized ones.

Our preliminary results show that most medium-size municipalities provide the service with the correct level of production compared to the costs they bear. However, most small municipalities will achieve higher efficiency if they increase their level of production and most large ones will be more efficient if they reduce it. We also found that those small and large municipalities that provide the service in collaboration are closer to the efficient scale of service provision than those that provide the service individually.

When it comes to the context around the service delivery, the results of our study show that population size is another factor that had impact on the efficient delivery of services by municipalities. At the same time, population density proved not to have similar impact. Moreover, there are no differences in the efficiency between municipalities ruled by the conservative parties compared to those that are led by socialist political parties.

These results provide an empirical basis for promoting multi-municipal collaborations by reorganizing the size and operation of delivery of some public services. Municipalities should consider that there seems to be a cap and a floor in the average size of the population to be served. Last but not least, those municipalities that are operating above or below their optimal scale can reach or get close to the optimal size if they collaborate with other municipalities or with private companies.