Squaring the circle Long-term control of public service management costs, public programme simplification and more efficient public spending
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
www.pwc.fr
Squaring the circle
Long-term control of public service
A PwC analysis
with recommendations management costs, public programme simplification
for action and more efficient public spending
Contents
Summary........................................................................................................................ 3
Introduction.................................................................................................................... 5
Why the method needs to change.................................................................................... 6
Area of focus 1............................................................................................................ 6
Area of focus 2............................................................................................................ 7
Area of focus 3............................................................................................................ 8
Area of focus 4............................................................................................................ 9
How we can introduce change....................................................................................... 10
Area of focus 5.......................................................................................................... 11
What needs to change ................................................................................................... 12
Our recommendations for action................................................................................... 15
Area of focus 6...........................................................................................................17
Area of focus 7.......................................................................................................... 19
Area of focus 8.......................................................................................................... 21
Area of focus 9.......................................................................................................... 21
Area of focus 10......................................................................................................... 23
Conclusion.................................................................................................................... 24
About PwC.................................................................................................................... 29
Summary
The answer to the question "Is it possible to The method we recommend, which is neutral
reduce public service management and non-partisan, aims to systematically
costs?" appears to be a resounding "Yes". identify and analyse all of the factors that
structurally contribute to management
However, the question only really makes sense costs and potential cost deviations.
if cost reduction is viewed not as the ultimate
goal, but rather as a consequence of The method is based on four key initiatives:
a broader, more dynamic plan to modernise (i) promoting accountability, (ii) identifying
public programmes. problem areas, (iii) measuring and comparing
results and (iv) streamlining and simplifying
At a time when France is rolling out a series processes. Together these initiatives aim to
of measures to slash red tape for businesses, develop and establish a coherent, robust
we should also keep in mind that framework for implementing reform and
simplifying public services and reducing costs controlling costs within a timetable of 18 to
for public service users does not automatically 24 months starting in autumn 2014.
mean increasing complexity and costs for
public organisations. Built on crucial imperatives and compatible
with government commitments, the
The solution involves setting and working framework we are recommending is also a
towards an objective and developing way to strongly encourage public sector
a pragmatic and consensus-based approach, players to assume greater responsibility and to
as well as closely monitoring the process make politicians and citizens/service users
over time. aware of the "total cost" of a public service, in
order to contribute (both at an individual and
The objective must be firmly focused on both collective level) to understanding, analyses
simplifying public programmes and and decision-making.
controlling the costs of public services over
the long term (rather than achieving an The idea is to (re)enable all politicians, civil
immediate but unsustainable reduction). service employees and other stakeholders in
the reform process as well as public service
beneficiaries to fulfil their responsibilities and
make decisions based on potential outcomes
and impacts (whether to take a particular
I would like to see a lean and effective course of action, take a different course of
French State, which continues to meet action or take no action at all).
our needs. We must aim to prevent costly
overlap and make the system, which In this way, we present strategies in this
becomes ever more complex each year, document for identifying the symptoms of
more comprehensible. dysfunction, addressing the root causes and
making the system generally more agile in the
Bernard Cazeneuve, interest of sustainable efficiency.
Minister of the Interior - July 2014Introduction
Rapidly developing a process While the road map he presented They are also influenced by insight and
and method to modernise the in June 2014 stressed the importance feedback provided by Strategie&1, PwC's
French State of digital technology and simplifying new consulting business, and the wide
administrative procedures for French variety of engagements carried out by
Since the appointment of the first Valls citizens, the actual method for PwC's various teams abroad.
government in the spring of 2014, efforts establishing a collaborative reform
to modernise public programmes have process to monitor the efficiency In particular, some of our
gathered pace in light of new and cost of each public policy still recommendations directly derive from
developments and challenges. These remains unclear. work carried out over a number of years
include the announcement and by PwC's Public Sector teams in the area
implementation of the Competitiveness of organisational agility, as described in
Pact, the Accountability Pact and the I n the future, studies such as "Défense agile | L’agilité
Solidarity Pact, the search for new ways the French State des organisations : mythe ou réalité?
to increase room for manoeuvre (e.g., will be more Constats, réflexions et perspectives"
Valls’s much-talked-about plan to agile and more ("Agile defence | The agility of
achieve €50 billion in savings), the organisations: myth or reality? Analyses,
collaborative.
definition of the first 50 measures in observations and outlook" – PwC study,
France’s recent red tape-slashing winter 2012-2013) and "Etat
initiative, the conclusions and forecasts Thierry Mandon, déconcentré : le laboratoire de la
given in a report by France Stratégie Secretary of State for State Reform modernisation de l’action publique"
called "Quelle France dans 10 ans?" and Simplification (Rencontres des (The decentralized State: the laboratory
(What France will look like in ten years' Acteurs publics [Meeting of public sector to modernise public programmes – PwC
time) and lastly the regional reform bill players], 1 July 2014) study, summer 2013).
passed by the French National Assembly
last July and subject to a second reading Some of these studies echo certain
in the French Senate in autumn 2014. Ideas for developing the right proposals put forward by the Terra Nova
method, based on our think tank's working group chaired by
Efforts to modernise the French State experience Jacques Sauret: "L’action publique et sa
were given a further boost by the modernisation : la réforme de l’Etat, mère
appointment of a dedicated secretary This document is intended to provide de toutes les réformes" (Modernising
of state, working under the authority ideas for concrete, pragmatic steps public programmes: the reform of the
of the Prime Minister. towards developing the right method. It State, mother of all rreforms – December
The new Secretary of State for State does so by focusing on three key, 2013)2. However, our proposals differ on
Reform, Thierry Mandon, said last June interdependent factors in modernisation: certain points, especially when it comes
that he believed it would take four controlling public service management to the concept and the consequences of
months to prepare a "systematic action costs over the long term, simplifying agility – a now frequently used term that
plan" and two and a half years to public programmes and making public is nonetheless rarely clearly defined or
“lay the essential groundwork". spending more efficient. applied. We hope that the analysis we
provide in this document will further
The observations made are based on the enrich the process.
experience of our audit and advisory
teams, who have developed an
understanding of the budgetary,
financial and cost control issues involved
in managing and running organisations
in both the public and private sector.
1/ Formerly Booz & Company.
2/ Particularly proposals 6, 7, 13, 17 and 18
of the Terra Nova report.
Squaring the circle – 5Why the method needs to change
Finding a way out of the • This can have negative consequences: AREA OF FOCUS 1
current paradox the activities and departments which
are already cutting costs are often The MAP plan: inadequate
Four key reasons why change is vital. called upon to further reduce their consideration of costs and a so-far
expenditure. The old structures remain opaque method of reform
The inefficiency of the method in place, along with the old working
generally adopted until now methods and habits, while quality of As regards controlling costs and expenses,
service and staff morale are at its meeting on 18 December 2013, the inter-
The central aim of controlling costs compromised over the long term. departmental committee for the modernisa-
and more particularly looking for Different political agendas and tion of public programmes (Comité
ways to reduce them, often leads to a indiscriminate, across-the-board cuts interministériel pour la modernisation de
vicious circle: undermine coherence and cohesion, l’action publique – CIMAP) again underlined
while vital new investment projects do the obligation of its public programme mod-
• Most organisations which set cost not receive adequate funding... and ernisation plan (Modernisation de l’action pub-
reduction objectives rarely achieve despite all this, excessive costs lique – MAP) to comply with France's
their targets or are unable to show continue to be an issue. budgetary commitments by setting quantita-
whether real savings have been tive economic objectives, some of which were
achieved as a result1. Where savings It should be noted that efforts to control included in the nation's stability programme
are made, they rarely prove to be public spending have so far barely for 2014-2017.
sustainable and underlying problems remedied these failings. The results they
are not resolved. have delivered have either been Despite this, the potential savings enabled by
• There is risk of committing to repeated insufficient or inconsistent, or their focus the 185 measures decided on over the course
cost reduction cycles without funda- has been too narrow, based on a sector- of the first four CIMAP meetings, estimated
mentally changing the strategic, specific or "pointillist" organic approach at between €5 billion and €7 billion, remain
organisational and operational which is ultimately not sufficiently well below the target of €50 billion.
approach. systematic or methodical.
Some have had relative success but at In fact, a method has barely been developed
the cost of a drastic reduction in quality for the MAP plan, the assumption being that
of service, which has permanently modernisation would automatically lead to
overshadowed any perceived benefits. reductions as illustrated by the absence of
documented measures or a precise timeta-
ble. The strategies adopted to address user/
citizen relations are vital and have been to
some extent successful, but they do not ena-
ble long term control of management costs.
The public policy assessments that were re-
launched following the implementation of the
MAP plan generally share a common meth-
odology. However, this methodology focuses
on analysing a single measure or policy at a
time and cannot be broadly applied with a
view to developing new ways of working.
1/ According to a study carried out by PwC, less than
30% of cost reduction programmes achieved their ini-
tial targets, of which less than half could show sustain-
able savings beyond a three-year period.
6 – PwC 2014Why the method needs to change
An incomplete and fragmented AREA OF FOCUS 2 • Based on our own analysis, the scope
public expenditure plan of which was narrower than that used
The CECRSP: an (overly) low-key by the Court of Auditors
While procedures to measure and control committee (25 evaluations), not a single
costs are already in place, they are too evaluation helped to properly estimate
often unconnected, incomplete, The Committee of Inquiry into the Cost and management costs. Two of the
dissimilar and not sufficiently Performance of Public Services (Comité evaluations recognised that it was
implemented (even though public d’enquête sur le coût et le rendement des ser- "extremely difficult, perhaps
expenditure naturally tends to increase). vices publics – CECRSP), which everybody impossible to fully deal with the scope
seems to forget has existed since 1946, of the evaluation, whether on a
Preliminary impact studies used to remains a low-key committee. comprehensive and aggregated basis
support draft legislation rarely define (budgetary or financial approach) or
the characteristics and scope of the A report by the French Senate published in on a detailed basis (measure by
management costs associated with the 2004 highlighted the fact that the committee's measure approach)."
policy or measure put to the vote in the progress report showed a significant gap
French Parliament and those that do between the theoretical objectives of its pro- • The second example concerns the
exist are generally unreliable and jects and the actual work carried out ("Placer indicators defined as part of the
insufficiently substantiated. l’évaluation des politiques publiques au cœur annual performance projects
de la réforme de l’État" ["Making public pol- presented to the French Parliament.
The principle of accountability from the icy evaluations the focus of state reform"],
first euro spent, introduced by the law report n° 392 by Joël Bourdin, Pierre André Out of a sample of 30 programmes
governing public finance (Loi organique and Jean-Pierre Plancade, 2003-2004). covering nine engagements and
relative aux lois de finances – LOLF) has representing more than €69 billion
never been fully and properly Two examples of existing measurement (commitment authority limit), only 8%
implemented in terms of analysing methods are given below: of the 234 indicators defined in the
spending efficiency and control. 2014 annual performance projects (PAP)
• The first example concerns public even partially include information
Public reports (by lawmakers, the Court policy evaluations: on management costs (i.e., 19 indicators,
of Auditors, think tanks, etc.) still of which 89% were identified
contain very (too?) few concrete and Less than 10% of the evaluations set as LOLF indicators "from a taxpayer's
precise details on management costs. objectives which would enable them to point of view").
estimate or assess management costs
The more systemic approaches adopted and none of them were able to Implementing an effective cost control
recently and coordinated by the Ministry ultimately meet such objectives2. As procedure is far from straightforward.
Secretary Generals to identify priority recently pointed out by the Court of Given that the French State’s "general"
engagements (PM's circular) are too Auditors, the Prime Minister's circular budget alone covers nearly
often implemented by teams who do not of 7 January 2013, which sets out the 12,000 budgetary monitoring units
sufficiently involve the budget offices, process for planning public policy (130 programmes, 1,600 operating
since the focus of the work is firstly on evaluations, does not hold the budgets and 10,600 operating units), all
employee numbers. evaluations to any cost-saving of which are involved in the cost
objectives. management process, cost control can
prove to be difficult.
2/ In its June 2014 report, the Court of Auditors es-
timated that out of the 60 public policy evaluations
planned by the date of the fourth CIMAP meeting, of
which 51 had been launched by the end of the first
quarter of 2014, only four, i.e., 7%, attached an en-
gagement letter which specifically set out a cost-sav-
ing objective.
Squaring the circle – 7In addition to the fact that the size of the A paradoxical situation in terms • Teams tend to take shelter in political
budgetary units can vary significantly, of mobilisation and governmental priorities which are
the existing system – albeit an effective and decision-making often poorly documented and
way for the National Budget Office to therefore interpreted in highly
recognise uniform and "tolerable" budget The need for a clear vision of costs would differing ways depending on the
freezes at the unit level – is largely appear to be obvious to everyone, yet the programme in question
ineffectual in encouraging cost control, concept and measurement of public (e.g., "strategic expenditure with a
let alone its implementation. service management costs are not fully weak legal basis" is categorised by the
understood. Despite this, everyone government as "core business or DNA"
Establishing accurate and relevant recognises that the tasks involved in as measured by the funds or number of
measurements is essential to the implementing cost management employees involved).
democratic debate since whatever is not procedures (updating monitoring tables,
counted not only does not count, etc.) constitute a heavy workload, and Programme results, which may be
but also becomes invisible for everyone. are often deemed to be unproductive recorded over several years, are either
since they divert resources away from not made widely available or not
AREA OF FOCUS 3 operating and analytical activities. thoroughly analysed, if at all. Their
estimates are often uncertain, as is their
Management costs: a blind spot? • Ministers struggle to maintain the sustainability, since robust analyses with
necessary critical distance from their reliable data on the actual consequences
The website data.gouv.fr, which defines itself activities, the policies implemented of reforms are few and far between, thus
as the "open platform for French public data", and the chosen means of action and calling into question their credibility.
has made available 13,567 sets of data relat- funding, in order to propose solutions
ing to 302 organisations (figures listed on the that can be systematically applied in a A scope of analysis which remains
website's "metrics" page dated 13 June 2014). breakthrough way3. too narrow
• The concept of "compulsory
Fewer than around 20 of these provide infor- expenditure/unavoidable expenditure" • Until recently, debates mainly focused
mation relating to expenditure or costs and, (DO/DI) applied in France’s budget on reducing operating expenditure.
even then, they tend to only distinguish process has so far proved largely The fallout from discussions on
between operating and investment costs. In ineffective: lacking a framework and investment expenditure will be on an
addition to this, the data are often old and criteria, the individual terms are entirely different scale, which means
rarely, if ever, take account of management inadequate and poorly defined4, the that impact study reliability will be all
cost indicators. expenditure determinants are the more important.
insufficiently taken into account or not • Cost reduction measures aim to ensure
even described, and the concept is that existing initiatives are sustained,
sometimes obscured5. but barely take into account new
public investment needs arising from
societal change and citizens' demands,
3/ "During the management meeting which takes
even though such investment is
place every autumn, the programme manager tradi-
necessary to develop a socially and
tionally sets the budget for decentralised public ser-
environmentally responsible French
vices at 95% of the previous year's allocation of funds.
State. As a result, the much-needed
The remaining 5% must therefore be negotiated."
debate on the relevant scope of action
4/ The definition of "compulsory expenditure" (es-
for the various players in the public
sentially accrued liabilities) is too restrictive while the
sphere is once again side-stepped.
scope of "unavoidable expenditure" is too broad,
meaning that both terms are misunderstood/misused
by ministers and lead to repeated, unconstructive dis-
cussions with the external budgetary authorities.
5/ Some ministers do not publish any DO/DI objec-
tives in their annual budgetary and accounting internal
control plan, despite providing details on nearly 150
initiatives.
8 – PwC 2014Why the method needs to change
The current priority AREA OF FOCUS 4 This allows for a more comprehensive view of
costs and can help to better understand the
The situation demands a decidedly Establishing the total management complexity of the service supply chains con-
different approach, which recognises cost over a programme’s duration is cerned and the various distribution channels
that: crucial to any successful reform used.
• one of the main reasons why recent The complete cost approach is the only one In addition, given that policy and management
reforms have struggled or failed, that makes sense in the public sector, given decisions are now based more on risk and
regardless of the merits of the related the complexity of the measures implemented, cost/benefit analysis, the concept of a "total"
initiatives, is the lack of support they the duration of their implementation and the cost must also take into account the deeply
receive due to the difficulty of weight of indirect costs engendered over every intertwined issues of social and environmen-
measuring their benefits, particularly stage of their life cycle. tal impacts.
in terms of costs;
• the fundamental question is not so The notion of measuring total cost over a plan's This need is heightened by the fact that
much about public expenditure or full life cycle has been developed for large- attempts to modernise through digital tech-
social expenditure as it is about the scale investment projects. Any other approach, nology and prevailing attitudes to the subject
goal of the reform concerned, as well such as only taking account of operating costs very often (perhaps too often) ignore its poten-
as its role and potential effectiveness or administrative fees, would be limiting in tially negative effects. Note that the system-
which should be demonstrable; terms of scope and also time horizon, stig- atic adoption of a paperless system also has
• a structural reform is not based solely matising, since focusing only on certain stages an impact on the carbon footprint: a 1 Mb
on a change of calculation and/or of the measure's life cycle and particularly on email represents 19 grams of CO2 according
management rules ("parametric those relating to public policy implementa- to a study carried out by the French Agency
reform"), even if such a change is tion, and ultimately less effective. for the Environment and Energy Management
sustainable, but rather it must aim first [Agence de l’environnement et de la maîtrise
and foremost to create the conditions The total cost approach allows for a greater de l’énergie – ADEME] in 2011).
necessary for long-term cost control, degree of approximation on the finer points
with the purpose of limiting the causes because it is less exposed to changes in scope
of structural cost deviations. than other, narrower methods. As a result, it
discourages quibbling about scope, provides
a complete picture and fosters individual and
collective responsibility while limiting side
effects.
The service cost approach, which has been
developed in certain utilities- or network-
related activities, involves measuring cost
throughout the value chain process for design-
ing, implementing and managing activities that
are required to serve the customer. It involves
carrying out a comprehensive analysis of how
the costs break down at each stage of the
process, and the factors that affect them.
Squaring the circle – 9How we can introduce change
A method and guiding principle • To this end, it is necessary to create
to follow the appropriate conditions and
incentives for encouraging long-term
It appears that there is no shortage of cost control in order to structurally
ideas about what should be done, but the prevent cost deviation, regardless of
challenge remains to encourage initial amounts.
politicians, citizens, public sector • In this way, the system will become
employees and civil society to accept agile, i.e., able to overcome obstacles
these ideas and then organise and of weakness, rigidity and inflexibility
implement them. in certain programmes and adapt to
changing needs and future
This involves first and foremost circumstances in a more spontaneous,
determining a method which is sustainable manner. This means
ambitious in its aims while also defining in advance key selection
remaining neutral in its assumptions1, criteria and conditions for success
a method which provides clear which will guide any future proposed
explanations and reliable results initiative. (see diagram: The principal
and is easy to use, a method factors that lead to cost deviations).
which will therefore be acceptable to the
largest number.
Firstly, the guiding principle is intended The principal factors
to be unifying and galvanising: that lead to cost deviations
identify the symptoms, deal with
the root causes and make the system
more agile.
Complex, poorly
• Without calling into question the managed
merits of the public programme programmes
concerned, which should be reviewed Wide variety
in advance, the idea is to identify and of entities and
analyse all of the factors that stakeholders
structurally contribute to management
costs and potential cost deviations.
The aim is to establish a discourse and
a programme of reform centred on the Management
identified cost drivers that must be cost
addressed as a matter of priority.
It must also be ensured that
deviations Lack of
Overabundance guidelines or
widespread public support for change of standards measurement
can be gained. system
1/ It avoids the demonisation of public expenditure,
Dependence on “reflex”
which tends to overshadow the role of productive in- procedures and rigid
vestment and the progressive and innovative nature of practices
some forms of expenditure.
10 – PwC 2014How we can introduce change
Four key principles Principle 2 The method should focus on the
Strictly speaking, no management importance of the quality of the data
Moreover, the objective put forward is cost target is better or more relevant used (in terms of reliability and
based on just four key principles which than any other. accuracy) as well as auditability.
are simple, accessible, easy to
understand and more critical than ever. Total cost (and the factors which contrib- Lastly, it should be stressed that the
ute to cost deviations) is just one tool for implementation of this method requires
Principle 1 assessing3 the value provided to beneficiar- the strong, robust backing of those
The concept of "management cost" ies by public policies (or at least those for at the highest level. Political engagement
must be understood in its broader which a need has been demonstrated, is vital to ensuring that structural reform
definition, i.e., the complete (or total) particularly with regard to whether or not is sustained over the long term,
cost incurred by a programme over its to (still) perform a risk analysis, or take a and government officials should demand
life cycle2 in order to perceive the benefit different course of action). that results be regularly reported.
of each euro spent or allocated (expendi- The method will only truly be effective
ture) or recovered (revenue). It is nevertheless vital that the overall cost if it involves the highest level
is established, as honestly as possible, so of government, who should be held
The total management cost is therefore that it can be broadly used as an objective responsible for its success.
similar to the policy cost (also called the reference in any and all comparisons and
"service cost" in certain sectors), cost deviation measurements. AREA OF FOCUS 5
in that it involves weighing the
consequences of the decision to act Principle 3 The neutrality of the method
based on certain institutional, financial Everybody must be encouraged to
and operating guidelines and procedures contribute and be held accountable In light of the stated intention to refrain from
(therefore also incorporating costs on matters of cost control, in due propor- making assumptions about the notion of public
related to the implementation of the tion to the factors that are identified as expenditure or the existence of an ideal
measure over and above operating costs contributors to cost deviations. management cost target, the method must
incurred in stable conditions). remain neutral in its conclusions. It aims to
The method therefore requires highlight and explain more systematically the
Costs are therefore analysed based on programmes to be clear and transparent areas and causes of cost deviations, and to
their frequency over the programme life throughout their duration in order to suggest selection criteria for potential changes.
cycle and the nature of their contributing motivate the programme administrators
factors (i.e., inherent, structural, and beneficiaries alike, while enabling Yet in any case, the method still allows both
systemic and/or implementation costs), them to identify the consequences of their politicians and citizens to set the boundaries
rather than on the traditional method actions in terms of cost control. of its scope and ultimately to determine the
of analysis by type and classification Highlighting and comparing results can conclusions that will be presented as part of
as fixed or variable. The calculation spur change and encourage the faster the analysis.
can sometimes lead to simpler, more adoption of best practices.
robust estimates than other approaches Moreover, it is compatible with the principles
which are more detailed but currently Principle 4 featured in a memo issued by France Stratégie
difficult to implement. The method should be pragmatic, in July 2014 entitled "Réduction des dépenses
drawing on data from (numerous) existing publiques : les leçons de l'expérience" (Reductions
In addition, since it is based on identify- analyses to give it meaning and consist- in public expenditure: the lessons learned),
ing and analysing the factors which give ency based on its own logic of consolida- N. Lorach, C. Mareuge and C. Merckling).
rise to cost deviations, the approach does tion and summary, but it should also be Nevertheless, we believe that this method goes
not require applying different principles all-embracing and standardised to enable beyond the principles highlighted there by both
for operating expenditure (including an overview of a highly diverse set of data, strengthening and shifting the conditions for
payroll), investment, direct aid and the as well as comparisons and monitoring success based on the link between "complexity,
payment of grants or social benefits. over time. It will need to be capable of efficiency and costs".
detecting when cost-related data is missing
and fill in these gaps in order to provide a
comprehensive, broadly shared vision of
management costs in every instance.
2/ This definition incorporates programme design
(process and organisation), implementation (structure 3/ In addition to service quality, programme subsidi-
and financing, staff and training, and even the disman- arity, the beneficiaries' perception of the constraints
tling of the previous measure), operational implemen- and risks associated with the chosen initiative and the
tation, management and evaluation. extent to which the related constraints are accepted.
Squaring the circle – 11What needs to change
The overarching framework • Identifying: objectively reviewing and
weighing priorities on a recurring basis
We have drawn up a set of to assess measures identified as
recommendations for action which unnecessarily and excessively costly or
together form the basis of a plan to involving cost deviations.
develop and establish a coherent and
robust framework for implementing This initiative, based on a political
reform and controlling costs, with vision of the main priorities of a public
institutional and practical guidelines programme, involves completing
based on the method described above, a coherent and standardised
starting in autumn 2014 and within a evaluation grid to review measures
timeframe of 18-24 months. currently in place or in development
in order to determine the most suitable
These recommendations, the key aspects avenues of reform in line with
of which are presented in the following the principles of ensuring more
pages, are structured around the four efficient public expenditure and long-
key initiatives presented below, which term cost control.
can be implemented either
simultaneously or sequentially on a • Measuring and comparing: building
recurring basis: a framework for measuring
management costs over the long term.
• Promoting accountability:
the permanent focus of the plan Based on a widely approved method,
going forward. the aim of this initiative is to gather
objective observations shared by all on
This initiative centres on (re)enabling the quality and effectiveness of the
politicians, civil servants and all other public programme concerned in order
stakeholders in the reform process as to facilitate the selection and
well as public service beneficiaries to implementation of the reforms which
fulfil their responsibilities and make are deemed to be necessary.
decisions based on potential outcomes
and impacts (whether or not to take a • Streamlining and simplifying:
particular course of action). the basic principles for finding
long-term solutions to problems linked
to overly rigid investment and
financing practices.
This no longer involves merely
correcting errors of the past but rather
fundamentally changing the way
measures and public organisations are
designed, financed, implemented and
evaluated. We must now (re)construct
this framework with a simpler and
more functional model to make public
programmes more understandable and
therefore more manageable and more
sustainable. (see diagram: A simple,
coherent and virtuous framework).
12 – PwC 2014What needs to change
The adoption of this overarching • It is no longer sufficient to treat Furthermore, this framework can be
framework is vital, irrespective of the programmes in isolation and only take planned in alignment with current
need or the urgency to try to reduce into account their operating costs. cost-savings initiatives in order to plot a
expenditure within a given scope. There Overall costs and cost deviation course towards sustainable structural
are three main reasons for this: analyses have to be integrated reforms based on an actual method
into the discussion about each rather than on short-term quantitative
• Cost cutting does not, in and of itself, programme’s scope and about the targets. This will make it possible to
prevent costs from rising in the future. French State's position. reconcile the need for immediate savings
This means that tighter cost control • This framework is a way to strongly with the need for long-term control of
must be systematically encouraged, encourage accountability among public expenditure.
while any factors that prevent or public sector stakeholders and to make
discourage it, as well as any biased politicians and citizens/service users
assessments, must be eliminated. This aware of the "total cost" of a public
rule should apply especially where the service, in order to contribute (both at
impact is most strongly felt, right from an individual and collective level) to
the programme design stage. better understanding, analyses and
decision-making.
A simple, coherent
and virtuous framework
Promote accountability
The permanent focus of the plan
going forward
Control management costs
Reduce complexity
Streamline Identify
Move away from “reflex” Spend more efficiently Assess and prioritise the treatment
procedures and rigid practices of measures which give rise
to cost deviations
Measure and compare
Establish a framework for
measuring management costs
over the long term
Squaring the circle – 13Our recommendations for action
The recommendations that we 4.Act on the results of the
Promoting have developed around this idea
have the simple objective of
"Identify" initiative.
This involves promptly adapting or
accountability making management
accountability the core focus of
dismantling measures that are running
at a loss or failing to fulfil their initial
the permanent focus public programmes. This efficiency objectives.
of the plan objective breaks down into four
separate proposals based on the Furthermore, it could lead
going forward following themes: to greater recognition for the teams
who most readily disclose their
1.Restore the full powers of the management costs.
LOLF law.
This involves giving the French Ultimately, the aim is to establish a
Parliament the necessary data – general framework for fostering
quantitative objectives, indicators and awareness and controlling
clear and comparable management management costs, which can be
cost information – to fully carry out its applied to each phase of the public
responsibilities. For its part, the policy and public service development
Parliament must request the and implementation process.
presentation and analysis of this data.
Recognising that in the long run it is
2.Establish a code of conduct. more expensive and more difficult to
The government should be obliged to measure and control what is widely
follow a frame of reference and dispersed, without a system of
standardised best practices when governance or real subsidiarity, the
carrying out its work and in all its idea is to reintroduce and, above all,
communications, such as when apply the management cost concept
presenting its assumptions and (as defined above) at each stage of the
estimates of total management costs, process and in all legal documents.
with an independent assessment
carried out by a trusted third party. In principle, this should send out
a strong signal to politicians
3.Be coherent and logical when and civil servants that they are being
defining and assigning held to high standards and levels
responsibilities to public of commitment. It would therefore
sector individuals. seem apparent that the first two
It is essential to ensure that public proposals should be promptly
sector employees feel empowered to do announced and implemented.
their jobs, by not overly altering the
scope of their responsibilities and by
giving them the appropriate levers for
action at their level.
This can, for example, mean redefining
the critical mass of certain
administrative structures or reducing
the number of public sector operators
in order to increase their ability to act
and manage, with more tightly
controlled management costs.
Squaring the circle – 15The aim here is to examine the By highlighting the most vital priorities,
Identifying opportunities that each public
programme presents in terms of
the aim is to develop a clear and concise
but also comprehensive and informative
Objectively reviewing scope, strategy and financing. vision of these programmes in order to
give (back) meaning and resources to
and weighing Based on the observation that ministers public initiatives within a given scope
priorities to assess and their departments find it difficult
to "think differently" about programme
and help to build consensus on future
avenues for improvement.
measures involving scope and content, we recommend
cost deviations that the arguments commonly put
forward during budget debates be
2.Enhance the professional
quality of public policy studies
systematically reviewed. and evaluations.
This entails significantly strengthening
The purpose is to better explain the link the operational content of analyses
between what drives a given public by ensuring a systematic review
programme (permission or obligation, of government initiatives based on a
based either on resources – to carry out more standardised method,
and/or to finance – or on results) and covering total management costs and
the organisational and operational including a clear assessment of the
solutions and financing procedures and value delivered.
channels set up to achieve its ends. In
particular, this involves analysing the Review teams should be comprised
risks of taking no action both in absolute of people with diverse profiles
terms and in accordance with the proce- and skills and include specialists with
dures in force. Our recommendation is experience of carrying out and
structured around proposals based on analysing complex projects.
four guiding principles: This will help to shape a body of
complementary analyses and
1.Take immediate steps to review robust recommendations.
public programmes based
on a pre-defined analytical grid 3.Review situations in which
detailing the main public economies of scale fail to produce
programme priorities. the expected benefits.
An analytical grid should be drawn up Many projects which focus on the
which can be used to examine and centralising, amalgamating, merging
explain the main priorities of public or outsourcing of resources involve
programmes and in particular to largely underestimated risks and
record the arguments which are overestimated benefits. The problems
commonly put forward to justify often arise during the implementation
budgets (see area of focus 6). phase (failure to maintain high quality
The aim of the resulting analysis of the work and service standards, savings
main government programmes is to below expected levels, etc.).
review, clarify and question their
purpose and the procedures that
structure their implementation.
16 – PwC 2014Our recommendations for action
While few can doubt the importance While this task is demanding and AREA OF FOCUS 6
of achieving economies of scale, arduous, it has now become utterly
the design and implementation essential. Appropriate means should A shared approach to expenditure that
procedures for many public projects, be mobilised to address the is deemed as unavoidable
such as shared service centres challenge of controlling costs as part
and decentralised regional services, of a method which is both decidedly In practice, each type of expenditure must be
should henceforth be reviewed in an transparent and efficient. evaluated using a precise set of questions
objective and honest way, giving much (concerning the public policy’s objectives, its
more emphasis to the opinions of After an initial review of all of the translation into law, the chosen methods for
public sector employees, beneficiaries programmes has been carried out, action, the planned financing procedures and
and partners. it should be repeated as necessary channels and the procedures set up for under-
to identify any evidence of cost standing and monitoring results) in order to
4.Only apply specific legal rules/ deviations and ensure that determine the level of detail to which the
statutes in cases which cannot be the measure in question still related obligation has to be explained. The
dealt with by ordinary law. corresponds to the objective for more detail provided in the justification, the
In line with the government's efforts to which it was created. more unavoidable the expenditure will be
simplify administrative procedures, shown to be.
the programme review must include a In the same way, whenever a new
specific section covering the legal rules measure is developed, it must be put It is critical to evaluate the potential risks of
and statutes inherited from historic into practice in order to determine "taking no action" when attempting to justify
situations and practices which how best it should be organised and that the expenditure is unavoidable: Will the
objectively should no longer apply to define the indicators that will achievement of operating objectives be jeop-
since their only continuing function is enable it to be monitored and ardised? For whom? Is there a financial risk
to preserve an unnecessary layer of managed successfully. If this is not (penalties, fines, etc.)? For whom?
complexity or benefits which could be done, what modernisation actually
addressed in other ways. means in practice will remain a Prioritising expenditure based on the meas-
mystery and the success of ure's intended main impact is part of a par-
For example, this approach demands a programme implementation will ticipatory process which leverages the
stepped-up commitment to remain just as elusive. knowledge and experience of the manage-
streamlining civil service departments ment teams. The exercise is particularly effec-
and compensation schemes in order to tive when framed by a method which retains
make their regulatory procedures and an ability to assess potential risks and impacts
bonus, promotion and social dialogue and recognise the importance of different
systems clearer, control the related points of view.
management costs more effectively
and make the reform implementation While an evaluation grid for determining una-
process more agile. voidable expenditure may establish a com-
mon set of principles, it must be completed
differently for each programme in order to for-
mulate an individual and contextualised argu-
ment which can be used to support
negotiations with the National Budget Office.
Squaring the circle – 17As the saying goes, "If you can’t 2.Broadly implement shared
Measuring and measure it, you can’t manage it",
yet it could also be added that
guidelines for activities and costs.
The widespread implementation
comparing only what is simple and easy to of guidelines for both activities and
gather can be measured costs1 aims to establish a shared
Establishing a systematically and reliably, since minimum regulatory framework which
framework for this is true both for data
gatherers and data analysts.
can then be adjusted to increasingly
greater levels of detail depending on
measuring the context and requirements of the
management costs This principle and the related proposals,
once again based on four guiding
public bodies concerned.
In particular it will help to establish
over the long term principles, address a clear objective:
overcoming the fragmentation which
what will be involved in the design,
definition, implementation, control,
impedes the development of a reliable, management and evaluation stages of
accurate and sustainable method of programme and policy roll-out,
measuring management costs. thereby improving understanding of
the different layers which constitute a
1.Significantly simplify and total management cost.
standardise existing
management guidelines. 3.Require the periodic disclosure of
A review of existing rules and comparative management data.
guidelines should be conducted in an Periodically and systematically
effort to make them more coherent, publishing comparative management
more precise, simpler and more data is essential to the analytical and
practically applicable, even if it means comparative process and also makes a
replacing them completely with better practical and positive contribution
designed, more systematic ones. This towards the government's objectives to
applies particularly to budgetary, make data available to the public on a
accounting and human resources large scale (the "open data" initiative).
issues. We must urgently move away Not only does this help the government
from a situation in which the to gain public trust, but it also
ambiguity or inconsistency of rules/ encourages collaborative working
guidelines mainly benefit those who practices and the sharing of
put them in place at the expense of information between vast research and
those who are directly affected by consultation communities to draw
them (see area of focus 7). attention to the choices made or under
consideration and also provide new
insights on future reforms.
1/ Examples of existing guidelines include France’s
national guidelines on public service management
costs linked to waste processing (ADEME) and its
accepted methodology for assessing nature reserve
management costs.
18 – PwC 2014Our recommendations for action
4.Using the "design to cost" AREA OF FOCUS 7 In April and May 2014, the National Budget
method to guide the project Office held discussions and began address-
design phase. The complexity of ing this issue, issuing the DF-2PERF-14-3001
This involves planning and management guidelines circular relating to the performance-related
organising service modernisation sections of the annual performance projects
projects in such a way that focuses The expenditure-by-purpose guidelines intro- included in France’s 2015 Finance Bill (PLF)
continuously on the key principles duced by the LOLF law set out a number of in an effort to improve the way in which each
of "design/development/ engagements, programmes and initiatives. public programme and budget is presented
evaluation" so that a number of Over time, internal government guidelines have and to simplify objectives and budget pro-
alternative solutions can be become increasingly extensive (at the initia- gramme indicators). It also issued the BLF-
explored simultaneously based on tive or request of the National Budget Office 14-3201 circular concerning the drafting of
the resources available, while or for ministers’ own needs), obscuring their the 2015 budget nomenclature (actions and
firmly placing both customer value original focus without simplifying manage- sub-actions) and the DF-MGFE-14-3280 cir-
and cost control at the heart of the ment procedures. cular regarding the simplification of the budget
process at every project stage. nomenclature for programmes, programme
There are currently at least 40 official budget- operating budgets (BOP) and operating units
This will shed new light on the related guidelines, only one of which was actu- (UO), and the drive to curb earmarking.
way in which certain public ally established by the LOLF law and which However, these proposals are effectively just
projects are designed in terms of is known (and used) by lawmakers, i.e., the guidelines and have not succeeded in launch-
scale and implementation by "purpose" guidelines (see sub-actions). The ing a movement to converge or standardise
ensuring that all stakeholders, so-called budgeting blocks guidelines are used certain activities. Moreover, they do not con-
whether those who contribute or in budgeting conferences and are mainly tain any guidelines specifically addressing
benefit from a given government based on the type of expenditure in question, management cost measurement and
measure, cooperate equally in the while the programme guidelines are specific control.
process, have an understanding of to each department and applicable by type
the relevant cost factors and are and purpose. In addition, there are guidelines Finally, it should be mentioned that there are
encouraged to be actively involved that address the scope of budgetary respon- other guidelines with little or no purpose at all
through to the roll-out phase. sibilities, programme/programme operating (they provide little actual guidance and are not
budgets and operating units. used by anybody in practice), yet they still
generate significant work and costs. For exam-
Under these circumstances, it should hardly ple, France's cost accounting analysis guide-
come as a surprise that many of those involved lines (CAC), drawn up in place of a real cost
in the budgetary process regularly question accounting reference document, continue to
the purpose and usefulness of certain guide- exist despite their usefulness often being
lines, given the length of time required to called into question.
understand and articulate them, not to men-
tion certain activities involved in the budget-
ary cycle itself. There are as many guidelines
as there are difficulties in ensuring high-qual-
ity, cost-efficient financial expenditure.
Squaring the circle – 19Following years of efforts This review should be made a priority at
Streamlining to modernise, reform and
transform public programmes,
all levels and involve all public service
players, and must be monitored and
Moving away from complexities needlessly remain,
owing to the way in which
assessed by public service users.
"reflex" procedures programmes are still based on 1.Including the concept of agility
and rigid practices "automatic" design,
implementation and financing
among the standard criteria for
analysing and choosing areas of
choices and are hampered public spending to modernise.
by long-established or standard The practical implementation of this
practices, the attitude being, concept throughout the life cycle of a
"that’s how it’s always public policy makes it possible to
been done" or "it’s a evaluate risks or areas of needless
departmental procedure". complexity potentially caused by
habitual ("reflex") or insufficiently
• In this context, the concept of innovative ways of thinking or acting.
subsidiarity (as both an objective This will entail regularly ensuring that
and an analysis criterion) is measures are effectively planned and
insufficiently assessed and managed to better facilitate
implemented. It should now be made collaboration and innovation, and as a
more effective as an operating result can be quickly adapted to new
principle and as an analysis criterion requirements and a changing
for every organisational change or environment (see area of focus 9).
situation. This will involve clarifying
its precise role in the process and From now on, no major detailed
ensuring its proper implementation. modernisation plan should enter the
public debate without a clear
• Similarly, the steps involved in discussion about the risks perceived
accessing services generally remain and deemed acceptable by those
complex and/or excessive in number concerned (citizens, public sector
despite dozens of ongoing projects to employees and partners), the service
simplify them. implementation strategy, the operating
procedures involved and the
The sheer diversity and complexity of the associated costs.
various rules and situations inevitably
lead to significant management costs 2.Rethinking the design and
and render the programme less clear and implementation of complex
comprehensible. At the end of the government projects.
"Identifying" initiative, the proposals If we are to have any hope of
grouped together under the four guiding systematically achieving the above
principles below outline some initial effects, the complexity of public
steps towards reviewing current policy modernisation projects (IT
practices to create more agile measures. systems, infrastructure,
organisational transformation)
must be addressed more
thoroughly, right from the design
and definition stages, so as to avoid
deviations which are identified too
late to be resolved (see area of
focus 9).
20 – PwC 2014You can also read
