Efficiency in Third Sector Partnerships for Delivering Local Government Services: The role of economies of scale, scope and learning

  • Tony Bovaird
  • Public Management Review, June 2014, Taylor & Francis
  • DOI: 10.1080/14719037.2014.930508

Efficiency in partnerships for local government services

What is it about?

Third sector partnerships are under pressure to change in the light of the increasing cost pressures on local public services. The literature throws doubt on the level of economies of scale and suggests that more attention should be given to economies of scope and learning. The common conflation of economies of size with economies of scale has led policymakers to overemphasize larger scale providers and has distorted the strategies which third sector organizations have adopted, pushing them towards mergers and consortia based on scale.

Why is it important?

This article makes a careful distinction between economies of scale, economies of scope and economies of learning. These different sources of efficiencies in an organisation or partnership are usually rolled together and misunderstood. As a consequence, very expensive mistakes are made when designing partnerships, collaborative working or mergers. This article demonstrates that local government parnterships should be paying much more attention to widening the scope and capabilities of their supply chains, rather than seeking mergers for greater scale.

Perspectives

Professor Tony Bovaird
University of Birmingham

It is extraordinary that the crude economist's concept of economies of scale has so mesmerised organisational studies scholars that they continually fall for the argument that bigger will mean more efficient. Not only does this not follow logically in most public services, there is also extensive evidence that it does not work in practice. This article is an attempt to demonstrate why the concept of economies of scale is often used inappropriately in public services.

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http://dx.doi.org/10.1080/14719037.2014.930508

The following have contributed to this page: Professor Tony Bovaird