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.

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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.

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