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The efficiency agenda for local government began in 2004, following Sir Peter Gershon's report. Three years on, the CSR07 target is tougher and the management challenge is steeper. From now on, local government will have to make 3% cashable efficiency gains each year. Continual and real efficiencies at this level present managers with substantial strategic and operational obstacles. The current challenge calls for a new managerial imagination in local government. We need a spirit of innovation across our sector which restlessly seeks new ways of doing things, with new ways of working to improve value for the public while cutting costs. Innovation bubbles up from service-users and frontline staff as much as it trickles down from politicians and managers, so my first point of advice would be to try to use the ingenuity of all your staff and service-users. Second, learn from others. All councils have to report on how they have made their services more efficient so, don't read your own, read the reports conducted by others. Third, harvest best practice from the blueprints and ‘tool-kits' of the DCLG, the IDeA and the Audit Commission. If you are looking for ways to achieve your 3%, the DCLG's Value for money delivery plan is a helpful starting point, but it is not a detailed route-map. There is no avoiding a fundamental reassessment of the basis of every service. Looking at a seven-year plan, councils need to consider that, by 2014, every local government service will, on average, need to be delivered at less than 80% of its current cost. So, we need to think longer term and lower cost. But what are the routes through this new efficiency landscape? The five main routes are: strategic service redesign strategic asset management operational efficiencies through business process improvement smarter supply management through sourcing services differently reducing service demand Each route contains several managerial approaches. And each managerial approach has its advocates, its zealots and its army of eager consultants. Beware people promising you one all-encompassing new approach that will solve all your problems – they won't. This is not a time for surfing managerial fads. Some management approaches – such as out-sourcing or shared services – will be helpful, but none will definitely deliver greater efficiency in all cases. And even if you find the right solution, you can lose all your gains if you implement it badly. The case for out-sourcing rests on the cost advantages of alternative approaches. For shared services, it depends on the extent to which price relates to volumes and on the optimal point of aggregation for each service or function. In local government, we manage a range of diverse services, and the underlying management economics of each of these services varies significantly, and we need to adopt the right management approach to each if we are to reduce costs substantially. Service redesign is the first step in considering the cost base of any service. It is essential if the service is to be changed and the cost base altered. This can be achieved by integrating services which were previously delivered separately, or by reducing, say, the number of outlets from which a service is delivered. The case for aggregating services or functions relies on there being ‘economies of scale' in organising work or service. But local government is principally organised to deliver ‘economies of scope'. Economies of scale refer to efficiencies associated with supply-side changes, such as increasing the scale of production of a single service or product. Economies of scope refer to efficiencies arising from demand-side changes, and are one of the main reasons for management strategies of product bundling and branding. What does the new search for ‘place shaping' in local government mean for these managerial discussions? At first sight, it may seem that locality-based branding and service bundling would suggest a new economy of scope and hence, argue against searching for economies of scale in delivery. But I suspect it may mean local government is set to become more a commissioner than a deliverer of service, and so, encourage councils to out-source provision to a new mixed economy of competing service deliverers. Barry Quirk is chief executive at Lewisham LBC and Local Government Efficiency Champion

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WHITEHALL

Reaching the peak of efficiency

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