National Association of Counties
Washington, D.C.

 Study finds growing interest in shared services

By Charles Taylor

In a Skype interview, Daryl Delabbio, administrator and controller, Kent County, Mich., discusses the value of counties' participating in shared services agreements — such as the "reverse auction" system his county manages.

Kent County, Mich. is putting the squeeze on some of its vendors and saving money in the process, both for the county and its local government partners in a shared services agreement.
Using “reverse auctions,” the county saved about 17 percent in 2010 on more than $1 million of commodities purchased — from toner cartridges to reams of paper — approximately $170,000.

“The way I describe it is, it’s an eBay in reverse,” said Daryl Delabbio, Kent County’s administrator and controller. “We set the top price that we’re going to pay based on what we know we paid the last time.” Vendors then vie to provide the product or service at a lower cost. The county expanded the auctions to include “about 20” other local governments, including Ottawa County in 2011 and, Allegan County in 2012.

Nationwide, counties are increasingly considering shared services projects and interlocal agreements for a variety of reasons, according to a new report, A County Manager’s Guide to Shared Services in Local Government, which Delabbio co-authored with Eric Zeemering, an assistant professor of public policy at the University of Maryland, Baltimore County.

BulletClick here to read A County Manager’s Guide to Shared Services in Local Government

“With the recent recession,” Zeemering said, “I think more counties have begun to look at local governments inside their own borders and to their neighboring counties to identify areas in which they can begin to create efficiencies and economies of scale, and perhaps even improve services with constrained budgets through partnerships with other governments.”

He surveyed county administrators and County Board chairs from across the country, and went in-depth with officials from five states: Colorado, Maryland, Michigan, Nevada and North Carolina.

Thirty-one percent of those surveyed reported that sharing or contracting services is “very common” for their county. More than 50 percent of respondents said that in the last year, local governments in their areas have been discussing shared services more than before.

More than 73 percent of county officials surveyed agreed with the statement: “I maintain communication with officials in other local governments in order to identify opportunities for sharing or cooperating on local government services.”

The study was funded by a grant from IBM’s Center for The Business of Government as part of its Collaborating Across Boundaries Series.

Zeemering said the range of shared services can include fee-for-service agreements and even swapping services. “Instead of developing a complex fee structure,” he said, “sometimes these county governments can develop an exchange system so the first government provides service A and in return, the second government returns service B to the other government.”

The report cites an example from Racine County, Wis., where cuts in state aid forced the closure of a county satellite office in the city of Burlington. Through an agreement with the city, the county offered eight hours of human resource administrative services to the city in exchange for city employees’ providing county services such as marriage, birth and death certificates, and collecting taxes.

Racine County Executive James Ladwig told the researchers, “It’s really difficult to make an argument against it, because it makes sense.”

Delabbio and Zemering stated there are four main reasons that counties explore shared service agreements: “To stimulate innovation in their communities; improve government decision-making; increase levels or quality of service; or improve working relationships with other local governments.”

Delabbio said Kent County’s reverse auctions collaboration has done all of those things. “Overall, I think it’s been a win-win,” he said. “We’ve diversified our vendor base; we’ve reduced costs; we’ve included local units of government.” He added he only wishes he could take credit for the project, but the purchasing department, working with IT, developed the system. Delabbio’s main contribution, he said, was to expand the it from an in-house project to include other local governments.

The researchers report the keys to forming successful partnerships are “leadership, “trust and reciprocity,” and “clear goals and measureable results.”

Based on their research and interviews, the authors made five recommendations for forming and maintaining shared service relationships:

  1. create a shared services assessment team
  2. identify strengths in participating governments
  3. consider pilot projects
  4. discuss and document responsibilities with partners, and
  5. make appropriate changes as needed.

The fifth recommendation is particularly important, Zeemering said, because situations and needs can change over time.

“A partnership that’s beneficial now might not be beneficial at some point in the future,” he explained. “Governments are well served by having a discussion in advance about how they might end a partnership if that need arises.”