Part 4: Management of Joint Arrangements

• Key Messages
• Introduction
• Project Management
• Governance Arrangements
• Funding and Resource Allocation
• Branding
• Monitoring and Evaluation

Key Messages

• When entering into a joint arrangement, local authorities should agree how they intend to work together.
• For larger projects, a project manager can play a valuable role in ensuring that key milestones, budgets, and timetables are met.
• Consideration should be given to how the joint arrangement will be governed.
• Consideration should also be given to the appropriate form and structure for a joint arrangement.
• Local authorities should agree at the outset how they will share any external costs.
• Where a joint arrangement has implications for staff, consideration should be given to how those implications are best managed.
• Throughout the life cycle of a joint arrangement, and on completion, progress should be periodically reviewed to ensure that key milestones, budgets, and timetables are being met.

Introduction

4.1
The success of a joint arrangement may be determined by how well it is managed. We expected that the joint arrangements in our 12 case studies would be soundly managed. Accordingly, for each joint arrangement, we considered:

• project management, including the relationships between the participants;
• governance arrangements;
• funding and resource allocation;
• branding in relation to issues of structure and identity;
• how implications for staff were managed; and
• monitoring and evaluation.

4.2
Generally, the joint arrangements were soundly managed as appropriate to their scale and complexity. The success of a joint arrangement can rely on the strength of the relationships between the local authorities involved. Successful joint arrangements were underpinned by constructive relationships.

Project Management

4.3
Some of the joint arrangements that we looked at were finite projects, whereas others, such as shared staffing, were ongoing arrangements. We expected all these arrangements to be soundly managed.

Founding Documentation

4.4
It is important for parties about to enter into a joint arrangement to consider how they will record the way they will work together. This will depend on the size, scale, and complexity of the joint arrangement.

4.5
In three of the joint arrangements that we studied, the participants had signed a formal agreement such as a Memorandum of Understanding (MoU). These formal agreements can provide the framework for a joint arrangement, and be the basis for the working relationship. An MoU can cover such matters as:

• purpose and intention of the joint arrangement;
• governance and management;
• timetable;
• funding formulas, budgets, and resourcing requirements;
• ownership of the intellectual property created by the joint arrangement;
• dispute resolution procedures; and
• entry, exit, and dissolution provisions.

4.6
For ongoing joint arrangements, a letter of engagement or a similar document between the parties can be used to set out the operating terms. Those we saw specified:

• period of the agreement;
• service to be provided;
• payment amount and payment schedule;
• provisions for termination of the agreement; and
• dispute resolution mechanisms.

4.7
In some instances, no such formal documentation had been drawn up. In one particular case, no formal MoU or other partnership agreement had been established between the parties at the outset of the joint arrangement and some areas of disagreement emerged at a later stage. A documented understanding or working agreement made between the parties when entering into the joint arrangement might have helped to manage tensions that arose.

4.8
Defining the provisions for entering and leaving a joint arrangement is important. As an illustration, local authorities participating in the Auckland Libraries Smarter Systems Project consortium may leave the project at various points, corresponding to a phases of the project. If a local authority decides to leave at the end of a phase, then the costs are structured so that the departing participant has paid to the end of that phase, and can take away a tangible product.

4.9
The number of participants in the project has been limited in order to:

• ensure that the project remains focused;
• collectively build on the readiness of each local authority to participate; and
• maximise benefits from the strong working relationships between the local authorities.

Use of Project Managers

4.10
The degree of formal project management varied according to the scale and complexity of the arrangement. Four of the eight larger joint arrangements had a project manager. A project manager can help to ensure that:

• key milestones are met;
• implementation of the project or strategy is effectively managed; and
• budgets and timetables are monitored.

4.11
For some of the joint arrangements, an external project manager was employed. An external project manager can help to negotiate priorities and resolve conflicting positions. They can also be useful where:

• the joint arrangement involves local authorities which have not worked together before;
• councillors or local authority managers are particularly sensitive to matters raised by discussions, or there are managerial sensitivities around the subject of the joint arrangement;
• there needs to be a dedicated resource overseeing project implementation; and
• all parties want to be seen as equal partners with shared rights and responsibilities.

Maintenance of Relationships

4.12
For some of the larger-scale joint arrangements, the internal project manager not only had to maintain strong working relationships with the participating local authorities, but also with different business groups, and managers within the organisation that they worked for.

4.13
Joint arrangements can have an indirect effect on local authority operations and activities. Where such wider impacts had been identified in our case studies, internal consultation had taken place. For example, the Wairarapa coastal strategy project team held a workshop to discuss the strategy with various professional groups within the participating local authorities.

4.14
The greater the number of parties involved in a joint arrangement, the greater the number of relationships that need to be maintained. These can include relationships with affected local authorities. If the joint arrangement affects other business groups within the organisation, they too will need to be consulted.

4.15
The range of relationships involved in the case study of the Auckland regional libraries consortium illustrates the required extent of consultation. The project leader (one of the library managers) had to maintain strong relationships with:

• the project board, which consisted of the library managers from the other four local authorities, and an information technology manager;
• the external project manager;
• the project sponsor (a chief executive from another local authority);
• the project leader’s own team, manager, and chief executive; and
• the information technology manager and team from the project leader’s local authority (to ensure that any system purchased would be compatible with existing information technology systems).

Governance Arrangements

4.16
When setting up a joint arrangement, consideration should be given to the most appropriate governance arrangements. These arrangements should be reviewed as the joint arrangement evolves to ensure that they are working appropriately, and, if necessary, altered.

4.17
Governance arrangements varied greatly in each of our case studies. As expected, the larger-scale joint arrangements that involved greater sums of money were governed by more formalised structures than the smaller shared staffing arrangements.

Governance Structures

4.18
A steering group made up of councillors or senior managers should oversee large-scale joint arrangements. The membership of the steering group (or equivalent body) should be determined by the size, scale, and sensitivities associated with the joint arrangement. The size of each participating local authority will also influence the nature of project oversight, including the level at which oversight is exercised within the organisation.

4.19
Forums or working groups play an important role in supporting staff, and can provide a means of resolving significant policy differences that may pose an obstacle to working together. One challenge facing Auckland local authorities that were considering forming a consortium to purchase regional orthophotography¹⁷ was to decide how the finished product should be made available to the public.

4.20
Responsibility for resolving that challenge and other policy differences that emerge will fall to a decision-making group drawn from the region, with councillor representation where necessary.

4.21
Figure 4 on the next page illustrates the governance structure established for the Auckland Libraries Smarter Systems Project. This governance structure is designed to ensure that management and councillors are kept informed about the progress of the joint arrangement.

Figure 4
Governance Structure for the Auckland Libraries Smarter Systems Project

The Role of Councillors

4.22
Local authority staff need to ensure that all relevant councillors from participating councils are kept fully informed, and that appropriate decisions are obtained in a co-ordinated manner. For the joint arrangements that we studied, staff had, where necessary, taken positive steps to ensure that councillors were adequately informed.

4.23
For example, briefings to councillors on progress with integration of Wellington water services were co-ordinated, with the project team preparing similar reports to councillors in both councils at the same time. This approach was reflected in parallel council resolutions.

4.24
In some circumstances, councillors became involved in projects, or in activities that had implications for their communities. For example, a group of councillors from participating local authorities monitored the work of staff project teams in identifying community outcomes for the Southland region, and a similar group monitored preparation of the coastal strategy for the Wairarapa. Councillors also led consultation with the community on the proposal to merge the water services units of Hutt and Wellington City Councils.

Appropriate Form and Structure of a Joint Arrangement

4.25
Joint arrangements and associated activities – such as commitment of significant expenditure, employing staff, and entering into contracts (with associated legal obligations) – can grow in scale and complexity to the point where it may be appropriate to consider a more suitable form or structure.

4.26
In considering options as to form and structure, local authorities should consider whether proposed governance or management arrangements meet the definition of a Council-Controlled Organisation under the Act. Joint arrangements or collective ventures that meet this definition must be established in accordance with a special consultative procedure, and meet the governance and accountability requirements contained in Part 5 of the Act.

4.27
Under section 88 of the Act, a local authority must also use the special consultative procedure for any proposal to alter the way that a significant activity is carried out. Section 88(2) describes the type of alteration to which this section refers, and section 88(3) specifies the circumstances in which the special consultative procedure is not required.

4.28
The project team preparing a proposal to merge water services in Wellington evaluated possible options for the form of the new entity against an agreed set of criteria. This evaluation identified three options that met the agreed criteria. The options were then further analysed against financial, legal, and operational factors, in order to determine the appropriate form for the new entity.

4.29
In another example, the Auckland Traffic Management Unit – formed by Auckland local authorities in conjunction with Transit New Zealand – became a business unit of Transit New Zealand. An agreement was drawn up whereby Transit New Zealand became the “managing participant” for the unit, which allowed Transit New Zealand to act as the legal entity, on behalf of the unit, and to:

• enter into contracts;
• employ staff;
• have access to the necessary funding;
• put in place systems, processes, and support structures; and
• work in a partnership style and secure support at councillor level.

4.30
Some joint arrangements had reached the point where the partners needed to review the legal form of the arrangement. The Regional Council Information Technology Consortium is one such example. The consortium was established as a loose grouping of regional councils to create and share software and databases. Consortium members share modules and buy services from a large information technology company.

4.31
While not involving large sums of money, the number of transactions between the regional councils has increased since the formation of the consortium. Further, the opportunity is now available to on-sell some of the consortium’s products. In our view, the consortium had developed to a stage where consideration needed to be given to the appropriate legal form for the arrangement.

Funding and Resource Allocation

4.32
Joint arrangements entail two categories of cost – external (such as bought-in services), and internal (such as staff time and administration).

Allocation of External Costs

4.33
Local authority partners need to agree at the outset how they will share external costs. All of the local authorities involved in our case studies had successfully negotiated a sustainable formula for sharing costs using a number of criteria, such as population, and length of coastline.

4.34
Where possible, a joint arrangement should be sufficiently flexible to allow participants to contribute in a form that best meets their needs. In drawing up the proposal for amalgamation of rural fire authorities in Southland, members of the project team agreed to recognise the financial and budgetary constraints of some of the parties, by allowing them to meet their share of costs by providing services. These included specialised technical support (such as mapping) and the secondment of staff. The services were ascribed a dollar value, ensuring equity between participants. These “in-kind” contributions will be reviewed as the new rural fire authority evolves.

4.35
Further, where costs are allocated and there is a possibility that circumstances could alter – such as changes in population size or characteristics, or the need for greater or lesser levels of service by one or more participants – there should be some mechanism to allow re-consideration of the agreed costs formula.

4.36
Joint arrangements provide the potential for services to be delivered more effectively and efficiently to some, at least, of the participating local authorities. Where joint arrangements involve capital expenditure, there is an opportunity, through distributing the costs, to reduce capital expenditure that would otherwise have been incurred by the individual local authorities. Risks can also be shared. Where the joint arrangement involves the purchase of assets, it is important that ownership of the asset is clarified in the agreement between the parties.

Allocation of Internal Costs

4.37
Some local authorities recorded and monitored staff time when providing services to another authority, to ensure that they shared their costs. This occurred in the Bay of Plenty, Canterbury, and Taranaki shared staffing arrangements. In other more project-based arrangements, local authorities were prepared to let the internal costs lie where they fell. In-house staff costs and overheads were often excluded from resourcing budgets.

4.38
As part of the Auckland Libraries Smarter Systems Project, each local authority was allocated specific jobs, such as archiving, banking, and the provision of office space. This was a practical way for the local authorities to ensure that the jobs were fairly divided.

4.39
Staff commonly participate in the work of joint project teams in addition to their normal work. As a result, joint arrangements sometimes made limited progress. Involvement in joint arrangements can provide valuable development experience for staff, but managers need to ensure that staff are free to contribute effectively.

4.40
Many of the joint arrangements and partnerships consumed significant amounts of resources. In these instances, budgets should be prepared and resources explicitly assigned.

4.41
We found that local authorities had carried out little assessment of the likely effects that entering into a joint arrangement would have on internal resources and competing work priorities. Staff costs were sometimes excluded from project estimates, and in some cases no records were available to show the extent of consumption of in-house resources as the project progressed. Without information on resource use, cost/benefit analyses will be incomplete, and the true costs of working together will be hidden.

Branding

4.42
Working groups may assume an identity separate to that of the joint arrangement members, and may interact with the community on behalf of participating local authorities or even third parties. Branding was seen by some local authorities as an important dimension of the collective purpose. A new brand had been created for 6 of the 7 joint arrangements that we examined where it may have been applicable to have a separate brand.

4.43
For example, as illustrated in Figure 5 below, the Our Way – Southland project and the coastal strategy project in the Wairarapa were each assigned a distinctive brand. Correspondence dealing with matters related to the two joint arrangements contained the logos and contact details of the participating local authorities.

Figure 5
Two Examples of Branding of Joint Arrangements

Implications for Staff

4.44
Wherever a joint arrangement has significant implications for staff, consideration must be given to how to manage those implications. Six of the 10 applicable joint arrangements in our case studies had significant implications for at least one staff member.

4.45
One example involved the transfer of Auckland City Council staff to the Auckland Traffic Management Unit, a business unit of Transit New Zealand. The transfer required Auckland City Council to ensure that:

• human resources staff were involved early so that staffing issues were not overlooked;
• staff supported, and understood, the reasons for the joint arrangement;
• staff contracts and any changes for individuals were discussed as early as possible;
• appropriate support was provided for staff;
• staff were fully aware of changes; and
• human resources staff at the two organisations maintained close contact.

4.46
The accountabilities of partners for staff should be clearly defined. For example, arrangements for sharing staff should make it clear how the staff member is accountable to each local authority. We found that this had been adequately addressed.

4.47
Three of our case studies involved local authority staff providing services to another local authority. Clear accountabilities were vital for this type of joint arrangement. For example, an employee of New Plymouth District Council spent two days each week in a role there and three days each week in a South Taranaki District Council role. Dual roles required the employee’s manager to define and distinguish the separate roles. Both local authorities reviewed the employee’s performance in the joint capacity.

Monitoring and Evaluation

4.48
Throughout the life cycle of a joint arrangement, and on completion, progress should be reviewed to ensure that key milestones, budgets, and timetables are being met. A review also provides an opportunity to identify lessons learned from the joint arrangement.

4.49
Ideally, when setting up their working relationship, the local authority partners should agree on processes for measuring and monitoring the effectiveness of their joint arrangements. For example, the Memorandum of Agreement signed by the members of the Southland Shared Services Forum in October 2000 records their agreement to review the performance of the forum annually, and to identify the effectiveness of the strategy and any further research necessary.

4.50
Some local authorities had sought independent assurance about their joint arrangements and structures, or about specific arrangements. For one case study, the external auditor had been contracted to provide assurance over the framework and the tender process as it occurred.

4.51
We found that joint arrangements were not generally evaluated to ensure that they delivered the expected benefits. Where proposals had identified net benefits from working together, there were no mechanisms to monitor and review actual benefits against expected benefits. The parties should agree at the outset on who should review the joint arrangement, and how often.

---

17: Orthophotography combines the image characteristics of an aerial photograph with the geometric qualities of a map.

page top