Efficiency analysis for the provision of local public services (pursuant to Law 5 AUGUST 2022, No. 118)
The reform of the provision of local public services provides for the possibility for local authorities to entrust the management of local public services through various channels:
• outsourcing to third parties through public procedures in accordance with the provisions on service contracts and concessions;
• mixed public-private company, whose selection of the private shareholder takes place through a dual-purpose tender;
• direct management by the local authority, so-called “in house” management.
The choice, in particular the “in-house” award, is subject to the preparation of a specific report which expressly gives an account of the reasons for the failure to resort to the market for the purposes of efficient management of the service, illustrating, also on the basis of the deeds and of the indicators referred to in articles 7, 8 and 9, the benefits for the community of the chosen form of management with regard to investments, service quality, service costs for users, impact on public finances.
M|R has high skills in the management of the economic-financial analysis relating to the economy/efficiency of the service. The analysis follows the benchmarking approach and compares, on the basis of balance sheet data, the economics of management by comparable companies, suppliers of the same service.
1. Analysis of the reference market. A careful analysis of the reference market is conducted on the basis of information of various kinds, internal and external to the tested party.
2. Search strategy setting: the initial set or “peer group” is defined, with respect to the reference company (i.e., tested party) starting from essential data extraction criteria (market, activity classification, independence, legal form, size, consolidated financial data ); the survey is based, in this phase, on the use of commercial databases (e.g. Aida, Orbis,…).
3. Quantitative analysis: the “peer group” is analyzed with reference to a series of indices (liquidity, solidity, profitability..) to refine the comparability between the individuals identified and the tested party on the basis of economic and financial profiles;
4. Qualitative analysis: the comparability defects are eliminated and a final set of companies is defined through:
• Review of descriptions related to the activity provided by the database;
• Viewing and in-depth information from the company’s website;
• Balance sheet analysis, explanatory note and management report;
• Consideration of historical chamber of commerce registrations at the Chamber of Commerce;
• Analysis of the summary diagram of direct and indirect shareholdings, of natural and legal persons.
5. Benchmarking analysis for the study of the level of efficiency: the final peer-group is analyzed in terms of a series of key indicators for the evaluation of the productivity/efficiency of the management with respect to the various types of management: outsourcing to third parties; mixed public-private company; direct management by the local authority (so-called “in house” management). The analysis is based on the use of efficiency estimation techniques such as Data Envelopment Analysis (DEA), Stochastic Frontier Analysis (SFA), semi-parametric methods à la Olley-Pakes, Growth Accounting, Development Accounting.
6. Drafting of a detailed report: in order to ensure maximum transparency and reproducibility of the analysis, an adequate description of all the steps of the analysis is provided, highlighting the research strategy and the comparability criteria adopted. In addition to the detailed report in text format, a summary of the work is provided in presentation format.