Performance and efficiency measurement in local authority building organisations

This work constitutes a study of the operations of local authority building direct labour organisations (DLOs) during the 1980s, An overt aim of Part III of the 1980 Local Government, Planning and Land Act was to improve efficiency in the operations of local authority building direct labour organisations (DLOs). Whilst the Act did not specify how DLOs should be organised, the legislation on accounting and accountability clearly had Important organisational implications. Even prior to 1981, some DLOs already obtained the majority of work via competitive tender, had control over their functions and had systems for demonstrating their efficiency. Others were not operated in such ways and fundamental changes were needed to successfully meet the challenge of the new legislation. By 1988, the Audit Commission admitted that DLO5 had very largely been successful in meeting the competitive requirements of the 1980 Act, but expressed concern over the varying levels of effectiveness and efficiency of operation that existed amongst organisations. An objective of the study is to look at the problems associated with efficiency and productivity measurement in the context of DLO performance. The Conservative government of this period had a strong conniitment to the improvement of efficiency of the public sector. In other areas of public services, various forms of performance Indicator were being employed to monitor performance, but for a DLO the sole measure of efficiency was the ability to meet the 5a target rate of return. The concern with efficiency produced new interest in the application of quantitative techniques to provide methods of efficiency measurement. This work undertakes a study of the problems associated with efficiency and performance measurement In this sector of the U.K. construction Industry. The availability of appropriate data at the Individual organisation level from 1981 onwards, enabled, for the first time, viable lnter-DLO comparisons to be undertaken at the micro-level and sectoral comparisons to be made at the macro-level. The data used In the study were obtained over a five year period from a variety of sources of published and unpublished sources. A unique database of expenditure and revenue Information from over 150 DLOs has been developed, which in many ways is even more comprehensive than the 'official' statistics collected by the Chartered Institute of Public Finance and Accountancy. Methods used for efficiency measurement With the great emphasis placed on ensuring that the public sector of the construction industry acts in an efficient manner, the data are employed In various methods for the measurement of efficiency. 1. At the sector level, total factor productivity neasurement is used to gauge the rate of growth of the DLO sector of the industry. 2. At the organisation level, 'Farrell' measures of efficiency are used. A model for measuring the efficiency of Individual organisations is presented. Data Envelopment Analysis I used to consider inefficiency that raises Costs above their feasible minimum.