Survival Through Regionalization: Effective Models for Intergovernmental Cooperation and Group Purchasing
All local governments want to save time and money in the procurement of goods and the provision of public services. How this is achieved varies from one municipality, county and school district to another. Regionalization, whereby two or more units of government work together to solve problems and seek common solutions, is clearly gaining in importance across New Hampshire as a successful approach for governmental efficiency. The term “regionalization” is also commonly referred to as inter-municipal, inter-local, or inter-governmental sharing arrangements or agreements. All of these terms are used synonymously in this article. By working together to mutually share resources and collectively procure goods and services, significant public benefits and cost savings can be achieved through economies of scale.
The purpose of this article is to introduce and review the results of a mutual sharing pilot study, Survival Through Regionalization: Effective Models for Intergovernmental Cooperation and Group Purchasing, currently being carried out by the Southern New Hampshire Planning Commission (SNHPC), in partnership with Dennis Delay of the New Hampshire Center for Public Policy Studies (NHCPPS), and Chris Porter, former researcher with the New Hampshire Municipal Association (NHMA). This article is also intended to advance and promote the practice of mutual sharing and group purchasing within the state.
This is the first study of this kind to be undertaken in New Hampshire. With funding provided by the Statewide Regional Partnership Fund through the New Hampshire Charitable Foundation, the pilot study has successfully:
(1) Identified all existing mutual sharing and cooperative agreements currently in place within the SNHPC Region (see map of region on next page);
(2) Identified and evaluated the highest priority interests and needs in mutual sharing and cooperative purchasing among the fourteen municipalities and three counties that make up the SNHPC Region; and
(3) Begun to develop five sharing models for how local governments can work together in addressing
these priorities.
Summary of Key Findings from the NHMA Regionalization Surveys:
The genesis for the pilot study grew from two statewide surveys conducted by the New Hampshire Municipal Association (NHMA) in 2010 and 2011. The purpose of the 2010 survey was to take a census of New Hampshire’s inter-municipal cooperative agreements, in order to measure how many and what types of agreements exist. Areas of investigation focused on: (1) Shared Positions/Programs/Functions; (2) Shared Facilities/Equipment; and (3) Cooperative Purchase Agreements. Survey responses were obtained from 56 percent of the state’s 234 cities and towns; the findings were published in the July/August 2010 edition of NHMA’s Town and City magazine. (See Christopher J. Porter, “LGC’s 2010 Regionalization Survey: Summary Report,” New Hampshire Town and City, July/August 2010, 14-20.)
The survey revealed that 40 percent of the participating municipalities indicated some level of sharing of ambulance/EMT services, followed by shared transfer stations and recycling facilities (26 percent). Shared prosecutorial services (19 percent) and parks and recreation (12 percent) rounded out the category.
Looking at shared facilities/equipment across the state, transfer stations/recycling facilities (20 percent) and ambulance services (14 percent) again topped the list among these sharing categories.
Shared purchasing agreements centered on fuel (oil/propane 17 percent; fuel 16 percent), followed closely by road surface materials (13 percent).
The 2010 NHMA survey concluded with the question, “What do you see as the impediments or difficulties in establishing cooperative, inter-municipal agreements of the kind described throughout this survey?”
In 2011, the NHMA returned to the municipalities that had participated in the initial regionalization survey to ask what, if anything, had changed in the past year. The findings from this second study were published in NHMA’s Town and City magazine in the January 2012 edition. (See Christopher J. Porter, “Inter-Municipal Sharing Agreements: What’s New?,” New Hampshire Town and City, January 2012, 19-21.) The line of questioning in the 2011 survey was as follows:
Since April of 2010, have you entered into any NEW regional, cooperative, sharing agreements with any municipalities, school districts, or the county?
Have any existing agreements changed during this time?
Are new things under consideration?
The percentages of total responses received with regard to these questions are summarized in the table on this page.
A year later, more municipalities, schools and counties were at least talking about new inter-governmental sharing agreements with their neighbors. Over the course of the two NHMA statewide surveys, a total of 141 cities and towns indicated they had established at least one regional sharing agreement with a neighboring city or town. Although many other agreements went undiscovered, some have now surfaced in the current Pilot Study.
Summary of the Pilot Study’s Regionalization Work:
The Pilot Study’s first step involved developing an inventory of existing mutual sharing agreements within the SNHPC Region. The Pilot Study’s Advisory Committee then identified needs, opportunities and role models for mutual sharing and group purchasing. The Mutual Sharing Pilot Study Advisory Committee is made up of managers, administrators, purchasing agents and appointed representatives from the 14 municipalities and 3 counties within the region, including appointed staff from several key state agencies, such as NH Department of Transportation (DOT) and the NH Department of Administrative Services, as well Professor Daniel Bromberg at the University of New Hampshire.
The inventory discovered a total of 37 agreements for sharing programs, services and functions; six for sharing facilities/equipment; and eight for cooperative purchasing. Most agreements address a number of key governmental functions, including: mutual aid, law enforcement, code enforcement, and building inspection; EMT and ambulance services; fire and police dispatching services; financing legal assistance among MS4 storm water municipalities; hazardous materials mutual aid; legal services for telephone and cable franchise agreements; hazardous waste collection days; SWAT units; automatic fire aid; agreements for use of school sports fields; water and sewer services; cell towers; solid waste disposal; and cooperative purchasing for electricity, heating oil and propane.
The Advisory Committee considered a variety of existing and new mutual sharing opportunities, including:
* regionalizing prosecutorial services through the county, similar to existing services provided by Strafford County
* sharing municipal assessors, similar to the New London-Newbury-Sunapee service agreement
* using cooperative purchasing for property re-valuation services
* participating in the NH Public Works Mutual Aid Program
* sharing building inspectors
* sharing in the cost for flagging at public events
* using group purchasing for office supplies
Results of the Mutual Sharing Opportunity/Needs Assessment Survey:
During the summer of 2013, the Advisory Committee distributed a mutual sharing opportunity/needs assessment survey, containing over 70 potential resource/sharing opportunity areas among the local government managers and administrators within the SNHPC region. Eleven surveys were completed among the fourteen municipalities and three counties in the SNHPC region.
The survey demonstrated the greatest interest for participating or sharing:
Grant Writers (80%)
Cooperative Utility Purchasing (80%)
Planners (70%)
Fuel Purchasing (70%)
Cooperative Office Supply Bidding (70%)
Information Technology (IT) Functions (66%)
The survey also showed significant interest in cooperative purchasing of:
Utilities (phone and broadband)
Energy (electricity, power)
Clean Fuels (biofuels, CNG)
Gasoline/Diesel Fuels
Assessing (revaluation/list of measures)
State of NH Combined Office Supply Bid
The Advisory Committee felt there was sufficient interest in pursuing the development of mutual sharing and cooperative purchasing models that addressed each of the highest scoring “opportunity areas”, as identified in the following survey summary below.
These models are briefly described in the following sections.
Office Supply Bidding: This model is the result of a new office supply purchasing program carried out through the State of New Hampshire’s Administrative Services Division.
This is the state’s first office supply bidding program, and as such, it will provide a benchmark for future models. As with all group/bulk purchasing programs, the more local governments that join, the greater the likely discount. Eligible participants include political subdivisions (counties, towns, school districts, special districts or precincts, or any other governmental organization), and any nonprofit agency under the provisions of section 501(c)(3) of the federal Internal Revenue Service code.
Participants must sign an addendum to be eligible to utilize the contract resulting from the bid invitation. In doing so, they are entitled to the prices established under the contract for a minimum of three, and up to a maximum of five years. Each participant is solely responsible for their association with the successful vendor. The state assumes no liability between the successful vendor and any participating entity.
Cooperative Fuel Purchasing: This is not a new program, as the state’s Department of Transportation Bureau of Fuel Distribution currently administers a statewide fuel distribution system designed to reduce vehicle-operating costs by eliminating retail (off-site) fuel purchases, among other goals. (More information on Fuel Distribution System can be obtained at the Bureau of Fuel Distribution website: www.nh.gov/dot/org/operations/highwaymaintenance/fuel-distribution/index.htm). This statewide fuel distribution system consists of 41 automated fueling facilities within six regions of the state.
Each fueling facility is available to all state departments, institutions, agencies and political sub-divisions, 24 hours a day, 7 days a week. Automated facilities require both a tag and ID code number to operate. The remaining 49 manual facilities are available only when a site manager is present.
Local governments can obtain gas and/or diesel from these distribution facilities at state-negotiated prices. Bio-diesel fuels are also available at the Durham facility. Compressed natural gas (CNG) is currently only available in Concord. Prices are bid out and negotiated annually by NH Department of Administrative Services and are generally lower than prices negotiated by local governments.
By purchasing fuels at a NH DOT fueling facility, local governments save on fuels despite the additional transportation costs associated with refueling. There are other savings realized by eliminating the liability associated with owning and operating a local fuel facility.
NH DOT Fueling Facilities in the SNHPC Service Area: Another fuel purchasing model exists among the towns of Dunbarton, New Boston, Goffstown and SAU #19, which are currently working together on a cooperative fuel purchasing bid and contract for propane and #2 heating oil. This contract provides a joint service model that can be duplicated by other local governments interested in the savings realized through economies of scale.
Sharing a Grant Writer/Professional Planner: Many communities within the SNHPC region do not have a dedicated (full or part time) grant writer with specialized skills in researching or writing grants, nor a professional planner who can write grants and manage the municipality’s growth and development. Through this pilot study, a model is being developed that would address this need, through both a cooperative group purchase agreement, as well as a shared service approach. The model will be based on the circuit-rider program, successfully implemented by the Nashua Regional Planning Commission. (See also Smart Growth America’s policy guide to establish a Circuit Rider Program at: http://www.smartgrowthamerica.org/circuit_rider_program).
This model will also provide local governments with the opportunity to procure the services of UNH graduate students in the Master of Public Administration’s Capstone Internship Program. This program is designed to provide students with an opportunity to apply the knowledge and skills developed in the MPA program to real world situations, which includes grant research and writing based upon local governments’ specific needs.
Cooperative Utility Purchasing: Local governments have a tremendous opportunity to work together to bid collectively to purchase wholesale electricity at significantly lower costs than are available from utility companies or individual rate promotion programs. This cooperative utility purchasing can provide lower electric costs to local governments for municipal buildings, street lights, water and sewer operations and other uses. Cooperative utility purchasing must be carried out on an annual basis, however, and the typical model requires that a host agency or local government be responsible for overseeing the bidding and contracting process.
Within the SNHPC Region, the Town of Goffstown, SAU #19 and the Town of New Boston have successfully worked together to bid and contract for wholesale electricity rates through a mutually agreed upon vendor. The model followed is similar to the cooperative utility purchasing agreement in place since 2009 between the towns of Hancock, Peterborough, Temple, Dublin, Jaffrey, Milford, and the Conval and Jaffrey/Rindge School Districts.
In addition to these cooperative, wholesale electricity purchasing agreements, the model being developed through this Pilot Study will include regional solar aggregation initiatives. Given recent advances in photovoltaic (PC) technology, effective solar development can now be supported in all regions of the globe at significant cost savings, including cloudy regions such as New England. This initiative is an inexpensive, sophisticated, volume-purchasing campaign which works to obtain lower purchase and installation costs for solar panels. Costs to local governments that participate in these initiatives are minimal.
Information Technology (IT) Sharing: The last model to be developed through the Pilot Study is the sharing of Information Technology (IT) services, staff, hardware (computers, servers, printers, monitors, etc.) and software (cloud-based systems and software licenses) through various approaches: (1) outsourcing of IT services; (2) group purchasing; and (3) sharing existing resources.
To gauge interest in these potential IT sharing models, a survey was distributed to IT staff and municipal/county/SAU managers and administrators within the SNHPC Region. Based on early survey returns, the area of greatest interest centers on the economies of scale possible through group purchasing, be it for hardware, software, licenses, or cloud-based systems.
While several municipalities are already availing themselves of discount purchasing agreements made available by the large hardware and software manufacturers, others are anticipating their initial foray into group IT purchasing through the State of New Hampshire’s office supply purchasing program. Clearly, there are several new and existing group purchasing avenues available for further analysis and discussion by the Pilot Study’s Advisory Committee.
Lessons Learned:
If the savings from municipal cooperation and shared services are evident in both theory and practice, why isn’t inter-municipal cooperation more widely pursued? There are probably several reasons.
Governments generally cooperate when it is in their self-interest, and may tend to exclude governments with higher costs or lower fiscal capabilities from cooperative agreements. A survey of the literature and analysis of almost 100 cases found that fiscal constraints were more likely to be a significant driver of cooperation in studies that include small municipalities and measure cooperation across a range of services (Factors Explaining Inter-municipal Cooperation in Service Delivery: A Meta-Regression Analysis by Germà Bel and Mildred E. Warner, presented at Public Management Research Association Conference, Madison, WI, June 22, 2013). But the study also found that the practice of inter-municipal cooperation may be driven by more nuanced goals regarding service effectiveness rather than efficiency.
While there are possible savings in inter-municipal cooperation, for some government functions, costs rise as the service area broadens. The costs for services such as public safety that involve high transportation costs increase over wider geographic areas, for example. Also many citizens fear that a more-distant government would not reflect their interests well and that their communities would lose their identities.
Finally there is a fear that if governments share responsibility, they lessen their own importance. Typically, small local governments jealously guard their independence. Thaddeus Squire, a nonprofit entrepreneur based in Philadelphia who works with small cultural organizations has nicknamed this the “Velveteen Rabbit Syndrome”. In the story of the Velveteen Rabbit the main character is a stuffed rabbit on a quest to become real through the love of his owner. In a similar way, local government officials may feel less “real” if they don’t have their own manager, copier, printer, building, staff and so on. Inter-municipal cooperation, when seen through this lens, can be very threatening indeed.
What’s Next?
As the Pilot Study nears completion at the end of February 2014, the results of the study will be summarized in a final report. In addition, there is interest in working together to prepare and publish a practical handbook on inter-governmental sharing and group purchasing for local governments in New Hampshire. The handbook will: (1) document successful mutual sharing models (both in New Hampshire and other New England states); and (2) provide easy to follow advice, guidance and instructions for developing and executing successful inter-governmental sharing agreements.
It is the hope that the Pilot Study will continue to advance the legitimacy of cooperative resource sharing among all units of government, and that the Governor’s office and state legislators will take notice and form a legislative committee to study and recommend new state initiatives and legislation (including possible incentives) to facilitate mutual sharing among every political subdivision in the state. There are many models and examples in New Hampshire, New England and across the nation for both state and local government. All it takes is a leap of faith and a decision to move forward.
With greater access to the many successful existing, new, and emerging mutual sharing and group purchasing models and programs, local governments will become better informed and financially stronger and resilient. This in turn will advance economic opportunity, and help to provide long-term, sustainable solutions to the day-to-day operations of local governments.