How the City of Utrecht achieved major budget savings through innovative service reviews

When the coalition government took office in the City of Utrecht in 2010 it was faced with central government-imposed austerity. The cabinet eventually agreed a durable budget reduction of €55m from 2014 onwards - this corresponds to 10% cut of the discretionary budget every year.

During a period of six months, 11 service reviews were carried out, inspired by new ideas stimulated by benchmarking against the ‘best in class’ in the Netherlands. Although the process was highly political, complex and brought together multiple interests, it resulted in 32 reform proposals with €66m estimated budget savings.

  * One-off cuts, to be achieved in this year only,
** Sustainable cuts, to be achieved this year and every following year

The review leader of each service review team was responsible for the development of independent statements regarding the transformation and budget cuts of the concerned policy area. Because they had to rely on the co-operation of the public officers in the review team, most review leaders involved them in finalizing the research method of the review (which had to be approved by the Review Director). However, the review leader was the only person held responsible for the objectivity and level of ambition of the review.

Each review had to be carried out within six weeks. Once the review report had been finalised the review leader was invited to present the results to (in case of the library) the Review Director, the alderman responsible for the library, the city manager and the library director. Subsequently, the report had to be presented to the corporate management team meeting chaired by the city manager. Following these discussions, the results were aggregated into three summaries and presented to the board of aldermen and mayor. At this stage, minor amendments could be made to the reviews but no far-reaching changes could be made.

As a last step, with the coordination of the Review Director an overarching plan was prepared which combined the individual reports’ and expected savings and linked them to broader organisational development issues. This overarching plan was accepted by the aldermen and presented to the local council in spring 2011.

Looking back: difficulties and success factors

In retrospect, three difficulties can be identified:

1. The comparability of the individual reviews - The 11 reviews vary not only in terms of scope, approach and depth, but also in terms of quality and validity. These differences are mostly due to the availability of time, benchmarking data and specific expertise in the review teams. Also, some services (e.g. libraries) are relatively simple, while others are complex and wide-ranging (e.g. social care). Nevertheless, each report addresses the key issues and challenges of the specific topic and uncovers the potential for improvement and budgetary cuts.
2. Second, the level of ownership felt by the department directors turned out to be lower than expected. Although this was seen as a risk from the beginning (and department directors were therefore involved in selecting the review leader), during the process many tensions could be perceived. For example, one department director tried to influence individual members of the review team to withhold relevant information. Furthermore, during the presentations of the individual results, the stakes became higher and higher, resulting in strong efforts to lower the savings and reform potential of a specific review. The most significant debates clearly occurred while discussing lower quality reviews which were seen to have more limited validity.
3. A third difficulty was the impact of the failed core-task analysis. Although this analysis was indeed undertaken (although not under the control of the Review Director), no specific cuts could be related to its results. So, because a savings potential of €55m had to be uncovered by the overall combination of the review, the reduction in hiring of external staff and the core-task analysis, the failure to find savings in the core-task analysis led to increased pressure on the review to come up with savings.

Looking at the success factors, three aspects should be emphasized:

1. The focus on priorities and sustainable cuts, rather than the usual salami-slicing with equal budget cuts of all services, was highly refreshing. According to research by Utrecht University, this distinguishes the City of Utrecht from many other Dutch cities.  
   
   “There are two contrasting ways to manage fiscal stress. One is to salami-slice budgets top-down and to figure out later how the budget savings can be produced. Another way is to think strategically - to reflect on the purpose and actual performance of the organisation, and to make holistic choices where to cut and where to invest.”

(Tom Overmans, Utrecht University)

1. Another success factor was to start the review with the positive question “What can we learn from best practice?” It truly opened up new solutions, new policy connections and other fresh thinking, rather than just doing what the City of Utrecht has always done, but in a cheaper way.
2. Finally, the way the individual reviews were carried out had added value. Involving local public officers in the review research teams helped to achieve the results within limitations of time and budget. During and after the review, no critical comments were made by administrative and political stakeholders regarding the (lack of) objectivity and independence of the results.

Within a timeframe of six months, the corporate and service review was executed. Under the central coordination of the Review Director, eleven reviews were carried out. During the process around one hundred public officers were involved (around ninety experts in the review teams and a dozen department directors). The process resulted in eleven individual review reports, which are publicly assessable, containing statements about performance, efficiency and savings potential.

From the library review, for example, it became clear that the performance level varied. Compared to top-performing libraries in The Netherlands, the Utrecht library had limited members and visitors (effectivity) and higher staff costs (efficiency); but also a larger collection with more loans per member (effectivity) and lower costs for housing and media (efficiency). Given the local ambitions and the need to modernise the library, three reform measures were proposed by the review team, providing a structural savings potential of €0.5m:

1. More business-like management, such as the proactive management of cost reduction and increasing of incomes;
2. Concentration of library locations, reducing fourteen average-performing locations to five high-performing locations with better services;
3. Privatising the library services in a foundation.

In total, the thorough review reports (averaging fifty-two pages) contained thirty-two specific measures brought together in an overall concluding report by the Review Director. These thirty-two austerity measures can be divided into effectivity-oriented measures and efficiency gains. Five measures were oriented at effectivity - for example, reconsideration of social policies in the review of social care. However, most measures (twenty-seven) were oriented at improving the efficiency of the administration and its activities - for example, by digitizing service in the review of public services, or the adoption of business-like management in the library.

In total, Utrecht has saved €135m since 2010 (€5m in 2011, €30m in 2012, €45m in 2013 and €55m in 2014).

The execution of the organisational review cost €800.000, just over 1% of the potential savings. This budget was mainly spent on the hiring of the external consultants, i.e. the Review Director and the leaders of the review teams.

There are two main lessons to be learned from this best practice case study:

1. The innovative municipal austerity plan in Utrecht added value by starting from an a priori investigation that enabled strategic decision making and linked the restoration of fiscal balance with a strategic repositioning of the organisation.
2. Although the level of ownership and acceptance of the overall review results varied between department directors, the execution of the review has certainly led to an undisputed sense of urgency on the part of the directors to take control over the process of modernization. 

The lessons from Utrecht show that combining internal expertise, experience and talent with external perspectives provides great value and opportunities for delivering high quality results in the context of limited time and budget.

The concluding report of the review process is publicly available:

Hiemstra, J. and De Vries, E. (2011). Utrecht staat voor een stevige veranderopgave. Samenvattende notitie externe doorlichting gemeente Utrecht. (in Dutch). (Utrecht faces a major challenge of modernization. Concluding report on the corporate and service review in the City of Utrecht)