Machinery of government in transition: standing up a cluster coordinating agency
PUBLIC SECTOR · MACHINERY OF GOVERNMENT · OPERATING MODEL
The situation
A state government had created a new central transport agency to sit above its existing operating entities and coordinate the whole cluster. The agency was months old. Functions were being transferred in from the established operating agencies, some confirmed and some still being argued over. Headcount was forecast to grow from around 430 to around 1,800, an increase of more than three hundred per cent, with every single function inside the organisation growing by more than half. Nobody had settled what the new agency was actually for, where its accountabilities stopped and the operating entities’ began, or how it would exercise authority over entities that had run themselves for decades.
Treasury commissioned an expenditure review, and the arithmetic produced an awkward result. The new agency’s own controllable budget was about $160 million, of which just over half was salaries and on costs and nearly a third was contractors and consultants. Its forward estimates gap on that budget was around $6 million. Meanwhile it directed a total budget of approximately $9 billion, almost all of it grants, subsidies and contract payments flowing out to operators and delivery bodies. A review scoped to the agency’s own cost base would have been an argument about six million dollars while nine billion sat untouched.
Before
Scope and accountabilities undefined
Headcount growing over three hundred per cent
Duplicated technology across entities
Costs announced before scoping
Contracts rewarding the wrong outcomes
The work
We reframed the review around the money the agency directed rather than the money it controlled, and delivered four things:
Established the baseline honestly, separating the agency’s own controllable expenditure from the far larger flows it administered, and setting out the growth and transfer picture so that the executive and Treasury were arguing about the same numbers. This sounds procedural. It was the single most useful thing in the engagement, because until then the transfers in from operating agencies were being counted differently by different parties.
Wrote the governance and operating model design principles for the new agency: distinct and visible separation of policy and planning from delivery and implementation and from operations and maintenance, accountabilities aligned to outputs, performance agreements with the operating entities covering productivity, reliability and service, an explicit market reform capability, separation of project from programme delivery, and honest end state resourcing so that duplication between the centre and the entities did not simply create a second layer of cost.
Identified, sized and validated the savings opportunities that only a cluster body could deliver, because they crossed entity boundaries and no individual agency had the standing to pursue them. The three quantified opportunities covered cluster wide technology asset utilisation and standardisation against a technology base of around $341 million, structural reform of a metropolitan bus contract portfolio of around $600 million where three quarters of the cost was variable and the contracts rewarded operators for outcomes they could not influence, and acceleration of an electronic ticketing business case to bring forward a one off benefit.
Scoped seven further cluster synergy areas into defined projects rather than leaving them as observations, covering shared corporate services, cluster wide strategic procurement, consolidated customer service delivery, centralised portfolio planning and investment optimisation, the construction delivery model, and congestion management, then set the whole programme out on a roadmap across nine quarters.
Alongside this we documented the project and programme delivery pattern that was driving cost growth across the cluster: major project costs announced publicly before detailed scoping and costing were complete, escalation modelled at consumer price index while input costs in the relevant sectors ran well above it, a propensity to over specify delivery standards, joint funding arrangements that transferred cost risk to the state, and a genuine gap between the capabilities the new agency needed and those available anywhere in the existing cluster.
After
Seven design principles agreed
Policy, delivery and operations separated
Single cluster technology strategy
Delivery framework with cost discipline
Contract reform with aligned incentives
The outcome
Approximately $65 million a year in savings at maturity, identified and validated with the agency, from three opportunities that no single operating entity could have delivered on its own.
A set of governance and operating model design principles that gave the new agency a defensible answer to the question it was being asked daily by the entities beneath it.
Seven cluster synergy areas converted from observations into scoped projects with targeted outcomes and named next steps, and a reform programme sequenced across nine quarters covering governance, cluster synergies, infrastructure, and major programmes and contracts.
The leverage in a coordinating agency is almost never in its own cost base. It is in the authority it has to change how the money it directs is spent, and that authority has to be designed deliberately rather than assumed to follow from the org chart.