Smaller Government: Shrinking the Quango State - Public Administration Committee Contents

Appendix A: Transition Guidance

Assessing business cases for changes to arm's length bodies

This guidance, developed with the NAO, sets out factors which we expect to be considered by business plans for reorganising public bodies. It also identifies likely costs and benefits which such plans should address.

A. Rationale for change
Key good practice principles

Be clear about why the change is being proposed, and in particular why existing arrangements are not able to deal with the situation.

Be clear about what the change is designed to achieve, and set corresponding objectives which can be tested at a future date.

Consult relevant parties about the change and its objectives, and incorporate consultation feedback in change planning.

B. Accountability and public administration impact

Key good practice principles

Clarify how the change affects the body's accountability to the relevant department and Ministers, to Parliament, and to the wider public.

Establish whether there are cogent reasons for the body to be independent from direct ministerial control.

Identify any wider public administration impacts, including those on the parent department, other departments and public bodies, and local government.

C. Options appraisal

Key good practice principles

Identify all feasible options, including no structural change and alternative delivery models.

Ensure that the option is chosen according to appropriate and well-evidenced criteria, and that key assumptions underlying the different options are tested and varied.

Ensure that the preferred option can be supported on grounds of economy, efficiency and effectiveness, and in particular on comparison of expected costs and benefits.

D. Identifying and managing costs

Key good practice principles

Ensure the costs of the change are estimated as accurately and completely as possible.

Express costs in monetary terms as far as possible, and specify other non-monetary costs in measurable terms.

Specify how long it is expected to take for costs to be recouped.

Put in place sound arrangements for recording and monitoring costs, and for bringing costs back on track if they start to exceed those budgeted.

E. Identifying and realising benefits

Key good practice principles

Ensure the expected benefits of the change are fully identified, and as far as possible expressed in measurable and monetary terms.

Define the timeframe for realising benefits, and the evidence needed to show that benefits have materialised.

Put in place appropriate arrangements to monitor benefits, and to manage risks that threaten those benefits being realised.

F. Managing the change

Key good practice principles

Ensure board-level support and clear leadership for change.

Ensure there are clear responsibilities for delivering the change, and that staff with appropriate skills are appointed to the implementation team.

Ensure there is a detailed implementation plan covering risks, deadlines, budget and impact on service levels.

Specify anticipated staff impacts and ensure changes are clearly communicated to staff.

G. Evaluation and review

Key good practice principles

Ensure effective review arrangements are in place to evaluate the change shortly after implementation, in order to identify and apply wider lessons.

If appropriate, define ongoing review arrangements to track whether the long-term objectives of the change, such as improved accountability, are being achieved.

Types of expected costs and benefits from reorganisations

Staff costs

Staff project costs, Recruitment costs, Temporary staff costs, Redundancy costs, Relocation costs

Salary uplifts where bodies with different pay scales merge, Training costs, Consultation process with staff, indirect staff costs, for example, senior staff planning time, non-project staff time

Property/accommodation costs

Capital acquisitions/refurbishments, Removal costs, Lease exit payments/restoration costs,

Service contracts - new/exits

Information technology costs

Capital IT additions, IT consultancy costs, Service contracts - new/exits/transition costs

Communication and branding costs

Signage and other branding, Website development, Stakeholder communication, Public awareness/advertising

Corporate costs

Corporate services, such as human resources and finance support. Professional fees, other consultancy costs

Other indirect costs

Productivity losses where change is disruptive or staff morale falls, Losses of expertise and institutional memory, Adverse effects on third parties, such as reduced customer or stakeholder satisfaction, decreased responsiveness to customers, or increased burdens on businesses and other organisations

Financial savings

Improved operational efficiency, Ability to cease lower priority functions or activities, Economies in back office functions (for example, through shared services), Estate and other asset rationalisation

Improved policy focus and delivery

Greater clarity about core priorities and organisational targets, Improved capacity to meet policy objectives, Increased effectiveness of policy or service delivery, A more coordinated/'joined-up' policy approach, For regulatory bodies, improved regulatory outcomes (for example, clarity and certainty of regulatory approach)

Better management and governance

Clearer governance and management structures, Improved financial management, Improved accountability, Ability to devolve functions to most appropriate level, Higher staff welfare and satisfaction, Greater transparency about organisational functions and activities

Beneficial third party effects

Increased responsiveness to customers/service users or external parties, higher customer/service user satisfaction, reduced burdens on business, other organisations or individuals

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Prepared 7 January 2011