Agenda of Revenue, Expenditure and Value Committee

Revenue, Expenditure and Value Committee

18 February 2025

Section 17A review update and approval of Terms of Reference

File No.: CP2025/00168

Te take mō te pūrongo

Purpose of the report

1. To approve the terms of reference for section 17A reviews of Stormwater Contracts and Waste (Bins Manufacturing and Maintenance).

2. To receive an update on approved service reviews that are already underway.

Whakarāpopototanga matua

Executive summary

3. Local authorities are required by legislation to undertake section 17A service reviews (also known as “value for money reviews”).

4. Section 17A reviews aim to improve the cost-effectiveness and quality of service delivery to Aucklanders. The value for money reviews are one way Auckland Council can ensure its resources are spent in a way that best meets the needs of communities of Auckland.

5. The service reviews are also expected to identify savings to contribute to the Long-Term Plan 2024-2034 savings targets.

6. This report contains an update on approved service reviews that are underway, as well as the proposed Terms of Reference for the Stormwater Contracts and Waste (Bins Manufacturing and Maintenance).

Ngā tūtohunga

Recommendation/s

That the Revenue, Expenditure and Value Committee:

a) whakaae / approve the Terms of Reference for the Stormwater contracts review.

b) whakaae / approve the Terms of Reference for Waste (Bins Manufacturing and Maintenance) review.

Horopaki

Context

7. Section 17A of the Local Government Act 2002 says that local authorities “must review the cost effectiveness of current arrangements for meeting the needs of communities for good quality local infrastructure, local public service and performance of regulatory functions”. Reviews must also consider options for how services are governed, funded, and delivered.

8. Reviews aim to improve the efficiency and effectiveness of delivering public services. They require a systematic evaluation of how services are delivered and whether improvements or changes are needed to deliver a better service for residents. Improvements are made through examining the below.

· Efficiency and cost Savings: Reviews seek to identify ways to deliver services more efficiently, including by identifying inefficiencies and areas where resources are not optimally used.

· Service quality: Reviews may assess whether the current methods of service delivery meet the desired outcomes for residents. If service quality is lacking, the review provides an opportunity to consider improvements.

· Alternative models: Reviews must assess other potential service delivery models, including collaboration, shared services, and public-private partnerships. This can lead to innovation and modernising service delivery approaches.

· Long-term planning and strategy: Reviews help the council think strategically about the future sustainability of services. By reviewing services periodically, local authorities can align them better with community needs and long-term objectives.

9. Overall, section 17A service reviews promote accountability and continuous improvement, ensuring that public services evolve to meet changing community needs and deliver value for money.

Auckland Council Section 17A reviews – Long-term Plan 2024-2034

10. The Long-term Plan 2024-2034 highlights a priority to deliver “better, faster, and cheaper.” Service reviews can advance this priority by improving cost-effectiveness (“cheaper”) and service quality (“faster and better”).

11. Service reviews are also expected to contribute to organisational savings targets. The Long-term Plan 2024-2034 provides for $27.8 million of additional savings in year one rising to $67 million in year three. These targets require Auckland Council to make ongoing annualised operating cost savings (i.e. permanently take cost out or permanently increase revenue), rather than rely on short-term or one-off measures.

12. To meet these targets, service reviews are expected to contribute about $12 million in annualised savings by year three.

Governance

13. Section 17A reviews are to be included in the Revenue, Expenditure and Value Committee’s annual work programme including approving the terms of reference for individual reviews, as well as monitoring and reporting on the implementation of, and the recommendations arising from those reviews.

14. This report is the third update to the Revenue, Expenditure and Value Committee since September 2024. During this period, the Terms of Reference below have been approved:

· Group Property Review

· P27 ‘Te Ara Hura’ Full Facilities Maintenance Contracts

· Building Consents

· Marina Management.

Tātaritanga me ngā tohutohu

Analysis and advice

Service Review Pipeline

15. Reviews for the 2024/2025 financial year are detailed below:

FY25	Description	Status	Update since September report
Pools and Leisure Delivery Model	Review of the service delivery strategy and delivery model for Pools and Leisure	Implementation and Delivery – led by the department	New contracts approved at the October REV committee
P27 Contracts: Parks and Community Facilities	Review of full facilities maintenance contracts	Planning	Local board engagement underway and initial market testing
Group property review	Review of the structure and performance of the council property portfolio management functions	Planning	Property framework being drafted with key SMEs
Marina management	Review of marinas across the council group	Initiate	Initial findings to be presented to the Revenue, Expenditure and Value Committee in March 2025.
Building Consents	Review of the building consents function	Initiate	Initial assessment to be completed April 2025
(New) Stormwater Contracts	Review of stormwater operations and maintenance contracts	Strategic Assessment	Terms of Reference to be approved by the REV Committee
*(New)* Waste (Bin Manufacture and Maintenance)	Review of the Waste (Bin Manufacture and Maintenance) contracts	Strategic Assessment	Terms of Reference to be approved by the REV Committee

Decision-making and reporting

16. Initiating a section 17A review will include internal scoping and shaping of the business case, this process will identify and define decision makers. If the identified decision makers are elected members they will be engaged from the start of the process, with regular updates on progress.

17. To ensure that service reviews are prioritised according to the guidance of elected members, the Revenue, Expenditure and Value Committee will receive regular quarterly updates on the progress of current reviews, as well as potential future reviews.

18. Once a review has been concluded, a recommendation report will be presented to the Revenue, Expenditure and Value Committee, including any improvements or service changes for consideration.

Stormwater contracts – Terms of Reference

19. The stormwater contracts cover the operations and maintenance of the council’s stormwater infrastructure, including general maintenance, restoration, inspection and emergency response services. Contract management is overseen by the Healthy Waters and Flood Resilience department.

20. The stormwater operations and maintenance contracts have an eight-year term (made up of five years initially, with an extension of three years). The initial terms for the North and Central contracts expire in 2026, with extension end dates until 2029. This has triggered a review under section 17A of the Local Government Act 2002. Starting the review now will also enable any significant variation to be included in the contract extension if required.

21. The review will assess available options and advise a recommended option for council’s stormwater management (operations and maintenance). This includes:

· Assessing effectiveness of current contracts

· Contract delivery model assessment to determine alternate options for delivery

· Potential contractual optimisation opportunities, such as process improvement or easier methods of data collection.

22. The full terms of reference can be found in Attachment A.

Supply of refuse, recycling bins and bin maintenance and distribution services – Terms of Reference

23. Auckland Council Waste Solutions oversees kerbside waste services across the Auckland region, requiring an inventory of over one million bins in various sizes for recycling and waste. Current contracts for bin supply and maintenance expire in June 2026, necessitating preparation for new contracts.

24. The Long-term Plan 2024-2034 includes budget for a mass renewal program aimed at replacing end-of-life refuse and recycling bins in targeted areas. Additionally, there is budget for introducing bins of varying sizes, however, this is subject to a policy decision on moving to fortnightly collections and requires a trial to be completed prior to public consultation.

25. The review will assess the following:

· What outcomes we want to achieve from future contracts

· What are the bin renewal options and a recommended approach

· What is the optimal supply and maintenance contract delivery model.

26. The full Terms of Reference can be found in Attachment B.

CCO transition alignment post-Governing Body decision (December 2024)

27. On 12 December 2024, the Governing Body approved the Mayoral Proposal 2025/2026: Council-controlled Organisation Reform, which included agreeing transferring and integrating all of Eke Panuku’s functions to Auckland Council, and transferring and integrating Tātaki Auckland Unlimited’s economic development function to Auckland Council.

28. The implementation of these recommendations will intersect with the reviews underway for the Group Property review and Marinas review. The Value for Money team is part of the transition team and will work closely to ensure that the review recommendations are considered and that the work is phased appropriately.

Tauākī whakaaweawe āhuarangi

Climate impact statement

29. Our climate commitments are set out in Te Tāruke-ā-Tāwhiri: Auckland's Climate Plan. With every service review, climate commitments are considered to ensure the decisions we make positively contribute to achieving the targets.

30. There is a commitment within the plan to reduce greenhouse gas emissions by 50 per cent by 2030 (against a 2016 baseline) and to achieve net zero emissions by 2050.

31. Reviews will seek to identify opportunities that improve cost effectiveness and reduce greenhouse gas emissions.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

32. Section 17A reviews occur across the Auckland Council Group. Once a service review has been triggered, then a value for money assessment will be undertaken and options for future service delivery considered. These may result in a change of service delivery to maximise the cost-effectiveness of the service. Impacts to the council group will be considered as part of reviews.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

33. Service reviews have different levels of impact on local boards. When a service review assessment will impact the level of service within a particular local board area, then staff will either seek a decision or feedback from the board depending on the allocated decision-making responsibility.

Tauākī whakaaweawe Māori

Māori impact statement

34. When reviewing services, consideration will be given to how council services (and any decisions to change) impact on the council’s statutory obligations derived from Te Tiriti o Waitangi, and its strategic commitments to Māori articulated through the Auckland Plan 2050 and Kia Ora Tāmaki Makaurau – Māori Outcomes Performance Measurement Framework (KOTM).

35. Generally, service reviews and decisions impact on the outcomes in the KOTM Framework as follows:

· Kia Ora te Whānau – Whānau and Tamariki Wellbeing: the council group is committed to providing relevant and welcoming public facilities and services for whānau Māori, including support for Māori-led services where appropriate:

· Service reviews and decisions consider both the impact on the relevance and manaakitanga of council services for whānau Māori, and opportunities to support Māori-led and co-designed services.

· Kia Hāngai te Kaunihera – An Empowered Organisation: the council group works to fulfil its commitments and legal obligations to Māori derived from the Treaty of Waitangi, as well as its capability to deliver Māori outcomes:

· Service reviews and decisions consider impacts on kaimahi Māori and Māori specialist roles, including potential reductions and opportunities to further support and embed specialist roles into service provision and design. Te ao Māori perspectives are considered as a part of service design.

· Kia Ora te Rangatahi – Realising Rangatahi Potential: the council group aims to support rangatahi Māori in their career development, and to participate meaningfully and effectively in the council’s decision making:

· Service reviews and decisions consider specific impacts to rangatahi Māori as both employees of Auckland Council and beneficiaries of Council-provided services.

36. Other outcomes and areas of interest for Māori may be identified through specific service reviews and decisions.

37. Specific engagement processes with mana whenua and Māori communities will be undertaken when there is a significant change in the level of service identified.

38. Service decisions will also consider Houkura - Independent Māori Statutory Board’s Schedule of Issues of Significance 2021-2025, and where appropriate seek additional advice from Houkura’s secretariat.

Ngā ritenga ā-pūtea

Financial implications

39. The basis of section 17A is to ensure that services are cost-effective when meeting the needs of the community. This is to ensure that Aucklanders are receiving value for money from the council services that they receive.

40. The Long-term Plan outlines Auckland Council’s commitment to delivering additional permanent on-going operating savings. These savings will come from a combination of service changes and efficiency savings. If these savings are not achieved, then rates will need to increase by more than planned ($25 million of ongoing operating savings is equivalent to about a 1 per cent average residential rates increase).

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

41. Each section 17A review has risks specific to that review. These risks are identified and mitigated as early as possible when the review is scoped by staff.

42. Section 17A reviews result in recommendations for how a service can be better delivered. If these recommendations are not approved and implemented, then there is a risk that the Long-term plan savings targets are not met, and the potential for further residential rates increases.

43. There is a reputational risk if Auckland Council does not comply with the requirements for section 17A. The Local Government Act does not explicitly set out any consequence for not complying, and therefore the consequences are most likely political or reputational rather than legal, and also depend on the nature of the non-compliance.

Ngā koringa ā-muri

Next steps

44. Staff will continue with the review of services as required by legislation or by Council decision and updates will be provided to the committee quarterly.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇨	Stormwater Contracts Terms of Reference
b ⇨	Supply of Refuse, Recycling Bins and Bin Maintenance and Distribution Services Terms of Reference

Ngā kaihaina

Signatories

Author

Chantelle Subritzky - Head of Value For Money

Authorisers

Anna Bray - General Manager Group Strategy, Transformation and Partnerships

Max Hardy - Director Group Strategy and Chief Executive Office

Ross Tucker - Group Chief Financial Officer

Revenue, Expenditure and Value Committee

18 February 2025

Auckland Council savings progress for the quarter ended 31 December 2024 and implementation update on Pools and Leisure and Early Childhood Education service delivery

File No.: CP2025/00557

Te take mō te pūrongo

Purpose of the report

1. To provide an update on progress towards meeting the savings targets for Auckland Council for the 2024/2025 financial year, and the implementation of decisions over Pools and Leisure and Early Childhood Education service delivery.

Whakarāpopototanga matua

Executive summary

2. The adopted final Long-term Plan 2024-2034 includes a combined enduring savings target for Auckland Council of $66 million for the 2025/2026. This is in addition to an ongoing $90 million per annum savings target that was set as part of the previous long-term plan and has already been achieved on an enduring basis.

3. As at 31 December 2024 Auckland Council has achieved $43.2 million (65 per cent) towards the $66 million savings target for the 2024/2025 financial year, including $11.2 million achieved during the second quarter.

4. Work is ongoing to deliver and strengthen a pipeline of further savings through ongoing efficiency initiatives, improving revenue, careful spend management, and the potential for some reduction in regional services subject to decision making.

5. As part of the overall savings targets, decisions have previously been made about specific savings targets for Pools and Leisure service delivery and the withdrawal of direct council provision of Early Childhood Education (ECE) services.

6. A prioritised list of savings initiatives has been developed to implement decisions relating to Pools and Leisure service delivery. Contracts are in the final stages of implementation, with one issue identified requiring further decision making.

7. The withdrawal of direct council provision of ECE services has now been completed with benefits of around $300,000 per annum achieved so far. Further benefits are likely to be achieved once decisions are made about the future use of some vacant ECE sites.

8. In addition to providing regular updates to this committee, progress against the savings target is also reported quarterly to the Governing Body as part of quarterly performance reporting and monitored monthly by the Executive Leadership Team for progress, risks and opportunities.

Ngā tūtohunga

Recommendation/s

That the Revenue, Expenditure and Value Committee:

a) tuhi tīpkoa / note that Auckland Council has achieved $43.2 million or 65 per cent of the 2024/2025 savings target, including $11.2 million achieved during the second quarter.

Horopaki

Context

9. Through the annual and long-term planning processes, Auckland Council has a number of operating savings targets that have been set over time:

· $90 million annual savings target set in the Long-term Plan 2021-2031 (the Recovery Budget), has been fully achieved on an enduring basis.

· $33 million per year for Auckland Council and $5 million per year for the REV Committee of additional savings set in the Annual Plan 2023/2024.

· $28 million has been set in the Long-term Plan 2024-2034, bringing the total additional saving target for the 2024/2025 to $66 million.

10. The 2024-2034 Long-term Plan continues to require significant financial restraint in the operating costs of Auckland Council. This includes setting prudent baseline funding measures and requiring additional initiatives to drive efficiency and value for money. Long- term plan decision-making set out both specific initiatives and target amounts for the Chief Executive to achieve as operating savings. Note that the term “operating savings” refers to both cost reductions and revenue increases, that is, any initiative that improves the net operating result.

11. As at 31 December 2024 $43.2 million (or 65 per cent) of savings had been achieved towards the overall combined $66 million savings target, leaving approximately $23 million to be achieved in the 2024/2025 financial year.

Tātaritanga me ngā tohutohu

Analysis and advice

12. In the second quarter ended 31 December 2024, $11.2 million of savings have been realised through the initiatives below:

· $8.2 million one-off net improvement in revenue driven by improvements to several fees and charges for services, including: higher numbers of Building Warrant of Fitness and commercial consents processed; and higher planning assessment activity for Plan Changes and Notice of Requirements.

· $0.8 million multi-year savings from improvements to how advice on community activities is created and managed through the implementation of a new tool and processes.

· $0.7 million permanent savings from elected member annual fees (set by the Independent Remuneration Authority) being lower than the budget allowed following a detailed budget review.

· $0.1 million permanent savings from other expenses from further reducing activity in discretionary areas.

· $1.4 million one-off saving from constraining expenditure below budget for the financial year-to-date through careful financial management. Examples include: staff cost budget not spent in the second quarter due to unfilled vacancies; and other expense savings from a detailed forecast of forward work programme spend compared to the budget allowed.

13. Over the years Council has implemented process improvements to the building and planning consenting processes and systems, which have incrementally enhanced productivity. The enhancements have allowed staff to manage increased demand from legislative changes and increased complexity with the number of multi-unit & multi-storey developments. Operational and system enhancements include improved reporting and a stronger focus on productivity and billing accuracy. Staff are more effectively aligned and engaged with entering and tracking performance, ensuring greater accountability.

14. Automated monthly billing system upgrades have improved customer billing, with tailored thresholds and triggers across different building products to improve completeness and timeliness. For example, the billing process for Code Compliance Certificates has been transformed. Previously, billing was triggered only when customers finalised their applications, leading to delays of up to 2-5 years and occasional bad debt write-offs. The automated process now ensures more timely and accurate billing, significantly reducing these issues.

15. The savings achieved include $1.2 million of one-off savings from staff cost budgets not spent due to unfilled staff vacancies through the second quarter. Furthermore, $0.2 million one-off savings have been achieved through project prioritisation, including three closed landfills where major work is not required to be carried out in the short to medium term.

Pools and Leisure progress update

16. The Pools and Leisure department has been tasked with identifying further efficiency improvements, targeting $3.0 million annual operating savings from the 2025/2026 financial year onwards. Given the timing of the decision, a reduced target of $1.0 million has been set for the 2024/2025 financial year.

17. A prioritised list of initiatives has been developed for immediate focus. A Pools and Leisure quarterly progress update is included as Attachment A to this report. A more detailed update will be provided at the March 2025 Revenue, Expenditure and Value Committee meeting. The update will include a breakdown of savings and benefits expected to be achieved this financial year, and the forward work programme for the 2025/2026 financial year.

18. Contracts with outsourced providers are in the final stages of completion, which have incorporated significant improvements to the previous contracts with legal support provided by DLA Piper and council legal staff.

19. Issues have been identified during final negotiations with the pricing provided by one service partner. Due to commercial sensitivities, a confidential report for decision making to allow finalisation of the contract has been prepared separately.

ECE service withdrawal completed

20. Three ECE centres in Kaipātiki Local Board area and one in the Howick Local Board area successfully transitioned to new operators effective from 1 October 2024. A more detailed progress update is included in Attachment A to this report.

21. The cessation of direct service provision by the council as enabled the achievement of around $300,000 of annualised benefits so far. This includes:

· $160,000 of permanent savings from a reduction in staff and back-office support costs, including vehicle operations, software, and direct management costs.

· $120,000 in commercial lease revenue. However, this additional revenue has been retained by the local boards as an increase to their funding in accordance with the Local Board Funding Policy, rather than being used to contribute towards the council’s budgeted savings target. This represents a tangible efficiency benefit to the community as this increased revenue will be used by the local boards to fund new or increased levels of service, or to help address the increasing costs of existing services.

22. Work is ongoing on how the remaining vacant ECE spaces are best utilised. Advice is being developed for the Hibiscus and Bays Local Board following workshops in quarter two. A commercial lease for an ECE operator is close to being finalised for the Devonport-Takapuna Local Board, however additional revenue will also be retained by the local board as an increase to their funding.

23. Staff will engage with remaining local boards through the remainder of the financial year to develop advice for remaining vacant spaces. Progress on the utilisation of vacant spaces will be reported through future quarterly operating savings updates.

Overall savings status

24. One-off savings and cost reductions are currently mitigating delays in achieving permanent savings across a range of identified savings initiatives. Further permanent and one-off savings are expected to be identified through careful cost management, and existing and enhanced savings programme processes such as quarterly reviews of spend against budget.

25. A one-page summary of the Auckland Council savings programme as at 31 December 2024 is included as Attachment B to this report.

Tauākī whakaaweawe āhuarangi

Climate impact statement

26. The spend reductions achieved did not relate to projects or activities with a focus on achieving improved climate impact outcomes.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

27. The savings targets for 2024/2025 partly apply to council-controlled organisations. Some savings initiatives are to be achieved for the group, for example, corporate property rationalisation, strategy and planning simplification, and group shared services.

28. New tools and process improvements successfully implemented in Auckland Council may also be shared with the council-controlled organisations for greater efficiencies and other benefits.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

29. The adopted 2024-2034 LTP noted that savings contributions are expected to come from implementing more cost-effective service delivery models for the provision of regionally-networked local services such as pools and leisure, and property management across the council group. These may affect local board budgets.

30. With the introduction of fairer funding for local boards from 1 July 2025, consideration is being given as to how this may work in the future.

Tauākī whakaaweawe Māori

Māori impact statement

31. This report does not seek any decision. The savings initiatives and targets were set as part of the annual budget process which was subject to consultation and considered impacts on Māori for the purposes of that decision-making. In terms of the savings achieved in the first quarter, we have not noted any that have any particular impact on Māori.

32. The Māori outcomes budget is ring-fenced for delivery of Kia Ora Tāmaki Makaurau and was not subject to cost reductions.

Ngā ritenga ā-pūtea

Financial implications

33. This report provides an overview of how Auckland Council is performing against its operating savings target, which supports meeting the 2024/2025 financial year budget. Savings reporting is also included in the Auckland Council quarterly performance reporting to the Governing Body for context as part of the council’s overall financial performance.

34. There are financial implications if the savings targets are not met for 2024/2025. This would result in higher debt levels and therefore higher interest costs and would have flow on effects through to future financial years. This would compound with the further $19 million savings target already included in the starting point for the 2025/2026 Annual Plan. These additional costs from not achieving savings would need to be considered through the annual plan process as to how they could be met, for example, through reducing services, deferring capital investment or increasing general rates.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

35. Progress towards the savings targets is on track, with a pipeline of expected efficiency improvements and anticipated expenditure below budgeted levels. Work is under way to identify further opportunities to close some gaps however, such as the shortfall from prior estimated savings through a change to the planned service delivery model for Pools and Leisure.

36. The significant risks to achievement of future savings and cost reduction targets include inflationary pressures on staff and other contracted operating costs which may reduce savings opportunities; and the pace at which process and efficiency improvements are implemented in order to realise benefits.

37. Changes to Local Board Funding Policy to give effect to increased decision making and fairer funding may also impact on opportunities to achieve savings related to locally funded services.

Ngā koringa ā-muri

Next steps

38. The next update will be provided after the council’s quarter three results are finalised for the financial year 2024/2025.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇨	Pools and Leisure update: ECE service withdrawal, operational savings programme update and progession of outsourced contracts
b ⇨	Auckland Council savings programme overview - 31 December 2024

Ngā kaihaina

Signatories

Authors

Nicole Heng - Senior Finance Advisor - Programmes

Abbey Zhuang - Management Accountant

Authorisers

Brian Chan - General Manager Financial Advisory

Rachel Kelleher - Director Community

Ross Tucker - Group Chief Financial Officer

Revenue, Expenditure and Value Committee

18 February 2025

Group Shared Services update

File No.: CP2025/00538

Te take mō te pūrongo

Purpose of the report

1. To provide an update on the implementation of Group Shared Services for Auckland Council Group.

Whakarāpopototanga matua

Executive summary

2. In June 2024, a Group Shared Services (GSS) construct was formally established in response to decision making for the Long-term Plan (LTP) 2024/2034, seeking to consolidate and reduce duplication with enabling support services across the council group, delivering measurable benefits to ratepayers.

3. The GSS business is functioning well, particularly in the more established customer base of Auckland Council, Eke Panuku and Tātaki Auckland Unlimited (TAU). Delivery of committed benefits for year 1 of the LTP are on track, employee engagement remains strong, and work is focused on building the pipeline of business cases that will enable progress to accelerate. While the transition of further services to a GSS model has been slower than optimal, this is primarily a result of the significant workloads within each customer (CCO) entity e.g. Contactless Payments and National Ticketing system work in AT, Local Water Done Well in Watercare, and CCO Reform input and planning for implementing the majority of change by 30 June 2025. Work is however underway to meet the Budget Committee decisions made on 4th December 2024 regarding GSS i.e. to accelerate progress and complete as many business cases for all in-scope functions by 1 July 2025.

4. In parallel, there is a continued focus to make progress wherever possible, with a particular focus on People, Procurement and Corporate Support Services where faster progress is visible. Less visible work is in establishing solid foundations within Technology and Data. Even though this progress is promising and fruitful, there is risk that the benefits profile could delay in FY26 unless strong momentum can be generated to shift the dial on executing on key elements of value work, which will require commitment from all entities.

5. GSS is acutely aware of the rapid pace of change in technologies that are enabling automation, simplification, and reimagination of the way Aucklanders can engage with council and experience the services and processes we, as a council group, provide. Each entity within the council group is experimenting with modern technologies (e.g. Artificial Intelligence) which is a positive sign of our collective commitment to find ways to be both efficient and innovative in how we solve problems / take opportunities that exist. At the macro level, council group can harness the opportunity that greater collaboration brings to design once and solve multiple problems.

6. The next six months through to 30 June 2025 are critical for GSS to complete as many business cases as possible so focus can then shift to executing the work required to achieve the benefits that exist, based on critical priorities and where real value can be derived. In the interim, more tactical quick wins are being taken to maximise the harvesting of benefits.

Ngā tūtohunga

Recommendation/s

That the Revenue, Expenditure and Value Committee:

a) tuhi tīpkoa / note the update and provide any feedback on next steps.

Horopaki

Context

7. In June 2024, the Governing Body adopted the Long-term Plan 2024/2034, including “Well-managed Local Government” as one of the seven priorities. Accelerating Group Shared Services was identified as one of a number of value for money initiatives, and a key strategy to achieve this goal (GB/2024/45, GB/2024/86). In addition, and complementary to this, was the adoption of the Fit For Purpose Technology (FFPT) strategy (GB/2024/45, GB/2024/86) that will shift the Group to a more modern and cost-effective technology landscape as the shift to a Group Shared Services model is undertaken.

8. The purpose of Group Shared Services is ultimately to enable our collective local government outcomes through the services provided to each of the group entities that contribute to the outcomes for Tāmaki Makaurau.

A screenshot of a website

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9. From 22 June 2024 the leadership structure for the Group Shared Services model was formally established to deliver services to all five entities in the Auckland Council Group. Legally it operates as part of Auckland Council, but is functionally separate, with specific governance arrangements in place.

10. From May/June 2024 the regular Group Chief Executives meetings regarding GSS evolved into formal meetings as the GSS Board. The Board adopted an Auckland Council Group Shared Services Board Terms of Reference. The Terms of Reference provide that “The primary purpose of the Board is to provide strategic oversight and decision-making for shared services across Auckland Council Group. The Board is accountable for ensuring the shared services are delivered effectively and efficiently by holding the Director GSS to account”. In August 2024, an Independent Chair was appointed.

11. At the Budget Committee on 4th December 2024, the committee agreed to the following principles to apply to the acceleration of Group Shared Services (including Watercare):

· all eligible functions from Auckland Council and Council-controlled organisations should be assessed for the Group Shared Services Programme (through business cases) as soon as possible and with as many as possible to be completed by 1 July 2025;

· the expectation is that all functions are shifted into Group Shared Services as soon as possible, to realise financial and other benefits from reduced duplication of back-office activities, unless there is a strong rationale not to include the function or part of a function (for example, where part of a function is highly specific to a Council-controlled organisation’s services and needs to be retained to protect the customer experience);

· decisions on business cases should be based on cost and benefits for the Auckland Council Group and its objectives as a whole, rather than impacts on individual Council-controlled organisations or the council parent;

· where there is a good reason for part of a function to stay within a Council-controlled organisation, it is still expected that common technology platforms or systems will be utilised and supported by Group Shared Services wherever possible.

Principles and scope of services

12. In early 2024 the Group Chief Executives agreed a set of principles for which services are shared, which were:

· the services are common across all entities and where there is currently duplication.

· the services are transactional / process intensive and can potentially be simplified, automated and digitised.

· inclusion of the service in GSS has the potential to leverage the group’s size and scale.

· it will deliver rate-payer value and contribute towards the proposed LTP savings target.

· inclusion of the service in GSS does not negatively impact on board’s accountabilities.

· inclusion of the service in GSS contributes towards a single ‘Aucklander’ interface with the council group.

13. In February and March 2024, the Group Chief Executives agreed the high-level scope for GSS being six functional areas that met the principles outlined above (but will be subject to final business case approval by the GSS Board):

i) Technology Services

ii) People Services

iii) Procurement Services

iv) Corporate Support Services

v) Data Services

vi) Customer Experience and Digital Services

Tātaritanga me ngā tohutohu

Analysis and advice

Progress with implementation

14. Historically, there has been some collaboration and adoption of shared services across the council group, but this was largely limited to the provision of some support functions to Tātaki Auckland Unlimited (TAU) and Eke Panuku. Eke Panuku are almost fully reliant on GSS and TAU has increased its consumption of GSS to now rely on a significant portion of shared services available. This demonstrates that the construct can work effectively.

15. Since formal commencement in July 2024, GSS has been focused on setting up the foundations of the new model and driving the early implementation of the next wave of opportunities.

16. Based on the outcomes of the December 2024 Budget Committee meeting and the expectation that business cases for all functions are completed by June 2025, the focus is now moving to an accelerated approach of working through this process so that the scope and plan is locked in and the programme can move forward with pace.

17. The approval of additional major programmes such as CCO Reform will disrupt some of the momentum, as there is significant GSS involvement that needs to be prioritised against GSS programme activity. As an example, Project Galaxy (group Human Resource Information System) will need to make way for CCO reform work in the first half of the calendar year.

18. In parallel to all of this work, agreed opportunities are being progressed with updates from each of the six functions outlined in the following sections.

People Services

19. The significant GSS opportunity for People Services is being delivered through Project Galaxy which is the implementation of a new Human Resources Information System (HRIS) for the group. The scope of this project includes implementation of group Payroll and Recruitment services. It also provides opportunity for further services to be considered within GSS but first the priority is to deliver services that generate value and traction.

20. The business case for this project was approved by the GSS Board in July 2024 and implementation is now in-flight. The project aims to deliver a more effective and aligned HR service, ultimately benefiting ratepayers and Aucklanders through a 10-year Net Present Value (NPV) of $11.3m.

21. With the demand on People Services from decisions on CCO Reform, there have been some impacts to the project timeline to accommodate this, but the overall intended benefits remain on track (but with a change in timeframe to realise).

22. Additional areas of focus at a group level include:

· GSS People Services is leading work on collective agreements on behalf of all entities except Watercare where it is collaborating closely to support the desired strategic outcomes of the group.

· The first phase of a payroll data and process improvement project has been completed for Auckland Council, Tātaki Auckland Unlimited and Eke Panuku which will deliver improved assurance around our compliance obligations and ensure we are better prepared to implement a modern, fit for purpose HRIS.

· A refreshed group remuneration policy has been developed and endorsed by the GSS Board for Governing Body approval in February.

Technology Services

23. Building on the success of the new commercial partnership with SAP, providing projected savings for ratepayers of $42.1 million over the next seven years, GSS Technology Services has now been focused on setting itself up with a new operating model and organisation structure (that went live on 14 October) to maximise the flow of value that can be delivered from optimised technology delivery.

24. A group technology architects forum has now been established with a current state group technology architecture landscape and lifecycle assessment in progress. Once complete this will have identified the key opportunities and sequencing to deliver value from group approaches to platform choices and technology service delivery.

25. Additional areas of focus at a group level include:

· a successful proof of concept has been delivered enabling Auckland Transport to monitor some of Eke Panuku’s CCTV feeds, with a feasibility analysis underway for whether GSS could utilise Auckland Transport’s CCTV platforms.

· the GSS Technology Services onboarding process is being developed to enable new systems and services to be transitioned to GSS as the broader operating model and structures are established. In-flight examples include Donesafe for TAU (for Health & Safety) and Complywith for Watercare (for compliance management).

Customer Experience & Digital Services

26. Customer Experience & Digital Services has been the most challenging function in terms of the need to clarify the scope as it relates to GSS, versus what should remain within the entities, due to the importance of the customer experience to respective entity service delivery e.g. AT owning the HopCard experience, critical to Aucklanders experience of our Public Transport services.

27. A current state of the customer interactions and channels landscape was presented to the GSS Board in November 2024 with the next step being to clarify the exact service scope where the potential for a group approach exists e.g. the contact centre experience, websites, and other digital enquiry interfaces.

28. Additional areas of focus at a group level include:

· TAU has been brought onto the GSS telephony platform resulting in reduced platform complexities, lowered running costs and enhanced reporting and analytics.

· an AI pilot project is in-flight to auto-summarise customer conversations in the GSS contact centre, with initial trials proving successful in delivering accurate customer interaction data and quicker handling times. Once completed, this could be extended across the group.

Data Services

29. The focus for data services is evaluating how we can better leverage the power of the group’s collective data as a group asset. To support this, a set of group data opportunities have been developed and was presented to the GSS Board in November 2024.

30. As a first step, in November 2024 the GSS Board also approved data sharing across and within the council group subject to ensuring that there is a robust control framework in place to meet prudent data sharing practices. This will be a key enabler to delivering on the data opportunity. Implementation actions are now underway so this can happen effectively, including development of a Master Services Agreement between entities.

31. A business case has been developed and presented to the GSS Board in December 2024, looking at options for the consolidation of GIS systems across the group which will have significant benefits for platform simplification and also in enabling a richer group view of our assets which will lead to a more efficient council group in how we execute works. The finalised business case is due for review at the March GSS Board meeting.

32. The cross-entity data leadership forum that has been established has evaluated the current state across the entities and identified a series of quick wins (across policy, process, people, and technology). This includes the development of a policy which strengthens data governance across the group.

Corporate Support Services

33. Corporate Support Services provides services including corporate property, physical security, workplace travel, print, mail, low value high volume purchasing, storage and catering. A number of potential opportunities for sharing services across the group have already been identified and informal sharing of services continues to increase which is demonstrating the potential value from the GSS model. For example, GSS providing new catering and workplace business partnering services for Auckland Transport.

34. A particular area of focus in 2025 will be corporate property where initial work is underway to consider a group corporate property approach which includes evaluation of strategic opportunities to optimise across the group corporate property landscape even further, including contract consolidation and consideration of the corporate property footprint.

35. Additional areas of focus at a group level include:

· A new fit for purpose storage centre for the Group is being progressed, future proofed so that storage requirements can be consolidated into one place where agreed. This will mean a number of costly leased storage facilities could be exited leading to greater efficiencies and cost savings.

· Progressing work to support business case requirements for workplace travel, print, mail, low value high volume purchasing and catering services. More formal sharing of these services will enable benefits to be harvested.

Procurement Services

36. Within procurement services, there are already some well-established group approaches to procurement that the GSS model is able to build on. This includes a GroupSource approach that has already been in place for several years where the scale of the group is leveraged to procure as a group for areas such as food services, print, fleet, talent acquisition services and HR technology. There has also been close collaboration and a group approach taken to procuring major infrastructure projects, such as the Downtown Infrastructure Development Project and the syndication of various supplier panels.

37. Additional areas of focus at a group level include:

· an off-the-shelf Source to Contract system (Ready Contracts), replacing SAP Ariba has a current planned go-live date of 31 March 2025 for Auckland Council, with Auckland Transport due to implement the same system by July 2025. Tātaki Auckland Unlimited are also planning to adopt this system.

· procurement centres of excellence (CoE) and communities of practice (CoP) are being developed to create a group approach to specific procurement activities and ensure leading practices are adopted and GSS benefits are being realised. For example, establishment of a contract management CoE and sustainable procurement CoP.

· a cross-entity leadership forum has been established with current state assessment for all entities currently underway. This will include a consolidated group procurement spend analysis and category review to identify incremental GSS benefits.

Innovating at the edge

38. Looking ahead, innovation and technology enablement are essential components of how Local Government delivers its activities and services to our customers and communities.

39. The pace of technology cycles is shortening with rapid advancements in areas such as Artificial Intelligence (AI), Internet of Things (IoT) and Digital Twin that are enabling new models of service delivery. Each entity within the council group is experimenting with modern technologies (e.g. Artificial Intelligence) which is a positive sign of our collective commitment to find ways to be both efficient and innovative in how we solve problems / take opportunities that exist. Examples of existing innovation from across the investment areas are outlined in the table below.

40. At the macro level, council group can harness the opportunity that greater collaboration brings to design once and solve multiple problems. Our focus is intentional, considering context such as equity and digital access, while recognising the next generation will increasingly be digital natives.

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Plan looking forward

41. The key focus for the remainder of FY25 is the successful completion of the functional business cases by 1 July 2025 to enable accelerated implementation, once the detailed approach for each of the functions is agreed.

42. Careful consideration is needed around scope and phasing to ensure the overall implementation cost and capacity profile can be managed over the implementation period. GSS and the entities already have a number of significant priorities in implementation, including Project Galaxy, CCO Reform and GIS (once approved). As the business cases are completed and scope confirmed, there will be a phasing requirement to manage the change impact.

43. The timetable for business case delivery is outlined below:

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44. In parallel, GSS will continue to focus delivery on immediate change priorities in service of the GSS strategic objectives.

45. A table of planned and in-flight activity is outlined below:

Tauākī whakaaweawe āhuarangi

Climate impact statement

46. Our climate commitments are set out in Te Tāruke-ā-Tāwhiri: Auckland's Climate Plan. Within GSS, climate commitments are considered to ensure the decisions we make around our services positively contribute to achieving the targets.

47. Specific areas of focus within GSS include the following:

· direct emissions (Scope 1 emissions) – this is primarily from the use of natural gas in corporate facilities and our fleet vehicles. Reliance on natural gas in Auckland Council corporate buildings has decreased over recent years as older buildings were divested and Hawiti (Albany) and Te Puutahitanga (Manukau) were converted to electricity. Use of natural gas in Te Wharau a Tāmaki is also being phased out (replaced with electric heat pump technology) as part of renewals work over the next few years. Emissions for other corporate buildings in the group will be considered as part of GSS service decisions. For our fleet vehicles we are currently implementing an electrification programme (where appropriate for operational needs).

· indirect emissions from electricity (Scope 2 emissions) – primarily through electricity use in corporate facilities (some buildings currently managed by GSS, other corporate buildings in the group will be considered as part of GSS service decisions) and procurement contracts with electricity providers for the whole organisation e.g. Ecotricity contract.

· indirect emissions (Scope 3 emissions) – this includes emissions that occur in the value chain. For the Council Group, these primarily arise through services provided by third parties (e.g. data storage, construction, and facilities maintenance). Procurement has an important role to play, through the sustainable procurement policy and other guidance or rules to either require or encourage emissions reduction from our suppliers.

48. Scope 3 represents Auckland Council’s largest source of emissions and provides our greatest opportunity for emissions reductions. Scope 3 also provides an opportunity to influence regional emissions through our purchasing power.

49. Across the GSS teams there is a focus on ensuring our climate commitments are reflected in the work we undertake.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

50. As a group-wide initiative focused on leveraging the scale of the group for group-wide benefits, GSS is specifically targeted towards realising the group opportunity. To be successful, GSS requires active collaboration from across the group and this is a key focus in the early stages to ensure risks are managed and the group-wide benefits area realised.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

51. Currently there are not any local considerations as part of the services GSS provides. If this were to occur, staff will either seek a decision or feedback from the local boards depending on the allocated decision-making responsibility.

Tauākī whakaaweawe Māori

Māori impact statement

52. The Group Shared Services Māori Outcomes team have realigned to meet the needs of the Group Shared Services operating model. The Māori outcomes team have moved to a portfolio relationship advisory model which in turn puts outcome delivery ownership on the business:

· the Māori Outcome Lead remains part of the Ngā Mātārae lead team to ensure GSS lead team are connected to the Kia Ora Tāmaki Makaurau Māori Outcomes Group Strategy. The leads focus is to set and monitor the strategic direction for Māori Outcome deliverables within Group Shared Services and maintain key stakeholder relationships.

· the Principal Advisor is responsible for the quality advice framework for Māori Outcomes within GSS and maintain strategic relationships with our internal teams and partners to ensure closely aligned with the business units we support and work with.

· the Māori Outcomes advisor supports the delivery of quality advice by supporting our GSS kamahi who deliver on Māori Outcomes. They are also responsible for providing reporting and insights to ensure we are meeting set outcome measures and making data driven, informed decisions.

53. Our Group Shared Services Māori Outcomes AMO (Achieving Māori Outcomes) plan has been set for FY25. Our priorities for this year are focused on building solid foundations for the GSS entity to give effect to the Kia Ora Tāmaki Makaurau Māori Outcomes Group Strategy. Our priorities include:

· setting up sound Māori Engagement practices that align to Ngā Mātārae’s ‘Mana ki te Mana’ Māori engagement framework.

· a full review of the GSS entities ability to effectively deliver and support the Council Groups delivery of Māori Outcomes, identifying process and/or capability gaps.

· supporting the uplift of kaimahi capabilities and competencies where identified roles align to outcome delivery or Māori engagement.

Ngā ritenga ā-pūtea

Financial implications

54. The approved Long-term Plan 2024/2034 included the establishment of savings targets from GSS outcomes to be achieved from efficient decision-making and timely implementation. Savings of $5 million were anticipated from FY25, rising to $14 million per year from FY29 onwards, resulting in expected savings of $123m over 10 years.

55. The key savings opportunity for GSS will come from the consolidated accountability to optimise investment in support functions and deliver against these savings targets. The establishment of the GSS Board provides group-wide governance to realise the opportunity. The more services that can be incorporated into a shared services model, the greater the cost base, and therefore the greater the opportunity to drive efficiencies and deliver against savings targets.

56. Progress against the FY25 savings target of $5m has been slow in the first six months of the year with the focus on setting up the foundations for GSS. However, opportunities have been identified and a plan is in place to deliver on this target.

57. Looking ahead, the focus will shift to the achievement of savings from delivery of the GSS strategic outcomes and consolidation of group service delivery. This remains the key priority for sustainable benefits realisation. Successful implementation of key agreed projects such as the SAP deal and Project Galaxy will be critical to realising early committed savings.

58. The December 2024 Budget Committee meeting decision to accelerate GSS business cases will support the realisation of the future financial benefits.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

59. In October 2024, an assessment of principal risks for GSS was undertaken, facilitated by the Auckland Council Risk and Assurance team.

60. 12 principal risks were identified, with the residual risk in all but one being medium or high:

i) Innovation (rate of change and keeping ahead)

ii) Data and information

iii) Funding Model

iv) Commercial value and performance

v) Governance and decision making

vi) IT currency and security

vii) License to operate

viii) Implementation of major projects and programmes

ix) People

x) Privacy

xi) Strategic alignment and execution

xii) Partner relationships

61. Accelerating the implementation of the GSS model in line with the December 2024 Budget Committee decisions will decrease the risk profile in some areas and increase the risk profile in others. The key impacts can be summarised as follows:

· Taking a further accelerated approach will reduce the risk profile in areas such as implementation costs and financial benefit; governance and decision making; and strategic alignment and execution. This is because greater certainty will have been created around the scope and timelines.

· In addition, there are areas where leveraging the group’s size and scale will reduce the risk profile through managing the risk at a group level (rather than on a smaller scale across five entities). Examples of this would include Data & Information and Innovation.

· Where the risk profile will be increased is related to the change risk for GSS and all five of the partner entities through the accelerated transition of services to the GSS model. This risk will need to be carefully managed through the programme management processes and includes working closely with all five partner entities, such as through the functional leadership forums to manage resource and prioritisation risk.

Ngā koringa ā-muri

Next steps

62. The Group Shared Services programme continues to drive momentum of the outcomes being sought for Governing Body and Tāmaki Makaurau.

Ngā tāpirihanga

Attachments

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Ngā kaihaina

Signatories

Author

Craig Renshaw - Executive Officer

Authorisers

Richard Jarrett - Director Group Shared Services

Ross Tucker - Group Chief Financial Officer

Chairperson	Cr Desley Simpson, JP
Deputy Chairperson	Cr Greg Sayers
Members	Cr Chris Darby
	Cr Julie Fairey
	Houkura Member Tony Kake, MNZM
	Cr Kerrin Leoni
	Cr Daniel Newman, JP
	Cr Sharon Stewart, QSM
	Houkura Chair David Taipari
	Cr Ken Turner
	Cr Maurice Williamson
Ex-officio	Mayor Wayne Brown

Author	Sonja Tomovska - Kaitohutohu Mana Whakahaere Matua / Senior Governance Advisor
Authoriser	Ross Tucker - Group Chief Financial Officer

Exclusion of the Public: Local Government Official Information and Meetings Act 1987