The implementation of shared service centres for back-office operations in the public administration could increase productivity and reduce costs in the long term as part of the administrative reform promoted by the government, according to an analysis conducted by PwC Romania specialists.
"The Romanian government has passed an emergency ordinance for the reform of the administration that officially recognises what specialists have been pointing out for a long time: the public administration is oversized, fragmented and financially unsustainable. The explanatory memorandum of the ordinance leaves no room for interpretation, speaking of "systemic dysfunctions", "excessively bureaucratic procedures" and "staff structures insufficiently adequate to the real needs of citizens". But beyond the proposed staff cuts and costs, the OUG does something truly significant: it formally defines the back office departments - financial-accounting, procurement, human resources, legal, audit, IT, communication, logistics - and opens up the possibility for the main public employers to take over all or part of these operations from the subordinated bodies,' according to PwC Romania.
In other words, the lawmakers create a legal framework for the centralisation of back office operations. What is missing in this context is a concrete model that shows how to do this without paralysing the administration, and a model already exists and is called a shared services centre.
"What are shared service centres? The concept is simple: instead of each town hall, hospital or school having its own accounting, payroll, procurement or IT departments, these operations are consolidated into a joint department with standardised processes and integrated systems. The service centre becomes an internal provider' for several institutions - for example, for all the mayoralties in a county."
Shared service centres have been operating for three decades in public administration in countries such as Canada, Sweden, Estonia and Poland, and the results confirm the efficiency of the model.
"The essential difference from a simple job cut is that this model does not reduce the quality of services but increases it. Employees specialise, operations become standardised, errors decrease, and the institutions can focus on their core mission," according to the analysis.
A preliminary study recently carried out in a county in Romania demonstrates that the model is directly applicable in Romania as well.
The analysis covered over 100 localities of a total population of over 500,000 inhabitants. The available public data allowed us to make a detailed assessment of 67 of these units, representing 90% of the county's population. Within them, we identified about 3,000 employees, of which 266 in financial-accounting and 88 in human resources.
In the financial-accounting area, between 60% and 70% of the processes have the potential for centralization. Of the 266 positions, between 90 and 100 roles could be taken over by a service center, with a productivity increase of 20-30% after the first year and a long-term cost reduction of 30-40%.
In the area of human resources, about 70 of the 88 operations could be centralised, with similar productivity increases. The gap with the international practice is striking: the current ratio at the level of the units in the county is 1 HR specialist for every 30 employees, while in the private sector the standard is 1 in 150, or even 1 in 200-300 for payroll and staff administration.
It is exactly the type of "functional overlap in the back office compartments" that the explanatory memorandum of the OUG identifies as a source of "excessive staff expenses."
In order to centralise the back office operations, PwC Romania suggests a gradual implementation model, built to reduce resistance to change and validate the results step by step.
Step 1: Voluntary clusters, as a pilot project. A group of 4-6 neighbouring localities form a cluster and voluntarily share the accounting, payroll and personnel administration operations via a common centre. The county council plays the part of a facilitator and source of initial funding. Proven success becomes the best argument for expansion."
Step 2 concerns the service centre at county level. "After the validation of the model, a single centre organised as a public institution is created. The obligation to participate is implemented gradually, operation by operation. The advantages become more visible: economies of scale, full standardisation, a single IT platform and equal access to expertise for all localities.
At the same time, Step 3 regards to selective outsourcing. "After a minimum of 12-18 months of stable operation, operations such as payroll processing or IT infrastructure can be transferred to specialist external providers, while maintaining full governance and internal control. Sensitive operations (accounting, financial reporting, public procurement) remain internal.
"It is worth noting that the OUG already introduces instruments that facilitate exactly this type of approach: the possibility of centralising the back office compartments at the level of the main public employer, the multiannual programme for funding administrative consortia based on milestone 310 in the National Recovery and Resilience Plan ( PNRR), the obligation to register all territorial administrative units in the National Electronic Online Payment System and even the possibility of outsourcing local budget debt collection services."
The recently adopted Emergency Ordinance does a necessary thing by forcing the reduction of an oversized administrative apparatus. But the linear cutting of jobs, without a structural alternative, risks affecting precisely the communities that most need functional public services, namely the small town halls in rural areas, without qualified human resources. Shared service centers offer exactly this alternative. They allow the reduction of the number of positions without reducing the quality of services.
"Romania no longer has the luxury of postponing the reform of its public administration. The budget deficit, European commitments and the pressure on local public services require immediate but also sustainable solutions. Job cuts can produce short-term savings, but without a structural reorganisation, they risk affecting precisely the communities that most need functional public services, namely small town halls in rural areas, without qualified human resources," PwC specialists note.
Shared service centers are said to be an internationally validated tool, and our studies show that they can generate both increases in productivity and quality of services, as well as long-term savings. And the OUG already provides the legal framework in which such a model could be implemented.
The next step is the first pilot cluster to demonstrate, with real figures, that the local public administration can be more efficient, more professional and closer to the citizen - not through cuts, but through reform, according to PwC Romania.
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