NPV and the Public Service

The use of NPV in the civil service started a long time ago and was largely inspired by the wave of Drucker driven management tips to improve performance of existing resources and maintain a forward looking approach to winning in a particular field. It made sense in the day that investing in projects that paid for themselves in the long-run would be a sound use of public money and not to mention a prudent one.

Image result for Don't waste money meme

The Problem

However more recently the use of NPV has become so pervasive that it has begun to have a negative, in my opinion, impact on the public service. Often times, initiatives that don’t meet positive NPV criteria are categorically dumped or placed on the back-burner till more funding becomes available and assuming no other projects cut the funding queue with a better NPV. This often means non-revenue generating items like better customer service, maintenance and repairs as well as process optimisation don’t take a front seat and drive the budget process. In Singapore, for example, we’ve seen the problem compound more recently after years of “prudent” financial management of the resources that the public service handles.

  1. Train faults and breakdowns.
  2. Faulty or poor quality construction at HDB public housing.
  3. Constant corrections and construction at large infrastructure projects.
  4. Budgetary stimulus packages for automisation and productivity after years of neglect in developing or encouraging companies to be more lean and professional.
  5. Lift faults at public housing developments that have led to grevious injury or loss of life.

And these are just off the top of my head without doing much in terms of research and review. At the end of the day, a person’s safety, comfort, peace of mind or other intangibles are left out of the equation when being considered. I think I should be clear and state that I don’t think these are easy choices to make and trade-offs to choose but they should be done, and that for the sake of simplicity or to reduce risk the government should not simply rely on a simple NPV to determine whether something or someone is worth investing in.

New Approaches

8lxg78eThere are plenty of new approaches that can be considered if as a whole the public service decides that it wants to take on a more holistic approach to service planning and implementation. In fact they could even take a leaf out of the book of a number of public hospitals, that have gone through their own data, and found that not handling patients proactively (though not immediately revenue generating) will in the long-run reduce costs as these patients will have a lower likelihood of ending up being high cost or resource intensive patients.

Other parameters to consider beyond NPV in service determination could include.

  1. Reductions in citizen time spent trying to access government services.
  2. Taking costs upfront on rather than paying re-actively for it down the line.
  3. Convenience to users.
  4. Aesthetics or UI to improve feel of something even if function/operations don’t change.
  5. Improvements in accessibility
  6. Improvements in feedback/improvement mechanisms
  7. Improve and include citizen’s suggestions in the process.

Some of these suggestions are likely to increase the budget or upfront costs without any immediate payout, and while this is a stupid approach politically, as policy experts and public servants the politics of the matter should take a back seat. In particular in a country like Singapore where the prevailing government was so overwhelming voted into power it should take an even further backseat. Governments with strong mandates should not see it as an opportunity to impose their will upon the populace but in hand with the public service they should see it as an opportunity to work even more closely with the public to increase the common good.

If you do not have an absolutely clear vision of something, where you can follow the light to the end of the tunnel, then it doesn’t matter whether you’re bold or cowardly, or whether you’re stupid or intelligent. Doesn’t get you anywhere. – Werner Herzog

– thebumblingtechnocrat


https://hbr.org/2014/11/a-refresher-on-net-present-value

http://www.straitstimes.com/singapore/housing/450m-set-aside-to-boost-safety-of-hdb-lifts

http://www.straitstimes.com/singapore/transport/government-and-smrt-reach-agreement-on-new-rail-financing-framework

http://www.channelnewsasia.com/news/singapore/smrt-operating-assets-to/2959500.html

http://www.straitstimes.com/singapore/hospitals-facing-severe-bed-crunch-take-unusual-steps

http://www.channelnewsasia.com/news/singapore/external-structure-from-tampines-block-collapses/3154354.html

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