Scale, quality and efficiency in road maintenance: Evidence for English local authorities

Abstract

This paper outlines the first econometric stochastic frontier efficiency analysis of road maintenance costs for local authorities in England in the academic literature. It is motivated by current public sector austerity requiring local authorities to provide efficient highway functions both in terms of learning from best practice (economic efficiency) and potential reorganisation to exploit economies of scale (scale efficiency). The analysis utilises a road condition measure and an end user (public) satisfaction indicator as well as road length and traffic factors. The availability of public satisfaction data is particularly important as incorporation of such a measure into benchmarking is currently in its infancy in economic regulation but is increasing in prominence, such as in regulation of health care. Evidence is found for an optimal road length which has implications for the current trend to merge the delivery of highways services across local authorities. Bigger is not necessarily better. A positive relationship is found between public satisfaction and cost which is strongest for very low or high public satisfaction. Finally, the median cost efficiency is 83% which implies many authorities have the opportunity to save substantial sums by adopting best practice without reducing service quality.