Efficiency of municipal service providers in the Republic of Croatia

Abstract

Municipal services, such as the collection, removal and disposal of waste, are
just some of the necessary activities carried out by public authorities. Efficient management and utilization of public resources improves the general well-being of a community, and benefits especially the users of municipal services. Hence, the optimal provision of public services is essential. This paper gives a comprehensive overview of municipal services, related primarily to waste collection and disposal, and other related municipal services. The purpose of the paper is to determine the relative cost efficiency of twenty public utility companies that collect household waste in different Croatian cities and surrounding municipalities. The method employed in the study is Data Envelopment Analysis (DEA), using a non-controllable input-oriented model with variable returns to scale. In addition to the relative efficiency results of each utility company, by means of projections on the efficiency frontier, sources and amounts of relative inefficiency were determined, which represent potential improvements for all inefficient utility companies. The results indicate that all inefficient utility companies can improve their efficiency by reducing the corresponding inputs. Thus, company material costs should be drastically reduced, i.e., the relatively inefficient utility company (with the exception of two companies) should reduce costs by at least 50%. Considering employee costs, half of the relatively inefficient utility companies should reduce such costs by up to 50%, while the other half should reduce those costs by 58.11% to about 70%. Furthermore, five of the inefficient companies should reduce total assets input by a relatively small amount (up to 38.00%), whereas the remaining seven companies should reduce the company's total assets from
60.96% to 70.99%. This means that management at inefficient companies take into account the obtained results when making decisions in the future in order to increase company efficiency, which is one of the characteristics of an optimal business.