Tarmo Puolokainen will defend his doctoral thesis on 15 February at 11.00 in room 124, J. Liivi 4
Tarmo Puolokainen will defend his doctoral thesis“Public Agencies' Performance Benchmarking in the Case of Demand Uncertainty with an Application to Estonian, Finnish and Swedish Fire and Rescue Services”
Professor emeritus Janno Reiljan (PhD), University of Tartu, Estonia
Professor Dr. Dr. h.c. (emeritus) Peter Friedrich (PhD), University of Tartu, Estonia
Professor Christopher J. O’Donnell (PhD), the University of Queensland, Australia
Professor Geert Bouckaert (PhD), Katholieke Universiteit Leuven, Belgium
Ants-Hannes Viira (PhD), Estonian University of of Life Sciences, Estonia
Description of the Problem
When planning the allocation of resources in public agencies, the demand for services is often unknown and prone to uncertainty. Without having the full information of the possible demand, the decision maker will insure oneself with additional standby capacity against upsurges in demand. Cost and efficiency studies predominantly assume known demand, which is unrealistic and hinders understanding the essence of service provision in public agencies. In many cases, it has probably resulted in underestimation of efficiency. The observed excess capacity can partly be explained by risk averse behaviour and should be incorporated to the analysis to avoid unjustly labelling such input usage as inefficiency. Ex ante, given expected demand, the resource allocation is optimal, but not ex post, given realised levels of demand. The challenge is to distinguish the necessary standby capacity from excessive mismanagement.
This thesis develops the theoretical concept and application to measure the performance of public agencies in the case of demand uncertainty. To evaluate the efficiency of a multi-unit and multilevel service providing public agency in the presence of demand uncertainty, one is interested in: (a) the cost-efficiency of the central agency, (b) any under-resourcing of subunits, and (c) the output-oriented technical efficiency of each subunit in jurisdictions. The suggested models would be the basis for planning resource allocation improvement in public agencies. The models are implemented using the example of the Estonian, Finnish and Swedish fire and rescue services. For estimation, different frontier analysis methods (DEA, FDH, DFA) are proposed.
Result and BenefitTypically, the rescue authority decides beforehand to allocate resources (rescuers, vehicles, etc.) between different subunits in jurisdictions without knowing how many emergencies will occur. The subunits must maintain a certain level of standby capacity to be able to respond to emergencies. Sustaining the readiness, however, is the most expensive component in the running costs. The results show convincingly that the models taking the demand uncertainty in the form of minimum service level into account, estimate a higher cost-efficiency irrespective of the estimation method or country (with different level of centralisation for management) analysed.