The economic contribution of Ordnance Survey - Efficiency

OXERA (Oxford Ecomomic Research Associates Ltd) Final Report (public version)

10. Efficiency and Effectiveness

This report has looked at the role that OS plays both in the economy and in society at large. Inevitably, the focus has been on existing uses. OXERA's preferred method of valuation would be a survey of WTP. Nevertheless, existing costs of provision have in places been taken as indicative of value, on the grounds that, if both commercial users and the government are willing to bear these costs, then they must derive at least equivalent value from their purchases.

This raises issues of efficiency and effectiveness. As the 1997/98 OS Annual Report states, 'being effective means giving customers what they want, when they want it and at a price they can afford. Efficiency is all about doing this with less effort and less cost.'

There are two rather different questions:

• could the cost of providing OS services have been lower, and hence its net contribution to economic welfare higher?
• would usage have been higher if prices had been lower, either as a reflection of greater efficiency or a different pricing policy?

Both are significant questions that require a detailed analysis, which has not been attempted, but they should be highlighted.

Effectiveness may be defined as meeting customer demands with respect to product definition and service quality. The majority of those interviewed by OXERA found that the range of products and services provided by OS was at the very least satisfactory-one public-sector interviewee thought that OS provided a 'very acceptable' standard of service. Many also commented that OS had become much more market-focused in recent years, so that consumer views now had more influence on OS's development plans.

Within the public sector, one measure of efficiency that is often used is the extent of cost recovery. Table 10.1 shows that OS's level of cost recovery has been improving over time, with it successfully outperforming the targets set by government. Its record is significantly better than that of other national mapping agencies.

Table 10.1: OS's cost-recovery performance

Source: OS (1997/98 and 1996/97), 'Annual Report and Accounts'.

However, this measure of efficiency is not one that would be used in an economic appraisal. This is because it would be perfectly possible to raise the level of cost recovery while reducing the value of the service to society and the economy by excluding some users through charging higher prices.

As discussed in Section 2, there are large efficiencies to be gained in the economy from the increased use of digital technologies. Such efficiencies are generated within OS, and, more significantly, by its contribution to the rest of the economy, through the provision of digital outputs. All OS's base dataset is now in digital form-a unique achievement for a national mapping agency-and products and services are, for the most part, produced using the most up-to-date technologies (e.g. PRISM, Portable Revision and Integrated Survey Module).

The dissemination of OS's digital product range through the economy has already been discussed: the progress can be summarised here by the fact that two-thirds of total OS sales now come from digital products, and 2,000 companies are known to be using OS-sourced digital data. In contrast, in France, more of IGN's sales come from paper maps than from digital products.

Inevitably, some GI data is best collected by a single source, although there is no reason why the same data cannot then be marketed by several companies. Wherever there is a monopoly, there is a related problem of ensuring that the company maintains a good level of efficiency. As has been seen, some products (e.g. large-scale rural maps) do not seen to be commercially viable. Certainly, no competitor to OS has yet emerged, although the Global Positioning Systems and aerial photography could change this. As discussed in Section 9, alternatives do exist for most other OS products and services, and these markets seem to be becoming increasingly competitive. The conclusion seems to be, therefore, that there are already significant competitive pressures on OS, and that these are probably growing.