Net Economic Value (NEV) possibly the worst framework ever adopted by civil service

Written by Ng E-Jay
12 April 2012

In his 1989 National Day Rally speech, Mr Lee Kuan Yew declared: “To build a country, you need passion. If you just do your sums — plus, minuses, credit, debit — you are a washout!

Barely a decade later, the civil service with the blessings of the Goh Chok Tong administration institutionalized the framework of “doing pluses, minuses, credits and debits” with the publicly stated aim of keeping the government lean and efficient. And from then on, the civil service lost its focus of serving the public.

They called it the Net Economic Value (NEV) framework. The NEV of each public agency is defined to be its revenue minus its operating and capital costs. Under this doctrine, each public agency was urged to continually raise its NEV on an annual basis, with the view of being cost-conscious and eliminating wastage of resources. Even better if each public agency could add to the government’s annual budget surplus. The NEV was one of the Key Performance Indicators (KPIs) used to judge how well each public agency performed. It could affect the bonuses and promotions of those near the top.

While some senior civil servants have said that the NEV framework discourages over-spending, they also admitted that the focus on dollars and cents, revenues and costs, profit and loss, had the potential to compromise the delivery of public service. One public servant who spoke to the media also said that the NEV framework could make spending on public infrastructure “overly conservative”, leading to failure to achieve the public good (TODAY, 08 April 2012).

Is this what has happened to the Land Transport Authority (LTA) and spending on public transport infrastructure? Over these past several years, we have seen that the overcrowding problem during peak hours has gotten worse and worse, and whatever piecemeal solutions the LTA offered has not alleviated the problem. All this while, the population has increased rapidly, but the provision of public transport infrastructure has failed to keep pace.

Is the NEV framework part of the reason why LTA has failed to build sufficient public transport infrastructure despite knowing full well that the government was going to open the floodgates and increase the number of people working and living here dramatically?

By its very nature, the civil service is unsuited to be treated like a corporation and made to function as if it were a mere profit-making enterprise with a keen eye on the bottom line. When you serve the public, the priority must be to deliver efficient and quality service in a manner that is sustainable over the long run. The priority cannot be how much costs you have saved, or how much money you have added to government coffers. That is a completely wrong way of looking at public service.

That does not mean we should not strive to be as cost-efficient as possible. It means that we must not institutionalize the concept of cost savings and cost recovery to the point where we withhold valuable services to the public simply because they add to costs. It means that when we provide public service, we must be balanced in our approach and always bear in mind that the primary mission is to serve the public well.

Another public servant, also speaking to the media, said that some ministries were especially unsuited for the NEV framework, such as the Ministry for Community Development, Youth and Sports. He said: “Say, you hire another 10 probation officers and you rehabilitate the delinquents, how do you measure the value to that?” (TODAY, 08 April 2012)

In many cases, the work that is done for the community simply cannot be measured in dollars and cents. Public service often delivers intrinsic rather than extrinsic value, and to attach a price tag to it would simply demean it and adversely affect the performance and morale of those trying to do public good.

Enhancing efficiency and optimizing resources are essential, but they must complement, not compromise, the delivery of public service.

Singapore Management University (SMU) finance professor Annie Koh also pointed out the difficulty in measuring outcomes using the NEV approach, which might also lead to silos and non-collaboration between different agencies. Citing how civil servants worked across ministries and agencies to craft the Jobs Credit scheme during the financial crisis between 2008 and 2009, Prof Koh said: “If everything has to be justified by NEV measures, we will not have been able to ride out that stormy period quite so successfully.” (TODAY, 08 April 2012)

According to the Ministry of Finance (MOF), the head agency which implemented the NEV framework, it was dropped in the 2011 Financial Year.

But the damage that has been done might take a very long time to repair. This is because the NEV framework has caused the entire civil service to adopt a short term mindset, very much like how quarterly reporting on Wall Street has led to public corporations manipulating their reported earnings with the short term view of delivering favourable financial statements rather than on increasing shareholder value in the long term.

In Summary

The NEV framework is the direct result of the mindset of the current ruling party that everything valuable must be quantified, and that the majority of attention must be placed on extrinsic, measurable factors. This mindset is the symptom of a greedy and self-serving ruling political elite that merely wants to enrich its coffers and make itself look good on the international stage.

Slowly but surely, the government has lost sight of the true nature and value of public service. It is become so enamoured with metrics and KPIs and quantifiable performance that it has lost touch with the ground, and has forgotten that public service is shaped not by dollars and cents, but by courage and character.

This is a fundamental problem, and a deeply entrenched one at that.

The scrapping of the NEV framework is a good step forward, a sign that the government finally recognizes that it has become myopic and has lost sight of what is truly valuable to a society and to a people. But more must be done to drive home the point and press for change. The people must speak out and stand up to be counted.

Let the government know that the old way of doing things is no longer acceptable.

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