Many OECD countries are exploring ways to lower government operating costs. These represent around a fifth of central government expenditure, over 60% of which is for compensation of employees. This chapter considers reforms aimed at adjusting inputs to government operating costs, which include optimising the size structure and compensation of the public workforce, streamlining public procurement, and optimising the government real estate portfolio. Large gains are also available from transforming how governments design and manage their operations. Ways to do this include making better use of digital technologies, re-organising public administrations, and performing some functions outside of government where this aids efficiency. Some governments are also applying across-the-board efficiency targets.
Restoring Public Finances
Enabling Effective Government
Abstract
The RPF Survey shows that around four fifth of respondent governments are exploring ways to lower operating costs through managing government inputs, as well as through transforming how the government functions. On the input side, measures aimed at optimising the size, structure and compensation of the workforce are the most prevalent. Measures aimed at strengthening the management of the government’s real estate portfolio and increasing value for money in public procurement are also frequently reported. At the same time, many respondents are exploring ways to generate efficiency gains by transforming how the public administration functions. While the saving-potential of these reforms is harder to isolate, survey responses indicate that consolidation efforts seem to converge around simplifying administrative processes through data and digital technologies, re-organising the public administration, as well as outsourcing services or functions.
Reform initiatives and savings measures
1. Optimising the size, structure and compensation of the public workforce
General freezes or restraints on public sector remuneration, including non-wage benefits.
Reducing staff through (1) reduction of back-office administrative staff; (2) reduction of replacement of departing staff and freeze of new hires; (3) layoffs/redundancies; and (4) voluntary departure packages (including early retirement).
Promoting more flexible employment contracts.
Specific freeze or restraints on remuneration.
2. Streamlining public procurement
Creating central purchasing bodies.
Simplifying the procurement process.
Digitalising the procurement process.
3. Managing the real estate portfolio
4. Using data and digital tools to simplify administrative processes
Using AI to automate high-volume, repetitive administrative tasks.
Connecting data sets across the public administration to tackle data fragmentation.
5. Reorganising the public administration
Reducing costs through shared services and platforms.
Abolishing/merging agencies.
Abolishing/merging ministries and departments.
6. Across the board productivity dividends/ efficiency targets for the public administration
7. Outsourcing or privatising administrative functions
Government operating costs represent a substantial and relatively stable component of public spending. Operating expenditure refers to the recurrent costs necessary to ensure the smooth functioning of public institutions and the delivery of public services. It encompasses the principal inputs to government operations, which are, in general terms (Figure 11.1):
Public employment, including salaries, wages, and social security contributions for government employees, which represents 59% of central government operating costs on average across OECD countries;
Intermediate consumption of goods and services used by government, including information technology, consulting, travel expenses, office supplies, materials and other intermediate consumption, which represents 41% of central government operating costs.
Average share of central government operating expenditure across OECD countries, 2024 or latest year available
Note: Data for Australia, Chile and Türkiye are not available.
Source: OECD calculations, based on data from OECD National Accounts Statistics (database) (OECD Data Explorer • Annual government non-financial accounts and key indicators as of 09/01/2026).
In many countries, fiscal consolidation efforts or reforms, past and present, have included a planned reduction in government operating expenditure and specifically that of central government. This points to the significant contribution that efficiency gains in central government operations can make to broader efforts to restore public finances.
Measuring and comparing government operating costs across countries is, however, subject to some caveats. The data used in this section represent the closest available proxy derived from national accounts statistics (see Box 11.1 for an explanation of how this indicator is calculated), but do not constitute a precise or fully standardised measure of government operating costs across all OECD countries. Indeed, differences in accounting conventions between countries, and variations in how outsourced functions are recorded, could affect the comparability of the resulting aggregates.
For the purpose of this publication, central government operating costs are specifically defined as the expenditures incurred by central government units in the production of public services and the day‑to‑day functioning of government. They are calculated by aggregating data from the System of National Accounts, on:
Compensation of employees, which includes all cash and in-kind remuneration (i.e. wages and salaries, free or subsidised housing) paid to central government employees, as well as employees’ social contributions (both actual and imputed) paid on behalf of employees.
Intermediate consumption of goods and services used by government, which includes expenditures on inputs consumed in the production process, such as office supplies, energy, IT services, maintenance, consulting, and other operational services.
This definition reflects the current production costs of central government, excluding goods and services financed by government, transfers, debt interest payments and capital expenditures. It also excludes other production costs related to consumption of fixed capital (often referred to as depreciation of capital) and other taxes on production fewer other subsidies to production, which are smaller in scale and less directly actionable by governments through their annual budgets.
The indicator covers data classified within the central government sector, following System of National Accounts. Data for this sector are consolidated with respect to transaction within central government, while transfers to other levels of government are included in total expenditure. Data for general government aggregates are consolidated to remove intra-governmental flows, ensuring consistency with general government accounting frameworks.
In this chapter, operating costs are presented primarily as a percentage of total central government expenditure, to evaluate the importance of operating costs within overall public spending at the central level. They are also referenced as a percentage of GDP, to assess the macroeconomic weight of government production costs.
Source: Authors based on System of National Accounts and OECD Government at a Glance.
In addition, cross-country comparisons of governments operating costs can be limited by differences in how responsibilities are distributed across government. In highly decentralised or federal countries, a large share of public employment, including teachers and healthcare workers, is recorded at subnational rather than central government level. Observed variations in central government operating costs across countries therefore reflect institutional arrangements as much as differences in the underlying efficiency of government administration. Notwithstanding these measurement limitations, the data reveal trends in the level and composition of central government operating costs across OECD countries that offer useful insights for governments seeking to identify efficiency gains and consolidate public finances.
First, central government operating costs represent a significant share of public spending across OECD countries. In 2024, central government operating costs represented 20.6% of total central government expenditure, varying substantially across countries (see Figure 11.2). The relative weight of compensation of employees and intermediate consumption also varies across countries. While this chapter focuses on the central level, it is also important to recognise that, on average across OECD countries, most of general government operating expenditure occurs at the lower levels of government. In 2024, 62.2% of general government operating expenditures in OECD countries occurred at the subnational level.
Note: Central government operating costs as percentage of total central government expenditure. Central government operating costs created by aggregating central government compensation of employees together with the cost of goods and services used by central government (intermediate consumption). Data for Japan and New Zealand from 2023. Data for Australia, Chile and Türkiye are not available.
Source: OECD calculations, based on data from OECD National Accounts Statistics (database) (OECD Data Explorer • Annual government non-financial accounts and key indicators as of 09/01/2026).
Second, central government operating costs in OECD countries appear to be relatively stable between 2007 and 2024, although a slightly decreasing component of central government spending across OECD countries (see Figure 11.3). They first declined between 2007 and 2012, moving from 23% of total central government expenditure to 21.5%, driven by consolidation efforts in the aftermath of the Global Financial Crisis. Between 2012 and 2019, they followed a slightly rising trend, reaching 21.8% of total central government expenditure in 2019, then experienced a decline to 19.3% in 2020, primarily driven by the rapid expansion of social benefits and economic support to businesses in the aftermath of the COVID-19 crisis. Since then, they have been slowly rising again to 20.6% of total central government expenditure as of 2024. Despite this slight overall decrease, cross-country data suggests that many governments remain at a considerable distance from the efficiency frontier, and that there is margin for countries to further reduce central government operating costs while preserving the quality of public administrations and services (IMF, 2025[1]), even if there is considerable scope and need for better measuring public sector productivity (OECD, 2026[2]), and if significant progress has for example been measured in the health area (see Chapter 6, (Australian Productivity Commission, 2024[3])).
The nature of efficiency efforts in this area matters as much as their scale. Indeed, much of the consolidation achieved over the past decade has relied on managing inputs into government operations, through containing levels of public employment or intermediate consumption of goods and services used by government, for instance through streamlining public procurement or optimising the government real estate portfolio. These measures remain relevant today, as suggested by the fact that 72% of RPF Survey respondents report using them, particularly in light of the large share of public employees expected to retire over the next five to ten years. Yet, there may be a limit to how far they can be used. In particular, in labour-intensive sectors such as health and education, the scope for obtaining productivity gains from reducing the size public workforce and public wages are structurally limited (Baumol, 2012[4]).
Central government operating costs, OECD average, 2007-2024
Note: Central government operating costs indicator created by aggregating central government compensation of employees together with the cost of goods and services used by central government (intermediate consumption). Data for Australia and Chile are not available. Data for Türkiye are not included in the OECD average.
Source: OECD calculations, based on data from OECD National Accounts Statistics (database) (OECD Data Explorer • Annual government non-financial accounts and key indicators as of 09/01/2026).
Governments can also rely on changing how they operate to contain operating expenditure. Countries are increasingly using these types of measures to increase the efficiency of their operations, with 77% of Survey Respondents (and OECD Members), already pursuing some form of operational reform. However, there is scope to do more. AI, in particular, offers new opportunities to improve productivity in administrative and transactional functions, as well as to concentrate human effort in areas where it adds most value, such as policy work, complex management, and direct service delivery (OECD, 2025[5]). While both approaches retain a role in containing government operating costs, reforms to how government organises and delivers its functions may offer increasing scope for efficiency gains, particularly as new technologies expand what is achievable through process reform and organisational change.
To recap, governments can mobilise two main types of instruments to achieve more efficient government operations:
Instruments aimed at reducing the quantity or price of inputs into government operations, which primarily include reforms aimed at optimising the size, structure and compensation of the public workforce, as well as reforms aimed at optimising the government real estate portfolio and streamlining public procurement to reduce intermediate consumption. These measures are discussed in Section 2 of this chapter.
Instruments aimed at transforming how governments operate – or how government services are produced and how public administrations function. These include the merger or elimination of ministries and agencies, shared service models, process simplification and digitalisation, outsourcing and contracting out services or functions, that can significantly transform government operations, even if their effects on government operating expenditure are harder to immediately isolate and measure. These measures are discussed in Section 3 of this chapter.
The RPF Survey shows that many respondents, including 69% of OECD Members, are exploring ways to lower government operating costs by reducing the quantity or price of inputs into government operations, particularly through reforms aimed at:
optimising the size, structure and compensation of the workforce,
optimising the government real estate portfolio, specifically buildings that are owned and/or leased by government,
streamlining public procurement.
The measures presented in this chapter reflect submissions to the 2026 RPF Survey, focusing on the saving measures planned for the 2025-2026 period. Figure 11.4 gives an overview of these savings strategies as pursued by respondents in 2025-2026. For each of these, this section provides an overview of ongoing reforms to reduce the quantity or price of the inputs and discusses considerations for future reforms.
Measures approved or submitted to parliament for the fiscal years of 2025 and 2026
Note: Results based on 39 RPF Survey responses. Answers to question 11 on Public Employment have been grouped under the category “Optimise the size, structure and compensation of the workforce”. The category shows the number of countries pursuing at least one reform within the grouped survey responses.
Source: 2026 OECD Survey on Restoring Public Finances, Question 12: Government Operations and Restructuring (answers 12d and 12e) and Question 11: Public Employment (all answers grouped ex post under “Optimise the size, structure and compensation of the workforce”).
11.2.1. Optimising the size, structure and compensation of the public workforce
Managing the size and the structure of the public workforce plays a key role in balancing fiscal discipline with the effective delivery of public services. Indeed, as mentioned above, compensation of central government employees accounted on average for 12.1% of total central government expenditure and 59% of central government operating costs in 2024, across OECD countries. At the same time, as shown in Figure 11.2, the fiscal weight of the central government workforce varies significantly across OECD countries. This also reflects differences in public sector responsibilities and institutional arrangements.
Ongoing reforms in optimising the size, structure and compensation of the public workforce
In line with this, more than half of respondents to the RPF Survey (and 57% of OECD Members) are implementing, or plan to implement, reforms and savings measures to contain the cost of the public workforce. The pattern that emerges is a broad reliance on targeted remuneration measures and workforce reductions as central tools for restoring public finances (see Figure 11.5).
Some respondents rely exclusively on targeted remuneration measures, while others deploy a broader package of reforms. This points to different interpretations of how best to stabilise public finances. For those pursuing only pay-related interventions, this may reflect a view of remuneration restraints as the most immediate, politically feasible, or technically straightforward lever for achieving short-term fiscal gains without longer term restructuring of the public service workforce. In contrast, respondents combining wage measures with organisational reforms such as cuts to back office or administrative staff appear to be aiming for more structural or efficiency-oriented adjustments, which are often combined with indirect efficiency measures, such as organisational changes or digitalisation of administration processes. Overall, respondents are calibrating their responses according to their institutional constraints, reform capacity, and tolerance for administrative change.
Measures approved or submitted to parliament for the fiscal years of 2025 and 2026
Note: Results based on 39 RPF Survey responses.
Source: 2026 OECD Survey on Restoring Public Finances, Question 11: Public Employment.
General freezes or restraints on public sector remuneration, including non-wage benefits
As shown in Figure 11.5, the majority of RPF Survey respondents that are pursuing reforms in public employment are using specific freezes or restraints on public sector remuneration, including non-wage benefits, to optimise the size, structure and compensation of the public workforce. These measures typically involve limiting wage increases for public employees across the entire workforce adopted by around 13 respondents (including 31% of OECD countries). In terms of sectoral cuts, Belgium plans to freeze the remuneration of teachers, while no respondents plan to freeze the remuneration of health professionals. Freezes or restraints to public sector remuneration can take different forms, such as actual cuts to salary or adjustments to non-wage benefits.
Governments facing tighter budgets are adjusting planned pay rises in an effort to break the link between wages and inflation. Respondents planning to decouple pay from indexation aim to slow the growth of the wage bill and create more predictable expenditure, especially in periods of high or volatile inflation. This approach may also carry risks: over time, real wages may decline, making it harder to retain staff and attract new talent in competitive labour markets. Examples from the RPF Survey include:
In Austria, the government planned for zero federal wage increase in 2027 and 2028. However, after negotiations with the main public sector union, it agreed to defer the start date of a previously-agreed 3.3% increase for 2026 to halfway during the year, and to spread that increase over three years. This is estimated to save EUR 300 million in 2026.
In Belgium, automatic pay rises will be implemented more slowly: when inflation passes the level that normally triggers an automatic pay increase, employees will now have to wait three months rather than two before that increase is added to their salaries.
Cuts to salaries and wages are among the most direct ways to contain public‑sector payroll costs. They are also among the most sensitive measures as they can harm workforce morale and productivity. This may lead to increased workforce management costs to maintain capability and service delivery. As such, they should be accompanied by clear and sustained communication with affected staff, safeguards for essential roles and a strategy to rebuild competitiveness once fiscal conditions improve. Examples from the RPF Survey include:
In Israel an across-the-board public sector pay cut for the years 2025 and 2026 was approved by parliament, alongside a one-off reduction in convalescence days across the public sector.
Alongside changes to wages, many governments are adjusting non-wage benefits to help contain workforce costs. These savings measures include reducing paid leave entitlements, tightening rules on allowances and benefits, and revising overtime policies. Such adjustments offer greater flexibility than pay cuts and can deliver savings without directly lowering salaries. Examples from the RPF Survey include:
In Canada, the government announced an intention to revise retirement benefits alongside revisions to public sector pay. It aims to adjust federal public sector employee pension contribution rates to maintain existing pension levels when accounting for the enhanced Canada Pension Plan and Quebec Pension Plan. The government is also increasing the required years of service for federal public sector pension recipients to qualify for retiree dental coverage from two years to six.
In New Zealand, changes to pay equity legislation were introduced in 2025 to narrow the eligibility criteria for pay equity claims in order to reduce the government’s liability.
Reductions in back-office and administrative staff
Reductions in back-office and administrative staff are reported by around eight respondents (including 20% of OECD countries). These measures target functions such as human resources, finance or other support services, and can result from efficiency gains from digitalisation and process simplification or the consolidation of some functions through shared services approaches, as discussed further in Section 3 of this chapter. Examples of savings measures from the RPF Survey include:
In Denmark, ministries have been assigned individual savings targets with an objective of reducing the number of full-time equivalents, with a particular focus on administrative roles. It is up to each Ministry to decide on the most appropriate implementation measures.
In Germany, the coalition agreement announced a cross-government administrative consolidation agenda, aiming to merge and rationalise federal agencies (CDU/CSU/SPD, 2025[6]). Each spring, the Budget Department at the Federal Ministry of Finance notifies federal ministries of their required staff savings. These targets are calculated from the annual budget law and the positions listed in that year’s budget plan. The ministries then report which posts and positions they will cut.
Reducing replacement of departing staff
Several RPF Survey respondents, including 20% of OECD countries, are planning to reduce the replacement rate of departing staff to contain the size of the public workforce. These measures typically involve setting a ratio that limits how many retiring or departing employees are replaced, allowing governments to gradually adjust staffing levels without direct layoffs. This approach is particularly relevant given the current demographic situation across OECD Member countries, as over a quarter of the current workforce will have left the public service in the next ten years (OECD, 2025[7]). Across respondents, replacement ratios vary depending on fiscal conditions and workforce strategies. Examples of savings measures from the RPF Survey include:
In Belgium, one out of three departing public servants in the Wallonia region is replaced.
In Chile, a similar one-in-three ratio applies for public servants retiring under the Incentive-to-retire scheme. In Chile, this reform is expected to reduce government expenditure in 2026 by USD 120 million.
In Italy, the 2025 budget limits spending on new hires to 75% of what was spent on staff who left in 2024.
Freeze new hires
Some RPF Survey respondents reported introducing hiring freezes on new recruitment, though these do not necessarily fall uniformly across the public service. The RPF Survey shows that most respondents planning hiring freezes are combining them with other measures to contain public workforce costs, recognising that freezes alone are not a sustainable long‑term strategy, with the following examples:
In Latvia, state and local government bodies cannot create new jobs unless approved by the Cabinet of Ministers or the local council. In addition, from 1 July 2026, they must remove any position that has been vacant for more than six months from the list of posts in the administration.
In Peru, the 2025-2026 budget laws limit how many new staff can be hired across all levels of government to prevent the payroll from growing faster than the budget allows. The laws also continue the ban on creating new pay categories or raising salaries for public employees and require that any approved pay amounts be fixed (rather than automatically adjusted each year).
As in past periods of fiscal consolidation, freezing new hires aims to contain the size and therefore the cost of the public workforce. Cutting back on the number of new hires can help preserve institutional knowledge and memory, whereas layoffs to existing staff have to be carefully calibrated to make sure that core skills and capacities are preserved to the greatest extent possible. Nonetheless, if not carefully managed, hiring freezes can limit the inflow of new talent and ideas, raise workloads for remaining employees and contribute to ageing workforces (OECD, 2016[8]).
Reduce staff through layoffs/redundancies
Some RPF Survey respondents plan to use layoffs as part of their efforts to reduce central government employment expenditure. For example, in Canada, the Comprehensive Expenditure Review aims to return the public service workforce to a more sustainable size through, among other initiatives, an estimated reduction of 16 000 full-time equivalents, or 4.5% of the workforce as of March 2025.
Layoffs are one of the most difficult workforce measures to manage. Especially in countries with a strong tradition of collective bargaining, civil service leaders must balance political sensitivity with the need to preserve essential skills and avoid harming long-term service delivery. Two main factors help determine the feasibility of layoffs: the strength of performance management systems and the level of employment protection attached to public sector contracts.
Indeed, most OECD countries link dismissals either to poor performance or to broader downsizing efforts where job protection is weaker (i.e. short-term or temporary contracts different to the protections afforded to civil servants). Although 63% of OECD countries formally allow dismissal for consistently poor performance, very few public servants are actually let go for this reason - typically less than 1% of the workforce (OECD, forthcoming[9]). Some RPF Survey respondents are trying to make these systems more workable. In Slovenia, for example, a new method of performance management linked to the wider pay reform that came into effect in 2025 emphasises ongoing dialogue on performance and growth, rather than retrospective evaluation. Layoffs are also closely tied to the broader framework of job security (see next section).
Promote more flexible employment contracts
Several RPF Survey respondents are exploring more flexible contract models, including easier entry and exit, as well as more adaptable pay structures. Flexible employment frameworks allow administrations to adjust workforce size and skills more efficiently in response to fiscal pressures and evolving service needs, and are particularly relevant given the variety of contractual arrangements – from career civil service to short-term contracts – under which public servants are employed across OECD countries. Likewise, flexibility in pay systems allows administrations to respond to labour market conditions, address skills shortages, and reward performance in a financially sustainable way. A group of RPF Survey respondents (Belgium, Czechia, Slovenia and Thailand) reported efforts to embed greater flexibility across their public employment systems as part of broader strategies to restore public finances. In particular:
In Czechia, recent amendments to the Civil Service Act were designed to increase flexibility in workforce management as part of broader efforts to restore public finances. These changes eased entry requirements for joining the civil service and gave employers more options to adjust staffing levels when needed, including through shortening severance periods in cases of redundancy.
Slovenia has reformed its public sector pay system after years of ad hoc adjustment. A new pay agreement with unions was reached at the end of 2024, and implementation began on 1 January 2025. The goal was to fix pay imbalances, introduce more flexibility in how staff can be rewarded, and make the system more appealing to younger workers while keeping it transparent and financially sustainable. The reform introduced a new pay scale with 67 grades. Pay steps are now closer together and salaries will be adjusted annually for inflation through negotiations, with a fallback rule if no agreement is reached. To increase flexibility, the law allows exceptions in special cases, for example, assigning higher pay grades, speeding up or delaying advancement, or waiving formal education requirements.
Voluntary departure packages
As part of the savings measure identified by the RPF Survey, a number of respondents (Canada, Chile, New Zealand and United Kingdom) indicated the use of voluntary departure packages, including early retirement, as a way to manage the size and cost of the public service. These programmes typically offer financial incentives or enhanced retirement benefits to encourage employees to leave of their own accord. They can help reshape the workforce but also present high upfront costs, risks of loss of experienced or high‑performing staff, and the possibility that departures may not align with organisational needs. As a result, governments often need to combine voluntary departure schemes with complementary measures such as targeted recruitment controls or strategic workforce planning to ensure that the long‑term impact supports both fiscal objectives and service continuity. All four respondents planning to use voluntary departure packages indicated that they plan to do so alongside other measures.
In Canada, the public service is projected to shrink by around 10% from around 368 000 employees in 2023-2024 to roughly 330 000 by 2028-2029 due to normal turnover, existing savings measures, and new efforts to slow spending. To help manage this reduction, the Government of Canada will offer a voluntary, time-limited Early Retirement Incentive for eligible employees aged 50+ (Group 1) or 55+ (Group 2) with at least ten years of employment and two years of pensionable service, with Treasury Board setting the rules.
In the United Kingdom, the 2025 Spending Review requires every department to cut its administrative budget by at least 11% in real terms by 2028-2029, and 16% by 2029-2030 (see Box 1.3. in Chapter 1). To meet these targets, the government is carrying out established voluntary exit schemes, voluntary redundancies, and compulsory redundancies. More than 8 500 civil servants are expected to leave by March 2027 under these schemes (National Audit Office, 2025[10]).
Specific freeze or restraints on remuneration
Some RPF Survey respondents are planning freezes or restraints on remuneration for education professionals. For example, in Belgium, teachers’ salaries account for half the entire budget of the Wallonia-Brussels Federation. As such, the Federation is placing special emphasis on reducing the salaries of teachers.
No RPF Survey respondents reported specific freezes or restraints on remuneration for health professions (e.g. doctors, nurses).
Framing fiscal adjustments as part of public service transformation
Efforts to consolidate public employment expenditure can generate immediate fiscal savings, but their long-term impact depends on preserving public sector capability and investing in wider transformations of the public service and administration. Indeed, efficiency in government is not solely a function of reducing inputs but requires that the public sector maintains the organisational capacity to deliver quality outputs and adapt to evolving demands. Analysis of from past consolidation episodes consistently shows that indiscriminate workforce reductions, prolonged hiring freezes, and sustained wage restraint can erode critical skills, weaken institutional memory, and reduce governments' ability to attract and retain the talent needed to modernise service delivery (OECD, 2016[8]; OECD, 2023[11]). Public sector productivity is shaped not only by the volume of resources deployed but by the quality of human capital, the effectiveness of management practices, and the capacity of organisations to learn and adapt, factors that are difficult and costly to rebuild once lost.
In this context, current fiscal pressures present an opportunity to reshape the public workforce for the future, provided that efforts to reduce costs go hand in hand with investments in productivity. This is particularly relevant as governments seek to harness the potential of new digital technologies and AI, since realising productivity gains from these investments requires a workforce with the skills, judgement, and organisational frameworks to deploy them effectively.
In this vein, a number of RPF Survey respondents have accompanied efforts to downsize the public workforce with wider transformation of the public service and administration. This type of public service transformation does not just focus on minimising costs but also sets out where investment is necessary to maintain capability, for instance through new tools, technology and training for a smaller, leaner public workforce. These wider public administration transformation strategies will be discussed in Section 3 of this chapter.
11.2.2. Streamlining public procurement
Streamlining the public procurement process can help reduce intermediate consumption by lowering the unit prices paid for goods and services, eliminating redundant and duplicated spending across departments, and reducing the administrative overhead associated with managing procurement processes. Given the size that intermediate consumption of goods and services used by central government represents in central government expenditure (8.5% of total central government expenditure, 41% of central government operating costs on average across OECD countries), the potential for savings through streamlining public procurement at central government is significant. However, 62.5% of public procurement expenditure occurs at subnational level (OECD, 2025[7]) and intermediate consumption does not account for procurement of infrastructure and public works. In addition, while the analysis in this section focuses on country efforts aimed at fiscal consolidation, reforms to public procurement should also support wider policy goals and promote transparency, integrity, competition, and accountability throughout the procurement lifecycle (OECD, 2015[12]; OECD, 2025[13]).
Ongoing reforms to strengthen public procurement efficiency
The RPF Survey shows that public procurement remains an important area in fiscal consolidation efforts. Around one third of RPF Survey respondents, including 26% of OECD countries, have adopted measures aimed at streamlining public procurement practices to consolidate public spending and enhance value for money. Respondents have reported using various tools to increase efficiency and achieve greater value for money, including centralising purchasing, simplifying procurement procedures or accelerating the digital transformation of procurement processes (Table 11.1).
Measures approved or submitted to parliament for the fiscal years of 2025 and 2026.
Note: Results based on 39 RPF Survey responses. OECD Secretariat categorisation based on detailed analysis of country responses to Q12 answer e. Streamline public procurement.
Source: 2026 OECD Survey on Restoring Public Finances, Question 12: Government Operations and Restructuring.
First, some RPF Survey respondents have established national central purchasing bodies (CPBs) for common goods and services (OECD, 2025[7]). Centralisation can improve value for money by generating economies of scale, reducing transaction costs, increasing compliance with procurement rules and supporting more consistent pricing. In addition, CPBs are more likely to have capacity to attract specialised workforce, support category management and introduce robust oversight mechanisms, which can also contribute to efficiency gains. The RPF Survey highlights a number of initiatives aimed at strengthening value for money in public procurement through centralisation:
Germany, as part of its broader Federal Modernisation Agenda, aims to centralise procurement capabilities by promoting the creation of central purchasing bodies and specialised excellence centres as well as by allowing later inclusion of additional contracting entities in framework agreements.
Latvia is expanding the scope of centralised purchasing to include new areas, notably insurance, transport and mobile communications.
Mexico has been developing a strategy for consolidating procurement, aggregating demand for standardised goods and services across administrative units and agencies.
Bulgaria is establishing a CPB for Information and Communication Technologies to tackle inefficiencies.
In addition, Chinese Taipei has established a procurement platform to provide a unified system to procure software, with the aim of promoting price rationality, consistency and transparency while enhancing interoperability.
Second, several respondents to the RPF Survey have taken steps to simplify procurement processes. Simplification can help reduce unnecessary administrative burden, shorten lead times, and improve user experience for public buyers and suppliers. Streamlined processes can reduce the number of full-time equivalent staff needed for routine transactional tasks and allow procurement officials to focus more on strategic functions such as planning, market engagement and contract management. Several respondents have reported taking measures in this area, for instance:
Canada’s 2025 Budget includes the establishment of an Office of Digital Transformation, which will be tasked, among other things, with identifying and eliminating redundant and counterproductive procurement rules to hasten AI adoption.
France amended the Public Procurement Code lowering the minimum revenue required of companies bidding on a public contract, and simplifying procedures for public buyers faced with successful tenderers who are not able to perform the contract.
Latvia also aims to shorten and reduce public procurement procedures, with national budget savings from public procurement expenditures estimated at around 2-4%.
Simpler and more proportionate processes can also widen access to public procurement opportunities for businesses, especially Small and Medium Enterprises (SMEs), hence strengthening competition and potentially improving value for money. Indeed, SMEs often struggle with the intricate and resource-heavy requirements of public procurement processes, including extensive documentation and compliance with complex legal standards, while larger enterprises typically have more resources to effectively navigate complex processes (OECD, 2025[13]). As emphasised by the OECD Recommendation on Public Procurement, measures that reduce complexity, introduce clear and standardised documentation, and facilitate participation by SMEs and new entrants can help strengthen efficiency and competition (OECD, 2015[12]). For instance:
Germany is aiming to reduce burdens to businesses by harmonising forms and templates across government (e.g. for self-declarations) and by expanding the use and validity period of self-declarations for bidders.
The European Union, which was not part of the RPF Survey, is also in the process of revising its Public Procurement Directives to achieve greater efficiency by simplifying procedures, which might bring further reform in EU/OECD countries in the future. At the same time, simplification should preserve coherent legal frameworks, clear tender documentation, proportional requirements, and adequate oversight.
The RPF Survey also highlights a few initiatives aimed at raising the value of thresholds for formal procurement processes (as opposed to direct awards of contracts) for the sake of providing greater flexibility and discretion to contracting authorities and reducing administrative burdens, notably in France, Germany, Latvia and Norway. While such measures may reduce administrative effort for lower-value purchases, competitive tendering should remain the standard method of procurement and exceptions and single-source procurement should remain limited, predefined, justified and subject to adequate oversight, as emphasised by the OECD Recommendation on Public Procurement. Raising thresholds should therefore be approached with caution and only with strong safeguards to preserve transparency, competition and accountability, and to mitigate risks of inefficiency, reduced competition, collusion or corruption for below-threshold procurement.
Third, RPF Survey respondents have been using digitalisation and AI in public procurement as levers to enhance efficiency, widen access to public procurement opportunities and strengthen competition. The RPF Survey shows that:
Canada aims to implement digital delivery of procurement-related documents to better manage project delivery.
Germany is rolling out a shared national e-procurement ecosystem, consolidating existing e-procurement platforms, enabling AI-assisted tendering and introducing AI-powered tools to evaluate complex bids.
Unlocking the full potential of public procurement for efficiency gains
While the measures reported by respondents in the RPF Survey focus on centralisation, simplification and digitalisation in the tendering phase, broad and strategic reforms to the whole public procurement cycle can unlock further efficiency, effectiveness and strategic gains (OECD, 2015[12]). For instance, better planning and needs assessments, market engagement, joint public procurement, category management, contract management, framework agreements and performance evaluation, can drive efficiency beyond the measures outlined in the previous section. OECD analysis, beyond the RPF Survey results, also suggests that there remain opportunities to strengthen the integration of procurement data and public financial management systems, which can help in identifying cost patterns, supplier concentration and potential savings (OECD, 2025[13]).
Reforms to public procurement aimed at enhancing value for money should also continue safeguarding competition, access, integrity, professional capacity, risk management and accountability (OECD, 2025[13]). For instance, centralisation efforts should not come at the expense of market access, especially for SMEs and new entrants: narrower access to procurement opportunities would hinder competition, likely driving costs up for government. In addition, to be impactful and avoid potential negative effects, centralisation should be accompanied by robust oversight and audit, transparent publication of procurement information, controls against corruption and collusion, data collection, capacity-building and monitoring and evaluation mechanisms (OECD, 2024[14]).
Unlocking the full potential of digitalisation and automation entails going beyond digitising existing approaches to simplifying workflow management, automating routine tasks, eliminating unnecessary documentation, and minimising clerical errors (OECD, 2025[15]). Digitalisation can support end-to-end integration across the public procurement lifecycle, improve workflow management, enable the reuse of data, and make public procurement more user-centred and connected. OECD findings also point to a low level of AI maturity in public procurement entities: emerging technologies, including AI, can support tasks such as spend analysis, classification, document management, supplier assistance, risk detection and bid evaluation, but their deployment should be accompanied by appropriate safeguards (OECD, 2025[13]). These include attention to data quality, interoperability, transparency, explainability, human oversight, non-discrimination, cybersecurity, and digital skills within the procurement workforce. OECD analysis also underlines that fragmented systems, weak data governance, outdated infrastructure and limited capability can reduce the benefits of digital transformation. The successful digital transformation of procurement therefore depends not only on technology adoption, but also on investment in institutions, people, standards and governance (OECD, 2025[15]).
Finally, reforms in public procurement are most sustainable when supported by professionalisation of the procurement workforce, robust risk management, performance measurement and ex post evaluation. For instance, the impact of reform measures should be monitored through relevant performance indicators so that governments can assess whether reforms are actually delivering better value for money, stronger competition, improved access and more effective public service delivery (OECD, 2024[14]).
11.2.3. Optimising the government real estate portfolio
Government real estate portfolio management – also referred to as public property asset management or public real estate management – refers to the strategic, portfolio-wide oversight of land and buildings held in government ownership, encompassing the full cycle of acquisition, use, utilisation, maintenance, adaptation, and disposal of these assets. In practice, governments’ real estate portfolio covers a heterogeneous stock of assets: administrative office buildings and ministerial facilities, public housing, schools, hospitals, courts, military installations, and the land underlying them, as well as undeveloped or surplus public land.
There is no international comparative data that tracks government real estate expenditure – such as leases, consumption of fixed capital on buildings, or utilities – as a distinct, comparable line item across respondents. Rather, these costs are embedded within broader categories (intermediate consumption, consumption of fixed capital) that are not disaggregated by asset type in standard cross-country publications. Yet, research suggests that property assets constitute a large share of what government owns (between 40 to 95% on average) and better management of government assets could generate up to 3% in GDP in additional revenues annually, indicating that better property asset management can produce substantial financial gains (IMF, 2018[16]; González and Dekyi, 2026[17]). In addition, governments are also following new patterns of office use in a post COVID context, where many corporate entities have reduced their real estate footprint, given new ways of working. This clearly opens up new opportunities for savings, which have been aggressively explored in the private sector, and which are also being harnessed by government.
Part of the challenge of public property asset management, therefore, is to shift towards a portfolio-level approach that treats government real estate as a managed asset class, subject to performance measurement, explicit strategic objectives, and financial discipline (Kaganova, O. and Amoils, J.M., 2020[18]). An increasing number of governments are making efforts in this direction.
Current reforms related to managing the government real estate portfolio
Around a third of RPF Survey respondents are conducting reforms to optimise the government real estate portfolios, including 31% of OECD countries. The reforms focus on reviewing national asset inventories to target idle real estate, promote asset reuse and enhance space utilisation. Examples include:
In Belgium, the federal government is preparing an inventory of all its real estate property, whether owned or leased, with the exception of strategic and sensitive sites, with a view to reducing the portfolio. Estimated savings amount to EUR 25 million in 2025, EUR 50 million in 2026, EUR 75 million in 2027, EUR 100 million in 2028, and EUR 150 million in 2029 and 2030.
As part of its national public efficiency programme for 2025-2030, the Programa Especial para la Eficiencia de la Gestión Pública 2025-2030, Mexico is modernising the management of its federal real estate portfolio of 111 473 federal properties. The Institute for the Administration and Appraisal of National Assets, the national authority for real‑estate administration and valuation, leads this transformation by targeting idle, unproductive, and underutilised assets and promoting asset reuse or disposal.
Chinese Taipei reports it regularly transfers real estate no longer required for public use to the Housing and Urban Regeneration Center, which then assists government agencies in constructing social housing, thereby revitalising state-owned property and promoting the reuse of assets.
Opportunities for further savings
While governments have started to realise the potential of achieving savings in terms of managing their real estate portfolio, these may only represent the tip of the iceberg. There are further savings opportunities through establishing comprehensive asset registers, adopting more long-term approaches to government real estate management and investing in energy efficiency strategies.
Establishing comprehensive asset registers and standardised valuation frameworks is a prerequisite for achieving further efficiency gains. Indeed, in most governments, an important barrier to progress in this area remains the absence of comprehensive, reliable data on what governments own, what it is worth, and what it costs to maintain – a prerequisite for any strategic portfolio management. Recent OECD analysis confirms the scale of this gap: only eight OECD countries have fixed asset registers covering all government assets, while ten countries (30% of 33 respondents) have no centralised register at all (OECD, 2023[19]; González and Dekyi, 2026[17]). The same analysis highlights that asset performance monitoring could be significantly strengthened through more systematic data collection, regular updating of asset information, and the integration of emerging technologies such as predictive maintenance tools and geographic information systems, which have the potential to transform asset registers from static inventories into dynamic tools for proactive portfolio management and long-run cost reduction (González and Dekyi, 2026[17]).
More generally, having this data could allow governments to develop more long-term strategic approaches to government real estate management to set strategic objectives, identify financial and non-financial risks (e.g. legal, operational, financial and environmental risks) and chart a roadmap for portfolio optimisation through segments of the portfolio rather than individual assets, e.g. considering assets together by function, asset type, priority and location. Such longer-term perspective can promote the identification of opportunities for consolidation, resource-sharing and economies of scale within and between segments.
This type of longer-term perspective can also support consolidating fragmented property holdings, reducing overall floor space, increasing utilisation rates, and sharing accommodation across departments and agencies. In doing so, governments can achieve sustained reductions in lease costs, facilities management expenditure, business rates or property taxes, and energy bills. The United Kingdom’s experience illustrates that office estate rationalisation can generate substantial and measurable fiscal returns (see Box 11.2).
The United Kingdom's Government Hubs Programme, led by the Government Property Agency (GPA), represents one of the most operationally advanced examples of centrally co-ordinated government office estate rationalisation among OECD countries.
Originating in His Majesty’s Revenue and Customs (HMRC) 2014 Building our Future initiative — which reduced the HMRC’s own estate from 170 offices to 13 regional centres — the programme was extended government-wide with the establishment of the GPA in 2018.
Its logic rests on consolidation through co-location: closing a large number of single-department, often ageing and underutilised buildings and replacing them with a smaller number of modern, digitally connected, multi-departmental hubs shared across government. The programme targets the closure of approximately 134 buildings — around 60 offices in central London and 74 regional offices — while opening 15 additional new hubs across the regions to accommodate more than 53 000 civil servants.
The parallel Whitehall Campus Programme has set a target of reducing the central London estate by 55%, from 84 buildings to around 20, with 11 buildings in central London planned to close by 2030, relocating over 14 000 civil servants and delivering total annual savings of GBP 94 million.
Early results demonstrate the fiscal materiality of this approach: the closure of 1 Victoria Street alone generated approximately GBP 30 million in annual running costs savings and approximately GBP 300 million in 20-year net present value, while HMRC expected to save more than GBP 300 million by 2025 as a result of its own hubs programme, with annual savings of approximately GBP 90 million by 2026.
Beyond fiscal consolidation, the programme simultaneously serves a regional development objective: the Places for Growth programme, which is closely integrated with the hubs strategy, has a headline target of relocating 22 000 roles outside of London by 2027, with 50% of United Kingdom-based Senior Civil Service roles to be based outside London by 2030.
Source: United Kingdom Government Property Agency
Finally, in the context of high energy prices, governments may wish to invest in measures for energy-efficiency and lifecycle maintenance strategies for public real estate, including integrating resilience considerations as part of long-term fiscal sustainability. The role of improved maintenance is also discussed in the chapter on public investment. In the case of real estate, retrofitting the public building stock, through insulation, low-carbon heating, and energy performance upgrades – can generate long-run reductions in public energy expenditure that compound over time. This also protects governments from stranded asset risk as energy performance requirements tighten, avoiding future write-downs on public buildings that fail to meet emerging regulatory standards that exist in some jurisdictions (OECD, 2025[20]).
RPF Survey responses show that many respondents are exploring ways to transform how the public administration functions in order to generate efficiency gains. Almost four fifths of respondents report at least one measure related to government operations and restructuring. Reported efforts include simplifying and enhancing administrative processes through data and digital tools, re-organising the public administration, setting across-the-board efficiency targets, and outsourcing services or functions (see Figure 11.6).
Measures approved or submitted to parliament for the fiscal years of 2025 and 2026
Note: Results based on 39 RPF Survey responses. Answers to questions 12a, 12b and 12f have been grouped under the category “Reorganising the Public Administration”. Answers to questions 12g and 12h have been grouped under the category “Using data and digitalisation to increase efficiency of administrative processes”. These categories show the number of countries pursuing at least one reform within the grouped survey responses.
Source: 2026 OECD Survey on Restoring Public Finances, Question 12: Government Operations and Restructuring (answers 12a, 12b, 12c, 12f, 12g, 12h and 12i).
11.3.1. Using data and digitalisation to increase the efficiency of administrative processes
The simplification of government processes and the automation of administrative tasks through digital technologies, including AI, represent an increasingly important lever for achieving efficiencies. It is the most commonly cited measure used by respondents to the RPF Survey in achieving savings in government operations (see Figure 11.7).
Measures approved or submitted to parliament for the fiscal years of 2025 and 2026
Note: Results based on 39 RPF Survey responses.
Source: 2026 OECD Survey on Restoring Public Finances, Question 12: Government Operations and Restructuring (answers g. and h.).
Digitalise administrative processes, including use of AI to increase productivity
Digital technologies and data allow governments to rethink routine tasks, eliminate duplication, and share data seamlessly across government, making often slow, paper-based processes faster and more efficient. Automation through robotic process automation, machine learning, and generative AI, in particular, offer governments the prospect of reducing staff time devoted to high-volume, routine administrative tasks. Almost half of RPF Survey respondents, including 51% of OECD countries, mention the use of AI to automate repetitive tasks, accelerate decision making and shift public servants’ time to strategic priorities and higher value work. Examples include:
In Canada, for example, the Office of Digital Transformation will seek to drive AI uptake across the federal government with the aim of promoting the automation of back-office tasks. Separately, organisations contributed to the CAD 13 billion in projected savings by 2028-2029 from the Comprehensive Expenditure Review through the use of technology, AI and automation.
In Czechia, the Jenda platform integrates AzureOpenAI is used to audit and pre-fill 100 000 monthly benefit applications, cutting processing errors.
Denmark’s cross-government AI taskforce has been tasked with freeing at least 50 million hours of public servants’ time (the equivalent to 30 000 full-time employees) by 2035 by tackling implementation barriers and scaling AI solutions across the public sector.
Thailand is piloting the use of AI Chatbots to cut public servants’ workloads by 30-50% in high-volume areas, such as land registration, auctions, and food approvals.
Connect public sector datasets for more effective management of benefits and for reducing fraud
The OECD’s analysis indicates that public financial management and fraud detection are common areas where governments are focusing the use of digital technologies, data and AI to increase the efficiency of administrative processes (OECD, 2025[5]). However, studies show that the quality of data underpinning digital and AI systems is often a binding constraint to achieving their full potential, and fragmented data and restrictions on data sharing frequently impede the success of digital projects (OECD, 2025[5]). Several RPF Survey respondents, including 40% of OECD countries, are working to connect data sets across the public administration. Examples include:
Czechia’s Citizen Portal grants trusted access to over 200 services via Bank ID and mobile eID authentication, aligning with EU Digital Decade targets and the implementation roadmap of the updated EU digital identity policy, including eIDAS 2.0 and the Digital Wallet.
Japan has been developing the Public Basic Information Database to enable once-only administrative procedures, thereby eliminating duplicate submissions, and to promote digital transformation across the private sector.
In the United Kingdom, the National Fraud Initiative, led by the Public Sector Fraud Authority, matches electronic data within and between public bodies (including local authorities) and other private sector organisations to prevent and detect fraudulent claims.
Thailand’s forthcoming Digital Data Sharing Act will broaden the use of the Big Data Institute’s DII platform to eliminate paper documents for licensing and reduce around 9.2 million transactions yearly.
Achieving further savings through better oversight of digital investments and data management
While a majority of RPF Survey respondents have included public sector AI use and digitalisation in their fiscal consolidation strategies, fiscal gains through digitalisation of administrative processes remain uneven (OECD, 2025[21]). Athough ex ante digital expenditure planning is widespread across OECD countries, with 89% of countries having mechanisms to estimate and plan spending on digital technologies, proof of significant fiscal gains from digitalisation of administrative processes remains limited to date (OECD, forthcoming[22]; OECD, 2025[21]). This reflects, in part, the long development cycles of digital and AI projects, which often exceed the three‑to‑five‑year horizons of consolidation plans, but also the rigidity of existing budgeting systems to fund iterative delivery that would derisk large initial capital investments and better adjust to the current shift to subscription-based, operational expenditure (e.g. cloud technologies). More fundamentally, ex post evaluation and benefits realisation remain underdeveloped: only 25% of OECD countries report conducting ex post cost‑benefit analysis of digital projects. Looking forward, improving the management and oversight of investments in digital technologies can reduce the duplication of expenditure, make spending more flexible and better tailored to agile digital delivery, while ensuring that the underlying digital transformation projects achieve their objectives (OECD, 2025[23]).
Although procurement frameworks have strengthened, with 32 out of 36 OECD countries having dedicated central guidelines for digital and ICT procurement, agile, iterative and innovation‑oriented approaches generally remain underused, with just 55% of OECD countries applying procurement methods suited to digital delivery (OECD, forthcoming[22]). As a result, many governments continue to manage fast‑evolving, data‑intensive technologies through static budgeting, rigid approval cycles and compliance‑oriented controls. Without parallel investments in data infrastructure and the adoption of adaptive oversight frameworks, digital and AI investments risk falling short of their fiscal and efficiency objectives, underscoring the need for more rigorous appraisal, review and course‑correction throughout the project lifecycle.
In addition, to achieve further efficiency gains by simplifying administrative processes, countries will need to first leverage the full potential of safely connecting data sets for efficiency gains. In many OECD countries, the data needed to manage operating expenditure strategically, whether on workforce composition and costs, procurement spending and supplier performance, or on property utilisation and asset condition, resides in separate, often not integrated administrative systems managed by different ministries, agencies, or levels of government. This fragmentation limits governments' ability to identify efficiency opportunities that span organisational boundaries, such as consolidating procurement across departments, rightsizing the government property portfolio in light of workforce data.
Finally, while advances in data infrastructure, interoperability standards and integrated financial management systems are creating new opportunities to connect these datasets, realising these gains requires addressing important legal and organisational constraints while also ensuring data security. In particular, data protection frameworks such as the General Data Protection Regulation (GDPR) impose strict requirements on data access, sharing and reuse, which can complicate efforts to link datasets. Moreover, effective implementation of the “once‑only” principle, whereby information is collected once and reused across government, often necessitates a reorganisation of back‑office functions, workflows and responsibilities. Without such reforms, data integration efforts risk remaining partial and underutilised, limiting their contribution to simplifying administrative processes and improving the strategic management of operating expenditure.
Looking beyond digital to increase the efficiency of administrative processes: lifting beige tape
Another option to reduce the burden of administrative procedures with a view to decreasing expenditure on government operations is to lift internal requirements and minimise controls, also known as beige tape. Although most government regulations and procedures were put in place for laudable reasons that relate to accountability, transparency and the pursuit of the public good, their expansion and layered accumulation, as well as their rigid implementation at times, has taken a toll on government capacity and efficiency in some countries. Administrative complexity can also undermine effective public service delivery to people and businesses by taking up resources that could be better used on the front-line of services. At the same time, maintaining appropriate internal controls remains essential to safeguard public resources and ensure value for money, particularly in areas such as procurement, personnel management and public financial management. Lifting internal requirements wholesale risks weakening expenditure control and accountability, which could ultimately undermine fiscal consolidation objectives.
A first step, therefore, to simplifying the way governments operate is to focus on the requirements that governments impose on themselves that create inefficiencies and excessive burdens for those applying them. These may include requirements that never or no longer serve their initial objective (e.g. because they are obsolete, overlapping or fragmented, or not followed through) or whose design and/or implementation are disproportionate to their goals (such as, transparency, accountability, and participation). These requirements may take the form of internal regulations or simply beige tape, i.e. administrative burdens that are not rooted in regulatory requirements. A number of RPF Survey respondents have mentioned their efforts to review and minimise these requirements, as is the case of Canada, Denmark, Germany or the Netherlands, suggesting room for further efforts in this field.
11.3.2. Re-organising the public administration
A common strategy used by RPF Survey respondents to transform the way government functions with a view to making them more efficient and reducing operating expenditures is to re-organise administrative functions. Re-organising the public administration can offer several benefits to restoring public finances. It can break administrative silos, leading to simpler administrative and decision-making processes, saving time and resources, streamlining reporting and strengthening accountability and oversight. It can reduce administrative overhead costs and lead to more efficient allocation of resources by eliminating duplication of functions and achieving economies of scale, in particular through shared services (OECD, 2015[24]). Finally, it can help governments target resources more precisely where they are most needed and avoid misallocations caused by administrative fragmentation. While public administration re-organisation can be politically difficult (e.g. due to potential job losses, for instance, as discussed in the section on public employment), research suggests that they can yield important dividends in terms of savings and agility (OECD, 2015[24]; OECD, 2010[25]).
Almost half of respondents to the RPF Survey, including 46% of OECD countries, are taking initiatives to re-organise their public administration by creating shared platforms and services. More than a third of respondents, including 40% of OECD countries are seeking savings by abolishing/merging ministries, agencies or departments (see Figure 11.8).
Measures approved or submitted to parliament for the fiscal years of 2025 and 2026
Note: Results based on 39 RPF Survey responses.
Source: 2026 OECD Survey on Restoring Public Finances, Question 12: Government Operations and Restructuring (answers a, b and f).
While most RPF Survey respondents have adopted strategies that specifically target one of these types of measures, two stand out in their efforts to undertake comprehensive efforts to re-organise and downsize their public administrations, Denmark and Germany (see Box 11.3).
In Denmark, the government introduced in 2025 a Multi-Year Work Programme for Central Government aimed at reducing the size of the state administration and achieving at least DKK 5.5 billion in administrative savings by 2030. These savings are estimated as equivalent to 6 500 full-time positions. The Programme includes measures on:
ministries-level efficiency and productivity plans;
consolidating back-office functions through shared services; and
merging agencies to reduce duplication of administrative tasks.
These organisational measures are complemented with efforts to streamline procedures, reduce inspection and oversight activities and limit local reporting requirements. A central component of the Programme is a new AI taskforce, which is tasked with freeing at least 50 million work hours (around 30 000 FTEs) by 2035 through tackling legal and other barriers and investing in large-scale AI projects.
Implementation will unfold gradually through annual budget bills and legislative changes. The administrative savings cover the entire central government (i.e. departments and agencies, universities, cultural institutions, justice and defence), with savings being reinvested in some sectors (most notably justice and defence), ensuring that the programme strengthens state capacity while reducing unnecessary administrative burden. By 2026, administrative savings of 2.5 billion of the 5.5 billion target by 2030 have been adopted in the budget bill, and each ministry has developed an implementation roadmap in its own efficiency and productivity plan.
In Germany, the government introduced the 2025-2028 Federal Modernisation Agenda, which it will implement over a 36-month period. These measures are aimed at promoting a more agile, efficient and citizen-centred federal public administration by
reducing bureaucracy
accelerating administrative procedures
strengthening state capacity
advancing digitalisation
improving the quality of regulation.
In particular, the reform aims to reduce the number of federal entities (currently estimated at 950) and address overlapping competences across levels of government. The reform also targets process simplification. To support implementation, Germany has introduced an Efficiency Fund, which finances process simplification or reorganisation projects that generate measurable administrative savings. Through dedicated funding in 2026, the Fund will encourage ministries and agencies to modernise their operations while linking financial support to clear performance indicators.
Source: Ministry of Finance, Denmark and Federal Ministry of Finance, Germany.
Shared services centres
Shared services centres (SSCs) are units that provide support services (such as HR, accommodation and facilities, communication, finance, audit and procurement) to more than a single ministry, agency or sub-sector of government (Ulbrich, 2010[26]). Shared services and platforms pool common administrative functions across ministries and agencies to exploit economies of scale and standardised processes (OECD, 2015[27]). Existing research highlights the efficiency benefits of shared service centres (SSCs) (OECD, 2010[25]; Ulbrich, 2010[26]) (European Commission, 2021[28]). OECD analysis highlights the importance of clarifying responsibilities, ensuring senior-level leadership and promoting collaboration with line ministries and agencies in order to achieve success in setting up new SSCs. Shared services provide not only an opportunity to centralise functions, but also to simplify, streamline and innovate complex back-office processes (European Commission, 2021[28]). Similarly, in the case of digital technologies, OECD countries are progressively adopting a Government as a Platform approach, developing shared digital infrastructure, common platforms and standards that leverage economies of scale, enable interoperability and promotes strengthened agency over government’s technology choices (OECD, 2020[29]; OECD, forthcoming[22]).
SSCs aim to improve the efficiency of operations by reducing duplication of tasks and creating economies of scale. They can also improve quality of internal services through specialisation, innovation and professionalisation of the workforce (European Commission, 2022[30]). This makes them directly relevant amid fiscal consolidation efforts, with SSCs, common digital public infrastructure (such as digital identity, data-sharing, and base registries) and joint procurement arrangements being common pillars of expenditure side consolidation strategies (OECD, 2025[7]). Yet, to be effective in contributing to fiscal consolidation, SSCs initiatives need to strike a balance between achieving economies of scale (which bring efficiency) and potential loss of efficiency due to higher co-ordination burdens and risks to transparency (at least for some specific back-office functions).
A significant number of respondents to the RPF Survey are aiming to reduce costs through shared services centres, including 46% of OECD countries. Common areas include human resource management, or procurement functions:
Canada seeks to realise efficiency gains by shrinking the government’s legacy IT footprint and reviewing, consolidating and renegotiating contracts across departments.
Portugal is promoting the creation of shared services for administrative support functions as part of its reform of the Central State Administration, building on its experience of shared services in planning and legal advice functions.
Slovenia brought 108 authorities, including 58 administrative units serving 2 500 users, to a Unified Work Environment that harmonises workflows, complemented by e-delivery systems linking 380 institutions to eliminate SMS and paper costs.
Abolishing and merging agencies
Following decades of “agencification” wherein functions traditionally performed by ministries were delegated to autonomous agencies, many RPF Survey respondents have undertaken reforms aimed at bringing core public functions back into the ministerial hierarchy or merging overlapping entities into single, larger structures. Agencification was originally considered a way to enhance efficiency through stronger specialisation (as implementation functions were transferred from ministries with broad mandates to single-purpose agencies) and through greater autonomy of public managers from political influence (within narrowly defined tasks and responsibilities, as well as, in some cases, budgetary autonomy). However, the expected efficiency gains of agencification have been rather thin, with research finding negative effects on public sector efficiency and value for money. Negative effects of earlier agency proliferation include governance vacuums, as well as unclear and weak accountability, blockages in policy implementation, and waste of public resources through duplicated mandates (Johnsøn, Marcinkowski and Sześciło, 2021[31]). Relaxed financial and personnel rules for agencies as compared to ministries, lack of organisational clarity, and weak coherence between agencies’ actions and government policy had also emerged as key issues regarding distributed public governance systems (OECD, 2002[32]).
Organisational consolidation has emerged not only as a reaction to the negative effects of agencification, but also as a cost-saving measure after the 2009 GFC to reduce administrative redundancies and overheads (Johnsøn, Marcinkowski and Sześciło, 2021[31]). Consolidation typically involves whole of government initiatives or targeted mergers within policy domains by (1) merging agencies; (2) transferring agencies’ functions back to the ministries; (3) withdrawing from performing specific functions resulting in abolishment of agencies; or (4) delegating these functions to other bodies, such as local governments, the private sector or civil society organisations.
A third of respondents to the RPF Survey have merged or abolished agencies in 2025. Examples include:
In Iceland, the government launched an efficiency review process in early 2025, to consider, amongst other things, the merger or consolidation of various bodies, for example police departments, maritime-related agencies and small agencies with overlapping or closely related mandates.
Latvia merged the Energy and Environment Agency (35-40 staff) into the State Environmental Service effective October 2025, centralising energy policy functions to boost efficiency.
Sweden merged the Agency for Public Management (Statskontoret) with the National Financial Management Authority (Ekonomistyrningsverket), integrated the Agency for Work Environment Expertise into the Swedish Work Environment Authority, and integrated the Agency for Support to Faith Communities into the Agency for Youth and Civil Society—reducing parallel structures since early 2025, with four more under 2026 budget review.
The United Kingdom is integrating the Valuation Office Agency into HM Revenue and Customs, aiming for 5-10% administrative savings by 2028-2029. In addition, the consolidation of the NHS in the United Kingdom is expected to save GBP 1 billion (see Health Chapter).
OECD analysis highlights the need to continue enhancing management arrangements, balancing autonomy and accountability of agencies (Johnsøn, Marcinkowski and Sześciło, 2021[31]). For instance, agencies could be required to provide transparent information on input costs more systematically to allow the owner ministry to assess their efficiency. Governments could also consider conducting regular reviews of existing agencies, exploring measures to improve efficiency and effectiveness.
Abolish/ merge ministries/ departments
Another commonly adopted measure involves merging ministries or departments. However, often the fiscal impact of such measures may be far less significant than the political significance as the underlying goal is to clarify accountability and ensure greater political coherence. Findings from the RPF Survey show recent instances of changes to ministries (abolishing or merging):
Belgium reorganised its federal authorities leading to savings of EUR 11 million through shared overheads.
Costa Rica has started a legislative process to abolish the Ministry of the Interior and Police and redistribute its units/agencies (i.e. General Directorate of Migration and Foreigners, National Directorate of Community Development, Administrative Migration Tribunal) to other relevant ministries.
The Slovak Republic abolished the Governmental Auditing Office, an internal audit unit of the Ministry of Finance, through the Government bill amending and supplementing Act No. 357/2015 Coll. on financial control and audit and on amending and supplementing certain acts.
Beyond the examples above, there remains large potential for leveraging ministerial portfolio change initiatives to sustain fiscal impact, notably through consolidation of administrative overhead costs. These changes can have significant value for money but need to be balanced against any costs that are inherent to any machinery of government change. Credible, sustained, multi-year adjustment paths can help consolidate administrative functions through merging of ministries and departments, while recognising the costs and benefits. Functional reviews can also help inform such efforts by mapping mandates and identifying opportunities for consolidation of administrative functions.
11.3.3. Across the board efficiency targets or productivity gains
Some respondents have chosen to apply cross-government targets to improve the efficiency of government operations, leaving it up to individual ministries and agencies to decide on the way in which they will meet these targets. These efficiency targets are typically set by ministries of finance or treasuries to sets a top-down percentage reduction applied to the administrative or operating budgets of ministries and agencies, while refraining from prescribing how those savings should be achieved. The implementing ministry or agency has discretion over how to achieve the targets, which may include workforce transformation, process simplification and digitalisation, re-organisation, outsourcing, or more generally, reductions in non-staff costs.
This top-down design reflects the principle that line ministries and agencies have better information about inefficiencies within their own operations than central budget offices or the centre of government. These efficiency targets are sometimes accompanied by corresponding so-called productivity dividends, whereby the ministries or agencies are incentivised to make these efficiency gains by ‘keeping’ the ensuing savings or part of them, and to allocate these to priority areas in their respective policy domains.
A third of respondents to the RPF Survey are pursuing broad measures to reduce operating costs through efficiency targets:
Iceland launched an efficiency review process in early 2025, taking an innovative approach by conducting a public consultation on opportunities to improve efficiency and simplify the structure of public administration. It received over 10 000 proposals from citizens, stakeholders, and public institutions as part of its 2025 efficiency review process. A task force reviewed the proposals and formulated 60 recommendations, with an overall target ISK 70 billion, (around 0.3% GDP) of savings by 2030, with ISK 4.9 billion projected for 2026 alone.
The Netherlands adopted an explicit fiscal consolidation path: beginning in 2025, annual administrative spending will be reduced by more than EUR 300 million, rising to EUR 1.1 billion by 2030. Ministries may decide how to meet these targets, meaning that reductions may come from staffing cuts or from trimming policy and programme budgets.
In Sweden, responsibility for staffing and wage decisions is fully delegated to agencies. The longstanding ‘productivity deduction’ within the civil service financial framework means agencies are not fully compensated for annual wage and price increases. This system applies continuous, built-in pressure on agencies to improve efficiency and manage staffing levels within budgets.
Setting across-the-board efficiency targets has several well-documented strengths: it avoids the information asymmetry problem inherent in centrally mandated cuts; it creates incentives for organisations to identify inefficiencies; and it preserves managerial accountability. However, efficiency targets can also have consistent weaknesses, such as not taking sufficient account of differences in capacities across ministries and a lack of guidance on the type of cuts ministries should make. These limitations point to the importance of complementing centralised efficiency targets with strong performance frameworks and resources to support administrative transformation. Equally important is ensuring that there are adequate incentives in place for line ministries and agencies to pursue genuine efficiency improvements, for instance by allowing them to retain and reinvest a share of the savings generated in priority operational or policy areas, rather than having all gains automatically recaptured by the centre.
11.3.4. Outsourcing or privatising administrative functions and services
Although used to pursue similar objectives, outsourcing and privatisation are related but distinct reforms to improve the efficiency of government operations. Outsourcing involves government contracting the provision of goods and services previously delivered in-house to non-government providers (private sector, non-for profit), while retaining overall control and financing responsibility. Privatisation, by contrast, entails the sale or other transfer of ownership of a public business, entity, unit or function to a non-governmental entity. Between these two instruments lies a spectrum of arrangements, including public-private partnerships (PPPs), which entail varying levels of risk-sharing and shared financing between government and private providers.
Regardless of the specific instrument used, data shows that the scale of government outsourcing across OECD countries is substantial and varies over time. Governments spent 10% of GDP on outsourced expenditure in 2011, declining to 8.8% in 2019, before rising again following the COVID-19 pandemic (OECD, 2013[33]; OECD, 2021[34]). By 2023, the average had stabilised at 9.2% of GDP across OECD countries (OECD, 2025[7]).
Only two respondents to the RPF Survey identified further outsourcing or privatisation of administrative functions and services as part of their consolidation strategies:
Denmark has facilitated the use of external IT services and expertise, particularly for AI solutions.
Thailand has also encouraged outsourcing of high-impact, citizen-facing public services with a view to reducing processing times and operating costs through its legislative bill on Facilitation of Licensing and Public Service Delivery, submitted to Parliament in April 2024.Through its Government Platform for Personal Data Protection Act, Thailand has also outsourced data protection compliance, generating THB 2.5 billion in direct savings. During the period 2025-2026, the Office of the Public Sector Development Commission (OPDC) is also advancing the transfer of government functions in key areas where the transfer process is ongoing, including the transfer of functions performed by Baan Kanchanapisek, an educational, vocational training and juvenile rehabilitation centre under the Department of Juvenile Observation and Protection, Ministry of Justice.
Considering trade-offs to achieve value through outsourcing
These examples show the potential for governments to outsource a wide range of functions, spanning from digital technologies, support services, intellectual and advisory services (through consultancies), as well as frontline public services. The research on whether outsourcing is an effective policy as regards reducing spending remain overall inconclusive (Alonso et al., 2017[35]). However, research does suggest that outsourcing is more likely to contribute to fiscal savings in well-defined, transactional services where competitive markets exist and performance is measurable, such as corporate functions or digital technologies and services (Institute for Government, 2019[36]). Indeed, research suggests that governments are generally better placed to deal with uncertainty and complex goals compared to private actors (OECD, forthcoming[37]). Countries pursuing savings measures through increased outsourcing of government functions may therefore wish to focus their efforts on these functions, while proceeding with caution when outsourcing frontline public services or advisory/ consultancy services.
For instance, digital technology has represented a fast-growing area of government outsourcing in fiscal value terms, not least because of the increased share of countries procuring new technologies, such as generative and agentic AI tools. Outsourcing allows governments to access advanced technologies as well as bring efficiencies by lowering market costs for digital solutions and products and leveraging economies of scale. At the same time, the fiscal and operational risks associated with large-scale digital technology outsourcing – including vendor dependency, cost overruns, and the accumulation of legacy technology debt – underscore the importance of robust digital investment governance. More importantly, governments are also growingly concerned about retaining agency and sovereignty over their technology choices. The OECD Digital Government Investments Framework provides guidance for strengthening governance, managing risks, and promoting result-oriented investments, emphasising that aligning budgeting with modern digital needs are essential conditions for successful outsourcing arrangements (OECD, 2025[23]). Governments need to develop the capabilities to strategically decide whether to outsource digital technology services from the market or to develop them. Better understanding where and when to outsource or develop in-house would benefit from a standardised and comparable base on government spending in digital technologies across OECD countries, including AI. Furthermore, it would contribute to better understand impact and efficiency steaming out digital technologies in government, and whether they are delivering efficiency gains and savings in practice.
Research suggests that outsourcing support or administrative services can also lead to large savings with relatively comparable levels of quality (Institute for Government, 2019[36]). For front-line public services – those delivered directly to citizens, including health care, employment services, social care, and custodial services – the findings are more mixed, cautioning against treating outsourcing as a reliable instrument of cost reduction in this domain (particularly for education and health). Outsourcing of employment services can offer cost-effectiveness gains – most notably in Australia, where the cost per employment outcome approximately halved following full outsourcing – but is persistently undermined by the practice of "parking" hard-to-place clients, information asymmetries, and the difficulty of attributing outcomes to provider effort (Langenbucher and Vodopivec, 2022[38]; Vodopivec, 2023[39]). Taken together, these findings suggest that while outsourcing can expand capacity and introduce competitive discipline in selected frontline service areas, governments should prepare well-developed transformation and risk management plans as part of a fiscal consolidation strategy which includes outsourcing.
Finally, outsourcing of management consultancy and professional advisory services has grown substantially across governments in OECD countries, particularly in the context of public sector reform programmes, digital transformation, and major policy reviews. A report from the United Kingdom NAO suggested that as of 2022-2023, central government spending on consultants was approximately GBP 1.4 billion or even higher (National Audit Office, 2025[40]). A common thread on the use of external consultancies is that the framework for contracting and monitoring their work is lacking. The United Kingdom NAO report pointed to a deeper relevant challenge: the government does not have a clear picture of how much is spent on consultants or how that spending is changing over time (National Audit Office, 2025[40]). Indeed, many countries do not have accurate data on the use of consultancies across government and of reliable criteria to assess whether the use of such consultancies represents value for money in a constrained fiscal environment.
In this context, some respondents to the RPF Survey intend to cut back on the use of external consultancies:
In Australia, savings of AUD 861 million and AUD 719 million are expected throughout the 2025-2026 and 2026-2027 budgets coming from reduced spending on consultants, contractors and labour hire.
Denmark's Multi-year Programme for Central Government explicitly targets reductions in consultancy spending as part of its broader administrative savings agenda (Government of Denmark, 2025[41]).
Canada has announced, as part of the Spring Economic Update for 2026, the commitment to reduce spending on external management and other consulting services by 20% over three years.
The United Kingdom has a target or reducing spend on consultancy by 50% compared to long run average.
Long-term, governments can re-focus on ensuring stricter controls on the use of consultancies and effective oversight of government spend in this area. This is what France is doing, for example, by setting ceilings beyond which a more thorough examination of the need for consulting services is carried out and setting up an in-house consultancy within the Interministerial Directorate for Public Transformation. As a result, the budget for externally procured consultancy services fell from EUR 271 million in 2021 to EUR 96 million in 2024 (Government of France, 2025[42]). Further research is needed, however, on the net savings gained from internalising advisory capacities, such as through in-house consultancies, versus outsourcing them. In New Zealand, the government has published guidance to clarify when and where consultants should be used. The guidance covers when not to use consultants or contractors; clarifies situations where it is appropriate to use them; and lists a series of steps to be taken in order to maximise value for money from use of consultants (New Zealand Government Procurement, 2026[43]).
Government operations represent a substantial and relatively stable component of public expenditure across OECD countries, making them a central focus of many countries’ fiscal consolidation strategy. Results from the RPF Survey, covering savings initiatives in 2025-2026, shows that respondents are pursuing a mix of measures, combining traditional approaches aimed at managing inputs, particularly public employment, procurement and real estate, with more structural reforms that seek to transform how public administrations function. While input‑based measures can deliver rapid fiscal savings, their scope is not unlimited and, if overused, risk undermining public sector capacity and service quality.
In this context, durable efficiency gains increasingly depend on reforms that change how governments operate. Digitalisation, data integration, organisational restructuring and internal administrative simplification offer significant potential, particularly when tackled simultaneously, but their fiscal impact is harder to quantify and often materialises only over time. These strategies may also entail upfront investment costs and important trade-offs, such as the need to preserve accountability and data privacy, for instance. As such, transformation‑focused strategies require longer‑term planning horizons, careful sequencing and sustained political and administrative commitment.
Taken together, results from the RPF Survey suggest that restoring public finances through leaner government operations is less about identifying a single silver bullet reform than about assembling credible, sustained and well‑sequenced reform packages. Successful strategies balance short‑term cost containment with longer‑term investments in productivity and embed consolidation efforts within broader public sector transformation agendas. In doing so, governments can gradually move closer to the efficiency frontier while preserving the institutional capacity needed to deliver high‑quality public services in a constrained fiscal environment.
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