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ACCA Applied Knowledge · Business and Technology · The purpose and types of business organisation

A city council is considering outsourcing its refuse collection to a private company under a contract. The council remains responsible for ensuring the service is delivered to residents. Which of the following is the most likely difficulty with measuring the council's performance on this service, compared with a private company?

Public sector performance is harder to measure because objectives are often multiple and non-financial, and profit is not the aim. Performance is judged instead on value for money, meaning economy, efficiency and effectiveness, together with service quality measures.

  1. APublic sector bodies have no stakeholders to report to
  2. BObjectives are often multiple and non-financial, so value for money rather than profit must be assessedCorrect
  3. CPublic sector bodies are legally prohibited from measuring costs
  4. DProfit is always the single clear measure of success

Explanation

Public sector services typically have several, sometimes conflicting, objectives such as quality, access and cost, and they do not aim to make profit. Performance is therefore assessed through value for money (economy, efficiency, effectiveness) and non-financial measures. Option D is wrong because profit is not the central measure in the public sector.

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