What general policy implications emerge from our analysis of the two main structural change proposals developed in the Final Report? In the first place, we have seen that serious reservations exist on the specification of the Regional Aggregation groupings.

For example, we have demonstrated that the Final Report has failed to recognise the significance of ‘non-discretionary’ factors, beyond the control of local authorities, which have a profound influence on the economic efficiency of water and wastewater service provision. Given the drastic physical and human differences confronted by councils in different parts of NSW, this failure can have ominous consequences for some of the proposed Regional Aggregations. Similarly, we showed that the Final Report had misguidedly used only partial performance indicators drawn from the NSW Best Practice Management of Water Supply and Sewerage Guidelines to gauge performance, despite the well-known problems associated with this approach. This had led to the use of false assumptions on council size and council efficiency in the Final Report. Moreover, the rough and ready nature of many of the Regional Aggregation groupings is further underlined by the fact that many of these groupings did not even meet the six criteria for structural aggregation developed in the Final Report. These deficiencies in the Regional Aggregation groupings strongly suggest that groupings should be used only on an indicative basis and membership should accordingly be on a voluntary basis.

Secondly, the Final Report proposed three organisational models suitable for employment in the Regional Aggregation context: The Council-Owned Regional Water Corporation model, the Binding Alliance model, and the Status Quo model (in some limited instances). With respect to the application of these models, the Binding Alliance is by far the most important model since it is the recommended option for a great majority of council groupings. However, we have demonstrated that the Final Report unwisely relied on the ‘straw man’ estimates provided by RAMROC (2008) in its submission to the Inquiry. This was unfortunate in several respects, not least the fact that the RAMROC figures were designed for the largest grouping and not for the ‘median’ grouping. Moreover, the Final Report completely ignored establishment costs and their potential impact on small groupings. Finally, the Final Report made no attempt to estimate scope economies in its efforts at costing. The policy consequences of these shortcomings strongly suggest that the financial characteristics of the Binding Alliance are not understood and thus the adoption of this organisational model should be contingent on individual council circumstances rather than on compulsion.