Benchmarking & Productivity Analysis

Benchmarking and productivity analysis is increasingly being used by economic regulators to find the efficient level of expenditure that regulated businesses need in order to deliver services to consumers. Understanding the gap between regulated businesses and the efficiency frontier, and the frontier shift from industry wide technical progress, is paramount for both the regulators and regulated businesses to perform at their peak for consumers they serve.

Using benchmarking and productivity analysis to drive efficiency and performance

Since 1999, Frontier Economics has been helping regulators and regulated businesses to develop and implement benchmarking and productivity analysis to assess the efficiency of historical expenditure and to set revenue allowances.

Benchmarking (or comparative efficiency analysis) is used to estimate the distance between a regulated business and the efficient frontier for the industry. This ‘gap’ is used to find the level of ‘catch up efficiency’ that the business needs to achieve in order to operate efficiently.
Productivity analysis is used to estimate the rate at which the efficient frontier is shifting over time due to industry wide technical progress. This ‘frontier shift’ is used by regulators to set productivity and ongoing efficiency targets for regulated businesses.

We advise clients on benchmarking and productivity analysis in a range of regulated industries including including electricity networks, gas pipelines, rural and urban water networks, airports and telecommunications infrastructure.

Advanced quantitative techniques to deliver practical advice

Our team of experts are a unique mix of regulatory economists with decades of experience, and academics in the fields of efficiency and productivity analysis, statistics and econometric modelling. Much of our advice is based on published peer reviewed papers on efficiency and productivity analysis in top-ranked journals.

Our economic advisory can help with:

Governments needing to implement industry reforms, such as amalgamations of infrastructure businesses supplying essential services.
Modelling the impact of planned efficiency programs on business performance. For example, we have developed ‘dashboards’ of efficiency and productivity metrics that companies can use to track their performance over time as efficiency programs are implemented, and to report progress to their senior management, Boards and shareholders.
Expert reports on benchmarking and productivity analysis that are used by regulated businesses to inform their expenditure proposals to regulators.
We have also advised bidders for major network assets on how regulators apply benchmarking and productivity analysis to set revenue allowances.
Legal appeals for regulated businesses that have challenged the regulators’ application of benchmarking analysis.

We have extensive experience applying a range of benchmarking and productivity analysis techniques, including:

Total Factor Productivity (TFP) and Partial Factor Productivity (PFP) analysis
Stochastic Frontier Analysis (SFA)
Least Squares Econometrics (LSE)
Corrected Ordinary Least Squares (COLS)
Data Envelopment Analysis (DEA)
Partial Productivity Indicators (PPI)

Our expertise in Benchmarking & Productivity

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Energy & Renewables

The energy transition is happening. As nations drive toward net zero emission targets and resilient renewable energy networks, economic analysis plays a pivotal role. Economics enables complex, data-driven decisions for governments, regulators, private sector businesses, investors, and market participants; to co-optimise gas, electricity and hydrogen markets. And we’re here to help.

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Urban & Rural Water

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The contemporary public policy and regulatory development landscape is not just about framing rules but about shaping equitable and sustainable futures in a constantly evolving global context. We use economic impact analyses, forecasting, market modelling, and other economic frameworks to inform policy and regulation.

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Transport

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Telcos & Digital Media

In today’s digital-first era of connectivity, the telecommunications and media sectors are key priorities for societies to thrive. Investing in the right things at the right time and delivering services at prices that maximise value to society are significant challenges that require strong economic foundations for decision-making.

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Financial Services

Robust economic analysis within the financial sector has never been more crucial. Amidst regulatory change, political scrutiny, credit market upheavals, technological advancements, and evolving consumer expectations, our expertise in the economics influencing the financial sector stands as an independent beacon for the public and private sector decisions seeking clarity.

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Benchmarking & Productivity

Using benchmarking and productivity analysis to drive efficiency and performance

Advanced quantitative techniques to deliver practical advice

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