MLD 102: Class 6, September 22 2014 - PowerPoint Presentation

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MLD 102: Class 6, September 22 2014 When contracting-out and the like works (and when it does not)More lessons about using NPM tools to ‘get things done’

Matt AndrewsSlide2

How did we get to a case on concessions in Mexico in the early 90s?Our focus is on how to ‘get things done’Getting governments etc. to implement policies, deliver services, etc. more often, more efficiently, and more purposefullyMany thought about this challenge in the first half of the 2oth century, but solutions offered tools that did not always deliverClassical administrative and bureaucratic theoryWhich still has a huge influence todayBut was criticized in the west in the 70s and 80 (It seems these tools don’t always work)At around the same time that developing country governments were emergingNew ways of thinking emerged in the west, around something that became known as ‘new public management’

Flatter and decentralized government, using performance metrics, outsourcing, privatization and contracting out

A series of ideas that influenced many developing countries and offered solutions to the problem of ‘getting things done’

But are these tools the panacea or are they also subject to conditions?Slide3

The questions matterPlaces like Messaria seriosuly consider these tools:Using targets for health care providers Contracting out parts of the health system, decentralize (or keep decentralized other parts)You will need to think about these tools in your strategies for getting things doneSYPA, PAE, and beyondWhat do you need to know to make sure you choose them at the right time and with the right concerns in mind?We discussed this w.r.t performance information on Wednesday

Today we look at concessionsSlide4

What happened in Cancun?What was the problem?Why did they choose a concessions arrangement?Was it a success?Why and what should be learned from this experience?Slide5

Lessons in using contracting out, etc. to get things done, 1 This is an important tool (Nichols):“Over the last several decades, in governments at all levels throughout the world, the public sector’s role has increasingly evolved from direct service provider to that of an indirect provider or broker of services; governments are relying far more on networks of public, private and nonprofit organizations to deliver services.”Potentially offers a way to: Raise money, save money, improve efficiency, deliver more quickly

But it should not be seen a panacea (Nichols):

“Outsourcing

is by no means a perfect solution. Some agencies don’t have the metrics in place to prove in advance that outsourcing a service will save money. Problems from

poorly conceived contracts

can create cost increases that surpass the costs of in-house services, and if there’s

shoddy contract oversight

, a government is vulnerable to corruption and profiteering. The privatization of public services

can erode accountability and transparency

, and drive governments deeper into

debt.”Slide6

You need basics to use the tool (Nichols) in the USA, beyond:“The states most successful … created a permanent, centralized entity to manage and oversee the operation, from project analysis and vendor selection to contracting and procurement. For governments that forgo due diligence, choose ill-equipped contractors and fail to monitor progress, however, outsourcing deals can turn into costly disasters.”And the problems need to be addressable by outsiders

Something which is often not the case when the problems are about existing public sector dysfunction, politics, etc. AND solutions are unknown.

“…outsourcing

deals are really about

risk…You’re

taking the risk of the unknown and dumping that on your

supplier…You’re

outsourcing a problem to a company that has limited control over the root cause of the problem

.” The only way for a public-private partnership to work, he suggests, is to drive transformation from within the agency. And that’s the hard part. Red tape usually prevents governments from making significant modifications, and private companies lack the authority to enforce real changes

.”

So: Choose the right tasks and have the necessary systems in place; and ensure that the contextual challenges (politics etc.) won’t inhibit an ‘external agent’

Lessons in using contracting out, etc. to get things done, 2 Slide7

Learning from NPM experience generally:Schick: The New Zealand model (late 80s early 90s) of ‘Government by Contract’“New Zealand has gone to extraordinary lengths to create conditions under which formal contracts are negotiated and enforced”Created entities to lead, accrual system to finance it, a capital charge system to capture full costs, etc.Schick: Some key lessons emerged:Better suited to “matters that can be specified in contracts, such as the purchase of outputs”

“Robust

contracting

depends on voluntary, self-interested action

. Sometimes, however,

self-interest defeats the government’s collective interest

.”

Contractualism

may weaken traditional values of public service, personal responsibility, and

professionalism (a checklist approach to accountability). Contract-like arrangements do not create arms-length relationships in the public sector,

nor do they enable the government to toughen its insistence on performanc

e. (Exit options?)Govt. officials attribute most of the improvement in government performance to the discretion given to managers rather than to formal contracts. (Do contracts make the difference?)Contracting is not costless. Negotiating, enforcing contracts entails enormous transaction costs.Schick: Developing countries are not a good fit for this…The demands of these tools make it ‘out of reach’The informality of the systems in many developing countries make it really riskyDecreased accountability etc.Countries should rather create reliable systems of controls etc. (Weberian bureuacracies?)

Lessons in using contracting out, etc. to get things done, 3 Slide8

Manning says the results of NPM in development are limited:“The effect has been mixed at best with some improvements in efficiency and mixed effects on equity. On the downside…the transaction costs of radical reforms tend to outweigh the efficiency gains of unbundling, and that reforms that pursue the separation of purchasers from providers may have decreased accountability — and that, consequently, inequity has grown.” Partly because needed public expectations are muted:“From the government side, the sound of any nascent consumer discontent other than at the local level is drowned out by the far louder noise of donor

conditionalities

. The

New Public Expectations in many developing countries seem likely to remain modest, and sidelined by the realities of

aid

.”

And because the public sectors lack necessary formality:

“

It is an empirical observation that

predictable resourcing, credible regulation of staff and credible policy are prerequisites for effective contract-like arrangements

.”

Lessons in using contracting out, etc. to get things done, 4 Slide9

So, should we never use these tools in development?Ehasn and Naz: it may not solve problems or be possible:“Critics argue that the argument in favour of introduction of NPM system is not convincing, particularly as it has failed to address the crucial issues of ethics, accountability, non-partisan distribution and administration…It has also been argued that

the very institutional and organizational structure of developing countries poses stupendous problems to successful implementation

of the reform

programmes

.”

Da Cunha

Rezende

: the change process itself may not succeed, given extant interests in governments

But Dan and Pollitt say it can be useful:

“An

adequate degree of administrative capacity, sustained reform over time and a ‘fitting context’ are the main

factors

which can tip the scale for the success of these management instruments.” But how do we think about these factors?Slide10

Manning’s Idea about ‘fit’Slide11

Notice different strategies for different situationsSlide12

So: we need to think about fit to contextPolidano…these reforms have fostered success and failures.Where they fit, they helpWhere they don’t fit, they hurtWe need a contingency approach to deciding if they fit:“There are at least two lessons in contingency here. First, political and indeed administrative leadership makes a big difference in ensuring that reforms overcome the implementation hurdle (the output stage). Second, to secure the desired outcome— in our particular case, better organisational

performance as a result of improved staffing—

reform initiatives have to be adapted to prevailing local circumstances

.”

This approach should be the one we use for our entire toolbox:

“These

conclusions, one might object, are not exactly striking in their originality. True. But this is precisely the point.

The success or failure of new public management initiatives depends on the same fundamental determinants identified by researchers in relation to previous generations of reforms

.” Slide13

We have a whole lot of classical administration, NPM and

other

tools in

our toolbox

How do we

Work out what to use,

When and how…Slide14

Next sessionWe will move towards a strategy for fitting the tools to the context in the next weeksIncluding a strategy to build political support and an appetite for changeA first question in every context is simply:“What does ‘getting things done’ mean?”We will discuss on Wednesday…Two cases of revenue agency reform