Volume 8 Number 10
October 8 - November 11 2012
Even after decades of public management reform, ‘one-size-fits-all’ solutions still bedevil government.
For all the talk of output focus, customer orientation and performance management, strait-jacketed thinking has still narrowed the possibilities for better public services.
Policy-makers must move beyond the concept of government bureaucracy at one extreme and privatisation or contracting out at the other, and consider emerging practices that expand the range of external service providers and the roles they play.
Firms and non-profits, volunteers, other government agencies, clients and even those subject to regulation are all potential contributors to social outcomes.
These wider possibilities haven’t got nearly as much attention as they should. Instead, for a long time government choices have stemmed from political ideology. Some governments mostly opted for privatisation, whereas others tended to keep and indeed build up bureaucracy – both ‘one best way’ solutions.
More recently, good public managers have sought to weigh up the costs and benefits, focusing on ‘value for money’. However, often they confine themselves to a narrow idea of benefits and costs.
These decisions should rather be based on a broader understanding of the benefits and costs. A better answer to the question of whether to privatise is not ‘Almost always’ (as conservatives argue) nor ‘Hardly ever’ (as the Left contends), but rather ‘It all depends’ – specifically, on whether the benefits outweigh the costs.
And here lies the special message: the benefits and costs involve more than just whether the service is better or cheaper. There are other costs that must also be weighed up in deciding whether to hand work over to an external provider.
Some of these costs arise from the fact that there are two or more organisations involved that want different things – for example, the service purchaser may want a good service at a low price, while the provider wants to cut corners on service and charge a higher price. But somehow they have to co-ordinate what they do so that the service works.
This means that time and effort will have to go into choosing a good supplier, spelling out what service is required, monitoring performance, and applying penalties or rewards. This is not so hard in services where there are lots of competing providers, and the service is easy to describe and measure. But where there’s a monopoly supplier, and the service is complex, it’s harder to hold the provider to account.
Other costs arise because handing the service over to an outsider means the government organisation loses a core competence which, once gone, is hard to retrieve. Many government agencies have learnt the hard way about the folly of handing over the system design aspect of big IT projects. And once a big project like public transport ticketing starts to malfunction, the government is a prisoner to the millions of dollars that have already been sunk in it.
In some services, it’s also a potential problem if enlisting external providers involves handing over the power to use legal authority or coercive force. Think about the many incidents of misuse of force in privatised detention centres or prisons, or even with bouncers at night venues. The staff involved are subject to different incentives from those of sworn law enforcement officers.
So instead of ‘one best way’, we need to follow some decision rules for choosing among different types of service provision. But we also need to use more up to date ways of encouraging the best performance from external providers once they have been engaged.
Once again, this means going beyond the conventional wisdom – such as the use of financial carrots and sticks – to a broader menu of ways to motivate and facilitate good performance. In particular, building trust between public agencies and non-government organisations can be more effective at this than rewards and penalties.
To make this happen, government agencies can be reshaped and equipped to better handle external providers. It calls for staff to be recruited and trained not only to deliver services themselves, but also to mobilise external parties to play their roles as well. And it means that much of the red tape that gets in the way of collaborating with other organisations must be peeled away.
Listen to Professor Alford in conversation with Associate Professor Janine O’Flynn from ANU’s Crawford School of Public Policy, as they discuss ‘Tender truths: The real costs of letting the private sector deliver public services’ with host Jennifer Martin for UpClose, the University’s podcast of Research, Opinion and Analysis: