The UK's Prudential Borrowing Framework: Professional Discipline and Control

Since 2004, governance and accountability arrangements for UK local government borrowing under the new Prudential Borrowing Framework (PBF) have been based on the professional discipline and control model of governance. It supplements the earlier centralised discipline and control model whereby municipal borrowing had to be specifically approved by central government and provides an alternative to Private Finance Initiatives (PFIs) and Public-Private Partnerships (PPPs) for capital procurement. Incorporating a case study of the use of PBF by Glasgow City Council, this paper considers the strengths and weaknesses of the PBF as a control mechanism for borrowing.     

Post-Contractual Lock-in and the UK Private Finance Initiative (PFI): the Cases of National Savings and Investments and the Lord Chancellor's Department

According to the UK government, one of the key features of the Private Finance Initiative (PFI) is the scope it provides to transfer risk to private sector suppliers. Under the PFI, public bodies are expected to develop interdependent relationships with suppliers that allow risk to be transferred. However, it is the argument of the author that it will not always be possible for interdependent relationships to be engineered by public bodies – on many occasions, public bodies will find themselves asymmetrically locked-in to their supplier. This situation leads to private sector suppliers becoming dominant in those relationships which, in turn, will allow them to pass back risk and obtain greater returns. As a result, the author argues that it is not a question of whether risk can be transferred under the PFI, but when. This argument is illustrated by use of the contracts managed by the UK National Savings and Investments and the UK Lord Chancellor's Department.     

VALUE FOR MONEY IN PFI PROPOSALS: A COMMENTARY ON THE UK TREASURY GUIDELINES FOR PUBLIC SECTOR COMPARATORS

The Private Finance Initiative (PFI), introduced to Britain in 1992, has become a major means of procuring public sector infrastructure. It involves long‐term contracts whereby private sector suppliers construct and own capital assets and provide services for which they are paid on the basis of availability or use. This paper focuses on the early stages of a PFI procurement, the decision to use the PFI rather than any other form of procurement. In 2004 and 2006, the UK Treasury issued new Guidance as to how this should be done. There are two stages to this Guidance: qualitative and quantitative assessments. This paper comments on some of the key issues in the quantitative assessments: the treatment of risk, of residual and life‐time costs, of tax, of rates of return and of the appropriate use of discounted flow techniques when finance is a constraint for an investing agency.     

EDUCATION,EDUCATION, EDUCATION: THE THIRD WAY AND PFI

In 1997, New Labour set about the task of reforming public services in the United Kingdom through the use of an ideology that became known as the ‘Third Way’. This research examines the context from which this concept emerged, and explores its relationship with the tools of delivery, with particular reference to the Private Finance Initiative (PFI). The paper begins by reviewing the Third Way, before analysing the arguments for and against PFI. Using an example from the Northern Ireland education sector, the paper argues that the characteristics associated with the Third Way are mirrored in the operational tools of public service delivery, such as PFI. The paper concludes that, within the context of the case study reviewed, there is a ‘consistent pragmatism’ in play in relation to how these delivery initiatives are operated and how they relate to their conceptual underpinnings.     

A study of the operationalization of management controls in United Kingdom Private Finance Initiative contracts

Utilizing evidence from a United Kingdom (UK) road case study Private Finance Initiative (PFI) project, this article considers how the UK central government's infrastructure strategy is operationalized through accounting-based performance measures and incentive systems, and articulates how the adoption of such systems is moderated by trust practices. The findings indicate that initial government policy objectives, translated as performance indicators in the case study, failed to offer adequate incentives for contractors and created tensions. However, controls were later developed through inter-party trust practices for managing performance and relational risk. These findings have important implications for PFI policy and practice, including that negotiation can: (i) lead to pragmatic controls being introduced to foster cooperation and trust-building; and (ii) provide opportunities for adapting the monitoring and incentive mechanisms. This study also contributes to the previous literature where PFI control systems were largely regarded as inadequate for dealing with unforeseen conflicts between parties.     

Some Lessons from Using PFI for School Building Projects

This article describes some lessons gained from observing the developments of PFI projects for provision of school buildings. The research, which was primarily based on participant observation methodology, aims to identify key issues relevant to the effective management of such projects. It also attempts to investigate ways in which the PFI process may be changing in this area. Issues covered in the research include motivation, staffing, ownership of the asset, innovation, local democracy and various financial matters. It is observed that some changes in practice in employing the PFI in this area have tended to move it back in the direction of conventional procurement.     

Power and transformational and transactional leadership in public and private organizations

Ten public and 35 private organizations located in Central New York State participated in a university- sponsored research project to study the effects of organizational characteristics upon types of leadership (transformational/transactional) and power demonstrated by supervisors. Public sector organizations in which managers had low control over rewards were compared to private sector organizations in which managers had high control over rewards.

Followers perceived public sector supervisors as more inspirational by their followers and they used more active management-by-exception behavior than those in private organizations. Private sector supervisors had more reward, legitimate and coercive power than supervisors in public sector organizations.     

DOES OWNERSHIP MATTER FOR THE PROVISION OF PROFESSIONALIZED SERVICES? HIP OPERATIONS AT PUBLICLY AND PRIVATELY OWNED CLINICS IN DENMARK

In terms of clinical procedures (to take the example used in this article, hip operations), both public and private organizations provide highly professionalized services. For this service type, our knowledge about ownership differences is sparse. To begin to fill this gap, we investigate how the ownership of hip clinics affects professional behaviour, treatment quality and patient satisfaction. The comparison of private and public hip clinics is based on data from the Danish Hip Arthroplasty Register and the Danish Central Patient Register combined with 20 semi-structured interviews. We find that private clinics employ stronger individual financial incentives and try harder to increase the income/costs ratio than do public clinics. Private clinics optimize non-clinical factors such as waiting time much more than public clinics and have fewer complication-prone patients than public clinics. However, the clinical procedures are very similar in the two types of clinics. Private clinics do not achieve better clinical results, but patient satisfaction is nevertheless higher with private clinics. The implication is that ownership matters for highly professionalized services, but professionalism neutralizes some – but not all – ownership differences.     

Privatization morphs into 'publicization': businesses look a lot like government

Private companies become like public agencies because competition for contracts is keen and they must be perceived by the contacting agent, government, as being agreeable with the government's demands in order to be contracted with again. Government makes suggestions, sets requirements, and provides recommendations to private companies which, over time, cause the private companies/facilities to look more and more like government agencies – and company managers are left pressed between their need to re-contract and the business instincts and acumen for which they've presumably been contracted with in the first place.
This paper will briefly visit the common arguments for and against privatization. Additionally, the results of a limited study of the effect of publicization on private prison companies operating nationally in the US will be examined.     

Public–Private Partnerships in Health in Malaysia: Lessons for Policy Implementation

The government of Malaysia, an early and enthusiastic supporter of the concept of privatization of public services, can also be considered as being highly supportive of more recent strategies such as “public–private partnerships” (PPPs) in the delivery of social services. It established a Public–Private Partnership Unit (UKAS) in 2011. This discussion of Malaysia’s experience with health care PPPs is based on a literature review. The record is mixed, with successes and failures. Critical factors for success include regulation, transparency, clear policy guidance and clarity on operational procedures and responsibilities, proper evaluation mechanisms, sustained financial support, especially for NGO partners, and unwavering commitment from policy-makers.     

Health maintenance organizations as Medicaid providers.

Evolution of a one-door, one-class system of medicine for all Americans was the professed goal of the social legislation of the 1960s. The development of health maintenance organizations (HMOs) was seen to be a major mechanism for assuring access to care and at the same time reducing the costs of social health programs. This has currently been reinforced by procompetitive proposals, which predict great efficiency resulting from the envisaged competition among organized systems of care. This article argues that established HMOs have no incentives to enroll Medicaid beneficiaries and that under current arrangements. Medicaid beneficiaries have no incentives to enroll in HMOs. As Medicaid programs across the states are cut, resulting in fewer benefits and more restricted physician payments, beneficiaries may have greater incentives to enroll in organized systems. Private physicians may also face greater incentives to develop HMOs to serve Medicaid beneficiaries. If that happens, however, a two-class system--one for the poor and one for others--will be institutionalized; and to assure minimum standards of care for the poor, more, not less, regulation will be required.     

How to Attract Donations: The Case of US NGOs in International Development

We assess the determinants of private donations across a large sample of US based NGOs with foreign aid activities. Our results show that donations do not depend in the expected way on publicly available information on NGO characteristics that reveal an efficient and targeted use of funds, notably the efficiency price of NGO aid and the degree of specialisation. Private donors rather rely on the frequently offered option to designate donations to preferred purposes – even though this is unlikely to tie the NGOs' hands.     

Does Ownership Matter for the Delivery of Professionalized Public Services? Cost‐efficiency and Effectiveness in Private and Public Dental Care for Children in Denmark

Recent decades have witnessed considerable interest in the cost‐efficiency and effectiveness of public services. Private provision is often claimed to be more cost‐efficient than public provision, but these efficiency gains are accused of being at the expense of effectiveness. Most of the evidence comes from relatively simple, technical services, because effectiveness is often difficult to define and measure for services produced by professionals. In addition, type of ownership might very well affect services produced by professionals differently as a result of professional standards and other regulation. The case in question, child dental care in Denmark, is a professionalized service which is remarkable for its clear and quantifiable measure of effectiveness. The findings show that neither cost‐efficiency nor effectiveness of public and private producers differs. The data represent cost and outcome measures controlled for structural variables for the 275 Danish municipalities between 1996 and 2002.     

HOW POLICY NETWORKS CAN DAMAGE DEMOCRATIC HEALTH: A CASE STUDY IN THE GOVERNMENT OF GOVERNANCE

This article examines a detailed case study of implementation networks in England using the example of the relocation of the Norfolk and Norwich hospital, which became a flagship PFI project for the Labour government after 1997. The case study illustrates the workings of the new order of multi‐layered governance with both local and national networks from different policy areas interacting. However, it also sheds light on the governance debate and illustrates how in the world of new public management, powerful actors, or policy entrepreneurs, with their own agenda, still have the facility, by exercising power and authority, to shape and determine the policy outputs through implementation networks. It is argued that, whereas policy networks are normally portrayed as enriching and promoting pluralist democratic processes, implementation networks in multi‐layered government can also undermine democratic accountability. Four aspects here are pertinent: (1) the degree of central government power; (2) local elite domination; (3) the fragmentation of responsibility; and (4) the dynamics of decision making which facilitates the work of policy entrepreneurs. All these factors illustrate the importance of ‘the government of governance’ in the British state.     

Miracle to meltdown: A pathology of the East Asian financial crisis

The financial crisis in East Asia was made more dramatic by the fact that the region's performance in terms of economic growth over the preceding decade had been widely perceived as a 'miracle'. What was it that transformed the region's fortunes, and what are the chances for a speedy economic recovery? Systematic analysis reveals that, while there is no unicausal explanation, and while few if any commentators anticipated the crisis before the event, the fundamental difference from previous international financial crises is the extreme indebtedness of the corporate sector of the crisis countries. Private sector repayment difficulties and the associated banking crises triggered the sudden withdrawal of capital and the collapse of exchange rates. Failure to address the underlying private sector debt overhang, and reliance instead on conventional macroeconomic policy solutions, have led to a decline in output and a depreciation in exchange rates which have been far greater than need have been the case.     

The real economic costs of granting foreign aid

Scholars interested in assessing the comparative economic burdens assumed by advanced nations in their loans and grants to the L.D.C.s have pointed out that adjustments are necessary for many factors such as rate of interest charged (if any), time pattern of repayment (if any), whether or not interest and repayment is in hard or soft currency or in kind, rate of return on capital invested at home, and so forth. Clearly, a loan or grant is more burdensome to the donor, if, for example: the interest charged is low, the rate of return at home is high, and repayment is in soft currency or in kind and extended over a long period of time.

In this paper, an additional important adjustment is suggested. It is argued that a grant or loan involves a social cost to the donor only if the donor is deprived thereby of the use of current output for domestic purposes. To the extent that aid is provided by (i.e. results in) the employment of otherwise unemployed labour and other primary factors, it may be viewed as socially costless to the advanced nation. In fact, by eliminating further unemployment via the multiplier, the granting of aid may (with a lag) leave the donor with more output available for home use than before. This type of analysis would not apply to western nations at or close to full employment, or to the usually fully employed centrally planned economies, since the granting of aid in these instances necessarily reduces the amount of output available for home use. For this reason, the granting of aid generally represents more of a sacrifice to centrally planned than to market economies. This is illustrated by estimates.

Loan repayment must also be evaluated in terms of its employment effects. Analysis shows that the employment effects of loan repayment is likely to be quite asymmetrical to that of disbursement.     

Government contracting and procurement: a critical process for both the public and private sectors

The costs and benefits of government purchases of goods and services from businesses are examined from the perspective of both public and private sector officials. Generally, governments see more benefits than costs, often because of fiscal stress. Businesses, especially newer, smaller firms are more likely to see more costs than benefits. The article concludes with ten projections for changes in public procurement systems by the year 2000. These are: (1) expansion of current vendor pools; (2) intergovernmental adoption of standardized forms and procedures for getting and staying on government vendor lists; (3) mainstreaming of purchasing into the government financial management decision-making loop; (4) more rigorous training requirements for government purchasing personnel; (5) greater use of public-private task forces to reform procurement policies and practices; (6) greater use of surveys inside and outside government to identify specific problem areas and structure reforms; (7) expansion of the auditing and contract monitoring section of purchasing departments; (8) extension of bidding/contract monitoring and evaluation requirements and procedures to subcontractors of prime government contractors; (9) greater efforts to include quality dimensions in cost estimates; and (10) more tension and litigation over “protectionism” in public procurement.     

The legitimacy of Dutch do-it-yourself initiatives in Kwale County,Kenya

Abstract

Established development organisations face a long-standing legitimacy crisis for not living up to the expectations once set. Meanwhile, thousands of small-scale, voluntary development organisations – referred to as Private Development Initiatives (PDIs) – have joined the field of international development. In this article, I examine the legitimacy of their acts from a local government perspective based on an analysis of four dimensions of legitimacy: regulatory, pragmatic, normative and cognitive legitimacy. The study took place in May 2017 in the Kenyan coastal county of Kwale. A range of government officials were interviewed on how they perceive the interventions of international development organisations in general, and Dutch PDIs in particular, and on their cooperation with these development actors. The study shows that, although many of these PDIs operate in areas that fall under the responsibility of the local government, most of them have a rather limited cooperation with the local government, putting their legitimacy in the eyes of local government officials at stake.     

The impact of functional responsibility and state legal constraints on the “revenue-debt” packages of U.S. Central cities

State governments have the power to restrict the revenue and debt sources available to their municipalities. States also have the power to assign functional responsibilities to their municipalities - - some of which can be extremely burdensome financially (educatin; welfare; hospitals). This research examines the effect of these state constraints on: (1) the revenue-debt use patterns; and (2) the fiscal condition of 243 U.S. central cities (FY 1974, FY 1975, 1976).

The results show that the revenue/debt use patterns of cities vary signigficantly according to the restrictions imposed by the state on their taxing, borrowing, and functional responsibility powers. In addition, revenue/debt use patterns differ among ciites experiencing varying levels of distriess. Severely distressed cities are more dependent on external revenue sources (federal, state). They are less capable of generating revenue at the local level and are less flexible in their use of local revenue soruces, depending more hevily on the property tax and less heavily on nonproperty tax and nontax revenue sources than healthier cities. They are also found to be more reliant on full faith and credit (property tax-backed) long-term debt and on short-term debt than the more prosperous cities.

Cities in states imposing heavy restrictions on use of property tax and full faith and credit long-term debt sources but imposing few restrictions on municipa; nonproperty taxing powers are generally the healthiest fiscally. Such state policies have effectively enhanced municipal diversification of both traditional revenue sources and debt sources.

The major significance of this research is the demonstration that state governments have within their policy-making power the ability to affect the fiscal dependency level of their respective municipalities. An activist role is necessary on the part of state governments if they wish to increase their role in municipal fiscal affairs relative to that of the federal government.     

Security Beyond the State: Private Security and International Politics

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