The Use of Contracting in the Public Sector

Around the world and especially in English-speaking countries there has been a wave of contract-based public sector management following on the heels of a wave of corporatisation and privatisation.     

The Problems of Policy Coordination: The New Zealand Experience

The problems of coordinating the development and implementation of public policy are legion. While such problems are most commonly associated with large federal systems, they can arise with equal force and complexity in small, highly centralized, unitary states such as New Zealand. This article has four main purposes. First, it briefly surveys some of the recent literature on the nature of coordination and the mechanisms for enhancing policy coordination in government. Second, it outlines the nature and causes of the coordination difficulties that have been encountered in recent years in New Zealand. Third, it explores the various attempts which the Labour government (1984–90) and the National government (1990–present) have made to overcome these difficulties. Finally, the article considers some of the lessons which emerge from New Zealand's recent experience.     

Parkinson's Law and the New Public Management? Contracting Determinants and Service‐Quality Consequences in Public Education

Why is contracting used more frequently under some circumstances than others? What is its impact on spending for core mission and on service quality? These questions are explored with data from more than 1,000 Texas school districts. The evidence for a recent three‐year period shows that contracting is negatively related to spending on school districts' central task and is not positively associated with district performance. Why, then, do districts contract? While several variables are associated with the degree of contracting, the most interesting is the relative size of a district's bureaucratic staff. Furthermore, the relationship between contracting and bureaucracy is reciprocal: Each is associated with subsequent growth in the other. The dynamic suggests an updated version of Parkinson's law. These findings indicate the need for researchers to probe the causes and consequences of contracting more thoroughly to help public managers assess this important option.     

New Millennium,New Public Management and the New Zealand Model

Recently the much‐discussed ‘New Zealand model’ of new public management (NPM) has become significantly revised. It now lacks the theoretical coherence and the market‐led focus that it relied on between 1987 and 1996. Labour‐led governments since 1999 have undertaken gradual and pragmatic – yet significant – changes in public management structures and principles, refining and sometimes reversing the model implemented in the late 1980s and early 1990s. This article does a ‘stock‐take’ of public management developments in New Zealand from 1999 to 2008, and argues that New Zealand can no longer be viewed as a leading exponent of market‐led NPM. Some NPM principles have been refined, but others have been quietly abandoned. The new National‐led government appears unwilling to undertake radical reforms, and, while it may seek a greater role for the private sector, looks set to continue with the ‘gradual and pragmatic’ approach adopted since 1999.     

The Impact of Electoral Reform on the Public Service: The New Zealand Case

October 1996 marked the beginning of a new era in New Zealand politics, with the advent of a system of proportional representation based on the German model. This article explores the impact of electoral reform on the public service. First, it summarises the extensive public sector reforms during the mid-to-late 1980s and considers the preparations undertaken by the public service for proportional representation. Second, it outlines the concerns and expectations about the likely consequences of the new electoral system on the bureaucracy. Third, against this background, the article examines the extent to which the public service has been affected by electoral reform. It is argued that despite some notable changes to the political environment within which officials operate, the overall impact of proportional representation on the public service to date has been modest. The analysis presented here is based on a series of interviews conducted during 1997 with ministers, senior public servants, ministerial advisers and parliamentary officials, along with a range of secondary sources.     

The Impact of Proportional Representation on Government Effectiveness: The New Zealand Experience

It is often claimed that proportional representation (PR) undermines government effectiveness, including decisional efficacy, fiscal prudence, electoral responsiveness and accountability. Drawing on New Zealand's experience since the introduction of a mixed-member proportional (MMP) electoral system in 1996, this article examines the impact of the new voting system on government effectiveness. Although government durability has been substantially reduced and the policy-making process has become more complex, governments under MMP appear to be no less able to address major policy problems or respond to changing economic circumstances. Moreover, New Zealand has maintained continuous fiscal surpluses under MMP — a radical departure from the protracted, and often large, deficits that characterised the previous two decades under a majoritarian electoral system.     

Public management reform and lessons from experience in New Zealand

This article is edited from a speech delivered to the University of Victoria, Wellington—IPMN Workshop on the theme lessons from experience in New Zealand. The author articulates a number of lessons that have been learned, and identifies some lessons that should have been learned. Scott writes from the perspective of having been directly and centrally involved in the development and implementation of what has been characterized as “the New Zealand model” of public management for more than twenty years, a record of service that continues to date. The views expressed also benefit from extensive consulting by the author for governments around the world. Among the lessons learned are (a) the need for clarity of roles, responsibilities and accountability in the implementation of management reform, (b) the importance of matching decision capacity to responsibility, (c) the significance of ministerial commitment and clarity on expectations, (d) the advantages gained from structural innovations within the New Zealand cabinet, (e) the need to analyze disasters carefully for what they teach, (f) approaches to embrace and foibles to avoid in implementing performance specification, (g) problems caused by confusion over ownership and improper assessment of organizational capability, (h) the fact that actually doing strategic management in the public sector is hugely complicated, (i) that it is time to put an end to the notion that there is an “extreme model” of public management in application in New Zealand, and (j) that public management, government and governance innovations in New Zealand are no longer novel compared to those advanced in other nations. With respect to lessons not learned satisfactorily, many are simply the dark shadow of positive lessons, i.e., having not understood or implemented the successes achieved in some parts of New Zealand government into others. The author concludes with an admonition to avoid jumping too quickly, in response to post-electoral rhetoric, to the conclusion that past reforms in have to be modified quickly and radically, and that the New Zealand Model has failed.     

Competitive Tendering and Contracting in the Australian Public Sector

The Hilmer reforms, and recent reports from the Industry Commission, advocate a significant shift toward competitive tendering for Australian public services. This article discusses the policy debate in the light of recent developments in the economic theory of contracts.
It will be argued that, although more intense competition can, on some occasions, generate apparent efficiency gains, it can also generate efficiency losses. Following Stigler, it will be argued that the general tendency for competition to generate cost reductions may be explained in terms of increased work intensity, and does not therefore involve a net social welfare gain. Such issues will be examined in relation to the Industry Commission (1995b) draft report on Competitive Tendering and Contracting by Public Sector Agencies, with particular attention to the issue of net social welfare benefits of contracting out. It is suggested that the Industry Commission estimates of efficiency gains available through contracting out are based on an incomplete sample, ignore the social transfer implied in reducing costs and are unlikely to hold for many sections of the public sector.     

Accountability or Countability? Performance Measurement in the New Zealand Public Service, 1992–2002

This article examines how output classes and performance indicators have changed between 1992 and 2002 in five selected departments of the New Zealand Public Service. Process, output and largely artificial service quality performance measures have crowded out outcome, efficiency and effectiveness indicators, across the board. Both output classes and performance indicators have been highly labile, though the reasons for this remain speculative in the meantime. The New Zealand state sector is currently implementing a ‘managing for outcomes’ strategy, intended to overcome too strong a preoccupation with the production of outputs. However, because output classes remain the key feature of the Public Finance Act 1989 the means of ensuring and demonstrating policy effectiveness must be more broadly based than a reliance on the countability of organisational output classes and performance measures.     

Hong Kong: Administrative Reform and Recent Public Sector Changes — The Institutionalisation of New Values

Public sector management in Hong Kong is facing major challenges as the territory has undergone substantial changes in the past four decades. A small government, following a policy of nonintervention in a colonial setting, has resulted in a highly structured system whereby it is more convenient to plan and coordinate administrative activities. This centralised structure and the prevailing role culture have combined to facilitate the implementation and institutionalisation of changes in the public service. Considering the experience and activities of selected government departments, it appears that there is a move toward more accountability and a consumer-oriented approach to public sector management in Hong Kong. The new initiatives appear to be consistent with the needs and mood of the society and seem likely to persist in the future, despite an element of uncertainty stemming from the reversal of sovereignty to the People's Republic of China.     

Contracting Revisited: Determinants and Consequences of Contracting Out for Public Education Services

The determinants and consequences of contracting are examined in more than 1,000 Texas school districts for 1997–2008. The results largely replicate prior research by O'Toole and Meier, showing that contracting is negatively related to spending on school districts’ core instructional functions and that the relationship between contracting and bureaucracy is reciprocal. The present findings, based on data from a longer period, indicate that contracting is positively related to school district performance. This article also finds support for an extended model of contracting determinants involving two environmental shocks: negative budget shocks and enrollment shocks.     

Balanced Scorecard Use in New Zealand Government Departments and Crown Entities

While the concept of a balanced scorecard (BSC) has been extensively documented, there is limited research on the application of the balanced scorecard in a public sector environment and in New Zealand. This article examines how the BSC is being used as a performance management system, a strategic management system and to discharge external reporting obligations in three New Zealand public sector organisations. The findings are relevant to both the academic community and managers by highlighting how the BSC has been adapted to reflect the unique characteristics of public sector organisations.     

Searching for Efficiency in the Public Sector: Interim Evaluation of Performance Budgeting in New Zealand

In this article I examine the efforts to promote performance measurement in the public sector with particular reference to New Zealand. In section two I examine the State Sector Act of 1988 and the Public Finance Act of 1989, which together brought about changes in the New Zealand public sector. In section three I examine the problems of implementing the reform. In section four I discuss the experience of developing statements of performance measurement required under the Financial Administration Act of 1989 and in section five I develop an alternative scheme on the basis that a uniform approach is less likely to be applicable to a range of public sector agencies. The final section contains a brief conclusion.