| Abstract: | The literature suggests that management contracts for public services work best when payment to the contractor is performance‐related and when there is minimal involvement by government in daily management. However, as this case study of Mozambique illustrates, neither of these principles can be straightforwardly applied in management contracts for organizational reform in a developing country. First, establishing successful performance‐related payment is difficult in a contract with multiple objectives and poor information. The value in setting up performance‐related payment appears to be more in focusing the objectives of the contract than in improving the contractor's performance. Second, a virtually ‘hands on’ role is required for the government agency supervising the contract, in the numerous political, legal and staffing issues which arise. The capacity of the agency to carry out this function is critical to the performance of the contract. It faces the challenge of completing the reorganization, sustaining initial achievements and running the new system economically. There are grounds for guarded optimism. Copyright © 1999 John Wiley & Sons, Ltd. |
