PIA 2000- Introduction to Public Affairs

Management of Contracts and the Impact of Contracting on Public Policy

Privatization and Contracting Out:

The Knowledge and Skills Base

Focus of the Week:

OverviewConcepts: New Public Management Principles:

1995-2005

Social Services- Delivery

Re-inventing Government- Customer vs. Citizen

Subsidiarity- Decentralization

Privatization: Private or Non-Profit Sector

Contracting Out- Extending Governance out of Government

A View from Canada Video

Privatization: In the U.S. and the WorldDefinition:

The process of divesting direct civil service responsibility for the provision of public services or the collection of revenues

Focus here on the World View in the 1980s as defined by the U.S.

A South African View

Privatization: Grants and Contracts

The Key to Understanding Contracting Out

Prior to 1979: Focus of Contracts was Purchases and construction

Before 1979- Social Services: “Block Grants”

Now Social Services: Contracted Out or Categorical Grants (Tied Grants)

Some Privatization is linked to Categorical Grants

Block Grants vs. Categorial Grants

Community Development Block Grants Categorial Grants

Tendering is the procurement of acquisition of goods and/or services at the best possible total cost of ownership, in the correct quantity and quality, at the right time, in the right place for the direct benefit or use of governments, corporations, or local authorities, generally by a contract. Tendering also for grants.

Context of Privatization: The Reagan-Thatcher Revolutions

Economic Reform and Structural Adjustment:

a. IMF Stabilization and trade liberalization

b. Currency reform, auctions-end of subsidies (end urban privileges) to end radical inflation

Next Target for Auction

The Reagan-Thatcher Revolutionsc. Market prices for agriculture and industrial goods

d. Deregulate the economy

e. Most Importantly: Free Trade

f. Domestic Changes followed International Reforms

One View of Free Trade

Conditionality and Privatization

Conditionality- World Bank and UNDP and the “Management”

SAPs- /Structural Adjustment Programs

Focus on Policy and Administrative Reforms

Conditionality- World Bank and UNDP and the "Management“ of Structural Adjustment Countries

One View of SAPs

ConditionalitiesReform the Bureaucracy

Decrease Size of Public Service

Individual Consultants, Grantees and Contractors work with investments and the service/commercial sector

Bridging and sectoral loans and grants major source of international involvement

CriticsEurope South Africa

Principles of PrivatizationKey Conditionality- Privatization of the economy within a context of administrative Reform

Principles of Privatization

a. divestiture

b. contracting out

c. liquidation

d. sell off public private partnership shares

The View from the 1080s Redeux

Principles of Privatizatione. International conditions for "good" bureaucrats, eg. World Bank Programs- special salaries for those on contract with the project

f. Goal: Return to the recurrent budgeting process and balanced budget principles of “Neo-Orthodox Economists”

Milton Friedman, 1912-2006University of Chicago

The Fundamental Assumption:Private Provision of Services

Use of conventional markets- No public sector involvement

Contracts with public agencies- Collection of Garbage; foreign aid and technical assistance

Monopoly Franchises: Hoover Dam; Cable Television; Amtrak

Hoover Dam

Private Provision of Services

Management Contracts- Public Enterprises such as airlines and hotels

Vouchers- private and charter schools

Consumer Cooperatives- Food clubs

Acting Vice Principal showing their school vouchers.

Privatization “Ideal”Key to the provision of efficient and

effective goods and services (Savas)

Need for Exclusion

User Fees, not taxes

The use of tolls

E-ZPASS

Privatization “Ideal”Key to the provision of efficient and

effective goods and services (Savas)

Need to exclude the CollectiveSome would argue excluding “common pool

goods” from privatization (Clean Air)

Worthy goods (health, education, etc.) are not collective goods

Father of Privatization

E.S. Savas is professor of public affairs at Baruch College, City University of New York

Reasons for Privatization Duncan Madsen Pirie, (born 24 August 1940). President Adam Smith Institute.

High Production costs in Government

Low levels of efficiency

Featherbedded labor costs

Pork Barrel Capital Allocations

Privatization- Reasons(Madsen Pirie)

Low level consumer input

Poor Maintenance and loss of service

Inability of political leaders to impose cost control

Free Riders

Free Rider Problem

Means of Privatization Liquidation

Close down (Load Shedding)

Divestiture

Sell off in whole or in part government shares

Liquidation

Privatization Means

Public-Private partnerships

Commercialization

Autonomy and user fees

Privatization MeansPublic Sector Reform

Cutback

the infamous 19% first cut (in Greece, at least)

Transfer to a public service organization or union

Contracting Out

The World Bank Formula, 2007World Bank attempt to privatise

Mumbai's water runs aground: Citizens reject report

Privatization Criticism

Private sector and NGOs are not necessarily more effective and efficient than government agencies (Paul Nelson)

Loss of Coverage for social services

Rule of Structural Adjustment- lower health and education statistics

Making Fun of Government Radio Style

1949- Things Change, or Do They?

AUDIO

10 Minute Break

COFFEE

Privatization CriticismCan replicate private sector Conditions

within government (Core of Reinventing Government argument--Osborne and Gabler)

“Contracting In”- Government Agency provides services for or from another Agency, NGO or Private Sector (Generating Revenue) (USDA provides staff for USAID)

Options Under Reinventing Government

Privatization CriticismReinventing Government

Steering rather than Rowing

Customer Driven Government

Competition within Government and between units

Key is decentralization--not privatization

Reinventing Government a world wide phenomenon (Korea)

Privatization CriticismPrivatization enhances corruption

Enhanced by cultural differences

Gifts vs. KickbacksCorruption as lobbying the Executive (Klitgaard)

Problems with Administrative Reform: International Examples

1. Departments buy and sell goods & services- statistics in Zaire/Congo or setting up “privatization networks” to acquire state properties.

2. Sub-economic salaries: offices, houses and telephones- buying soap and selling chickens. International salaries for essential workers (Consulting Practices)

Privatization in LDCs and MDCs

Problems with PrivatizationReality- The absence of recurrent budgets

in LDCs

Activity (economy) driven by technical assistance projects the only game in town

NGOs and for profit contractors and consulting firms take the jobs

Result: Privatization means internationalization

A Pennsylvania View

Globalization: Chinese View

The Principles: Review

Private Provision of Services:

Use of conventional Markets: no public sector involvement (Purely private)

Contracts with public agencies (Contracting Out)

The Principles: Review

Monopoly Franchises

Management Contracts

Vouchers

Consumer Cooperatives

U.S. Government Performance and Results Act of 1993

Boundary Valuation Problem (BVP): The Key to Privatization (additional constraints).

Service Delivery Systems and Categories of Service Delivery

Issue of “size”: hard services or soft with capital or recurrent costs

Macro--Physical ServicesHighways, Sewerage Main Lines, ElectricityDeconcentrated or Privatized

Micro--Physical ServicesDevolved or Delegated

Focus of Stimulus Spending-Jobs

Service Delivery Systems and Categories of Service Delivery

Issue of “size”: hard services or soft with capital or recurrent costs

Social Services--Health, Education or Community Development (such as Social Funds)

Delegated or Contracted

Grants and Sub-Grants to Non-Profits

Investment or Production

Privatized

Public Private Partnerships

Note: Non-Profit Role in Service Delivery

Service Delivery Systems and Categories of Service Delivery

Private Provision

Use of conventional Markets

Contracts with public agencies

Monopoly Franchises

Management Contracts

Vouchers

Consumer Cooperatives

Monopoly Franchises

The Revenue Model

Public Private Partnerships: A Historical Example

German diplomats award Henry Ford, center, with their nation's highest decoration for foreigners, the Grand Cross of the German Eagle, in July 1938.

Discussion of Reading: New Authors

William L. Riordon, Plunkitt of Tamany Hall

Bessie Head, “The Collector of Treasures”

Cameron Duodu, “The Tax Dodger”

William L. Riordon and Plunkitt

George Washington Plunkitt (1842–1924) was a long-time State Senator in the state of New York representing the Fifteenth Senate District. He was especially powerful in New York City and he was part of what is known as New York's Tammany Hall machine.

Boss Tweed VIDEO

William L. Riordon was a New York Journalist in 1905

Authors of the Week

Born and educated in Ghana, Cameron Duodu started work on a general purpose magazine called New Nation in Ghana

Bessie Head, 1937-1986Bessie Emery Head

was born in Pietermaritzburg South Africa, the child of a wealthy white South African woman and a black servant when interracial relationships were illegal in South Africa.

She lived and wrote in Serowe, Botswana