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PIA 2000- Introduction to Public Affairs
Management of Contracts and the Impact of Contracting on Public Policy
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Privatization and Contracting Out:
The Knowledge and Skills Base
Focus of the Week:
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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
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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.
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A South African View
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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
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Block Grants vs. Categorial Grants
Community Development Block Grants Categorial Grants
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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.
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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
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Next Target for Auction
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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
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One View of Free Trade
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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
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One View of SAPs
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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
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CriticsEurope South Africa
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Principles of PrivatizationKey Conditionality- Privatization of the economy within a context of administrative Reform
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Principles of Privatization
a. divestiture
b. contracting out
c. liquidation
d. sell off public private partnership shares
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The View from the 1080s Redeux
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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”
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Milton Friedman, 1912-2006University of Chicago
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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
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Hoover Dam
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Private Provision of Services
Management Contracts- Public Enterprises such as airlines and hotels
Vouchers- private and charter schools
Consumer Cooperatives- Food clubs
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Acting Vice Principal showing their school vouchers.
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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
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E-ZPASS
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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
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Father of Privatization
E.S. Savas is professor of public affairs at Baruch College, City University of New York
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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
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Privatization- Reasons(Madsen Pirie)
Low level consumer input
Poor Maintenance and loss of service
Inability of political leaders to impose cost control
Free Riders
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Free Rider Problem
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Means of Privatization Liquidation
Close down (Load Shedding)
Divestiture
Sell off in whole or in part government shares
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Liquidation
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Privatization Means
Public-Private partnerships
Commercialization
Autonomy and user fees
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Privatization MeansPublic Sector Reform
Cutback
the infamous 19% first cut (in Greece, at least)
Transfer to a public service organization or union
Contracting Out
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The World Bank Formula, 2007World Bank attempt to privatise
Mumbai's water runs aground: Citizens reject report
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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
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Making Fun of Government Radio Style
1949- Things Change, or Do They?
AUDIO
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10 Minute Break
COFFEE
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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)
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Options Under Reinventing Government
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Privatization CriticismReinventing Government
Steering rather than Rowing
Customer Driven Government
Competition within Government and between units
Key is decentralization--not privatization
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Reinventing Government a world wide phenomenon (Korea)
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Privatization CriticismPrivatization enhances corruption
Enhanced by cultural differences
Gifts vs. KickbacksCorruption as lobbying the Executive (Klitgaard)
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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)
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Privatization in LDCs and MDCs
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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
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A Pennsylvania View
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Globalization: Chinese View
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The Principles: Review
Private Provision of Services:
Use of conventional Markets: no public sector involvement (Purely private)
Contracts with public agencies (Contracting Out)
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The Principles: Review
Monopoly Franchises
Management Contracts
Vouchers
Consumer Cooperatives
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U.S. Government Performance and Results Act of 1993
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Boundary Valuation Problem (BVP): The Key to Privatization (additional constraints).
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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
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Focus of Stimulus Spending-Jobs
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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
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Note: Non-Profit Role in Service Delivery
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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
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Monopoly Franchises
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The Revenue Model
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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.
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Discussion of Reading: New Authors
William L. Riordon, Plunkitt of Tamany Hall
Bessie Head, “The Collector of Treasures”
Cameron Duodu, “The Tax Dodger”
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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
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Authors of the Week
Born and educated in Ghana, Cameron Duodu started work on a general purpose magazine called New Nation in Ghana
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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