Analysis of Articles about Managing Public Service Contracts - Essay Example

Article Summaries DeHoog, R.H. (2006). Commentary on “Managing Public Service Contracts: Aligning Values, s, and Markets”. Public Administration Review 66 (3), pp68-71. Goal of the Article The commentary reviews the article Managing Public Service Contracts: Aligning Values, Institutions, and Markets written by Trevor Brown, Matthew Potoski and David Van Slyke. The commentary is penned by DeHoog, Ruth Hoogland. The commentary published in 2006 in Public Administration Review. The commentary describes the core features of the article and presents a concise critical review of the researchers prepositions. Audience DeHoog notices that the researchers have pointed out towards an important issue through their article and their efforts have fruitfully let the readers understand the issue in adequate manner. The article being reviewed by DeHoog emphasizes upon the core issues, values, market management strategies and policies related with the management of public service contracts (p.66). Key Concepts In this concise commentary DeHoog has mentioned the weaknesses and strengths of the authors’ points being presented in the article. He has thoroughly reviewed the issues being discussed by the authors and their approaches to discuss those issues. The critic appreciates certain elements of the article under observation (for example, the comprehensive connections between the theory and practice of contracting) and disapproves of others (for example, the neglecting of certain “nuances” of contracting). The author believes that the impact of political power in terms of contracting has been underplayed in this study; there is a political agenda at plat behind the upsurge of the contracting business that has not been touched in the article. The authors of that article are more inclined towards taking contracting as a managerial service, and so they tend to eliminate the strong role of evolving political situations in contracting. DeHoog claims that the authors have managed to put forth a clear structured guide for contracting practitioners and students, yet they have failed to emphasize that this employment is neither a clear cut business, nor an easy one. Moreover, he says that his view has been shaped by the stinging questions that emerge due to the severe opportunist culture and corruption of the whole affair even in places where competent workers are hired. He says that these authors have failed to point out the extent of political impact on discussion making; their values are economy, a pro-business philosophy and an election-coalition building value. While balancing stakeholders, unaware managers might not even understand the hold of these pressures on their services, and perhaps those who know would conveniently ignore them. Secondly, the authors while talking about institutions fail to mention that even non-profit organizations have their own agendas and can turn opportunistic as well. Thirdly, he says that there might be a conflict of interest between contracting personnel too which could lead to an unreliability of the services occurred. Dehoog also feels that the authors’ point regarding the fact that the transaction costs in relational transacting is high is not entirely true and can have very good results in weaker markets. The researchers have discussed some core values of contracting in their article. These values include effectiveness, efficiency, accountability and service quality etc. However, DeHood believes that the authors have overlooked some of the critically important values associated with contracting like economy, cost cutting and pro-business philosophy. Due to the absence of the discussion about these values, the arguments presented in the article become weaker and less compelling. However, the discussion of institution and realities related with organizational culture makes the article strong and argumentative (p70). Reading add understanding of The authors have identified an important point that operating in weak markets might require the contractors to pay extra transaction cost but it is an important point to notice here that even in highly competitive and strong markets, the contractors have to pay significant transaction cost because they have to take certain measures to remain competitive in the market place that they might not need to take while operating in the weak and less competitive markets. It shows that there are some contradictions among the arguments presented by the authors in the article and the commentator DeHoog has intelligently identified those contradictions and has presented arguments for both the sides to show the validity of the authors’ prepositions. The commentator specifically praised the researchers’ capability for effectively creating link between theory and practice and prove this link through their empirical investigation. Overall the researcher seems very contended from the efforts made by the researchers Brown, Potoski and Slyke to compel people rethink about the issue being covered in the article, Conclusively, Brown, Potoski and Van Slyke’s article provides one with a comprehensive framework regarding contracting, yet for it to be truer to reality, they could have explained their points in even greater detail. Brown, T.L., Potoski, M. and Slyke, D.M. (2006). “Managing Public Service Contracts: Aligning Values, Institutions, and Markets”. Public Administration Review 66 (3), pp53-67. Introduction The article “Managing Public Service Contracts: Aligning Values, Institutions, and Markets” is written by Trevor L. Brown from Ohio State University, Matthew Potoski from Iowa State University and David M. Van Slyke from Syracuse University. Goal of the Article It is basically about contracting in the public services; the significance of it as well as the limitations binding it. The authors investigate the issues associated with the management of the public service contract and the role of key elements that affect this contract. These elements include markets, institutions and the values of the contractor and markets (p53). Audience People in the favor of contracting take it as a means of cutting back on service costs through better and efficient management. Conventional thinkers against contracting, however, consider it to be a hurdle in the maintenance of service quality. Either way, according to the authors, there are certain non-controversial beliefs about contracting that are generally accepted (p54). Key Concepts Firstly, contracting presently is and in the future will remain as one of the chief tasks for public managers; they may not have options otherwise but to get through with it under unfavorable market conditions. Moreover, public contractors cannot evade political underlying that puts a “premium on balancing competing stakeholder values” (2). Lastly, it is not valid to generalize the effectiveness of contracting since it varies according to the market. Researches provide public contractors with numerous regulations of improving service delivery through contract management. The authors take contracting as a “tool” (2) used to increase the efficiency of service delivery, yet at the same time whether it works or not is highly dependent on the way of usage of the “tool”. They take up Kettl’s charge of putting forth a clear framework on contract management for students and practitioners of public services. The points affecting their framework will be: it is the democratic stakeholder preferences that “establish the values to be optimized” in the delivery of services, the availability of tools for the balancing of competing values depends on the public law and the organizational arrangements, and the nature of service markets determine the choice of which tool or vendor to avail for stakeholder values. They dig up previous researches that show “how managers can use the lenses of public values, institutions, and service markets to improve service delivery”. That is examined through three stages: the decision to deliver services via contract or directly, selection of vendors, and the placement of monitoring tool for effective implementation (Brown, Potoski and Slyke, 2006). The authors notice that the size and competitiveness of the market are some important features that affect the contractors while managing their tasks. In the weak and less competitive markets there is usually requirement of more transaction cost due to less numbers of vendors and parties involved in the business. Due to lack of high competition the transaction cost is also high because several services are offered at high rate due to their low supply. It shows that the contractors have to make sure that they must study the market features in details before initiating the task of contracting related with the market because all their transactions would be effected by the size and competitiveness of the market while they have to keep in consideration several other important issues as well. Irrespective of the fact whether direct or contract services are provided, the effectiveness of the execution of core management functions is directly proportional to the quality of services. With the advent of the contracting business, it is envisioned to make things financially and organizationally easier, although that is mainly true for “governments who invest in strong contract management capacity. There is an ill assumption that the introduction of contracting through the government will cause a removal of managers controlling the quality of the service, thus compromising it. The role of the government’s central management is to prepare public values, institutions, and service market conditions efficiently throughout the three stages of contracting. Firstly, conditions for suitable contracting are laid-out. Secondly, the public managers have to construct a branched out plan including the dispatching of tasks and defining the contract’s incentives, provisions and performance measurement systems. Thirdly, the management of the task is essential; “monitoring vendor performance, communicating with service recipients, and executing incentive programs”. There is crucial decision-making involved for the public managers who have to work under pressures from stakeholders. Sometimes, institutions, public laws, and organizational arrangements determine the limitations of possible tools for the public managers. Effectively optimizing value tradeoffs and executing core management functions is the most important thing in managing public service delivery; it is not only about operations management and vendor relations but it is also about identifying, targeting and balancing shifting stakeholder values. Potential stakeholders include: interest groups and attentive segments of the general public, elected officials, the media, public employees, administrative superiors, collaborators and partners, service recipients, and vendors (Brown, Potoski and Slyke, 2006). At times the interests of all these different kinds of stakeholders might conflict. To overcome this problem, managers could structure the “tradeoffs for key decision makers or, as is often the case, use their discretion to make these tradeoffs as they implement services” (4). The practical aspect is that there are certain conditions that lie outside the control of a manager e.g. laws and rules of service delivery. Yet, services with lower transaction costs are more favorable to the managers than those with higher transaction costs. It is quite vital as well as challenging to identify and prioritize political stakeholder preferences. A suitable way of doing that would be to arrange “public meetings and hearings, requests for comment and information, advisory committees, and focus groups” or inviting stakeholder participation before starting the contract processes. Different strategies determine the usage of different tools e.g. stakeholder value mapping and balanced scorecard approach. They are there to check the values of stakeholders, to search for the most effective service delivery approaches and to experiment with various ways for achieving their objectives. In Kaplan and Norton’s approach, the public managers cross-check their actions with their goals to decide whether to use direct or contract service. Reading add to Understanding Public law and organizational arrangements are essential institutions; the former lays the ground for legal constraints and the latter identifies the availability of resources and capacity. To being able to deal with vendors more easily, the managers should know how to plan and coordinate service delivery, negotiate with vendors, and monitor task completion and executing incentives, and having specific technical skills (Brown, Potoski and Slyke, 2006). The conditions of markets are imperative to eliminate principle-agent problems (i.e. between the contracting government and a vendor). For an effective market strict conditions are necessary to minimize opportunistic behavior. There are two major service-specific sources of transaction costs: asset specificity (that causes an imbalance of power in the case of the vendor as opposed to the manager) and ease of management (a comprehensive metric system to measure the quality of service delivery). In practicality, it is possible that the advantages of direct or contract services might super-cede each other depending upon the competition between vendors and the government. Examining the political and legal context is very necessary for contract practitioners and students. To overcome the problems associated with a “thin” market, managers can: hire new vendors, split service delivery to multiple contracts, allow public employees to compete against private vendors and employ joint contracting, or they might on the other hand opt for direct delivery. In the case of governments that want to buy instead of making the service itself, the public managers enjoy certain discretions that are: vendor tasks, outcome measures, vendor qualifications, vendor compensation, contract duration, incentives and sanctions, renewal provisions, payment schedules and reporting requirements. The focus is on the types of vendors that can be chosen: private firms (motivated by profit), non-profits (would not generally behave opportunistically but goals might differ from public objectives) and other governments (not effective against solving inefficiency). The institutional arrangements essentially affect the superiority of the “vendors in achieving stakeholder values” (9). For low transaction cost services - as opposed to high transaction cost services - the vendor is less powerful thus the choice of a vendor is consequently less problematic. Either way, it is neither a hundred percent devoid of risks. Relational contracts can cause a healthy means of trust and sharing, yet it can also lead to incomplete contracts. Relational contracts start off with a higher transaction cost for both involved, but it gradually gets it to decrease. The last phase of contracting is the actual management of service delivery under the terms of the contract. The impact of implementation eventually affects the outcome of the services. To ensure positive returns, monitoring the vendors is very important, since research proves that the stronger the monitoring and accountability system, the more efficient the vendor turns out to be. For this, legal guidance cannot be ignored. The easier it is to keep a check on the vendors, the chances of desired outcomes is achieved more readily. A way to avoid the monitoring problems is to comprehend the service production process of the vendor and identifying and monitoring accordingly. On the other hand, public managers can use the relational contracting technique as well and develop and understanding amongst each other. In conclusion, the article has been illustrating that effectively managing or researching the three stages of the contracting process requires an appreciation of the intersection of three factors: public values, institutions, and service markets. Values, including public interest values, are the stakeholder preferences that public managers must balance or optimize as they deliver services (Brown, Potoski and Slyke, 2006, p56). Institutions, or the laws and organizational arrangements that frame service delivery, determine the range of tools and resources that public managers can employ to achieve stakeholder values (Brown, Potoski and Slyke, 2006, p57). The characteristics of services and their markets influence which contracting tools are best suited to achieve stakeholder values (Brown, Potoski and Slyke, 2006, p58). Public values, institutions and service markets are concepts that practically cannot survive alone; they need to be inter-related. Thus a step-outline of contracting should be made keeping all of these things in mind. For future research: scholars need to familiarize themselves very vividly with economic theories, institutional theories and strategic management theories. Secondly, the context in which contracting occurs cannot be ignored. And thirdly, when contracts seem a nuisance and a predicament in terms of efficiency, direct service system is more advisable. Overall the article is research based and the authors have discussed the key issues and points with the help of valid arguments and prepositions that made the article strong and highly informative. References Brown, T.L., Potoski, M. and Slyke, D.M. (2006). “Managing Public Service Contracts: Aligning Values, Institutions, and Markets”. Public Administration Review 66 (3), pp53-67. Read More