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Decentralising public functions to public agencies, entities and bodies: benefits, pitfalls and management . Olaf Merk OECD. Second Budget Reform Seminar, Maputo, Mozambique. Structure of presentation (1). Definitions Arguments in theory Evidence in practice Conditions.

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slide1

Decentralising public functions to public agencies, entities and bodies: benefits, pitfalls and management

Olaf Merk

OECD

Second Budget Reform Seminar, Maputo, Mozambique

structure of presentation 1
Structure of presentation (1)
  • Definitions
  • Arguments in theory
  • Evidence in practice
  • Conditions
structure 2 put differently
Structure (2): put differently
  • What are we talking about?
  • Why could it help?
  • What are the international experiences?
  • Under what conditions can it work?
definitions 1
Definitions (1)
  • Decentralisation
  • Spatial deconcentration
  • Functional deconcentration
  • Market-type mechanisms:
    • Outsourcing
    • Public private partnerships
    • Vouchers
definitions 2
Definitions (2)
  • Common objectives
  • Interconnectedness
  • Focus of this presentation: functional deconcentration and outsourcing
definitions deconcentration 3
Definitions: deconcentration (3)
  • Ministerial departments
  • Departmental agencies
  • Public law administrations
  • Private law bodies
arguments deconcentration 1
Arguments deconcentration (1)

Most important ones:

  • Efficiency
  • Independence from politics (conflict of interests, supervision)
arguments deconcentration 2
Arguments deconcentration (2)

Some notes on efficiency:

  • More focus/smaller span of control
  • Separation policy making; implementation and supervision
  • Application of private sector management models
arguments deconcentration 3
Arguments deconcentration (3)

Other arguments:

  • More expertise
  • More interaction with society
  • Build an own identity
evidence deconcentration 1
Evidence deconcentration (1)

Increase in agencies:

  • OECD wide and other regions (Central and eastern Europe)
  • Country examples:
    • UK: 131 new agencies since 1988
    • Korea: 23 new agencies since 1999
    • Netherlands: 200 new agencies since 1993
evidence deconcentration 3
Evidence deconcentration (3)

Concerns:

  • Efficiency?
  • Intransparency
  • Accountability
  • Non-performance
  • Undiagnosed non-performance
  • Corruption
evidence deconcentration 4
Evidence deconcentration (4)

Other concerns:

  • Built-in resistance to change
  • Consistency with national context
  • Robustness
conditions deconcentration 1
Conditions deconcentration (1)

Focus applicability to areas where independence of politics is needed:

  • Conflict of interest areas (oversight over elections)
  • Independence of judgements (accession of medicines, economic forecasts)
  • Regulatory oversight over areas where government is an actor (post, telecom)
conditions deconcentration 2
Conditions deconcentration (2)

Institutional framework:

  • Sound legal system
  • Sufficient administrative capacity at ministries
  • Sufficient control mechanisms
  • Phasing in
conditions deconcentration 3
Conditions deconcentration (3)

Organisational features:

  • Clear goals, no overlapping functions
  • Measurable services (output/outcome)
  • Cost price model
  • Evaluation
defining outsourcing
Defining outsourcing

Different sorts:

  • Blue collar support services
  • High technological support services
  • Core government tasks
arguments outsourcing
Arguments outsourcing
  • Reduction of costs
  • Access to expertise
  • Substitute poor government service
evidence outsourcing 2
Evidence outsourcing (2)
  • Cost savings:- US: 33%- Australia: 15-20%- Denmark: 5-30%- Iceland: 20-25%- UK: 25%
  • Service improvements:- US: 25%
evidence outsourcing 3
Evidence outsourcing (3)

Concerns:

  • Accountability: who is responsible?
  • Higher costs when public preferences change
  • Dependency on contractor
  • Loss of public information
  • Transaction costs
  • Principle/agent-problems
conditions outsourcing 1
Conditions outsourcing (1)

Institutional framework:

  • Sound legal system (effective contract enforcing)
  • Competitive supplier markets
conditions outsourcing 2
Conditions outsourcing (2)

Organisational features:

  • Building up commercial skills (HRM implications)
  • Clear description of output/outcomes
  • Defining equal treatment criteria
  • Redress mechanisms
conclusions
Conclusions
  • Mixed experiences in OECD countries
  • More evidence for effectiveness outsourcing than deconcentration
  • Only desirable under strict conditions; do African countries meet these conditions?
  • Alternative: professional ministries