1. Procurement and Public Official Career Concerns Institutions in Public Procurement Klenio Barbosa Sao Paulo School of Economics Fundação Getulio Vargas 10th INGP Annual Conference on Public Procurement in the Americas October 28-30, 2014 - Asunción, Paraguay Klenio Barbosa (EESP-FGV)Officials Career Concerns1 / 14

2. Internal Organization of Institutions Employees’ efforts, skills, knowledge, creativity, and dedication are crucial to good performance of any kind of private or public organization. Designing and implementing effective policies to motivate, attract and retain good people; and to help them to develop their potential skills and knowledge are among the most important challenges in all organization A well-structured human-resource policy is a key ingredient for the success of any organization. Human-Resource Policies Matters Klenio Barbosa (EESP-FGV)Officials Career Concerns2 / 14

3. Internal Organization of Institutions Employees’ efforts, skills, knowledge, creativity, and dedication are crucial to good performance of any kind of private or public organization. Designing and implementing effective policies to motivate, attract and retain good people; and to help them to develop their potential skills and knowledge are among the most important challenges in all organization A well-structured human-resource policy is a key ingredient for the success of any organization. Human-Resource Policies Matters Klenio Barbosa (EESP-FGV)Officials Career Concerns2 / 14

4. Internal Organization of Institutions Employees’ efforts, skills, knowledge, creativity, and dedication are crucial to good performance of any kind of private or public organization. Designing and implementing effective policies to motivate, attract and retain good people; and to help them to develop their potential skills and knowledge are among the most important challenges in all organization A well-structured human-resource policy is a key ingredient for the success of any organization. Human-Resource Policies Matters Klenio Barbosa (EESP-FGV)Officials Career Concerns2 / 14

5. Internal Organization of Institutions Employees’ efforts, skills, knowledge, creativity, and dedication are crucial to good performance of any kind of private or public organization. Designing and implementing effective policies to motivate, attract and retain good people; and to help them to develop their potential skills and knowledge are among the most important challenges in all organization A well-structured human-resource policy is a key ingredient for the success of any organization. Human-Resource Policies Matters Klenio Barbosa (EESP-FGV)Officials Career Concerns2 / 14

6. Human-Resource Management in Private Corporations Many important theoretical and empirical economists have been analyzing the different human-resource policies in private institutions. Economic agents in private corporations can be motivated by: performance-based compensation: bonus, company’s share and options; career paths within the company and promotions, and outside’s company opportunities; institution’s mission: self-motivated employers. The goods and bads of such incentive schemes in private institutions have been largely investigated by numerous scholars. What can we say about the incentive design in public organizations? Klenio Barbosa (EESP-FGV)Officials Career Concerns3 / 14

7. Human-Resource Management in Private Corporations Many important theoretical and empirical economists have been analyzing the different human-resource policies in private institutions. Economic agents in private corporations can be motivated by: performance-based compensation: bonus, company’s share and options; career paths within the company and promotions, and outside’s company opportunities; institution’s mission: self-motivated employers. The goods and bads of such incentive schemes in private institutions have been largely investigated by numerous scholars. What can we say about the incentive design in public organizations? Klenio Barbosa (EESP-FGV)Officials Career Concerns3 / 14

8. Human-Resource Management in Private Corporations Many important theoretical and empirical economists have been analyzing the different human-resource policies in private institutions. Economic agents in private corporations can be motivated by: performance-based compensation: bonus, company’s share and options; career paths within the company and promotions, and outside’s company opportunities; institution’s mission: self-motivated employers. The goods and bads of such incentive schemes in private institutions have been largely investigated by numerous scholars. What can we say about the incentive design in public organizations? Klenio Barbosa (EESP-FGV)Officials Career Concerns3 / 14

9. Human-Resource Management in Private Corporations Many important theoretical and empirical economists have been analyzing the different human-resource policies in private institutions. Economic agents in private corporations can be motivated by: performance-based compensation: bonus, company’s share and options; career paths within the company and promotions, and outside’s company opportunities; institution’s mission: self-motivated employers. The goods and bads of such incentive schemes in private institutions have been largely investigated by numerous scholars. What can we say about the incentive design in public organizations? Klenio Barbosa (EESP-FGV)Officials Career Concerns3 / 14

10. Human-Resource Management in Private Corporations Many important theoretical and empirical economists have been analyzing the different human-resource policies in private institutions. Economic agents in private corporations can be motivated by: performance-based compensation: bonus, company’s share and options; career paths within the company and promotions, and outside’s company opportunities; institution’s mission: self-motivated employers. The goods and bads of such incentive schemes in private institutions have been largely investigated by numerous scholars. What can we say about the incentive design in public organizations? Klenio Barbosa (EESP-FGV)Officials Career Concerns3 / 14

11. Incentives and The Internal Organization of Government → ←→ ← → →→ → “Incentive T & h 973 e 3; ory has been mainly motivated by an applied to TSE Pictures private organizations. Yet, in view of the important role played by civil servants and politicians in our economies, one may wonder why limited attention has been devoted in this field to the internal organization of government.” Jean Tirole (1994). Jean Tirole (Toulouse School of Economics) 2014 Nobel Prize in Economic Science Klenio Barbosa (EESP-FGV)Officials Career Concerns4 / 14

12. Tirole’s Contribution to Procurement Design Laffont and Tirole (1993): on the external and internal organization of institutions surrounding public procurement. Klenio Barbosa (EESP-FGV)Officials Career Concerns5 / 14

13. This Presentation Aim: To bring a discussion on how human-resource policies procurement officials should be designed. for 1 To rise the potential problems on translating private sector’s human-resource policies to the government. 2 To highlight the special features of the public sector: careful design of human-resource policies in public institutions. 3 A few empirical studies have evaluated the existing human-resource policies in public institutions (lack of good data). As an scientist, I say: “We have a lot to learn about it”. Klenio Barbosa (EESP-FGV)Officials Career Concerns6 / 14

14. This Presentation Aim: To bring a discussion on how human-resource policies procurement officials should be designed. for 1 To rise the potential problems on translating private sector’s human-resource policies to the government. 2 To highlight the special features of the public sector: careful design of human-resource policies in public institutions. 3 A few empirical studies have evaluated the existing human-resource policies in public institutions (lack of good data). As an scientist, I say: “We have a lot to learn about it”. Klenio Barbosa (EESP-FGV)Officials Career Concerns6 / 14

15. This Presentation Aim: To bring a discussion on how human-resource policies procurement officials should be designed. for 1 To rise the potential problems on translating private sector’s human-resource policies to the government. 2 To highlight the special features of the public sector: careful design of human-resource policies in public institutions. 3 A few empirical studies have evaluated the existing human-resource policies in public institutions (lack of good data). As an scientist, I say: “We have a lot to learn about it”. Klenio Barbosa (EESP-FGV)Officials Career Concerns6 / 14

16. This Presentation Aim: To bring a discussion on how human-resource policies procurement officials should be designed. for 1 To rise the potential problems on translating private sector’s human-resource policies to the government. 2 To highlight the special features of the public sector: careful design of human-resource policies in public institutions. 3 A few empirical studies have evaluated the existing human-resource policies in public institutions (lack of good data). As an scientist, I say: “We have a lot to learn about it”. Klenio Barbosa (EESP-FGV)Officials Career Concerns6 / 14

17. Performance-based compensation Play important role to motivate workers in private institutions. Formal incentives = monetary incentives Private institutions: remuneration very sensible to performance clear goal: profit maximization verifiable measures of performance: company value Public institutions: multiple goals (e.g., low price, high quality) many goals are hard to measure: quality is not perfectly measurable Klenio Barbosa (EESP-FGV)Officials Career Concerns7 / 14

18. Performance-based compensation Play important role to motivate workers in private institutions. Formal incentives = monetary incentives Private institutions: remuneration very sensible to performance clear goal: profit maximization verifiable measures of performance: company value Public institutions: multiple goals (e.g., low price, high quality) many goals are hard to measure: quality is not perfectly measurable Klenio Barbosa (EESP-FGV)Officials Career Concerns7 / 14

19. Performance-based compensation Play important role to motivate workers in private institutions. Formal incentives = monetary incentives Private institutions: remuneration very sensible to performance clear goal: profit maximization verifiable measures of performance: company value Public institutions: multiple goals (e.g., low price, high quality) many goals are hard to measure: quality is not perfectly measurable Klenio Barbosa (EESP-FGV)Officials Career Concerns7 / 14

20. Performance-based compensation Play important role to motivate workers in private institutions. Formal incentives = monetary incentives Private institutions: remuneration very sensible to performance clear goal: profit maximization verifiable measures of performance: company value Public institutions: multiple goals (e.g., low price, high quality) many goals are hard to measure: quality is not perfectly measurable Klenio Barbosa (EESP-FGV)Officials Career Concerns7 / 14

21. Monetary Incentives to Procurement Officials In principle, public officials could be paid according to objective measures of performance. acquisition price, quality of the service/product acquired, time to completion, cost overrun, etc However, multiplicity of objectives and tension between measurable and nonmeasurable objectives in public institutions. not a good idea to make officials’ remuneration sensible to performance. Why? Klenio Barbosa (EESP-FGV)Officials Career Concerns8 / 14

22. Monetary Incentives to Procurement Officials In principle, public officials could be paid according to objective measures of performance. acquisition price, quality of the service/product acquired, time to completion, cost overrun, etc However, multiplicity of objectives and tension between measurable and nonmeasurable objectives in public institutions. not a good idea to make officials’ remuneration sensible to performance. Why? Klenio Barbosa (EESP-FGV)Officials Career Concerns8 / 14

23. Monetary Incentives to Procurement Officials In principle, public officials could be paid according to objective measures of performance. acquisition price, quality of the service/product acquired, time to completion, cost overrun, etc However, multiplicity of objectives and tension between measurable and nonmeasurable objectives in public institutions. not a good idea to make officials’ remuneration sensible to performance. Why? Klenio Barbosa (EESP-FGV)Officials Career Concerns8 / 14

24. Monetary Incentives to Procurement Officials In principle, public officials could be paid according to objective measures of performance. acquisition price, quality of the service/product acquired, time to completion, cost overrun, etc However, multiplicity of objectives and tension between measurable and nonmeasurable objectives in public institutions. not a good idea to make officials’ remuneration sensible to performance. Why? Klenio Barbosa (EESP-FGV)Officials Career Concerns8 / 14

25. An Example: Procurement Agency Procurement official’s tasks: low price and high quality of products price dimension: easy to make comparisons and construct objective measures quality is not perfectly measurable Therefore, officials’ remuneration should, in principle, be sensible to performance price dimension and not sensible to quality dimension Strategic official: works to acquire products with excessively low price tension between price and quality: it may hurt quality Bottom Line: making officials’ remuneration sensible to price dimension can reduce quality of goods and service acquired by the goverment. Any hope? Any other incentive scheme? Klenio Barbosa (EESP-FGV)Officials Career Concerns9 / 14

26. An Example: Procurement Agency Procurement official’s tasks: low price and high quality of products price dimension: easy to make comparisons and construct objective measures quality is not perfectly measurable Therefore, officials’ remuneration should, in principle, be sensible to performance price dimension and not sensible to quality dimension Strategic official: works to acquire products with excessively low price tension between price and quality: it may hurt quality Bottom Line: making officials’ remuneration sensible to price dimension can reduce quality of goods and service acquired by the goverment. Any hope? Any other incentive scheme? Klenio Barbosa (EESP-FGV)Officials Career Concerns9 / 14

27. An Example: Procurement Agency Procurement official’s tasks: low price and high quality of products price dimension: easy to make comparisons and construct objective measures quality is not perfectly measurable Therefore, officials’ remuneration should, in principle, be sensible to performance price dimension and not sensible to quality dimension Strategic official: works to acquire products with excessively low price tension between price and quality: it may hurt quality Bottom Line: making officials’ remuneration sensible to price dimension can reduce quality of goods and service acquired by the goverment. Any hope? Any other incentive scheme? Klenio Barbosa (EESP-FGV)Officials Career Concerns9 / 14

28. An Example: Procurement Agency Procurement official’s tasks: low price and high quality of products price dimension: easy to make comparisons and construct objective measures quality is not perfectly measurable Therefore, officials’ remuneration should, in principle, be sensible to performance price dimension and not sensible to quality dimension Strategic official: works to acquire products with excessively low price tension between price and quality: it may hurt quality Bottom Line: making officials’ remuneration sensible to price dimension can reduce quality of goods and service acquired by the goverment. Any hope? Any other incentive scheme? Klenio Barbosa (EESP-FGV)Officials Career Concerns9 / 14

29. An Example: Procurement Agency Procurement official’s tasks: low price and high quality of products price dimension: easy to make comparisons and construct objective measures quality is not perfectly measurable Therefore, officials’ remuneration should, in principle, be sensible to performance price dimension and not sensible to quality dimension Strategic official: works to acquire products with excessively low price tension between price and quality: it may hurt quality Bottom Line: making officials’ remuneration sensible to price dimension can reduce quality of goods and service acquired by the goverment. Any hope? Any other incentive scheme? Klenio Barbosa (EESP-FGV)Officials Career Concerns9 / 14

30. An Example: Procurement Agency Procurement official’s tasks: low price and high quality of products price dimension: easy to make comparisons and construct objective measures quality is not perfectly measurable Therefore, officials’ remuneration should, in principle, be sensible to performance price dimension and not sensible to quality dimension Strategic official: works to acquire products with excessively low price tension between price and quality: it may hurt quality Bottom Line: making officials’ remuneration sensible to price dimension can reduce quality of goods and service acquired by the goverment. Any hope? Any other incentive scheme? Klenio Barbosa (EESP-FGV)Officials Career Concerns9 / 14

31. An Example: Procurement Agency Procurement official’s tasks: low price and high quality of products price dimension: easy to make comparisons and construct objective measures quality is not perfectly measurable Therefore, officials’ remuneration should, in principle, be sensible to performance price dimension and not sensible to quality dimension Strategic official: works to acquire products with excessively low price tension between price and quality: it may hurt quality Bottom Line: making officials’ remuneration sensible to price dimension can reduce quality of goods and service acquired by the goverment. Any hope? Any other incentive scheme? Klenio Barbosa (EESP-FGV)Officials Career Concerns9 / 14

32. Career-Oriented Public Officials Career concerns may lead public officials to make good decisions. Existence of possible career path for public officials are important to motivate them: existence of promotions in the public sector: based on subjective and objective measures job prospective in the public institution or private sector: reputation higher levels (high salary) with fewer position than lower levels: tournaments Klenio Barbosa (EESP-FGV)Officials Career Concerns10 / 14

33. Career-Oriented Public Officials Career concerns may lead public officials to make good decisions. Existence of possible career path for public officials are important to motivate them: existence of promotions in the public sector: based on subjective and objective measures job prospective in the public institution or private sector: reputation higher levels (high salary) with fewer position than lower levels: tournaments Klenio Barbosa (EESP-FGV)Officials Career Concerns10 / 14

34. Career-Oriented Public Officials Career concerns may lead public officials to make good decisions. Existence of possible career path for public officials are important to motivate them: existence of promotions in the public sector: based on subjective and objective measures job prospective in the public institution or private sector: reputation higher levels (high salary) with fewer position than lower levels: tournaments Klenio Barbosa (EESP-FGV)Officials Career Concerns10 / 14

35. Career Concerns: Job Prospective Outside Public Sector The availability of jobs in private sector is subtle: Positive Effect: A perspective of better jobs in private institutions (recognition, good image and reputation for the work done in the public sector) motivates civil servants, attracts and retains good people in the public sector. Negative Effect: A public official which takes too strong a hand in controlling contractor activity, he might be damaging his opportunity for a future career working for the supplier: Revolving door issue! Lack of the studies on the benefits and costs of career-oriented officials Klenio Barbosa (EESP-FGV)Officials Career Concerns11 / 14

36. Career Concerns: Job Prospective Outside Public Sector The availability of jobs in private sector is subtle: Positive Effect: A perspective of better jobs in private institutions (recognition, good image and reputation for the work done in the public sector) motivates civil servants, attracts and retains good people in the public sector. Negative Effect: A public official which takes too strong a hand in controlling contractor activity, he might be damaging his opportunity for a future career working for the supplier: Revolving door issue! Lack of the studies on the benefits and costs of career-oriented officials Klenio Barbosa (EESP-FGV)Officials Career Concerns11 / 14

37. Career Concerns: Job Prospective Outside Public Sector The availability of jobs in private sector is subtle: Positive Effect: A perspective of better jobs in private institutions (recognition, good image and reputation for the work done in the public sector) motivates civil servants, attracts and retains good people in the public sector. Negative Effect: A public official which takes too strong a hand in controlling contractor activity, he might be damaging his opportunity for a future career working for the supplier: Revolving door issue! Lack of the studies on the benefits and costs of career-oriented officials Klenio Barbosa (EESP-FGV)Officials Career Concerns11 / 14

38. Career Concerns: Job Prospective Outside Public Sector The availability of jobs in private sector is subtle: Positive Effect: A perspective of better jobs in private institutions (recognition, good image and reputation for the work done in the public sector) motivates civil servants, attracts and retains good people in the public sector. Negative Effect: A public official which takes too strong a hand in controlling contractor activity, he might be damaging his opportunity for a future career working for the supplier: Revolving door issue! Lack of the studies on the benefits and costs of career-oriented officials Klenio Barbosa (EESP-FGV)Officials Career Concerns11 / 14

39. Procurement and Rent-Seeking: The Case of Paraguay Auriol, Flochel and Straub (2011) Findings: firms selling more to the public sector have higher profit margins best potential entrepreneurs towards rent sectors, distracting them from innovative or export-oriented ventures, it generates a serious misallocation of talents issue across the economy. Straub’s research project: Aim: to study the impact of distortions in public procurement on entrepreneurship in Paraguay Data: Specific survey that measures of differential efficiency across public providers Klenio Barbosa (EESP-FGV)Officials Career Concerns12 / 14

40. Procurement and Rent-Seeking: The Case of Paraguay Auriol, Flochel and Straub (2011) Findings: firms selling more to the public sector have higher profit margins best potential entrepreneurs towards rent sectors, distracting them from innovative or export-oriented ventures, it generates a serious misallocation of talents issue across the economy. Straub’s research project: Aim: to study the impact of distortions in public procurement on entrepreneurship in Paraguay Data: Specific survey that measures of differential efficiency across public providers Klenio Barbosa (EESP-FGV)Officials Career Concerns12 / 14

41. Procurement and Rent-Seeking: The Case of Paraguay Auriol, Flochel and Straub (2011) Findings: firms selling more to the public sector have higher profit margins best potential entrepreneurs towards rent sectors, distracting them from innovative or export-oriented ventures, it generates a serious misallocation of talents issue across the economy. Straub’s research project: Aim: to study the impact of distortions in public procurement on entrepreneurship in Paraguay Data: Specific survey that measures of differential efficiency across public providers Klenio Barbosa (EESP-FGV)Officials Career Concerns12 / 14

42. Procurement and Public Officials Career Concerns On going project by Barbosa and Straub (2015?), and IPEA Aim: empirically to investigate the link between public officials’ experience and career path and public procurement contracts. Data: From Brazil identify how purchase administrators’ career paths (past experience in the public or private sectors) determine procurement outcomes Questions: Does previous experience of public officials, as administrator in the public or private sector, improve procurement outcomes? Does the performance of the public officials as public administrator, measure by the procurement outcomes, determine their subsequential career path in the public or private sector? Is there any evidence of the so-called “revolving doors” ? Klenio Barbosa (EESP-FGV)Officials Career Concerns13 / 14

43. Procurement and Public Officials Career Concerns On going project by Barbosa and Straub (2015?), and IPEA Aim: empirically to investigate the link between public officials’ experience and career path and public procurement contracts. Data: From Brazil identify how purchase administrators’ career paths (past experience in the public or private sectors) determine procurement outcomes Questions: Does previous experience of public officials, as administrator in the public or private sector, improve procurement outcomes? Does the performance of the public officials as public administrator, measure by the procurement outcomes, determine their subsequential career path in the public or private sector? Is there any evidence of the so-called “revolving doors” ? Klenio Barbosa (EESP-FGV)Officials Career Concerns13 / 14

44. Procurement and Public Officials Career Concerns On going project by Barbosa and Straub (2015?), and IPEA Aim: empirically to investigate the link between public officials’ experience and career path and public procurement contracts. Data: From Brazil identify how purchase administrators’ career paths (past experience in the public or private sectors) determine procurement outcomes Questions: Does previous experience of public officials, as administrator in the public or private sector, improve procurement outcomes? Does the performance of the public officials as public administrator, measure by the procurement outcomes, determine their subsequential career path in the public or private sector? Is there any evidence of the so-called “revolving doors” ? Klenio Barbosa (EESP-FGV)Officials Career Concerns13 / 14

45. Procurement and Public Officials Career Concerns On going project by Barbosa and Straub (2015?), and IPEA Aim: empirically to investigate the link between public officials’ experience and career path and public procurement contracts. Data: From Brazil identify how purchase administrators’ career paths (past experience in the public or private sectors) determine procurement outcomes Questions: Does previous experience of public officials, as administrator in the public or private sector, improve procurement outcomes? Does the performance of the public officials as public administrator, measure by the procurement outcomes, determine their subsequential career path in the public or private sector? Is there any evidence of the so-called “revolving doors” ? Klenio Barbosa (EESP-FGV)Officials Career Concerns13 / 14

46. Procurement and Public Officials Career Concerns On going project by Barbosa and Straub (2015?), and IPEA Aim: empirically to investigate the link between public officials’ experience and career path and public procurement contracts. Data: From Brazil identify how purchase administrators’ career paths (past experience in the public or private sectors) determine procurement outcomes Questions: Does previous experience of public officials, as administrator in the public or private sector, improve procurement outcomes? Does the performance of the public officials as public administrator, measure by the procurement outcomes, determine their subsequential career path in the public or private sector? Is there any evidence of the so-called “revolving doors” ? Klenio Barbosa (EESP-FGV)Officials Career Concerns13 / 14

47. Procurement and Public Officials Career Concerns On going project by Barbosa and Straub (2015?), and IPEA Aim: empirically to investigate the link between public officials’ experience and career path and public procurement contracts. Data: From Brazil identify how purchase administrators’ career paths (past experience in the public or private sectors) determine procurement outcomes Questions: Does previous experience of public officials, as administrator in the public or private sector, improve procurement outcomes? Does the performance of the public officials as public administrator, measure by the procurement outcomes, determine their subsequential career path in the public or private sector? Is there any evidence of the so-called “revolving doors” ? Klenio Barbosa (EESP-FGV)Officials Career Concerns13 / 14

48. Procurement and Public Officials Career Concerns On going project by Barbosa and Straub (2015?), and IPEA Aim: empirically to investigate the link between public officials’ experience and career path and public procurement contracts. Data: From Brazil identify how purchase administrators’ career paths (past experience in the public or private sectors) determine procurement outcomes Questions: Does previous experience of public officials, as administrator in the public or private sector, improve procurement outcomes? Does the performance of the public officials as public administrator, measure by the procurement outcomes, determine their subsequential career path in the public or private sector? Is there any evidence of the so-called “revolving doors” ? Klenio Barbosa (EESP-FGV)Officials Career Concerns13 / 14

49. Thank you !!!! Klenio Barbosa Sao Paulo School of Economics - FGV Fundação Getulio Vargas klenio.barbosa@fgv.brv Klenio Barbosa (EESP-FGV)Officials Career Concerns14 / 14