1. Second Budget Reform Seminar, Maputo, Mozambique
Decentralising public functions to public agencies, entities and bodies: benefits, pitfalls and management
Olaf Merk
OECD
Second Budget Reform Seminar, Maputo, Mozambique

2. Structure of presentation (1)
Definitions
Arguments in theory
Evidence in practice
Conditions

3. Structure (2): put differently
What are we talking about?
Why could it help?
What are the international experiences?
Under what conditions can it work?

4. Definitions (1) Decentralisation Spatial deconcentration
Functional deconcentration
Market-type mechanisms:
Outsourcing
Public private partnerships
Vouchers

5. Definitions (2) Common objectives Interconnectedness
Focus of this presentation: functional deconcentration and outsourcing

6. Definitions: deconcentration (3)
Ministerial departments
Departmental agencies
Public law administrations
Private law bodies

7. Arguments deconcentration (1)
Most important ones:
Efficiency
Independence from politics (conflict of interests, supervision)

8. 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

9. Arguments deconcentration (3)
Other arguments:
More expertise
More interaction with society
Build an own identity

10. 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

11. Evidence deconcentration (2)

12. Evidence deconcentration (3)
Concerns:
Efficiency?
Intransparency
Accountability
Non-performance
Undiagnosed non-performance
Corruption

13. Evidence deconcentration (4)
Other concerns:
Built-in resistance to change
Consistency with national context
Robustness

14. 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)

15. Conditions deconcentration (2)
Institutional framework:
Sound legal system
Sufficient administrative capacity at ministries
Sufficient control mechanisms
Phasing in

16. Conditions deconcentration (3)
Organisational features:
Clear goals, no overlapping functions
Measurable services (output/outcome)
Cost price model
Evaluation

17. Defining outsourcing Different sorts: Blue collar support services
High technological support services
Core government tasks

18. Arguments outsourcing
Reduction of costs
Access to expertise
Substitute poor government service

19. Evidence outsourcing (1)

20. Evidence outsourcing (2)
Cost savings: - US: 33% - Australia: 15-20% - Denmark: 5-30% - Iceland: 20-25% - UK: 25%
Service improvements: - US: 25%

21. 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

22. Conditions outsourcing (1)
Institutional framework:
Sound legal system (effective contract enforcing)
Competitive supplier markets

23. Conditions outsourcing (2)
Organisational features:
Building up commercial skills (HRM implications)
Clear description of output/outcomes
Defining equal treatment criteria
Redress mechanisms

24. 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