Organizational Design

1. Organizational Design

2. Public Bureaucracy/Monopoly’s Failures • “Management by Rules” • Weak incentives to maximize efficiency • Weak incentives to maximize quality • Service provider/service overseers determine recipient preferences, not recipients

3. Basic Organizational Design Correctives • Decentralization • Deregulation • Reinvention Laboratories • Opting Out or Chartering • Waiver Policies • Site-Based Management • Decentralizing Administrative Systems

4. Basic Organizational Design Correctives continued • Monopoly Regulation • Regulated Monopoly Provision • Enterprise Management • Performance Management • Benchmarking • Contracting • Privatization

5. Contracting’s Drivers and Appeal • Potential Benefits • Efficiency • Economy • Effectiveness • Innovation • Drivers • Private Ownership of the Residual • Competition • Scale • Capacity / Competency

6. Contracting’s Pitfalls • Trading Public Monopolies for Private Monopolies • Service Failure/Discontinuity • Fractured Accountability and Political Patronage Abuse • “Hollowing” of the State

7. Phases of Contracting • The “Make or Buy” Decision • Bidding and Selection Process • Managing Service Provision under Contract

8. Traditional Approaches to Public Sector Contracting Production Costs $ $$$ BUY Core Peripheral Strategic Competency Public Value

9. Transaction Costs – Costs to Management “The comparative costs of planning, adapting, and monitoring task completion under alternative governance structures...(Williamson, 1981)”

10. Sources of Transaction Costs • Service Specific Characteristics • Asset Specificity • Ease of Measurement • Market Conditions • Thin versus Competitive • Vendor Type • Public, Nonprofit, Private Firm

11. Service Characteristics and Contract Risks

12. Service Characteristics and Contract Risks

13. Contracting’s Correctives • “Make” Rather Than “Buy” • Increased Contract Management Capacity (e.g. coordination, monitoring) • Joint Service Delivery • Nonprofits/Other Governments over Private Firms • Market Stimulation/Maintenance

14. Shuttle Case • Does contracting involve high transaction costs? What are the specific risks of contract failure? • What role does contracting play in the explosion? • If contracting plays a role, what steps are available to improve contract performance or should NASA “make” rather than “buy”? • What are the consequences for NASA of “making” rather than “buying”?