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2. Managing incentives and risks pdg Partnership for Democratic Governance
administering services directly; lower levels of government previously mandated to oversee the direct provision of services; and frontline service providers such as health workers or teachers who sometimes enjoyed a high degree of discretionary powerpdg in their sector. Partnership for Democratic Governance
• Reluctance to enter into direct relationships with third-party service providers, particularly non-governmental and civil society organisations (NGOs and CSOs), with whom the government may have a history of mistrust and which it may see as political rivals. • Reduced opportunities for government officials to dispense patronage or to profit from rent seeking. This may particularly apply to those entities in government which previously administered the relevant functions directly. >TIP: An assessment of the incentives and counter-incentives for government should take into account the fact that government is not necessarily a homogenous entity; different stakeholders within government may hold different incentives, depending on their position. Assessing the balance of power and interests among these groups is essential to understanding how much support for contracting out exists within government (e.g. the Ministry of Planning, Ministry of Finance and line ministries), where that support lies, whose influence is going to have more bearing on the contracting out decision, and whether it will prove possible to contract out taking these elements into account.
Donor incentives and disincentives For donors, the positive incentives for governmentled contracting out may include the desire to: • Provide urgent services: contracting out can enable the state to provide or receive urgent services which it lacks the capacity to provide itself. • Develop state capacity: this is a priority for international donor engagement in fragile situations (OECD, 2008). • Enhance state legitimacy and accountability: citizens receive services and the state works in partnership with a range of service delivery agents, thereby reducing the possibility of conflict and/ or government collapse. • Increase government engagement in strategic planning, and enhance its supervisory role. • Increase government ownership of service delivery objectives. • Align donor support with government systems. • Provide services in remote geographical areas which the state cannot reach in the short term. • With performance-based contracts, provide assurance that public funding is being well spent since pre-identified outcome or outputs can be independently verified, thus reducing waste or inappropriate allocation of funds. OECD donor countries are committed to the Paris Principles on Aid Effectiveness and the Accra Agenda for Action (AAA), which emphasise the importance of government ownership of development processes and the alignment of donors’ initiatives with government policy. Nevertheless, donors may not always be in favour of financing government-led contracting out for the following reasons:
OECD PDG HANDBOOK ON CONTRACTING OUT GOVERNMENT FUNCTIONS AND SERVICES IN POST-CONFLICT AND FRAGILE SITUATIONS © OECD 2010