The Responsible Contract Manager: Protecting the Public Interest in an Outsourced World

8. Performance Measurement and Performance Management

145 Chapter 8 Performance Measurement and Performance Management CONTRACTED SERVICES require government workers to develop a whole new set of skills including contract design, negotiation, program monitoring, and evaluation. Sophisticated information systems are also needed to provide the performance measures and evaluation programs that are essential to effective contract management. This chapter explores the theory and practice of performance management and information technology in the context of outsourcing public service delivery. We discuss the use of government strategic planning and information-based performance management to plan and manage private contractors performing public tasks. While information systems are critical to the management of in-house organizational activities and units, we believe they are even more important in managing the work of contractors. Performance Management Challenges Posed by Organizational Networks Although well-managed, dynamic organizations find themselves undergoing constant change, two factors do not change—the need for management direction and the demand for accountability. While mayors and commissioners might try to blame a bad result on an inadequate contractor , that argument is generally not accepted by the public, especially over the long term. When programs are implemented by a variety of organizations that form a network, issues of communication, coordination, and direction are generated. Organizations within the network need to learn what tasks they are to perform, when they should perform them, the objectives they are 146 Chapter 8 attempting to achieve, the customers they are being asked to serve, and the information they must provide to the agency they are working for. This requires extensive contact and information exchange. When members of the network are contractors, the agency contracting for the work does not perform the tasks in question, but it should determine what tasks must be performed, by whom, at what time, and for what purpose. The agency must learn whether the tasks have been performed and what outputs and outcomes the tasks have generated. It must coordinate the actions of numerous contractors and, where contractors must interact, ensure that the interaction is working as designed. When noncontractual members of a network are involved in program implementation, the public agency may need to provide incentives and services to encourage network members to provide data to the performance measurement system. Organizational networks, when they run well, can be more efficient and effective for some functions than can vertically integrated hierarchical organizations . However, they must be managed, and such management is not cost-free or easy. It requires an innovative type of management that relies on new and additional mechanisms for communicating to and influencing the behavior of external organizations. Often contract instruments must be used to exercise influence: for example, linking payment schedules and bonuses to performance. To receive these incentives, vendors must perform in certain specific ways, and they must also provide the lead agency with information on their performance. A performance-based contract cannot function without accurate and verified information about contractor performance. Performance Management In addition to the data we present in chapter 1, a number of researchers have noted the trend over the past decade for state and local governments to contract out, or outsource to private and particularly nonprofit organizations , many of the services previously delivered by civil servants (Sclar 2000; Cohen and Eimicke 2002; Avery 2000; Butcher 1995; Forrest 1993). Forrest notes that agencies have thus been transformed “from direct providers to monitoring, regulation, and contract-enforcing agencies” (1993, Performance Measurement and Performance Management 147 51). He emphasizes the importance of new management skills necessary to guide these organizations that now have a networked contractor structure rather than the traditional hierarchical service delivery structure. Forrest regards the increase in emphasis on performance monitoring as part of the process of contract specification and oversight necessary in these new structures (1993). Martin and Kettner cover the process of performance measurement in human service agencies and programs in some depth (1996). They define performance measurement as the regular collection and reporting of information about the efficiency (inputs/outputs), quality, and effectiveness (outcomes) of programs (1996, 3). They argue that the chief reason to adopt performance measurement in human services is to improve the management of those programs by supplying agencies with information about who their clients are: their demographic characteristics; their service requirements; the amount, quality, and level of service received ; and the outcome of receiving the service. Performance measures keep managers informed about how their program is doing and assist in oversight. Performance measures...