Government Executive - Authors - Alasdair Roberts

Good Intentions, Bad Idea

David Van Slyke and Alasdair Roberts — Wed, 15 Aug 2007 00:00:00 -0400

Unlike the military institutes, the public service academy concept is flawed from the start.

It's not easy to knock H.R. 1671 and S. 960, the House and Senate bills that would establish the U.S. Public Service Academy. The bills have drawn bipartisan support and endorsements from two presidential candidates-Sens. Hillary Clinton and Joseph Biden. And the proposal addresses a real problem: the shortfall in talented people interested in working for federal, state and local government. Still, it's a badly flawed concept.

The idea is based roughly on the armed services' pioneering U.S. Military Academy, established in 1802. The Public Service Academy would recruit talented high school graduates, provide a liberal arts education with emphasis on leadership and public service, and arrange placement in a public sector job. The education would be free for students who complete five years of public service.

One critical weakness of the plan is its determination to establish a government-run facility to provide a service already available at dozens of universities. Remember the famous Yellow Pages test, which says that government shouldn't make something if multiple providers already are listed in the phone book? The proposal flunks that test. The National Association of Schools of Public Affairs and Administration has accredited more than 150 undergraduate and graduate programs in the field. Several of those schools would take exception to the claim in H.R. 1671 and S. 960 that America lacks "national institutions" to promote public service.

As scholars and teachers in public administration, we know that government agencies make a critical contribution to the public interest. But we also know there are certain tasks that bureaucracies don't perform particularly well. Running a liberal arts university is one of them.

As the legislation now stands, there would be extraordinary pressure on Public Service Academy administrators to make research and teaching conform to short-term priorities. This is apparent with the proposal's emphasis on security concerns. The academy would be located in the Homeland Security Department, and the DHS secretary would be the only permanent member of its oversight board. National security is the only substantive criterion mentioned in the bills that would guide decisions about placement of graduates in the federal government.

Put aside the wisdom of entrusting a leadership academy to the department that ranks lowest in surveys on workplace satisfaction. How would the rest of the federal bureaucracy-including departments such as Health and Human Services, Interior or Education-be served by this security-oriented agenda? Is a military approach to education, including a requirement that students wear uniforms to classes, likely to produce leaders who would be well-suited for other sectors of government?

And then there is the problem of inflexibility. Suppose academy administrators decide a few years from now that experience and changing circumstances require an adjustment in curriculum. Any university administrator can tell you that such adaptation is a necessary but difficult task. Their problems would pale, however, next to the predicament of the academy's managers, who would find that key elements of the curriculum are cemented in an act of Congress.

Another critical weakness of the plan is the technique for encouraging graduates to stick with the public sector. It holds graduates liable for the cost of their education until they have completed five years of service. After that, the alumni would be on their own in developing a career path. There is nothing that parallels the system of advancement in the military. There is no plan for more challenging assignments and no path to posts at the highest levels of government.

We've already seen well-intentioned recruitment programs fall short of their potential because of the failure to undertake such long-term planning. According to human capital experts in government, there has been no systematic tracking of the 3,000 alumni of the Presidential Management Fellows program. There is a significant initial investment in recruits, but the government fails to nurture that investment in later years.

This is a sharp contrast to the military academies, which are part of a much larger system for identifying and grooming leaders. Officers are consciously given challenging assignments and clear signals about performance and progress. There is a path for advancement to the highest ranks.

Moreover, officers know that two decades of service will result in a generous pension. We don't advocate similar entitlements for civilian employees. We simply note that the incentives for graduates of military academies to stick with public service are far stronger than they would be for alumni of the Public Service Academy.

The House and Senate should be commended for their efforts to address the human capital crisis. But let's apply a 21st century solution. We can leverage the capabilities of many institutions already engaged in public service education. For example, we could consider an ROTC-style plan to reimburse tuition for students in existing degree programs. We could encourage curriculum en-hancements, such as short-term postings and internships in public sector jobs. And we could use technology to allow leading scholars and practitioners to instruct students on standardized components of the curriculum.

Of course, we need to go further. We must build stronger incentives for individuals to remain committed to public service-through career development, competitive salaries for critical posts and reduced reliance on political appointees at the apex of government.

This approach would give us more than another national institution. It would create a robust but flexible network of researchers, teachers and students committed to public service leadership.

Professors of public administration at Syracuse University's Maxwell School, David Van Slyke (www.vanslyke.info) is the Birkhead-Burkhead Professor of Teaching Excellence and Alasdair Roberts (www.aroberts.us) received the 2006 NAPA book award.

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Lockbox Government

Alasdair Roberts — Mon, 01 May 2000 00:00:00 -0400

letters@govexec.com

ast year, the Clinton administration unveiled a proposal to protect the Social Security and Medicare trust funds as baby boomers retire in the coming decades. Over the next 15 years, Congress would set aside $3 trillion in general revenues to pay down debt and increase trust fund assets.

The Clinton plan is an ambitious attempt to shape spending decisions by the next seven Congresses. Borrowing a term more commonly used by bankers, Clinton said his law would create "a true lockbox." Through changes to budgeting laws, the $3 trillion would be segregated so that future Congresses couldn't use it for other purposes.

Clinton's proposal is the most recent and dramatic illustration of a broad new trend: lockbox government. Around the world, policy-makers are finding innovative ways to protect public programs from pressure for continued cutbacks to government spending. Key activities-and whole agencies-are being excluded from normal budget processes and given the protection of long-term funding guarantees.

Lockboxing sometimes disguises itself as government reinvention. In fact, it's quite different. Reinventors believed that government could "work better and cost less." Proponents of lockboxing think they know better. They've seen the real costs of retrenchment: a weakened civil service, eroding infrastructure and diminished capacity to undertake long-term planning. Lockboxing doesn't just try to manage budget cuts and downsizing. It tries to avoid them in the first place.

The problem is that there is something anti-democratic about reforms that limit the ability of future legislatures to allocate scarce budget dollars. Creating financially free-standing agencies could also weaken legislative oversight. And there may be unfairness in the process of deciding which parts of government should get lockbox protection.

On the other hand, lockboxing might be the only way to ensure that critical federal functions get the attention they deserve. Cash-strapped governments around the globe have an unhealthy tendency to give short-term interests top priority. Lockboxing is an imperfect way of ensuring that long-term interests-such as development of critical infrastructure-get appropriate treatment.

Few REGO Reductions

For many governments, the 1990s were the decade of reinvention. The reinventing government, or REGO, movement went by different names in different countries, but always emphasized the themes outlined by David Osborne and Ted Gaebler in their 1992 book, Reinventing Government (Addison Wesley): reduction of red tape, accountability for results rather than compliance with procedures, and greater reliance on markets for provision of services.

Reinventors had something else in common: They rejected the idea that budget deficits demanded a reduction in government services. Osborne and Gaebler complained that politicians were fixated on "the same old options: fewer services or higher taxes." They argued that REGO would produce "dramatic increases" in efficiency that would avert service reductions or tax hikes.

Osborne and Gaebler weren't the first to claim that there was a "third choice" for governments. Ten years earlier, the Grace Commission said it could finance the Reagan-era defense buildup by reducing inefficiency in the federal government. But the reform effort failed. Critics complained that the commission had concocted "fantasy figures." Commission members blamed Congress for failing to act on their proposals.

REGO seemed more promising. Osborne pointed to other national governments that had achieved dramatic savings. He claimed that the United Kingdom had reduced its civil service by one-third while "dramatically improving performance." New Zealand was said to be doing more with half the staff. The Clinton administration took note, launching a reform effort-the National Performance Review-that would make the United States government "work better and cost less."

The Clinton administration's faith in the power of REGO to save money became clear in 1994, when it launched the new Violent Crime Reduction Trust Fund. The administration said that the $30 billion fund, intended to pay for new law enforcement and crime prevention programs, would be financed by eliminating 252,000 positions in the federal civil service. The President promised that the reduction didn't imply "cutting other services"-only eliminating "unnecessary layers of management and nonessential staff."

The promise was never realized. Although the size of the federal workforce dropped sharply, most of the reductions came in the Defense Department as a result of cutbacks in military capabilities after the end of the Cold War. In other words, the government was saving money the old-fashioned way-by doing much less. The General Accounting Office found that the personnel cuts had also eroded capabilities in non-Defense departments.

The administration's 1996 proposal to establish performance-based organizations (PBOs) within the federal government was a second statement of faith in the power of REGO. Administration spokesmen said that the PBO plan had "huge potential," noting that the British government had used a similar reform to cut its civil service by one-third. Osborne suggested that the plan could produce savings of $25 billion a year-enough to fund a battery of new education programs.

Again, the promise wasn't realized. In four years, only two PBOs have been established-the Education Department's Office of Student Financial Assistance in 1998 and the Patent and Trademark Office in November 1999. Other efforts to start PBOs have been stymied by bureaucratic, union and congressional resistance.

In fact, there never was good reason to think the PBO plan would have produced the promised savings. In Britain and New Zealand, the government workforce was cut mainly by privatizing industries or reclassifying employees. The cost of running core government departments did not decline dramatically.

In the United States and other countries, REGO failed to provide much protection against increasing pressure to cut budgets. In a 1999 study, Paul Light of the Brookings Institution (a Government Executive columnist) concluded that ongoing efforts to downsize agencies and cut budgets had worsened the "quiet crisis" documented more than a decade earlier by a special commission on the public service. The Canadian and British governments also acknowledged problems in recruitment and retention of public servants.

The damage to human resources was matched by decaying infrastructure. Throughout the 1990s, governments tried to avoid politically sensitive cuts to essential services by reducing capital investment and operations and maintenance spending instead. In the United States, Canada and Britain, government investment-measured as a share of total spending-dropped to 40-year lows in the late 1990s.

Compounding these problems was a weakened capacity to undertake long-range planning as dollars became scarce, budget battles became more intense, and the outcomes of those battles less certain. In 1993, Vice President Al Gore suggested that Congress should adopt a two-year budgeting cycle and reduce appropriations earmarks so departments could plan more effectively. In reality, budget cycles became shorter: In only one of the last five years has the appropriations process been completed by the start of the fiscal year. Appropriations earmarks have proliferated as congressional leaders try to build majorities for contentious spending bills. This year, the biennial budgeting idea has won support from several key lawmakers, including House Speaker Dennis Hastert, R-Ill., but it still faces stiff opposition from some members of Congress.

Building Firewalls

Faced with the hard realities of retrenchment-a weakened civil service, eroding infrastructure and increased uncertainty-the federal government has begun to move beyond REGO. Rather than absorbing continuing budget turmoil, policy-makers are looking for creative ways to avoid it in the first place. They are opting out of traditional budget processes and building lockboxes instead.

The Violent Crime Reduction Trust Fund was a harbinger of things to come-but not for the reasons cited by reinventors. The fund was an effective method of constraining budget decisions over several Congresses. The 1994 law mandated a transfer of general revenues into the fund for six years, imposed conditions on how money in the fund could be spent, and excluded that spending from budget enforcement rules.

The violent crime fund was the first in a series of "firewalls" designed to protect spending in specific policy areas. New rules to restrict transfers from defense to non-defense discretionary spending were adopted by Congress in 1996 and were also included in the 1997 Balanced Budget Act. The 1998 Transportation Equity Act for the 21st Century (TEA-21) created a third firewall to protect federal highway and transit spending. The TEA-21 firewall actually mandated a minimum expenditure of $198 billion over six years, and provided for the spending level to rise along with increases in fuel tax revenues.

By 1999, proposals to establish many more policy firewalls had been floated. The Clinton administration wanted a new Children and Education Trust Fund to fence off $156 billion in additional spending. (The proposal has since been adopted by the Gore presidential campaign.) Sen. Patrick Moynihan, D-N.Y., proposed new guarantees for spending on medical education. Rep. Ron Klink, D-Pa., sought "explicit and stable funding" for programs that promote access to telecommunications services. And Rep. Don Young, R-Alaska, gained bipartisan support for his effort to build a firewall around programs financed out of the Land and Water Conservation Fund.

These efforts to break out of the traditional appropriations process are part of a long-term trend. The proportion of federal revenues earmarked for special or trust funds has increased substantially in recent years. At the same time, congressional discretion over the use of money collected in those funds has declined. GAO reports that the number of federal accounts with permanent appropriations authority almost doubled from 1987 to 1996.

The trend isn't limited to the United States. For years, the British Treasury resisted efforts to earmark revenues for specific purposes, arguing that earmarking limited its flexibility in budgeting. Recently, however, it's been losing the battle. Bowing to pressure from a tax-weary public, the Labour government has made a habit of promising that revenues raised from new taxes will be preserved for specific purposes. The erosion of Treasury influence is most obvious in the field of transportation policy. The Labour government says that revenue from new tolls and fuel taxes will be "ring-fenced" for improvements in roads and public transportation.

The Canadian government has found an even better way of making expenditure commitments on key policies: one-time endowments to independent organizations. In the last three years, it has transferred $7.3 billion to support longer-term spending by non-governmental agencies.

Agencies Opt Out

Policy firewalls typically protect spending in broad areas. In many countries, governments have also developed narrower, agency-specific lockboxes. Agency heads have been encouraged in these efforts by their clients, employees and legislators-who may disagree on many things, but agree on the need to protect agency funding.

Congress included a guarantee of future funding for the Food and Drug Administration in the 1992 Prescription Drug User Fee Act. The law allowed FDA to collect user fees from the pharmaceutical companies the agency regulates. Because of the new fees, FDA's budget increased by about 15 percent between 1992 and 1997, allowing the addition of almost 700 extra staff.

Proposed performance-based organizations have also attempted to buffer themselves against pressures on discretionary spending. The Patent and Trademark Office has tried to tighten control over fees collected for its services, which have increased substantially since 1990. Last year, Congress used $116 million of PTO's fee revenue to support other government programs. The House Judiciary Committee-echoing complaints from PTO, its clients and union representatives-says the temptation to divert PTO fees "has proved increasingly irresistible."

For several years, PTO's supporters pushed for a law to convert the agency into a government corporation-a step that would include better protection against diversion of fees. The PTO Efficiency Act adopted last November doesn't create such a corporation, but it does increase PTO's budget autonomy. It includes a provision allowing PTO to "exercise independent control" of its budget. Kim Muller of the International Trademark Association says he hopes this provision will "take PTO off the books of the Department of Commerce and help to block efforts to transfer the agency's money to unrelated programs." The law also gives PTO the power to retain all user fees it collects.

Supporters of another proposed PBO, the Federal Aviation Administration, have made similar attempts to opt out of the budget process. The agency, which operates the nation's air traffic control system and oversees an airport improvement grant program, is primarily funded through the Aviation Trust Fund, which draws most of its revenue from passenger ticket taxes. The fund received $10.1 billion in revenue in 1999, but only $8.2 billion was spent on aviation programs.

Critics say the diversion of trust fund revenues is contributing to an imminent crisis in air transport. In 1997, the National Civil Aviation Review Commission said that skyways would "succumb to gridlock" unless Congress changed "crippling budget rules" that prevent FAA from using money in the trust fund. The commission said that money collected in a revamped fund should be automatically appropriated to FAA, and that the agency should be exempted from discretionary spending caps-steps that would eliminate the need to "compete for funding with other modes of transportation and other government programs."

Several key legislators share the commission's concerns. Last October, the House aviation subcommittee suggested that inadequate spending was "the overriding reason" for the dramatic increase in flight cancellations and delays in 1999. Transportation Committee Chairman Bud Shuster, R-Pa., lobbied for new budget rules that would "put an end to the stealing of trust fund dollars." The new restrictions are included in the Aviation Investment and Reform Act for the 21st Century (AIR-21), approved by Congress in March.

A third proposed PBO-the St. Lawrence Seaway Development Corporation-also wants to change its mode of financing. The organization maintains locks on the St. Lawrence River and is financed through an annual appropriation from the Harbor Maintenance Trust Fund. The corporation has argued that it should be financed through an automatic annual transfer from the fund based on the volume of Seaway traffic.

Private Financing

Governments have found a third way of protecting critical expenditures: private financing of capital-intensive projects. Private financing is usually promoted as a technique for tapping the expertise of the private sector in building and managing infrastructure. However, it also serves a second purpose-forcing governments to make long-term commitments to spending on major assets.

Under private financing, businesses take over the traditional government role in financing, building and operating major assets. Cash-strapped governments don't need to make large initial investments in those assets or pay for ongoing operations and maintenance. Instead, governments make long-term contracts-often 20 or 30 years-to purchase services from the private sector.

Although private financing is most popular with state and local governments, the approach has also captured interest at the federal level. The Defense Department plans to privatize 1,700 of its utility systems and make long-term agreements to buy services from the new private operators of those utilities. DoD has also started pilot projects to determine whether private financing can be used to improve military housing. At its Fort Meade project, the department expects to make $2.1 billion in payments under a 50-year lease. In 1998, the Energy Department signed a contract that will oblige BNFL Inc. to invest $4 billion in construction of a tank waste remediation facility at Hanford, Wash. DOE made a 20-year commitment to pay BNFL a fixed unit price for processing waste at the new facility.

Some observers argue that such long-term commitments may shield the cost of keeping up federal facilities from the vagaries of the budget process. A 1998 study by the National Research Council concluded that agencies too often respond to budgetary pressures by stinting on operations and maintenance. (The backlog of maintenance for U.S. government facilities is estimated at tens of billions of dollars.) Lease payments-which are calculated to include O&M expenses-can't be skipped. Similarly, long-term agreements may provide a check against the tendency to cut new investment during periods of budgetary stress.

A Canadian report suggests private financing is an exercise of "political will" that overcomes the legislature's reluctance to make multi-year commitments on infrastructure spending. The British government has committed itself to 250 privately financed ventures, with annual payments that will exceed $5.5 billion by 2012.

The Best We Can Do?

Reinvention was supposed to give us a government that was lean and agile. Lockboxing may be giving us something else: governments that are actually less flexible, as "discretionary" spending becomes less and less discretionary.

For some critics, imposing these constraints on future governments may seem undemocratic. Removing agencies from the regular appropriations process may also rob legislators of an opportunity to hold agency officials accountable for policy decisions. If functions are spun off to private organizations, oversight could be weakened further. Important budget and operational information may no longer be available to legislators or the public.

Lockboxing can also distort spending priorities. Agencies are more likely to be protected from budget pressures if they can collect large fees from their clients, and if those clients have the political clout needed to create lockboxes. Functions with poorer and weaker constituencies may then bear the brunt of budget-cutting efforts.

Parts of government that don't produce concrete, easily measured outputs may also be at risk. Some critics suggest that an undue emphasis on private financing can skew investment to projects with easily priced benefits-such as transportation infrastructure-and away from projects that produce more distant and less certain benefits, such as education programs. Parts of government that produce no direct public services-such as policy offices-are also vulnerable.

Advocates of lockboxing say these complaints are exaggerated. They argue that the boards governing many new agencies actually promote accountability by giving clients a stronger voice. Legislation can also provide assurances that important agency information will remain publicly available.

The most powerful argument in favor of lockboxing is pragmatic. Critics of traditional budgeting arrangements argue that politicians can be myopic, with a habit of solving short-term budget problems by sacrificing long-term investment needs. Lockboxing strategies may ensure that critical infrastructure gets the attention it deserves during periods of budgetary stress.

A similar argument has already been used in many countries to justify the creation of independent central banks. Governments surrendered discretion over monetary policy because they could not resist the temptation to spur short-term growth at the expense of long-term price stability. Alan Blinder, a former vice chairman of the Federal Reserve Board, recently argued that the same logic could be applied to other parts of government as well.

This reasoning can't justify all recent experiments in lockboxing. It doesn't excuse attempts to opt out of traditional budgeting where there is no clear evidence of failure to make sensible long-term decisions. In some cases, however, lockboxing might be the right strategy: not exactly a model of democratic governance, but the best we can do in the circumstances.

Alasdair Roberts is an associate professor in the School of Policy Studies at Queen's University in Ontario, Canada. In 1999-2000, he is a fellow at the Woodrow Wilson International Center for Scholars in Washington.

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REGO Around the World

Alasdair Roberts — Fri, 01 Jan 1999 00:00:00 -0500

ive years after his National Performance Review began tackling the troubles of the U.S. government, Vice President Al Gore is broadening his aim. On Jan. 14 and 15, Gore will host his first international conference on public service reform.

The meeting on "Strategies for 21st Century Government: A Global Forum on Reinventing Government" will bring together 150 politicians, senior bureaucrats and academics from 45 countries. They'll convene for two days at the State Department to compare their experiences in making government work better and cost less.

The conference will be chaired by Gore but is sponsored by eight government and non-government organizations. The goal, says Elaine Kamarck of Harvard University's Kennedy School of Government, who is chairing the committee organizing the conference, is to "create a dialogue where people engaged in government reform can share their best practices and learn from each other." The event also will give Gore a chance to profile one of his key initiatives and claim a spot as a leader of the emerging international reinventing government ("REGO") movement.

The conference could also pose difficult challenges. It may be tough to find common ground between developing and developed countries, and old and new democracies. And comparisons are bound to be made. After five years, how does Gore's reinvention effort stack up to those overseas?

New Global Paradigm

Gore's conference will be the latest in a series of international meetings that have examined the global convergence of thinking about how to reform the public sector. A 1993 conference of 65 Commonwealth countries found a strong "common pattern" in management reforms. Many observers also saw evidence of convergence during a recent special session on public-sector reform held by the United Nations General Assembly, and in a meeting of member countries of the Organization for Economic Cooperation and Development in 1996. Former Office of Management and Budget Director Alice Rivlin, chair of the OECD meeting, says it revealed a "startling" similarity in international reform efforts.

A theme emphasized in these meetings--and likely to be noted during the January conference--is the common bundle of problems afflicting different governments. The outlook at the 1996 OECD meeting was bleak. Government's ability to maintain programs, participants said, is being squeezed by the cost of servicing public debt. Taxing and regulatory powers are being undermined by the ability of businesses and workers to jump borders. Meanwhile, special interest groups are ratcheting up their demands on government, and because of government's inability to provide high-quality services, citizen disenchantment is growing.

Outside the United States, the ideas touted as remedies for the current crisis are known as the "New Public Management," or NPM. British academic Christopher Hood coined the phrase in 1991. But there's a close resemblance between NPM and REGO. Both emphasize the need to prune non-essential programs, give managers more freedom to use resources wisely, focus on results rather than inputs, and rely more on the private sector for service delivery. Hood argues that NPM has become the "new global paradigm" for organizing government.

Advocates argue that NPM can produce dramatic improvements in public-sector performance, and even overall economic performance. New Zealand is a widely cited model of what NPM can do. Stuck in the economic doldrums throughout the 1970s, New Zealand undertook a series of dramatic public-sector reforms in the 1980s. (See "The Wonder Down Under," March 1997) Many state-owned industries were privatized. Remaining government departments were given broad freedom over human and financial resources. And top civil servants, now hired on short-term contracts, negotiate annual performance agreements.

University of Maryland professor Allen Schick, one of a growing number of American scholars who have studied New Zealand's reforms, says they have made the country's public sector "more effective, productive and responsive. There has been significant improvement in the quality of service provided to New Zealanders."

Many other countries are following New Zealand's lead. "NPM-oriented reforms have swept the world," says Lawrence R. Jones, a professor at the Naval Postgraduate School in Monterey, Calif. "While the pace of reform has varied widely, change is penetrating even to nations where little reform was anticipated."

Donald Kettl, director of the Brookings Institution's Center for Public Management, agrees. "This really is a truly global effort. There are enormous similarities in the questions that people are asking, and resonance in the strategies that people have tried."

More Than Just Talk?

Not everyone agrees that the world is converging on a new global paradigm. Skeptics say that advocates of reform overstate the consensus because it bolsters their case for reform at home. Furthermore, these critics say, there is a big gulf between what governments say and what they do.

Pakistan may illustrate the point. At the 1996 U.N. meeting, Pakistan was a booster of a new global paradigm, arguing that there was "a virtual consensus on guiding principles concerning public administration." But spokesman Khalid Aziz Babar added a healthy caveat: The consensus is mainly at the "conceptual level." Generic prescriptions, he warned, didn't always make sense given local conditions. In fact, Pakistan's own reform program includes new central controls to stamp out corruption and create a merit-based civil service. It may be exactly what's needed, but it's also at odds with the trend toward cutting central controls in the bureaucracies of many western democracies.

Other emerging democracies share Pakistan's problems. A recent report by the European Union criticizes Eastern European nations for slow progress in civil service reform. But the kind of reform that's said to be needed isn't a reduction in internal red tape. On the contrary, the EU's SIGMA project, which studies reform in Eastern Europe, is calling for stronger central coordination and control of personnel policies. It's considered essential to build professional, non-political workforces. Kamarck says the conference will take into account the "vast differences" in some aspects of national reform efforts. "Some countries are still dealing with setting up an honest civil service and a credible regulatory structure," she notes.

The case for a common paradigm may be strongest in the western democracies--but even here, there is significant variation. British academic Christopher Pollitt, a longtime observer of international reform trends, says much of continental Europe has been "distinctly lukewarm" about applying NPM-style reforms. Professor Frieder Naschold of Berlin's Social Science Research Center argues that the German public sector has "neglected the international trend toward reform." NPM, he says, is an "Anglo-Saxon" approach to reform, which has really taken hold in the English-speaking OECD countries--the United States, Britain, New Zealand, Australia and Canada.

Comparing Progress

For some observers, a key question may be: How does the United States' track record on reform compare to those of other national governments? It's a split decision. The Clinton administration has made slow progress in reforming basic government systems. On the other hand, it may be a model for innovations that don't depend on legislative changes.

Compare, for example, progress on reforming civil service laws and budgeting systems. Since 1988, New Zealand has implemented radical changes, giving department heads broad discretion over the use of human and financial resources. Britain has also given top managers more freedom on personnel and financial matters, although it hasn't gone as far as New Zealand. Many commentators suggest that this sort of internal deregulation has been the key to productivity improvements within these two governments.

The U.S. government, by contrast, hasn't made significant progress on reform of civil service laws. NPR's 1993 proposals for overhauling civil service rules got no further than draft legislation, which died after union leaders expressed their ardent opposition in June 1995. It's a similar story with budget reform. In 1993, NPR called for eliminating legislative restrictions on how agencies can spend appropriated money and on how many employees they may hire. Congress didn't adopt the suggestions.

Other countries have also gone further in reforming agencies that provide services to other parts of government. Ten years ago, Australia began breaking up the monopolies that its Department of Administrative Services once enjoyed over the supply of printing, accommodation and property management services. Canada and the United Kingdom went further, selling off their government printing offices. On the other hand, NPR's 1993 recommendations for similar changes to the U.S. Government Printing Office and General Services Administration haven't been fully adopted.

In fairness, it often is easier for other governments to make big changes in basic systems. All other English-speaking OECD countries have parliamentary systems of government, in which prime ministers and cabinets have more freedom to act decisively.

"The U.S. has adopted some of the most aggressive and ambitious and sweeping efforts compared to all the other nations," says Kettl. "It has launched more battles on more fronts than virtually any other country. On the other hand, our system of government makes it difficult to initiate and sustain that kind of change. By almost anybody's measure, we have a more complicated environment to work in."

Kamarck cites NPR's experiment with "performance-based organizations" to illustrate the challenges that confront U.S. reformers. The PBO initiative, unveiled by Vice President Gore in 1995, was based on a British experiment begun by Prime Minister Margaret Thatcher in 1988. The Thatcher government divided its big line departments into more than 100 smaller service delivery agencies. Each of these new "executive agencies" is focused on better-defined goals and has more freedom to experiment with new ways of doing work. David Osborne, co-author of Banishing Bureaucracy (Addison Wesley, 1997), calls the Thatcher experiment "a resounding success."

But the Gore initiative had less luck. By September 1998, only one PBO--the Education Department's Office of Student Financial As - sistance--had been established, and it wasn't even on Gore's list of PBO candidates. The critical difference between the two experiments is that the American plan required congressional approval, while the British plan required no legislative action at all.

Setting the Pace

Where legislative authorization isn't required, American reformers have made more progress. Kamarck says many foreign reformers have been impressed with NPR's success in promoting customer service within the federal bureaucracy. She points to an initiative begun in 1993 under which agencies were ordered to develop customer service standards and measure progress in achieving them. NPR reported in October 1997 that agencies had published 4,000 customer service standards.

The Social Security Administration is also becoming an internationally recognized benchmark for customer service, Kamarck says. An independent 1995 study rated SSA's 1-800 phone information service as one of the best in either the public or private sector. Since then, SSA has improved its response time on phone inquiries even further. In some cities, it has also begun taking applications for benefits on the 1-800 line, saving customers a time-consuming trip to an SSA field office.

Customer service will be one of the main themes at the January conference. "Serving citizens is something everyone has to cope with," say Kamarck. "It's a key to electoral stability." For example, South Africa's Department of Social Welfare recently overhauled its pension application process, replacing a centralized, paper-based system with one in which field workers take applications with laptop computers. The new system cuts processing time from months to weeks.

The Indian state of Madhya Pradesh responded to popular complaints about lack of access to education with a program that promised a teacher for any disadvantaged community that provided classroom space. In one year, 16,000 schools were established, enrolling 500,000 students. Both governments recently received awards in an innovations competition sponsored by the Commonwealth Association for Public Administration and Management.

The South African initiative also highlights the second major theme of the conference: the use of information technology to improve government performance. Again, it's an area where the U.S. government has achieved notable successes. One example that Kamarck says has attracted international attention is the Internal Revenue Service's Telefile program, a winner in the 1997 Innovations in American Government competition. Last year Telefile allowed more than 5 million Americans to file their 1040EZ forms by touch-tone phone. The National Park Service's new ParkNet Web site provides up-to-date information about campsite availability and allows customers to make reservations for some parks over the Internet.

The conference may also draw on the IT successes of other countries. One widely acclaimed example is the ServiceOntario project, a partnership between the Ontario government and IBM Canada that began in 1996. The project uses ATM-style kiosks located in malls to deliver a range of government services. IBM made the entire capital investment and recoups its costs through transaction charges. The project won an award for innovation from the Institute for Public Administration of Canada in 1997.

A project undertaken by the European Union gives an even more dramatic demonstration of the power of technology. The Infoville project will transform seven communities throughout Europe into electronic villages, whose residents can access government, educational and commercial services through fiber-optic intranets. Experiments in telemedicine are also planned. "This goes beyond improving service delivery to citizens," says Jack Pellicci, a vice president at Oracle Corp., which is providing software for the project. "This is about empowering citizens to do it themselves. It's service by the citizen."

Been There, Done That

Observers may see another potential roadblock at the conference: What seems like radical reform in other countries is already old news in the United States. Take, for example, the idea of contracting out work to the private sector. Since the early 1980s, the British government has adopted several programs that compel public agencies to outsource a fixed amount of their work every year. Other national governments have followed suit. In countries that have a tradition of strong, independent civil services, large-scale contracting-out is a radical change.

It's a different story in the United States, as Donald Kettl noted in his 1993 book, Sharing Power (Brookings Institution, 1993). Federal agencies have faced pressure to outsource commercial activities for decades. They've also grappled with the problem that follows the decision to contract out: how, in Kettl's words, to be "smart buyers" of services. The record of U.S. agencies is decidedly mixed, but other countries might be able to learn from their mistakes.

Another area in which the United States is a pioneer is results-oriented budgeting and management. Governments around the world have signed onto the idea that public agencies should be held accountable for outcomes, not inputs. But the United States is ahead of the pack, Kettl argues. "One of the things that distinguishes us is the really ambitious effort in the Government Performance and Results Act," he says. "No other government in the world has tried to go so far so fast." Or been at it for so long. American reformers have been working on the practical implications of a "results orientation" for 30 years. A lot has been learned about what can be measured, and what can't--and about whether good information about results actually changes budget decisions.

In some areas, however, other countries must follow their own paths. For example, consider the global phenomenon of privatizing government-owned industries. This movement has dramatically changed the shape of national governments and contributed to improved economic performance. Most of the 30 percent reduction in British public employment between 1979 and 1995 came from the disposal of government-owned industries. The current global sell-off of state-owned telecommunications operations--including the recent privatization of Spain's Telefonica and Brazil's Telebras--is radically transforming that industry.

Keeping Momentum

There is one point on which conference participants are likely to agree. If public-sector reform isn't handled carefully, it can be politically costly. The Labor Party government that began New Zealand's reforms was tossed out by voters in 1990. Two years later, citizens endorsed changes to the country's electoral system that make it almost impossible for any future government to implement such sweeping reforms. In Britain, citizen dissatisfaction with the national government increased throughout the tenure of Thatcher and her successor, John Major, also fueling a movement for electoral reforms to limit the power of future governments. In Sweden, the center-right government that attempted reforms after 1991 was removed by voters in 1994.

Faced with political risks like these, it's understandable that many governments undertake reform only when absolutely necessary. As officials noted during the 1996 OECD meeting, it often takes a crisis--such as the looming inability to repay foreign lenders--to spur governments to action. It was fear of hitting "the debt wall" that drove the Canadian government to implement large-scale public service reforms in 1994.

Today, many governments have their books back in order. The United States and Canada have recorded their first budget surpluses in 30 years. There's evidence that the sense of crisis that gripped governments--and chastened voters--has evaporated. Last fall's fight over the U.S. budget seemed very much like business as usual. Is there a risk that support for serious public-sector reform might also slacken?

Kamarck doesn't think so. "What's going to drive reform in the long run is not deficits or surpluses," she says. "It's the need to maintain international competitiveness. Competition creates a situation where you want to keep your state spending down, so you can free up capital for private-sector investment."

Kettl agrees. "The urgency may decline, but management issues don't just go away," he says. "We've had problems with the IRS, and they're not going to disappear. Every nation has problems like that."

The U.S. experience may also show other nations how there can be political benefits to public-sector reform efforts. Vice President Gore's REGO effort has become the longest-running attempt to reform the federal government this century. Unlike most of its predecessors, NPR has made an extraordinary effort to show publicly why reform is necessary and how it can improve government performance. NPR Deputy Director Michael Messinger notes that the current exercise also benefits from the sustained interest of Gore himself--a degree of political commitment that can serve as a model for other national reform efforts.

The organizers of the January conference say it's just the first step toward a new international emphasis in Gore's reinvention project. A Web site dedicated to international collaboration will be unveiled by Gore on the second day of the meeting. Follow-up sessions are already planned. "We hope that this will be the first of many conferences," Kamarck says. "We want to create an ongoing dialogue in the world about innovations in government."

Alasdair Roberts is an associate professor of public management at Queen's University in Ontario, Canada.

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Command Performance

Alasdair Roberts — Thu, 01 Aug 1996 00:00:00 -0400

ritain's Driver and Vehicle Licensing Agency (DVLA) used to be so badly run that it was a national joke. The agency, which handles millions of vehicle registrations and driver's licenses every year, sometimes took months to process applications. Drivers boasted they could go for years without DVLA noticing their renewal fees hadn't been paid.

That changed in 1989, when DVLA became Britain's first "executive agency." It was given more freedom to manage money and people. In return, the agency was expected to meet tough targets for service quality and compliance with the law. DVLA's new chief executive was paid a bonus based on meeting the targets.

DVLA's transformation has been remarkable. The agency adopted new technologies, reengineered work processes and rationalized field offices. Turnaround time for applications dropped dramatically, and the agency won an award for excellence in customer service. Compliance among drivers also improved. Moreover, DVLA achieved this with fewer resources: Its budget dropped by 10 percent between 1991 and 1995 and staffing fell by 15 percent.

Success stories like this inspired Vice President Al Gore's National Performance Review to propose similar reform in the U.S. government. In March, Gore unveiled a plan to convert service delivery activities to "performance-based organizations" (PBOs), that will be given more freedom in exchange for tougher accountability for results. By this fall, bills to establish several PBOs will be sent to Congress. More may follow later.

David Osborne, co-author of Reinventing Government, says the PBO plan holds enormous promise. The British experience seems to support that conclusion. But the British have also encountered big challenges in implementation that will probably be repeated here. And Congress has concerns about the impact of the PBO plan on its traditional oversight role.

Britain's 'Next Steps'

The British reforms that are the model for the PBO plan came out of a 1988 study by Sir Robin Ibbs, a senior adviser to Prime Minister Margaret Thatcher. Most work within the British civil service, Ibbs said, consisted of delivering services to citizens. But that didn't mean the civil service was good at it. Many managers lacked the skills needed to improve service, and there was little pressure to improve results. Furthermore, Ibbs argued, there were too many central rules that made it difficult for managers to improve service quality.

Ibbs' proposal, known as the Next Steps plan, was to dramatically change structures and incentives within the British civil service. Parts of government that were concerned mainly with service delivery would be set up as executive agencies that would be given more flexibility to do their work. Each executive agency would negotiate with its parent department an annual performance agreement include measurable targets for financial performance, efficiency and service quality. At the end of the year, each agency would report whether it had achieved those targets.

Ibbs also proposed new rules for hiring and paying the heads of executive agencies. Chief executives would be recruited through open competitions and appointed for a limited term, usually three years. They were to get yearly bonuses of up to 20 percent of base salary tied to their success in meeting annual performance targets.

The first executive agency, DVLA, was set up in 1988. By April 1996, there were 125 agencies, with 37 more candidates being considered. Officials expect that by the end of 1997, 75 percent of the British civil service will work in executive agencies. Agencies vary substantially in size, from the massive Social Security Benefits Agency, with a staff of 67,000, to the Wilton Park Conference Center, with a staff of 30. One-quarter of the executives recruited since 1988 have come from the private sector. Some of the old agency chiefs won the new chief executive positions.

Many observers credit the Next Steps plan for achieving large improvements in efficiency and service quality throughout the British civil service. The Social Security Benefits Agency, for example, now handles a workload that would have required 15,000 more employees in 1990.

The author of one study suggests that the publication of performance targets increases pressure on managers and sharpens legislative oversight of the agencies. "There is a clarity of accountability that is very real," DVLA's first executive, Stephen Curtis, told legislators in 1994. "It does make a difference." Curtis also credited the "genuine managerial freedom" that has been given to agencies.

The Next Steps reforms received support from some unexpected places. John Smith, former leader of the opposition Labor Party, endorsed the initiative in 1991. However, Labor's support has weakened as the Conservative government puts more emphasis on privatization and contracting out. A parliamentary committee reviewed the reforms in 1994 and called them "the single most successful civil service reform program of recent decades."

How The U.S. Plan Developed

The decision to pursue in the U.S. reforms based on the UK model was made last summer, after a meeting between Vice President Gore and Administration officials and David Hunt, the minister responsible for civil service in the British government.

The PBO plan marks a change of strategy for the National Performance Review (NPR). In its 1993 report, NPR proposed several reforms in laws governing the civil service, procurement, budgeting and administrative services. Although NPR has achieved important progress in some areas like procurement, many other governmentwide proposals haven't been adopted by Congress. The PBO plan, by contrast, takes an incremental approach. Flexibilities will be proposed for individual organizations, rather than government as a whole.

The decision to move ahead with PBOs was motivated by last year's debate over the future of the Commerce Department. The first PBO candidates come from Commerce. The PBO plan can be regarded as one element of the Administration's response to complaints that Commerce ought to be dismantled or largely privatized. The plan would give units within the department more independence in operational matters but would retain a policy-making and oversight role for Commerce's core staff.

Vice President Gore announced last September that Commerce's Patent and Trademark Office would be the first PBO candidate. In March, Gore revealed the names of seven more candidates, including the $6 billion-a-year Defense Commissary Agency. Additional candidates are also being considered. For example, NPR's 1995 report included a suggestion that the National Oceanic and Atmospheric Administration's Mapping and Charting Service be made into a PBO-style organization. And Occupational Safety and Health Administration chief Joseph Dear recently said that his organization might volunteer for performance-based organization status.

The PBO candidates announced so far account for only a small portion of the government's 2 million employees, but advocates say there's lots of room to expand the plan. John Koskinen, OMB's deputy director for management says "there are significant areas of the federal government that provide services which are stable and measurable and would benefit from the application of the PBO concept." John Kamensky, NPR's deputy project director, points out that roughly two-thirds of federal employees deliver services directly to the public or customers within government. Direct service agencies include large organizations such as the Veterans Affairs Department and the Social Security Administration.

How Much Freedom?

One of the two key proposals of the PBO plan is more freedom to tailor internal activities to suit the goals and circumstances of the organization. Commerce's National Technical Information Service (NTIS), a PBO candidate which provides online services for a range of government agencies, wants to speed up procurement for rapidly evolving computer systems. NTIS' director, Don Johnson, argues that personnel and budget flexibilities will allow the organization to serve clients more effectively.

One of the first challenges in developing the PBO plan has been deciding how much freedom to give PBOs, and what form that freedom should take. Managers in some PBO candidates have pushed for broad, legislative exemptions that would give flexibility in a range of areas, including personnel management, procurement, real property management, budgeting, fee-setting, staffing limits, printing and paperwork requirements. The aim is partly to escape laws that tie up line operations. However, some managers see such exemptions as a way of circumventing central agencies, such as OMB and OPM, that are perceived as slow or stingy in giving waivers under existing law.

For some managers, the model for reform was provided in the 1996 Transportation appropriation. The law, signed last November, gave the Federal Aviation Administration the freedom to design its own personnel and acquisition systems. A similar approach was taken in HR 2533, the administration's bill to establish the Patent and Trademark Office as a PBO. The bill was sent to Congress last fall.

This approach can generate strong opposition. The FAA exemptions were criticized by Sens. William Roth, R-Del., and John Glenn, D-Ohio, senior members of the Senate Government Affairs committee, who argued that the proposed exemptions provided no safeguards against contracting or personnel abuses. The Senate committee, and its House counterpart, also worry that PBO exemptions will chip away at governmentwide laws under their jurisdiction.

Reaction to the proposed exemptions for the Patent and Trademark Office has been harsh. In Congressional hearings last March, leaders of the agency's three unions opposed HR 2533, largely because of their concern over the proposal to exempt the agency from civil service legislation. Ronald Stern, president of the Patent Office Professional Association, said that the bill would "eliminate the underpinnings of the civil service system" and allow managers to "carry out their personal prejudices."

Although senior officials at OMB and OPM support the PBO plan, some staff in those agencies share concerns about giving PBOs broad legislative exemptions. They argue that some PBO candidates have neither made the case for broad exemptions, nor considered whether existing regulatory flexibility might meet their needs. One OMB official says he's "convinced that a large proportion of what people would like to do could be done with presently available flexibilities."

Central management agencies are now making an effort to show PBO candidates how much freedom they've already got under existing law. For example, OPM distributed a memo in March that outlined existing flexibilities, such as the right to increase pay under special circumstances. It held a workshop on flexibilities for PBO candidates in May. Other agencies are taking similar steps.

Where PBO candidates do propose legislation, it's unlikely to include broad exemptions like those given to FAA and proposed for PTO. Instead, two alternative approaches are being considered. In the personnel area, PBOs would be allowed to launch demonstration projects like those authorized in the 1978 Civil Service Reform Act. Some of the rules that restrict demonstration projects in the 1978 Act would be waived, but OPM's power to approve and supervise projects would be maintained, and unionized employees would be protected against dramatic changes.

The Office of Federal Procurement Policy is taking a slightly different approach. It has developed a menu of provisions that provide relief from existing procurement rules. Many of these provisions are based on proposals for governmentwide procurement reform that have not yet been adopted by Congress. PBO candidates would select those menu items that suit their needs.

Getting Results

Under the PBO plan, the trade-off for increased freedom is tougher accountability for results. The plan builds on the 1993 Government Performance and Results Act (GPRA), which requires agencies to develop annual performance plans and performance reports that establish and report on specific, measurable targets. Targets would be negotiated by each PBO and its parent department at the start of the year, and a large part of each PBO executive's pay would be tied to meeting those targets.

Target-setting sometimes fails when managers try to establish a definitive list of outcome measures for their programs. The British have taken a narrower, more practical approach. Annual performance agreements focus on a small number of measures that highlight aspects of agency work that need attention, such as processing time for benefit claims, or accuracy of agency decisions. Targets also focus on productivity and unit costs, or specify budget savings to be achieved in a year. Measures often change from year to year as agencies improve their understanding of what matters and their ability to collect performance information.

However, British experience has shown that making and enforcing performance agreements is not always easy. A 1994 study of the British reforms by French civil servant Sylvie Trosa endorsed the new system but reported that parent departments were sometimes frustrated by their inability to judge whether targets were tough enough. As a result, Trosa, observed, "most departments take the view that the game is to be more demanding than agencies."

There have been other problems, too. Trosa found that in the early years, departments leaned more on what could be measured than what really mattered. That meant more emphasis on financial targets than on service quality, if the agency did not have good systems for assessing service. Trosa also cited the example of a regulatory agency that was encouraged to focus on the number of enforcement actions, which could be easily counted, rather than industry compliance with the goals of the law.

GPRA's phase one pilot projects, which focus on the development of performance plans, have produced similar results. An OMB study completed last fall said that GPRA's pilot projects showed high-quality performance plans could be produced across government. But the study found "a significant number of pilot projects encountered substantial problems." It noted agency difficulties in defining measurable targets, a focus on measures that were unrelated to program goals, and difficulties in obtaining data needed to assess performance.

The administration wants to give teeth to the idea of accountability for performance by changing the way PBO executives are hired and paid. Its proposal for the patent office provides that the new chief executive officer would be hired on a six-year contract and could only be fired for failing to live up to the terms of the yearly performance agreement. The CEO's base pay would be $148,000, but an annual bonus of up to $148,000 could be awarded for hitting performance targets.

OMB's Koskinen calls this new way of hiring and paying executives "the main argument in favor of the PBO model." He notes that service delivery functions "often are run by political appointees who turn over in less than two years and often are more interested in policy formulation rather than management." Career executives, on the other hand, are "generally very good," but can't be dismissed if performance is "not bad but not great."

However, the PBO hiring and salary arrangements might be tough to implement. It isn't clear that Congress will tolerate a total salary package of almost $300,000. Advocates argue that the pay is lower than that of executives heading businesses of similar size. In addition, questions have been raised about the constitutionality of the administration's proposals for appointment and removal of the patent office chief executive. NPR's Kamensky says the Justice Department has approved the approach taken in the administration's PTO bill.

The bonus plan would also have to be handled carefully. The proposed 100 percent bonus is much larger than that paid to the heads of Britain's executive agencies. Unless the system for assessing performance and deciding on bonuses is perceived to be fair, and there are mechanisms for quickly resolving disagreements about bonuses, the plan could meet opposition. Similar concerns arose after the introduction of performance-based bonuses for Senior Executive Service members in 1978.

New Zealand's government, which uses performance-based pay for its department heads, tries to manage this problem by having a third party-its State Services Commission-make decisions about bonuses. Jonathan Boston, a professor of public policy at Victoria University at Wellington, has studied the New Zealand system, and says most executives like the performance-based approach, because it gives them clear annual objectives. Cabinet ministers, on the other hand, sometimes express frustration about the rigidity of the system and the time consumed in negotiating agreements.

Who's in Charge?

The administration's proposal to establish the patent office as a PBO was widely panned during Congressional hearings last September. All three of the agency's major user groups-the American Bar Association, the American Intellectual Property Law Association and the Intellectual Property Owners-opposed the proposal. User groups preferred an earlier bill introduced by Rep. Carlos Moorhead, R-Calif., that would establish the office as a conventional government corporation. Underlying the debate over the PBO proposal was a tussle for control. User groups believed that the administration's proposal would have given the Commerce Department too much power to meddle in patent office activities. Moorhead's bill would have given the office more independence. Its CEO would be confirmed by the Senate, and would have to consult with an advisory board of user representatives mostly appointed by Congress.

In May, the subcommittee that oversees the patent office decided to ignore the administration's proposal and report out Moorhead's bill. Administration officials protested, arguing the Moorhead measure undermined the Administration's ability to make policy in the intellectual property field. "The advantage of the PBO concept," OMB's Koskinen argues, "is that there is no doubt that the operating entity is still part of the department."

In June, the Administration warned that the Moorhead bill would be vetoed if changes weren't made to strengthen the Commerce department's power over the patent office. One amendment to clarify Commerce's role was made in a Judiciary Committee mark-up of the bill. Another amendment requiring yearly performance agreements between the CEO and the department will be introduced on the House floor.

The PBO plan is consistent with earlier NPR recommendations that also strengthened the administration's control over administrative activities. In fact, the history goes back further than that. Executive branch reformers have been using the British civil service as their model for most of this century. The British model, advocates argue, gives top managers more room to use resources efficiently and engage in long-term planning. The price, critics complain, is reduced legislative oversight and control over administrative activities.

The PBO plan may be modified to respond to these concerns. For example, Congressional committees might be given an opportunity to discuss annual performance agreements before they're finalized with PBO executives. None of the 132 independent agencies will be candidates.

Advocates of the PBO plan will also attack the argument that it diminishes Congressional control over departments and agencies. NPR's Kamensky says the administration's goal has not been to diminish oversight but to direct attention away from administrative details toward outputs and outcomes. Furthermore, proponents argue, the PBO approach will provide the information-in terms of performance targets and reports-that is needed to exercise effective control over PBOs.

Good Fences

The biggest difficulty confronting the UK's Next Steps agencies gets little public attention. It's the problem of setting and enforcing boundaries between parent departments and the executive agencies. The 1994 Trosa report called this "the most difficult challenge facing the Next Steps reform."

Executive agencies complain that parent departments interfere too much in agency activities, or refuse to give agencies the freedom they need to achieve their targets. In some cases, agencies haven't used the flexibility they've won because they fear angering the parent department and provoking more intervention.

Parent departments sometimes have good reasons for wanting to exercise tight control over executive agencies. They cite their obligation to coordinate policy or service delivery between agencies, worries about erosion of staff mobility within the department, or their responsibility to ensure that agencies use resources prudently and efficiently. Studies of similar reforms in other governments have found that parent departments sometimes worry that agencies will become loose cannons whose activities might embarrass the department's political head.

The problem of managing the department-agency relationship isn't a new one. A 1991 study of the British reforms suggested part of the difficulty might be a lack of clarity among parent departments about their role in the new system. Trosa suggested that interfering with agencies might be a natural response of parent departments threatened with substantial budget cuts and seeking to rationalize their own existence. The 1991 study proposed that senior civil servants within departments should be appointed to act as impartial arbitrators between departments and agencies. Trosa made the same recommendation.

The public also may pressure departments to intervene. The British Prison Service, set up as an executive agency in 1993, found this out last year. The service attracted controversy after two escape attempts by high-risk prisoners. There has also been debate about whether the service is too soft on dangerous offenders. Labor Party critics pressured the minister responsible for the Prison Service, Michael Howard, to tighten the reins on the agency.

Howard had a dilemma. When he argued that the problems were operational, and that agency managers should be given room to fix them, opposition party legislators criticized him for "passing the buck." When Howard tried to exercise tighter control, however, agency managers complained that he was violating the terms of the performance agreement. After months of controversy, Howard eventually fired the agency head, Derek Lewis, last October.

Lewis quickly announced he was suing Howard for wrongful dismissal. He noted that the Prison Service achieved all of its performance targets in 1995, and complained that Howard's interference undermined his ability to get work done. In March, the British government, wanting to avoid a lengthy public trial, announced it would not contest Lewis' lawsuit.

There are more than a hundred British CEO appointments, and Lewis is the first to sue for wrongful dismissal. The Prison Service was also a bad candidate for executive agency status, because of its high public profile and lack of consensus about the work it does. In March, NPR said it won't recommend PBO candidates that don't have "broad-based support from key stakeholders."

Rules or Culture?

Some critics are likely to argue that the PBO plan focuses too much on the rules that constrain line managers and not enough on the real barriers to change: managers with weak leadership skills and organizational cultures that kill initiative and innovation. In last summer's debate on the FAA exemptions, for example, Sen. William Roth, R-Del., argued that the organization's troubles were "a result of poor management," not legal constraints. Critics also point to a recent General Accounting Office examination of NPR's "reinvention labs" that suggests the importance of waivers as a prerequisite for reform is overstated.

PBO advocates don't deny that reform requires more than loosening the rules. Heads of the PBOs will have to work hard to retrain workers, build a service-oriented culture and encourage initiative. But proponents argue that attempts at cultural change will fail if rules make it impossible for employees to be innovative or responsive to customer demands.

Supporters of the PBO plan also emphasize the essential second element: a heavy emphasis on results. They argue that the PBO approach will force organizations to get better at specifying goals, measuring performance, and incorporating performance data into day-to-day decision making For people outside the executive branch-whether in Congress or the media- the PBO plan could make it easier to decide whether agencies are getting the job done.

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