Managing for performance: Measurement and monitoring of contracts in the transit industry
| DOI | https://doi.org/10.1108/JOPP-16-02-2016-B003 |
| Pages | 208-242 |
| Date | 01 March 2016 |
| Published date | 01 March 2016 |
| Author | Olga Smirnova,Juita-Elena (Wie) Yusuf,Suzanne Leland |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 16, ISSUE 2, 208-242 SUMMER 2016
MANAGING FOR PERFORMANCE: MEASUREMENT AND MONITORING
OF CONTRACTS IN THE TRANSIT INDUSTRY
Olga Smirnova, Juita-Elena (Wie) Yusuf and Suzanne Leland*
ABSTRACT. Public agencies contract out to pursue a variety of goals. But,
these goals cannot be realized if the performance of contractors is not
assessed and monitored. This study examines the state of performance
measurement and contract monitoring in the U.S. transit agencies. We
focus on three research questions: (1) What monitoring capacity exists
within transit agencies? (2) What monitoring methods are used b y transit
agencies? (3) What performance measures are tracked by transit agencies?
We find monitoring units are common in a third of agencies in the study.
Service and customer com plaints are the most common performance
measures, while penalties and liquidated damages are the most frequent
form of penalties. Finally, we find that transit agencies utilize a variety of
output and outcome measures to monitor contractors.
INTRODUCTION
The last three decades have seen growing emphasis on
performance measurement and management as a mechanism for
ensuring accountability (Boyne, Gould-Williams, Law, & Walker, 2002;
Dubnick, 2005). More recently, interest in performance measurement
has been driven by a number of forces, such as increased citizen
distrust of government, taxpayer revolts, devolution of responsibility
---------------------------
* Olga Smirnova, Ph.D., is an Associate Pr ofessor, MPA Department of
Political Science, East Carolina Univer sity. Her research interest is in
economic development and performance measurement. Juita-Elena (Wie)
Yusuf, Ph.D., is an Associate P rofessor, School of Public Service, Old
Dominion University. Her research interest is in transportation policy,
infrastructure finance, and environmental policy. Suzann e Leland, Ph.D., is a
Full Professor, Department of Political Science and Pu blic Administration,
University of North Carolina at Charlotte. Her research interest are urban
policy and local government administration.
Copyright © 2016 by PrAcademics Press
MANAGING FOR PERFORMANCE: MEASUREMENT AND MONITORING OF CONTRACTS 209
to lower levels of government, legislative actions to manage spending,
and privatization (Poister, 2008). Yet, while privatization has
contributed to the call for greater accountability, it has complicated
efforts to use performance measurement as a tool.
The growth of contracting out services has led many agencies to
examine how they monitor their contracts in order to maximize their
effectiveness. Scholars have emphasized that when public services
are outsourced, their provision (and performance) needs to be
monitored. Regular tracking and monitoring is a key characteristic of
performance measurement. Public agencies contract out to pursue a
variety of objectives, including achieving cost savings, realizing greater
efficiency, managing risks, and improving service delivery. However,
such contracting may pose risks to government; in several American
examples, contracting has been marked by graft, corruption, and
concerns about service quality (Durant, Girth, & Johnston, 2009;
Keeney, 2007). Furthermore, the benefits of contracts cannot be
realized if the performance of contractors is not assessed and
monitored. Contracting out for services presents challenges to
performance measurement, due largely to information asymmetry and
the possibility of opportunistic behavior by private contractors
(Amirkhanyan, 2011). Government agencies must be smart buyers
and smart managers of contracts (Fossett et al., 2000; Kettl, 1993),
but research on the “hollow state” (Howlett, 2000; Milward & Provan,
2000; Milward, Provan, & Else, 1993) has raised concerns about
government’s ability to manage provision of contracted services.
Milward (1994) noted the irony of contracting in that it is promoted
as the solution to government inefficiency and mismanagement, but
can work well only if the government agency manages the process
effectively. Other researchers have similarly acknowledged the
importance of contract management, and contract monitoring
specifically. Gormley (1994) pointed to the need to monitor to “avoid
unfettered discretion” (p. 231) and to evaluate performance to ensure
that contracts provide the desired outputs and outcomes. Fossett et
al. (2000) suggested that, to be prudent purchasers, government
agencies must be able to specify performance measures, determine if
and how contractors are meeting performance metrics, and hold
contractors accountable for meeting the metrics by sanctioning them
for failure to perform. As Potoski noted, “The pressing question is no
longer whether government should purchase goods and services but
210 SMIRNOVA, YUSUF & LELAND
rather when to purchase and how to manage and regulate purchasing”
(2008, p. S58).
This study analyzes the current state of practice of contract
monitoring and performance measurement in the transit industry. We
utilize data from a survey of transit agencies in the U.S. to examine
contract monitoring practices, including monitoring capacity,
monitoring methods, and performance measures. To supplement the
survey findings and add more depth to our analysis, we also develop
profiles of contract monitoring and performance measurement
practices in ‘typical’ agencies.
CONTRACTING OF TRANSIT SERVICES
We believe that the transit industry provides valuable insight into
performance management of contracts because of the industry’s
contracting history. Public transportation was originally provided by
private companies and over time transitioned to a government-
dominated industry. Eventually, government entities began contracting
with private companies for the delivery of transit services.
State and local governments in the U.S. rely extensively on
contracting for public transit services (rather than in-house provision).
Data from the National Transit Database show that this trend began in
the 1980s, and today, over half of transit agencies contract out.
However, empirical evidence over the last several decades suggests
that cost-savings do not necessarily materialize automatically from
contracting out transit services (Leland & Smirnova, 2009; Perry &
Babitsky, 1986; Smirnova & Leland, 2014; Zullo, 2008). Smirnova and
Leland concluded that public agencies “should pay attention to
monitoring the performance of the contract and should also keep in
mind the challenges of liability, diminished capacity, and some loss of
control over daily operations that might occur during contracting out”
(2014, p. 362).
Nowhere is the reliance on contracting for complex tasks or
services more evident than in the delivery of transit services. In this
study, we examine contract monitoring and performance
measurement practices of transit agencies in the U.S. Specifically, we
focus on three questions:
(1) What monitoring capacity exists within transit agencies?
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