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PSC 211 Final: 211 Final Exam Guide

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University of Alabama
Political Science
PSC 211

PSC 211 Final Study Guide The Make or Buy Decision: Contracting Out ● Make decision ○ Production + provision ○ The government will produce a good/service and provide it to the public on their own ● Buy decision ○ Provision = supplying ○ Buying (contracting out) = government provides goods/services to citizens, but doesn’t produce ● Bidding processes ○ Sealed bids - most competitive between contractors ■ For low complexity and uncertainty ■ Bids are opened up by the agency (Invitation to Bid) ■ Lowest bidder receives contract ○ Multi-step bids ■ Bids opened up by agency ■ Bidders demonstrate capabilities in response to technical proposal (Request for Qualifications) ■ Responses are evaluated by agency and those deemed “responsive and responsible” are allowed to bid ■ Contract goes to lowest bidder ○ Sole-sourced/negotiated contracts - least competitive ■ Bids opened up by agency ■ Bidders demonstrate capabilities in response to technical proposal ■ Discussions are held with bidders whose responses were in “competitive range” ■ After discussions, bidders propose “last and final offer” ● Different contractors ○ For-profits ■ Have extensive expertise and resources to deliver services and acquire new contracts ■ Best to contract out to for-profits when services/goods require specific techniques, knowledge, or equipment ○ Affiliates of national non-profits (compare strengths and weaknesses of non- profits) ■ Locally governed affiliate within a national headquarter ■ Receive administrative, policy, and technical assistance from national headquarters ■ Mission/goal is to serve public benefits → consistent with government goals ○ Local non-profits ■ Nonprofits that develop as a local response exclusively → community based ■ Have familiarity with local area and needs to a specific group of clients/people ■ Bring important qualifications to service provision ■ Weaknesses include: ● Fewer funds and administrative resources -- because no national headquarters ● Lack of expertise and experience to whole procurement process ○ Nonprofits are best for high complexity/uncertainty → hard to define best strategy to approach problems ■ Drug and alcohol treatment, homeless shelters, etc. ● Likelihood of contracting out ○ Economic benefits ■ Better services + greater efficiency because of competition ● Competition between public and private, private agencies → risk of losing contract and being replaced ○ Pragmatic (practical) and political rationale ■ Need to add capacity for services without expanding government workforce ■ Fundamental change in provision of services → consumer-oriented services with performance-based payments ■ Greater flexibility in private vendors ■ More conservative leaders lean towards smaller government, so there’s more contracting out ● Promoting competition in procurement process ○ Increasing the pool of qualified bidders ■ Make contracts smaller and less complex ■ Provide seed money to potential contractors to acquire skills/resources to bid on a contract ■ Pre-proposal conferences ○ Using competitive contracts (procurement) rather than sole-sourced or negotiated ■ Sole-sourced discourages participation from new bidders ○ Reducing incumbency advantage ■ Incumbency advantage = giving current contractors priority/not switching because of costs on clients and agency ■ Solutions? ● Lower turnover costs with smaller contracts ○ Giving clients a choice of service providers → will increase contractor specialization ■ Many small contractors = more competition ■ Potential problems? ● Too similar of tasks spread out over multiple contractors → less efficient? ● Increased costs of monitoring and administration ● Difficult to integrate services ● Less likely to achieve economies of scale (more fragmentation of services) ● Vendor opportunism (vendors/contractors acting on their own accords) ○ Three behaviors related to information asymmetry ■ Hiding important changes in service delivery ■ Overstating performance outcomes ■ Focusing on immediate outputs instead of fundamental outcomes ○ Become prevalent when there’s a high level of uncertainty or high level of complexity ● Enhancing accountability by managing vendor opportunism ○ Ex-ante (before contracting) ■ Risk assessments of possible situations ■ Articulate clear goals and objectives in RFP ■ Write good contracts with clear expectations of contractor’s activities/outcomes to be achieved ○ Ex-post (after contracting) ■ Enforcement/monitoring system → outcomes, processes, financial integrity ■ Sanction contractors for non-compliance or poor outcomes ● CASE STUDY: Indianapolis ○ ABC - activity-based costing ■ Important for managing cost and facilitating continuous improvement ■ Determined whether goods should be manufactured in-house or outsourced ■ Identify activities needed to be performed to provide a service ● Ex: controlling traffic, driving trucks, etc. ■ Identify resources needed to conduct each activity ● Ex: trucks, gas, raw materials, etc. ■ Calculate unit cost of each activity ■ Calculate total cost of providing service ○ Performance measures ■ Assessed how well services were provided, how to monitor specific services, and how competitive contracts would be evaluated ● Emphasized pay-for-performance and further evaluation ● Setting clear standards about outcomes helps to compare actual achievement ● Ensures quality of public services ○ Popular budgets ■ Explained to citizens where their money was going → focused on output measures ● Ex: number of streets repaired ■ Finances more transparent to the people ○ Customer survey ■ Made sure services were wanted by the citizens, determined level of satisfaction from customers ■ Helps government make informed decisions about public service provisions True/False: Activity-based costing (ABC), as a tool for identifying costs of providing a specific service, helps government officials gather information about consumers’ satisfaction with currently provided public services. Example Short Answer Questions 1. Why should governments contract out? a. Better services, greater efficiency i. Competition b. Pragmatic reasons i. Expand capacity without adding more government employees c. Political preference of conservative party i. Small government 2. How can you promote competitive in procurement (contracting) process? a. Increasing pool of qualified bidders b. Using sealed bids rather than negotiated contracts c. Reduce incumbency advantage d. Give clients a choice of service providers (many small contractors instead of one big contractor?) i. Many small contractors = more competitive 3. What is one strategy to enhance accountability in contracting process? Regional Governance ● Metropolitan Statistical Area: any county containing a city/cities with a combined population of at least 50,000 + adjacent counties that are socially and economically integrated with the central city ● City-County Consolidation ○ The merging of county government with municipalities to create a unified government unit ■ Structural consolidation - replaces pre-existing local government structure ● Three-step process of city-county consolidation ○ Pre-condition? State constitution or statute needs to allow for the creation of the united local charter ○ 1st step? Agenda building on consolidation of two or more local governments ○ 2nd step? Creation of charter for consolidation plan ■ Includes specification of new structure and functions ○ Last step? Public referendum → if citizens don’t approve, consolidation doesn’t happen ● Advantages of city-county consolidation ○ Technical efficiency from scale of economies ■ Scale of economies = cost savings and greater productivity by increasing the scale of service provision ● Minimize inputs to provide same/greater outputs → two people/agencies aren’t doing the same job ■ Fragmentation = contrasting concept of scale of economies ● Good for diverse community demands, easy to manage for government ■ Counter argument? ● Increase in transaction costs for metropolitan governments ● Consolidation may decrease per capita costs of producing public services but it will increase overall transaction costs ● Costs to both unified government and residents ○ Metropolitan renewal by addressing inequity between an inner urban city and suburban cities ■ How? ● Expand tax base to include city and wealthier suburbs ● Establish fair tax system → those in suburbs pay for cultural and economic benefits of the city (user fees?) ■ Counter argument? ● Wealthier suburban municipalities need to be included BUT wealthier suburbs may be opposed
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