Contracting - Out Public Services In Local Authorities In Zimbabwe: The Case of Harare City Council
By
Tawanda Zinyama
A Thesis Submitted in Fulfillment of the Requirements of the Doctor of Philosophy Degree in Public Administration
Department of Political and Administrative Studies
Faculty of Social Studies
University of Zimbabwe
June 2016
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Abstract
Contracting - out has become a central feature of modern government and one of the key
institutions to deliver public services to the citizens. While arguments have and continue to
be made in favour of contracting - out the provision of public services to private agents, little is
known about the merit s and shortcomings; factors that promote or obstruct effective and
successful contrcating - out. The guiding research question was: What are the experiences of
Harar e City Council with contracting - out the provision of public services between 1995 and
2014? The study sought to explore contracting - out experiences of Harare City Council in
order to provide a source of valuable information for local government managers to
ameliorate the contracting - out process es . The principal objective of the study was to inve stigate and describe Harare City Council’s experiences with contracting - out the provision of public services in order to better appreciate the factors that make or break the contracting - out proce ss.
The study included a qualitative sample of 52 participan ts pu rposively selected. In addition to these participants, the researcher attended four local government conferences and workshops where nine local experts were interviewed. The study also used a que stionnaire of 45 questions to a survey sample of fifty ( 50) respondents from Harare City Council. Thirty - two
(32) completed sur veys were returned. However, three were discarded leaving only 29 and a response rate of 58%. The survey questionnaire included sections that asked about service production arrangement s , contract management capacity, contracti ng out functions, contracting out procedures , management of contracted companies, benefits of contracting out,
policy environment, expectations and cha llenges of contracting out. The study also used document search to gather data.
Q ualitative analysis of data comprised analysis for similarities and differences, coding and categorising , and constant co mparison. The themes from the data were compared to existing
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literature on contracting - out theories, global experienc es and theoretical framework. T he qualitative analytical frameworks were supplemented by statistical data outputs from
Statistical Package for Socia l Scientists (SPSS).The study employed triangulation for data
validation by reviewing case data from archiva l records such as council resolutions,
memoranda, strategic plans, newsletters, minutes, by - laws, reports, annual financial and
budget statements, audit reports and other such documents.
The findings indicate that t he contracting - out refor m within Harare C ity Council yielded less than wholly impressive results. The HCC did not contract out the provision of public services but management problems. Contracts were poorly designed and the legal framework was heavily fragmented. Contracting - out in the public sec tor is more complex than in the private sector even if services appear to be the same due to political exigencies. The influence of political and socio - economic factors, such as, demand for quality services and public employee opposition to contracting - out, still help to account for variations in local government contracting. Contract management capacity is an important determinant of local government contracting. Transparency in the contracting out process is essential in order to avoid any controversy about the awarding of tenders. The results showed that HCC lacks a strategic approach to contracting - out. There was no well - documented strat egy for contracting
out - ad - hoc approach. It was striking to note that HCC adopted a minimalist approach to
contrac t monitoring and supervision. The overwhelming impression was of the absence of
formal contract management.
The following recommendations were proffered. For contracting - out to be effective and
successful, the local authorities should be able to properly m anage the contracting - out
processes, that is, to define contract objectives, negotiate contract terms, prepare and
implement contracts, and monitor and evaluate performance. There is also need to provide
leadership in setting policy, contract oversight and monitoring, setting and enforcing
iii regulation and determining costs. There is need for sound policy and institutional f ramework ; l egisl ation governing contracting o ut ; ensuring top management s upport ; t ransparency ; e ncourag ing c ompetition ; s tro ng performan ce m onitoring ; c ontr act design, implementation and m anagement ; s takeholder i nvolvement ; a do ption of strategic approach to c ontracting out and capacity b uilding .
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Acknowledgements
Unless the Lord builds a house, the work of the builders is wasted. Unless the Lord protects a city, guarding it with sentries will do no good. Psalms 127:1
The height by great men reached and kept were not obtained by sudden flight, but they, while their companions slept, were toiling upw ard in the night: Longfellow
Completing the PhD thesis journey is an adventure in learning and personal growth - the
outcome of which can result in extraordinary accomplishment and contribution. No one
climbs a high mountain alone. The PhD journey was arduous and long, four years from
beginning (January 2012) to end (December 2015) and it was sometimes frustrating, exhausting , gruelling and discouraging . Experience and expertise, support and encouragement are all needed. I am indebted to ma ny people who provided these necessities, which helped to make this dissertation a reality. None of them, of course, is responsible for the contents of this work.
My intellectual debt is owed to my supervisors: Professor Paul Mavima and Dr. Alfred G.
Nhe ma who made this dissertation more readable than it otherwise might have been. Their criticisms and suggestions of my academic work, which sometimes I did not comprehend, forced me to deal with important issues, which I would have otherwise conveniently ne glected in my field study. Their patience, kindness and appreciation of my work have been an energising source of personal encouragement, intellectual challenge and growth. They found me, nurtured my early incoherent work, railed at me when I often needed it and patted me on the back (often undeservingly) to keep me going. Thanks, my supervisors, for the faith.
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I would like also to acknowledge and thank Dean of Faculty of Social Studies, Professor
Charity Manyeruke for urgi ng me to present my thesis chapte rs to the Department of Political and Administrative Studies of University of Zimbabwe. She used to say to me: “That which you acquire too easily, you esteem too unconscientiously.” I would also like to thank Prof.
Charity Manyeruke who, in her capacity as the then Zimbabwe Organization for Social
Science Research in Eastern and Southern Africa (OSSREA) Chapter Liaison officer, for exchanging ideas about putting up a thesis proposal together. OSSREA and University of
Zimbabwe (UZ) are acknowledged for organ ising a month - long Researc h Methodology
Training for PhD c andidates , which was considerably beneficial and allowed for networking and interaction with colleagues .
I want to thank members of the Department of Political and Administrative Studies at the
Uni versity of Zimbabwe for the tremendous assistance and guidance they gave me. It would be invidious of me to single any out but I would like to express my great appreciation to Dr.
D.P. Chimanikire (Acting Chairperson), Professor Gideon Zhou, Mr. Eldred Mas unungure,
Mr. Hardlife Zvoushe, Mr. Alois Madhekeni, Mr. Lawrence Mhandara, Ms Marvis Chiware,
Mrs. Evelyn Mazando and Dr. Heather Chingono for their cogent criticisms of my draft presentations to the department. I also want to thank the POLAD secretariat for organising departmental seminar s for me to present thesis chapters, Mr. Tapiwa Charles Rubaya
(Administrative Assistant), Tafadzwa Chigodora and Kudzai Mhishi (both secretaries). I am especially indebted to all Master of Public Administration (MPA) stu dents I taught during those four (2012 - 2015) years. I tested out my ideas on them while their reactions contributed greatly to the evolution o f arguments of this thesis . I also want to acknowledge Mr. Kennedy
Manduna (then Teaching Assistant in the Departm ent of Political and Administrative Studies)
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who assisted with SPSS during data analysis. Hudson Mutandwa is also acknowledged for
assistance rendered throughout the study.
University of Zimbabwe lecturers made insightful presentations at doctoral seminar s on
Higher Degrees Workshop s on Data Analysis and Thesis Write - up ; and Skills for Writing and Publishing in High impact j ournals organised by the Office of the Pro - Vice Chancellor -
Academic Affa irs and the Postgraduate Centre of University of Zimbabwe. The y provided foundational information on preparing the c ore chapters of the thesis .
The completion of this thesis was made possible by financial support from the Vice -
Chancellor, Professor Levy Nyagura of the University of Zimbabwe. I was also (two times i n a row: 2012 and 2013) a recipient of POSCO Africa Fellowships Award at the University of
Zimbabwe sponsored by POSCO TJ Park Foundation of South Korea in “Recognition of
Outstanding Scholastic Achievement and Dedication to Knowledge . ”
I gratefully acknowledge the indispensable foundation and support of my family: my handsome sons: Mukudzei Peace and Anenyasha; my wonderful daughters: Gracious Kudzai and Charlotte Blessings; who played a crucial role in helping me find the creative space needed to de velop and work on my ideas. They provided a loving atmosphere full of positive energy and fun for which I am truly grateful. I also want to thank my wife, Tafadzwa
Rwodzi, who has always been unfailing in her support of my work. Last but not least, I ackno wledge the support and encouragement I got from my young brother, Tongesai
Zinyama.
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My acknowledgements would be incomplete without mentioning the immense and invaluable contribution one way or the other, of all those who aided in the gestation of this st udy. These included all the respondents who spared time from their very busy schedules to entertain my presence during the in - depth interviews and filling in questionnaires during the period of inquiry. These nameless participants confirmed, inveterated an d sharpened my arguments.
To all, my sincere thanks.
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Dedication
To my father, Rwodzi Zinyama, aged 86.
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List of Tables
Table1.1: Comparison of Fee Structure Between Government and Private Health
Institutions as of January 1999……………………………………………….11
Table 2.1: Adapted Contract Management Capacity Framework……………………..101
Table 2.2: Service Complexity Scenarios and the Demand on Contract Management...102
Table 3.1: Basic Beliefs of Alternative Inquiry Paradigms…………………………….108
Table 3.2: In - depth Interviews Conducted with Key - Informants………………………121
Table 3.3: Alignment of Research Questions and Variables with Questionnaire……...124
Table 4.1: Summary of Empirical Findings on Contr acting out Public Service ………152
Table 4.2: S ervices Subject to Contracting out Under 1988 Act……………………….158
Table 5.1: Zimbabwe’s Economic Performance: 1980 - 1995…………………………..201
Table 5.2 Key Legislation in Zimbabwe Local Government………………………….213
Table 6.1: Designation: If Both Public and Private Se ctors could Provide The Same
Service, Who Do You Think Would Do a Better Job?...... 239
Table 7.1: Specifications for Collection and Transportation of Domestic and Commercial
Refus e……………………………………………………………………….265
Table 7.2: Con tract Process, Definition of Contrac t Terms and Scope of Work ………274
Table 7.3: Monitoring and Supervision of C ontract Implementation ………………276
Table 7.4: Severity of Contract Sanctions……………………………………………...277
Table 7.5: Contract Dura tion…………………………………………… ……………...278
Table 7.6 Contract Renegotiation, Renewal and Termination………………………... 279
Table 7.7: Assessment of the Quality of Contract Design with Ref use Collection…….280
Table 7.8: Comparative Expenditure and Income Figures on Refuse Collection By HCC,
HCC and Contractors, and contractors A lone (Full Cost Recovery) ………298
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List of Figures
Figure 2.1: The Organisational Failure Framework……………………………………...76
Figure 2.2: A Contract Management Theoretical Framework ………………………..99
Figure 6.1: Basis of Contracting Out…………………………………………………...237
Figure 6.2: Has any Comprehensive Risk and Legal Assessment been Done To Ascertain
What Functions Can or Cannot be Contracted out Within Legislative
Requirements and Interests of the Stakeholders?...... 237
Figure 6.3: If Both Public and Private Sectors Could Provide The Same Service, who Do
You Think Would Do A Better Job?...... 239
Figure 6.4: How are Agencies Se lected for Contracting Out?...... 241
Figure 6.5: How Much Weight, in Percentage, is appropriated for Price Selection Variable
in Contracting out?...... 243
Figure 6.6: Are Your Contracts based on Fixed Price, Schedule of Rates or Combination
of The Above?...... 245
Figure 6.7: How Are The Firms That Are Contracted Monitored?...... 247
Figure 6.8: Level of Political Interference in Contracting Out Decisions?...... 251
Figure 8.1: CABS/Old Mutual Budir iro Houses Crack ………………………………315
Figure 9.1: A Contract Managem ent Framework ………………………………………407
Figure 10.1: A Contract Managem ent Framework ………………………………………426
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List of Boxes
Box 7.1: Announcement on Refuse Collection………………… ……………………292
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Appendices
Appendix A Initial Letter Soliciting Participatio n
Appendix B First Follow - Up Letter
Appendix C Second Follow - Up Letter
Appendix D Questionnaire Survey
Appendix E Interview Guide
HCC Officials, Former Council Commissioners and Mayors Contracted Companies Residents Associations State Procurement Board Ministry of Local Government, Public Works and National Housing
Appendix F Published Articles
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Table of Contents
Abstract i
Acknowledgments iii
Dedication v
List of Tables vi
List of Figures vii
List of Boxes viii
Appendices ix
Abbreviations and Acronyms xxv
CHAPTER ONE: SETTING THE PROBLEM CONTEXT AND BACKGROUND
1.0 INTRODUCTION……………………………………………………………………..1
1.1 BACKGROUND TO THE PROBLEM……………………… ……………………….4
1.1.1 Historical Context of Contracting out in Zimbabwe …………………………6
1.2 STATEMENT OF THE PROBLEM ………………………………………………..19
1.3 RESEARCH OBJECTIVES…………………………………………………………24
1.4 RESEARCH QUESTION……………………………………………………………25
1.5 WHY THIS STUDY? ………………………………………………………………..25
1.6 LIMITATIONS OF THE STUDY…………………………………………………..29
1.7 DELIMITATIONS OF THE STUDY………………………………………………..33
1.8 ASSUMPTIONS OF THE STUDY………………………………………………….34
1.9 ETHICAL ISSUES CONSIDERED…………………………….…………….…... ..36
1.10 ORGANIS ATION OF THE STUDY ………………………………………………..40
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CHAPTER TWO: LITERATURE REVIEW: CONCEPTUAL AND THEORETICAL
FRAMEWORKS
2.0 INTRODUCTION……………………………………………………………………43
2.1 CONCEPTUAL FRAMEWORK……………………………………………………46
2.1.1 What is a Contract?...... 46
2.1.2 Contracting………………………………………………………..…………48
2.1.3 Contracting out……………………………………………………………….48
2.1.4 Privatisation…………………………………………………………………..49
2.1.5 Competitive Tendering……………………………… ……………………….50
2.1.6 Public and Collective Provision of Services…………….…………………...50
2.1.7 The Concept of Quality………………………………………………………52
2.1.8 The Concept of Accountability………………………………………………54
2.1.9 The Concept of Competition or Ownership………………………………….56
2 .2 THEORETICAL FRAMEWORK…………………………………………………...57
2.2.1 Economic Theories………………………………………………………...…59
2.2.1.1 The Transaction Cost Theory ………………………………………………..60
2.2.1.1.1 Asset Specificity……………………………………………………………..63
2.2.1.1.2 Ease of Measurement ………………………… ……………………………..63
2.2.1.2 The Principal - Agent Theory…………………………………………….……67
2.2.1.3 The Market Contestability Theory…………………………………….……..73
2.2.1.4 New Institutional Economics...... 74
2.2.1.5 Contractualism……………………………………………………………….77
2.2.2 Political Economy Discourse…………………….…………………………..79
2.2.2.1 The Public - Choice Theory…………………………………………………...80
2.3 THEORETICAL FRAMEWORK OF CONTRACTING OUT………………….….83
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2.3.1 Contracting out Policy……… …………………………………………….….84
2.3.2 Strategic Contracting and Communication …………………………….…..86
2.3.3 Communication Strategy for Contracting Issues……………………..…..…..88
2.3.4 The Contract……………………………………………………………….…89
2.3.5 Public Service Provision………………………………………… ……….….92
2.3.5.1 For - Profit Providers…………………………………………………………..93
2.3.5.2 Non - Profit Providers…………………………………………………………93
2.3.5.3 Other Public Providers……………………………………………………….94
2.3.5.4 Provider Networks……………………………………………………………94
2.3.5.5 Level: Local, Nation al or Global……………………………………………..95
2.3.6 Regulation……………………………………………………………………95
2.3.7 The Institutional Context……………………………………………………..97
2.4 CONTRACT MANAGEMENT CAPACITY……………………………………….99
2.5 CHAPTER SUMMARY…………………………………………………………...102
CHAPTER THREE: RES EARCH DESIGN AND METHODOLO GI CAL
PERSPECTIVES
3.0 INTRODUCTION……………………………………………………………..……105
3.1 RESEARCH METHODOLOGY…………………………………………………...106
3.2 BASIC BELIEFS OF ALTERNATIVE INQUIRY PARADIGMS .………………108
3.3 CASE STUDY METHODOLOGY………………………………………………...111
3 .4 SELECTION OF PARTICIPANTS………………………………………………...117
3.4.1 Who Participated in the Study?...... 117
3.4.1.1 Waste Management Department……………………………………………118
3.4.1.2 Water Reticulation…………………… ……………………………………..118
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3.4.2 How the Participants were Selected? ………………………………………119
3.4.2.1 Rationale for Selection Criteria?...... 120
3.4.3 How Many Participated in the Study?...... 120
3.5 INSTRUMENTATION……………………………………………………………..123
3.5.1 Quantitative Instrumentation ………………………………………………124
3.5.1.1 Survey Questionnaire ………………………………………………………124
3.5.1.2 Field Testing of Survey Questionnaire……………………………………...125
3.5.2 Qualitative Instrumentation…………………………………………………126
3.5.2.1 Direct In - depth Interview…………………………………………………...127
3.5.2.1.1 Interview Pilot Study………………………………………………………..127
3.5.2.2 Documentary Search……………………………… ………………………..129
3.5.2.3 Observation…………………………………………………………………131
3.6 DATA COLLECTION PROCEDURES……………………………………………131
3.6.1 Qualitative Data Collection Methods ………………………………………132
3.6.1.1 Documentary Search…………………………………………………..……132
3.6.1.2 Semi - structured Interviews………………………………………………….134
3.6.2 Quantitative Data Collection Methods……………………………………...135
3.6.2. Survey Questionnaire ………………………………………………………135
3.7 DATA ANALYTICAL FRAMEWORK……..…………………………………….136
3.7.1 Qualitative Data Analysis…………………………………………………. .137
3.7.2 Quantitative Data Analysis…………………………………………………140
3.7.3 Validation of Findings………………………………………………………140
3.7.1 Qualitative………………………………………………………………….140
3.8 CHAPTER SUMMARY……………………………………………………………143
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CHAPTER FOUR: CONTRACTING OUT REFORM: THE LES SONS OF
EXPERIENCES
4.0 INTRODUCTION…………………………………………………………………..144
4.1 METHODOLOGICAL PROBLEMS………………………………………………145
4.2 EMPIRICAL FINDINGS…………………………………………………………...146
4.2.1 Cost Changes………………………………………………………………..147
4.2.2 Services Quality…………………………………………………………….149
4.2.3 Competition or Ownership………………………………………………….149
4.3 Specific Country Empirical Evidence………………………………………153
4.3.1 European Union Experiences ………………………………………………153
4.3.1.1 Legal - Institutional Contracting out Framewo rk in European Union……….155
4.3.1.2 European Commission Guidelines for Contracting out…………………….155
4.3.2 United Kingdom…………………………………………………………….156
4.3.2.1 The Compulsory Competitive Tendering Regime………………………….159
4.3.2.2 The Policy Basis of Contracting …………………………………………….160
4.3.2.3 Institutional Framework……………………………………………………160
4.3.2.4 Contracting out and the Management of Services…………………………..162
4.3.2.5 Contracting out and the Cost of Services…………………………………...163
4.3.2.6 Contracting out and Employme nt and Industrial Relations ………………163
4.3.2.7 Evaluation of the United Kingdom Experiences……………………………164
4.3.3 Local Government Innovations in American Cities………………………..165
4.3.3.1 Washington Roundtable and Washington Research Council……………….166
4.3.3.2 City of Indianapolis………………………………………………………168
4.3.3.3 Evaluation of the Indianapolis Experience………………………………….170
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4.3.3.4 Georgia, USA, Atlanta Experience: When Contracting out Really doesn’t
Work: Atlanta’s Water Contract……………………………………………171
4.3.3.4.1 Wha t Went Wrong in Atlanta?...... 173
4.3.3.4.2 Why Contracting out worked Better in Indianapolis than in Atlanta?...... 174
4.3.3.5 New York City Experience: Careless Contracting: The Problem of Designing
a Contracting System to avoid Corruption………………………………….176
4.3.3.5.1 Problems of Contracting out in New York City…………………………….177
4.3.3.5.2 What Lessons can be Gleaned from New York City Experience?...... 178
4.3.3.6 Lessons from Uni ted States of America and United Kingdom……………..179
4.3.3.7 Kolkata Metropolitan, India………………………………………………...181
4.4 EMPIRICAL EVIDENCE OF CONTRACTING OUT IN AFRICA……………...182
4.4.1 Ghana……………………………………………………………………….183
4.4.1.1 Ghana Process of Awarding Contracts……………………………………...184
4.4.1 Tanzania …………..……………………………………………………..…185
4.4.1.1 Public Sector Reform in Tanzania………………………………………….185
4.5 THE LESSONS OF EXPERIENCE…………………………………………..……187
4.6 CONCLUDING REMARKS ………………………………………………………190
CHAPTER FIVE: ZIMBABWE: POLICY ENVIRONMENT
5.0 INTRODUCTION…………………………………………………………………..192
5.1 ZIMBABWE’s POLITICAL SYSTEM…………………………………………….193
5.2 ZIMBABWE’s SOCIO - ECONOMIC SYSTEM (1980 - 2014)……………………..195
5.2.1 1980 - 1990 Era………………………………………………………………195
5.2.2 Econ omic Structural Adjustment Programme (ESAP): 1991 - 1995………...197
5.2.2.1 Did ESAP Achieve Its Mandate?...... 200
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5.2.3 1997 - 2008 Period………………………………………………………...…204
5.2.3.1 Zimbabwe Programme of Economic and Social Transformation…………..204
5.2.3.2 Millennium Economic Recovery Programme………………………………206
5.2.3.3 National Economic Recovery Programme………………………………….207
5.2.3.4 Macro - Economic Policy Framework (MEPF) (2005 - 2006) ………………208
5.2.3.5 Monetar y Policy Statements (2007 - 2008)…………………………………..208
5.2.4 The Transitional Period: 2009 - 2013………………………………………..210
5.3 LOCAL GOVERNMENTSTRUCTURES AND SYSTEMS IN ZIMBABWE…..211
5.3.1 Legal Framework and Institutional Structures for Local Government……..215
5.3. 2 Policy Institutional Arrangements…………………………………………..216
5.3.2.1 Inter - Ministerial Committee ………………………………………………216
5.3.2.2 Committee of Permanent Secretaries……………………………………….217
5.3.2.3 The Cabinet…………………………………………………………………217
5.3.2.4 Ministry of Local Government, Public Works and National Housing……219
5.3.2.5 Local Government Board………………………………………………..….219
5.3.2.6 Research and Consultancy Services………………………………………...220
5.3.2.7 Residents Associations……………………………………………………...220
5.4 OVERVIEW OF SERVICE DE LIVERY…………………………………………..220
5.5 CHAPTER SUMMARY……………………………………………………………221
CHAPTER SIX: THE NAT URE AND DYNAMICS OF CONTRACTING - OUT
WITHIN HARARE CITY COUNCIL
6.0 INTRODUCTION…………………………………………………………………..223
6.1 STATUS OF CONTRACTING - OUT………... ……………………………………22 4
6.2 L EGAL FRAMEWORKS FOR CONTRACTING - OU T IN HARARE…………...224
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6.2.1 Constitution of Zimbabwe (Amendm ent No.20) Act, 2013………………...225
6.2.2 State Procurement Act [Chapter 22:14]…………………………………….226
6.2.3 Public Finance Management A ct [Chapter 22:19]……………… ………….226
6.2.4 Urban councils Act [Chapter 29:15] and By - Laws ………………………227
6.2.4.1 Tender formulation Com mittee (TFC)……………………………………...227
6.2.4.2 Tender Verification Committee (TVC)……………………………………..228
6.2.4.3 Tender Adjudication Committee (TAC)…………………… ………………229
6.2.4.4 Procurement Committee (PC)……………………………………………...231
6.2.4.5 The Supervisory Role of the Proc urement Committee (PC) ………………231
6.2.4.6 Observed Challenges……………………………………………………….232
6.3 CONTRACTING - OUT INSTITUTIONS...…… .. ………………………………...233
6.4 CONTRACTING - OUT RATIONALE……………………………………………..234
6.5 BASIS OF CONTRACTING - OUT………………………………………... ………23 6
6.6 SERVICES CONTRACTED - OUT…………………………………………………238
6.7 WHO ARE THE CONTRACTORS?...... 238
6.8 SELECTION OF CONTRACTORS………………………………………………..240
6.9 PRICE VERSUS NON - PRICE FACTORS………………………………...………241
6.10 LENGTH OF CONTRACTS……………………………………………………….244
6.11 SELECTION CRITERIA………………………………………………….……….244
6.12 CONTRACT PRICING…………………………………………………………….245
6.13 COMPETITION………………………………………………………… ………….245
6.14 CONTRACT PERFORMANCE……………………………………………………246
6.15 CONTRACT MO NITORING………………………………………………………246
6.16 CONTRACTING OU T IMPACT…………………………………………………..247
6.17 OBSERVED CONTRACTIN G OUT CHALLENGES……………………...……..248
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6.18 LEVEL S OF POLITICAL INTERFERENCE ……. ………………………………250
6.19 OPPOSITION TO CONT RACTING OUT………………………………………...251
6.20 ROLE OF STAKEH OLDERS……………………………………………………...254
6.21 CHAPTER S UMMARY……………………………………………………………259
CHAPTER SEVEN: CONTRACTING OUT REFUSE COLLECTION AND
TRANSPORTATION
7.0 INTRODUCTI ON…………………………………………………………………..260
7.1 BRIEF BACKGROUND OF HCC’s WASTE MANAGEMENT…………………261
7.2 CONTRACT D OCUMENTS………………………………………………………263
7.2.1 Scope of Work……………………………………………………………… 263
7.2.2 Vehicle s……………………………………………………………………..264
7.2.3 Manpower………………… ………………………………………………...264
7.2.4 Prices ………………………………………………………………………..264
7.2.5 Financial Sta tements ………………………………………………………264
7.2.6 Tender Vali dity……………………………………………………………..264
7.2.7 Cancella tion…………………………………………………………………265
7.2.8 Compliance with Council’s Tender Conditions……...……………………..265
7.2.9 Further Info rmation…………………………………………………………265
7.3 CONTRACT AWARD ING PROCESS…………………………………………….272
7.4 CONTRACT TERMS, DEFINITIO NS AND SCOPE O F WORK……………….. 273
7.5 FINANCIAL INCENTIVES TO COMPANIES TO DELIVER SERVICES… ...…274
7.6 CONTRACT MONITORING AND SUPERVISION……………………………...275
7.7 SANCTION S……………………………………………………………………….276
7.8 CONTRACT D URATION…………………………………………………………277
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7.9 CONTRACT RENEGOTIATION, RENEWAL AND TERMINATION………….278
7.10 RELATIONSHIP BETWEEN CONTRACT DESIGN AND QUALITY…………280
7.11 ASSESSMENT OF CONTRACT DOCUMENTS ………………………...……….283
7.11 .1 Contract Management Challenges………………………………..…………284
7.11.2 Conflict of In terest……… ………………………………………………….286
7.11.3 HCC’s Incapacity to Restructure Refuse Monopsonic Market……………..287
7.11.4 Contract Legal Binding a nd Mutual Trust………………………………….288
7.11.5 Cost Savings to HCC from Contracting Out……………………………… 289
7.12 STAFF REDUCTION S……………… …………………………………… ………29 0
7.13 CHALLENGES ENCOUNTERED BY CONTRACTED COMPANIES………….291
7.14 INCAPACITY IN CONTR ACTED COMPANIES………………………………..291
7.15 INCAPACITY ON HARAR E CITY COUNCIL…………………………………..294
7.15.1 The Charges Per Bin Were Said To Be Not Commercial……… …………..295
7.15.2 Slow Decision - Making……………………………………………………...295
7.15.3 Lack of Clarity on Information Contained in Tender and Contract………...295
7.15.4 Inclusion of Services in Contracts: Mbare Skip Bin Service ………………296
7.15.5 Lack of Feasibilit y Studi es………………………………………………….297
7.16 CHEATING BY CONTR ACTED COMPANIES………………………………….299
7.17 LEADERSHIP C HALLENGES……………………………………………………301
7.18 GENERAL OBSER VATIONS……………………………………………………..302
7.19 CHAPTER S UMMARY……………………………………………………………302
CHAPTER EIGHT CONTRACTING OUT INNOVATIONS IN SAMPLED CASES
8.0 INTRODUCTI ON…………………………………………………………………..303
8.1 CONTRACTING O UT PROCESS…………………………………………………303
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8.2 HOUSING EXPER IENCES………………………………………………………..303
8.2.1 Housing Policy Overview …………………………………………………..304
8.2.2 Bill and Melinda Gates Foundation (BMGF) ………………………………304
8. 2.2.1 Backgr ound…………………………………………………………………304
8.2.2.2 BMGF Motivation…………………………………………………………..305
8.2.2.3 Work Done By BMGF for Har are City Council…………………………...305
8.2.2.4 Discussi on………………………………………………………… ………..306
8.2.3 CABS/OLD Mutual: Budiriro Housing Project…………………………….306
8.2.3.1 Backgr ound…………………………………………………………………306
8.2.3.2 Rationale of Budiriro Hou sing Project……………………………………...308
8.2.3.3 Costs and Benefits of Contracting Out the Provision of Hous ing…………. 309
8.2.3.4 CABS/OM and HCC Challenges…… ……………………………………...310
8.2.3.4.1 Conflict of In terest………………………………………………………….310
8.2.3.4.2 Low Uptake of Bud iriro Houses……………………………………………311
8.2.3.4.3 Corruption…………………………………………………………………..315
8.2.3.4.4 Quality of Budiriro Houses…………………………………………………315
8.3 GKW: WATER RETICULATION CONTRACTING OUT……………………….316
8.3.1 Background…………………………………………………………………316
8.3.2 Water Contracting out Disc ourse in Zimbabwe…………………………….317
8.3.3 Leadership Crisis……………………………………………………… ……320
8.3.4 Enter BiWater International Company…… ………………...………………320
8.3.5 European Investment Bank (EIB)…………………………………………..323
8.3.6 Discussion of GKW, BiWater and EIB……………………………………..324
8.4 CHEMPLEX CORPORATION: WATER TREATMENT CHEMICALS………...329
8.4.1 Background…………………………………………………………………329
xxiv
8.4.2 Results from Harare C ity Council…………………………………………..329
8.4.3 Results from Chemplex Corporation ………………………………………330
8.4.4 Observations and Analysis………………………………………………….332
8.5 EASIPARK (Pvt) Ltd: CI TY PARKING……… …………………………………...336
8.5.1 Background………………………………… ………………………………336
8.5.2 Easipark Chall enges………………………………………………………...336
8.5.3 Conflict of In terest………………………………………………………….338
8.5.4 Opposition to Ea sipark……………………………………………………...340
8.6 AIRPORT RO AD…………………………………………………………………..341
8.7 WILKINS CLINIC SERVICES CONTRACTED OUT……………………………345
8.7.1 Catering Services……………………………………………………………347
8.7.2 Cleaning Services…………………………………………………………...349
8.7.3 Security Services……………………………………………………………350
8.7.4 Obse rvations From Wilkins Clinic’s Contracted Out Services…………….. 350
8.8 CHAPTER SUMMARY……………………………………………………………352
CHAPTER NINE: DISCUSSION AND SYNTHESIS OF FINDINGS
9.0 INTRODUCTI ON…………………………………………………………………..353
9.1 CONSTITUTIONAL AND LEGAL FRAMEWORK…………………… ………..353
9.1.1 The Constitution of Zimbabwe………………………………………… …..353
9.1.2 State Procurement Act [ Chapter 22:14]…………………………………….354
9.13 Indigenisation and Econ omic Empowerment ………………………………357
9.1.4 Contracting - Out Policy……………………………...…...…………………358
9.1.5 Policy Di scord………………………………………………………………359
9.2 INSTITUTIONAL F RAMEWORK………………………………………………..361
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9.2.1 Oversight Institut ions ……………………………………………………....362
9.3 CONTRACTING - OUT RATIONALE……………………………………………..366
9.3.1 Efficiency Gains and Cost Savings……………………………… …………372
9.4 CONTRACTING O UT DYNAMICS………………………………………………372
9.5 MARKET STRUCTURE AND COMPETITION………………………………….373
9.6 POLITICAL DY NAMICS………………………………………………………….375
9.7 CONTRACT MO NITORING………………………………………………………379
9.8 CONTRACT ACCOU NTABILITY………………………………………………..381
9.9 CORRUPTION AND CONF LICT OF INTEREST ………………………………383
9.10 PROBLEMS OF PRIVATE SECTOR BUSINESS PRINCIPLES………………...385
9.11 THE PROBLEM OF SHIRKING…………………………………………………..386
9.12 MINISTERIAL IN TERVENTION…………………………………………………388
9.1 3 POLITICKING ABOUT CONTRACTING - OUT………………………………….389
9.14 STRATEGIC CONTRACTING - OUT……………………………………………...391
9.15 ECONOMIC VERSUS POL ITICAL RATIONALITY……………………………392
9.16 SICK INSTITUT IONS……………………………………………………………..393
9.17 OVERT POLITICAL MANAGEMENT…………………………………………...394
9.18 POLICY REVERSALS/VACIL LATIONS/UNCERTAINTY……………………..395
9.19 CONTRACTING OUT WITH NON - PR OFIT AGENTS OF PUBLIC POLICY…397
9.20 STAKEHOLDER I NVOLVEMENT……………………………………………….397
9.21 CONTRACT MANAGEM ENT CAPACI TY……………………………………...400
9.22 OPPOSITION TO CONT RACTING OUT………………………………………...402
9.22.1 Expectations from the Residen ts……………………………………………402
9.22.2 Technical Sk ills……………………………………………………………..403
9.22.3 Ethica l ………………………………………………………………………403
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9.22.4 Leadershi p Skills……………………………………………………………403
9.23 THEORETICAL FRAMEWORK………………………………………………….404
9.24 POLICY AND MANAGEMENT IMPL ICATIONS OF STUDY FINDINGS…….407
9.24.1 Contract Man agement ………………………………………………………408
9.24.2 Strategic Contract ing Out………………………………………………….. .409
9.24.3 Communication about C ontracting Out…………………………………….410
9.24.4 Contract Accountability……………………………………………… …….411
9.24.5 Legal Frame work…………………………………………………………...413
9.24.6 Lessons for Public Ad ministration………………………………………….413
9.24.7 Political a nd Institutional Risks t o Contracting Out……………………….. 415
9.24.8 Technical Fac tors…………………………………………………………...416
9.24.9 Managerial F actors………………………………………………………….417
9.24.10 Fiscal Stres s……………………………………………...………………….418
9.24.11 Stakeholder Partic ipation…………………………………………………...419
9.24.12 Feasibility Studi es………………………………………………………...... 419
9.24.13 Distinction between Public and Private f or - profit Organisations…………..420
9.24.14 Reverse Contra cting………………………………………………………...420
9.24.15 Employee Opposition M anagement………………………………………...420
9.24.16 Non - Profit Privat e Agents…………………………………………………..421
9.25 CHAPTER SUMMARY…………………………………………………… ………421
CHAPTER TEN: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
10.0 INTRODUCTION …………………………………………………………………423
10.1 SUMMARY OF THE STUDY …………………………………………….………423
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10.1.1 Synopsis of the Problem Statement …………………………………………423
10.1.2 Objectives and Research Questions ……….………………………………..423
10.1.3 Synopsis of the Theoretical Framework …………………………………….425
10.1.4 Synopsis of the Methodolog y ………………………………………………427
10.1.5 Major Findings ……………………………………………………………...429
10.1.5.1 Contract Design ……………………………………………………………..429
10.1.5.2 Cost Savings ………………………………………………………………...430
10.1.5.3 Legal Framework …………………………………………………………...430
10.1.5.4 Institutional Framework …………………………………………………….430
10.1.5.5 Contract Awarding Process …………………………………………………431
10.1.5.6 Contract Accountability …………………………………………………….432
10.1.5.7 Market Structure and Competition ………………………………………….432
10.1.5.8 Service Quality ……………………………………………………………...432
10.1.5.9 Fiscal Stress …………………………………………………………………432
10.1.5.10 Strategic Contracting - Out …………… …………………………….. ……...433
10.1.5.11 Leadership …………………………………………………………………..433
10.1.5.12 Contract Monitoring and Oversight ………………………………………...434
10.1.5.13 Contract Management Capacity …………………………………………….435
10.1.5.14 Private Sector Realities ……………………………………………………..436
10.1.5.15 Policy Reversals …………………………………………………………….436
10.1.5.16 Staff R eductions …………………………………………………………….437
10.1.5 .17 Contracting out W ith Non - profit Agents …………………………………...437
10.1.5.18 Corruption and Influence of the Political Process …………………………..437
10.1.5.19 Abuse of Indigenisation and Economic Empowerment …………………….438
10.1.5.20 Policy Formulation and Stakeholder Inv olvement ………………………….438
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10.1.5.21 Opposition to Contracting - out …………………………………… …439
10.1.5.22 Policy Implementation ……………………………………………………...439
10.1.5.23 Problems of Private Sector Business Principles in Public Sector …………..439
10.2 CONCLUSIONS ……………………………………………………………………440
10.2.1 Contract Management ………………………………………………………444
10.2.2 Policy Environment …………………………………………………………444
10.3 RECOMMENDATIONS …………………………………………………………...445
10.3.1 Policy and Institutional Framework ………………………………………...445
10.3.2 Legislation Governing Contracting Out …………………………………….445
10.3.3 Structural Framework ……………………………………………………….448
10.3.4 Managerial Factors ………………………………………………………….449
10.3.5 Ensure Top Management Support …………………………………………..450
10.3.6 Transparency …………………………………… …………………………..451
10.3.7 Encourage Competition ……………………………………………………..451
10.3.8 Strong Performance Monitoring …………………………………………….452
10.3.9 Contract Design, Implementation and Management ………………………..453
10.3.10 A Transplant That Might Be Helpful ……………………………………… .454
10.3.11 Stakeholder Involvement ……………………………………………………454
10.3.12 Adoption of Strategic Approach to Contracting out ………………………..456
10.3.13 Capacity Building …………………………………………………………...457
10.3.14 Progressive Progress ………………………………………………………..458
10.3.15 Role of Regulation ………………………………………………………….459
10.3.16 Policy Adaptability ………………………………………………………….459
10.4 AREAS FOR FURTHER RESEARCH …………………………………………….460
BIBLIOGRAPHY …………………………………………………………………………..462
xxix
APPENDICES ………………………………………………………………………………491
Abbreviations and Acronyms
AAG - Affirmative Action Group
ABA - Activity Based Accounting
ACR - Adversarial Contractual Relational
ADBI - Asian Development Bank Institute
AfDB - African Development Bank
AG - Auditor General
ARDC - Association of Rural District Councils
AU - African Union
BACOSSI - Basic Commodities Supply - Side I ntervention Facility
BMGF - Bill and Melinda Gates Foundation
BOOT - Build - Own - Operate and Transfer
CABS /OM - Central African Building Society /Old Mutual
CBA - Cost - Benefit - Analysis
C BOs - Community Based Organisations
CCZ - Consumer Council of Zimbabwe
CHRA - Combined Harare Residents Association
CIPFA - Chartered Institute for Public Finance and Accountancy
CJC - Competition Joint Committee
CZI - Confederation of Zimbabwe Industries
xxx
DA - District Administrator
DRC - Democratic Republic of Congo
EIB - European Investment Bank
EOI - Expression of Interest
EIB - European Investment Bank
EMCOZ - Employers’ Confederation of Zimbabwe
ESAP - Economic Structural Adjustment Programme
ESOPs - Employee Stock Ownership Plan s
EU - European Union
FDI - Foreign Direct Investment
FELOPADs - Foreign Exchange Licensed Oil and Diesel
FOLIWARS - Foreign Exchange Licensed Warehouses and Retail Shop
GoZ - Government of Zimbabwe
GDP - Gross Domestic Product
GPA - Global Political Agreement
HCC - Harare City Council
HMWU - Harare Municipal Workers Union
HRT - Harare Residents Trust
HWSA - Harare Water and Sewerage Authority
IFIs - International Financial Institutions
IFB - Invita tion for Bids
IMCCP - Inter - Ministerial Committee on Commercialisation and Privatisation
IMF - International Monetary Fund
JVC - Joint Venture Company
LGIU - Local Government Implementation Unit
xxxi
LGMB - Local Government Management Board
MDC - Movement for Democratic Movement
MDC - T - Movement for Democratic Movement - Tsvangirai
MDC - M - Movement for Democratic Movement - Mutambara
MEPF - Macro - Economic Policy Framework
MERP - Millennium Economic Recovery Programme
MLGPWNH - Ministry of Local Government, Public Works and National Housing
MLGR U D - Ministry of Local Government, Rural and Urban Development
MNCs - Mult i - N ational Corporations
MoFED - Ministry of Finance and Economic Development
MoH&CC - Ministry of Health and Child Care
MoA - Memorandum of Ag reement
MOU - Memorandum of Understanding
MPA - Master of Public Administration
NCC - National Coordinating Committee
NECF - National Economic Consultative Forum
NEDPP - National Economic Development Priority Programme
NERP - Na tional Economic Recove ry Programme
NERC - National Economic Recovery Council
NGOs - Non - Governmental Organisations
NIE - New Institutional Economics
NPG - New Public Governance
NPM - New Public Management
NRZ - National Railway of Zimbabwe
NYC - New York City
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OCR - Ob ligation Contractual Relationship
OECD - Organisation for Economic Cooperation and Development
OMZ - Old Mutual Zimbabwe
OPC - Office of the President and Cabinet
PA - Provincial Administrator
PF - ZAPU - Patriotic Front - Zimbabwe African People’s Union
PAT - Principal - Agent Theory
PAZ - Privatisation Agency of Zimbabwe
PC - Procurement Committee
PLARP - Parastatals and Local Authorities Re - orientation Programme
PPPs - Public - Private Partnerships
PSIP - Public Sector Investment Programme
PSRP - Pub lic Sector Reform Programme
RBZ - Reserve Bank of Zimbabwe
RDC - Rural District Councils
RFP - Requests for Proposals
RFT - Request for Tender
RBZ - Reserve Bank of Zimbabwe
SAZ - Standard Association of Zimbabwe
SADC - Southern African Development Community
SELTIC - Service, Efficiency and Lower Ta xes for Indianapolis Commission
SPB - State Procurement Board
SPC - Special Purpose Company
SPSS - Statistical Package for Social Scientists
SSA - Sub - Saharan Africa
xxxiii
STERP - Short - Term Emergency Reco very Programme
TAC - Tender Adjudication Committee
TFC - Tender Formulation Committee
TNDP - Transitional National Development Plan
TVC - Tender Verification Committee
UCA - Urban Councils Act
UCAZ - Urban Councils Association of Zimbabwe
UK - United Kingdom
UNICEF - United Nations Children and Education Fund
USA - United States of America
VFM - Value for Money
VIDCOS - Village Development Committees
WADCOS - Ward Development Committees
WB - World Bank
ZANU - PF - Zimbabwe African National Union - Patriotic Front
ZCTU - Zimbabwe Congress of Trade Unions
ZESA - Zimbabwe Electricity Supply Authority
ZILGA - Zimbabwe Local Government Association
ZIM - ASSET - Zimbabwe Agenda for Sustainable So cio - Economic and Transformation
ZIMCORD - Zimbabwe Conference on Reconstruction and Development
ZIMPREST - Zimbabwe Programme for Economic and Social Transformation
ZIMSTAT - Zimbabwe Statistical Agent
ZINWA - Zimbabwe National Water Authority
ZNCC - Zimbabwe National Chamber of Commerce
xxxiv
ZNSC - Zimbabwe National Security Council
ZUPCO - Zimbabwe Passengers United Company
xxxv
CHAPTER ONE
SETTING THE PROBLEM CONTEXT AND BACKGROUND
1.0 INTRODUCTION
The growth in contracting - out for services sparked debate regarding its benefits and shortcomings as a service delivery approach (Foged , 2015; Greenwood, 2014; Hodge, 2000;
Kettl, 1997; Sclar, 2000). Empirical studies conducted during the 1980s and 1990s pointed to a host of political and ideologic al factors as determinants of local government contracting
(Bel et al., 2014; Ferris, 1986; Domberger et al. , 1987; Walsh, 1991) . Recent studies,
however, have begun to suggest that managerial factors such as the capacity to plan and
monitor contracting initiatives, have trumped political ones as determinants of contracting -
out at the local levels (Brown et al. , 2015; Foged, 2015; G reenwood, 2014; Hefetz and
Warner, 2004; Fernandez et al ., 2008). Although findings from these empirical studies were
somewhat mixed and inconclusive (Awortwi, 2013; Seddon, 2014; Sclar, 2013), they served
to identify various sets of factors that accounte d for the use of contracting by local
governments including fiscal stress, political and ideological factors, service supply and cost
factors and contract management capacity.
Contracting out has been a characteristic in the ongoing public management refo rms, often
associated with the phenomenon of the New Public Management (Fortin, 2000; Pollitt and
Bouckaert, 2004). The world of public services delivery has changed noticeably in recent
times. Contracting - out has been introduced to carry out services, suc h as, refuse collection,
hospital cleaning and catering, street cleaning, bus transport, water supply, traffic light
maintenance, tree pruning, fire protection, parking, parks and recreation, security services
among others (Monga et al. , 2009; Greenwood, 2 014). This resulted in better services with
1 less administrative headaches (Auger, 1999). The advocates of contracting - out are of the view that it leads to efficiency gains in terms of cost savings. “For several services, evidence demonstrates that private production is cheaper than public production (Greenwood, 2014;
Sclar, 2000). Furthermore, surveys of public officials, before - and - after studies, and cross - sectional econometric studies demonstrate that savings average about twenty - five per cent for the sam e level and quality of services, after taking into account the cost of administration and monitoring the contract (Monga et al. , 2009; Domberger et al. , 1987; Hirsch, 1995a; Hodge,
1999).
Periodic fiscal crises facing governments at all levels , compel pub lic officials and managers to take a hard look at which services they should deliver and how they should deliver them.
Peters and Waterman (1982:292) urge companies to “stick to their knitting”. “The cry from the executive suite should become “prove it can ’t be outsourced” (Peters, 1992 :197 ). This means that government s should concentrate on core functions and outsource non - core ones.
Public organisations used to enjoy monopoly of public service delivery. The governance model followed a stable hierarchical chain of command. Competition for public service delivery is now widespread. What Kettl (1993) called “the competition prescription” has taken a hold of public sectors everywhere on the globe. Public services are now increasingly put out to tender, contra cted out and delivered by private sector providers. These providers could be for - profit making companies or non - governmental organisations.
From the mid - 1980s , however many governments bega n to hand over supply of goods and services, through privatisation or contracting - out, to competitive commercial operators as part of private sector led - economic development and growth (Njunwa, 2007). There are strong
2
arguments that these partnerships between th e public and private sectors could enable
improve service ac cess, variety, punctuality and increased value for money, transparency and accountability in spending of public money (Brown and Potoski, 2006).
Contracting - out encourages governments to be more efficient and responsive by applying
market strategies to pu blic service provision (Osborne and Gaebler, 1992; Kettl, 1997). The
end result should be better services, to the benefit of citizens, at lower cost (Sclar, 2000;
Savas, 2000). In contrast, provision of public services by the public sector tends to be
mono polistic, lacks competition which drives either cost or quality and efficiency, is more
subject to political patronage, union influence and red tape, swamps the public administration
system with trivia (Kelman, 2002a; Van Slyke, 2003; Awortwi, 2013).
The opponents, however, state that government policies or services are products of public
services. These policies are adopted with public interest in mind, not the profit motive and the
spirit of entrepreneurship. They argue that “private companies are driven by profit motive.
They may be tempted to cut corners on services unless cities closely monitor the private
companies’ performance” (Rosenbloom, 2015). Furthermore, Cohen and Eimicke (2008)
argue that in order for contracting - out to be successful – beyon d just meeting efficiency goals
– the tool must also “….be understood and adapted to conform to the requirements of
representative democracy” ( 2008:20). Previous research has suggested that cities do not do a
very good job in performing their oversight fu nctions (Brown and Potoski, 2003a;Kelman,
2002a; Van Slyke, 2003). Also the ‘contract state’ approach to contracting - out raises a series
of difficulties for the public sector, including issues of private sector opportunism, problems
of the monitoring of co ntracts, the commodification of the public realm and a lack of
accountability. Contracting - out has been increasingly attempted for the provision of services
3 by Harare City Council with limited success, yet very little effort has been made to examine empiri cally the various facets of contract management of public services. This study seeks to fill this gap by studying the process of contract management in the Harare City Council,
Zimbabwe.
This chapter sets the problem scene for this study and is organised into nine sections: (i) background to the problem, (ii) statement of the problem, (iii) research objectives, (iv) research questions, (v) why this study?, (vi) limitations of the study, (vii) delimitations of the study, (viii) assumptions of the study and (ix) organisation of the study.
1.1 BACKGROUND TO THE PROBLEM
The contracting - out of government functions and services to external providers is an established practice in many developed and develo ping countries. The contracting - out strategy became popular in the public sector because of the perception that governments are intrinsically inefficient (Warner and Bel, 2008). While proponents, who often have roots in public choice - economics cite efficiency and cost reduction as reasons to contract - out, critics, who often have roots in traditional public administration counter that contracting - out tends to sacrifice key public interest values (e.g. equality of treatment) and reduces service delivery capacity (Brown et al. , 2006). The private sector is usually co nsidered to be more economic, efficient and effective than the public sector. Thus, it has been suggested that the remedy for what ails governments , is to change the way government does business by making it more business - like (Kettl, 1993) such as opening up to competition, result - oriented budgets, increasing use of markets, performance contracting and customer - orientation (Johnston and
Romzek, 2010).
4
Recent contracting out policy debates in both developed and developing countries , have been
strongly infl uenced by a trend towards “marketisation”, including the introduction of private
for - profit providers in local government (Manyanhaire et al. , 2009; Dowd , 2011 and Bryce ,
2012). These developments are attributable to two main s ets of influences. The first is the emergence of new public administration which identified private sector mechanisms as a
solution to many of the problems currently experienced by the public sector in many p arts of
the world (Sclar, 2013; Jean - Bernard, 2009). A second key driver of t he contracting out has
been the accumulating evidence of the failure of local authorities throughout the world to
meet key objectives of effic iency and cost saving (Goodsell, 2007; OECD , 2010 ; Tavenyika
2006).
The contracting - out strategy has gained much prominence in recent years, such that a majority of government agencies in most Western countries use it as the dominant mechanism for delivering public services. In fact, in a study by Council of State Governments in the Unite d States in 2010, it was found that 93 percent of all privatisation activities in both
state and local governments consisted of contracting out. A study by DeHoog and Salaman
(2009) found that direct delivery of goods or services by government bureaucracie s
accounted for only 5 percent of the activity of the federal government in 1999. A follow up
study by Choi et al. (2011) found that roughly 60 percent of United States government agencies used contracts with other governments, 70 percent contract - out with non - profit entities and 80 percent engage in contracts with private firms. One can infer from these studies that contracting - out is extensively employed in delivering public services in developed nations. What the literature has failed to realise is that there are conditions precedent for contracting - out but are found in developed countries. These conditions may not exist in developing countries. For instance, there may be rent - seeking and corruption that
5
may weaken competitive bidding in developing countr ies like Zimbabwe. As such, the same
levels of success in contracting out that are achieved in developed nations , may not be
possible in developing countries.
1.1.1 Historical Context of Contracting out in Zimbabwe
Zimbabwe introduced public sector refor ms in 1991 following the introduction of the
Economic Structural Adjustment Programme (ESAP) in order to reduce costs, refocus the
activities of the public sector and to promote the role of the market in service provision
(Masunungure and Chimanikire, 2007 ; Zhou 2000). As is evident from “ Zimbabwe: A
Framework for Economic Reform (1991 - 1995 )” , the reform programme sought to achieve its goals through a mix of policy options, which included the sale of shares, sale of assets, leasing, privatisation, deregulat ion, devaluation of the Zimbabwe dollar and contracting out of non - core activities. The liberalisation and the deregu lation of the policy framework we re therefore central features of the then new management orthodoxy.
Under contracting - out arrangements, the main objective was “to obtain value - for - money service delivery” (GoZ, 1991). Tevera et al. (2003) observed that “until now, contracting out has not resulted in significant cost savings.” This was apparent in their study on contracting out of refuse col lection by Harare City Council where the council made a loss of Z$40 million (ibid.). In the case of clinical contracts, the study of the contract with a mine hospital in Zimbabwe , indicated that the government was able to obtain services of the same quali ty at a lower cost through a public hospital. In this particular case, it was noted that the contract was unable to control utilisation of health services at the hospital. Total costs ballooned and provincial resources were disproportionately concentrated in one district at the expense of the other districts (Tevera et al. , 2003). This prompted some authors to query whether contracting out arrangements could , in fact , be regarded as successful at all in saving costs
6 and enhancing the provision of public services efficiently (Bertelli and Smith, 2010; Brown et al. , 2015).
Contracting - out is designed ostensibly to eliminate the large budget ary burden in the public sector and to improve effi ci ency (Cohen and Eimicke, 2 008), yet the local authorities in
Zimbabwe are hesitant in implementing it.
Since 1980, the Zimbabwe Government viewed the financing and provision of public services to be its political and social responsibilities. Indeed, there was a socialist orienta tion which gave the government a major role in the economy. It must be stated that the initial ideological and policy somersault happened within the ruling ZANU - PF itself when after capturing power, the political leadership considerably softened its develo pment goals and methodologies. For instance, Bond and Manyanya (2002:9) report that black voters:
…were equally stunned, no doubt, that Mugabe’s immediate willingness to compromise with white - owned capital in the name of racial reconciliation.
Jenkins (19 97:585) writes:
Unexpectedly, when it took the reins of government, ZANU (PF) back - pedalled on its hard - line Marxist - Leninist approach, although not on its rhetoric.
It can be, consequently, argued persuasively that the state - led development strategy was a historical necessity. It was dictated by the law of the situation given the gross socio - economic inequities inherited. Any other approach would have been indefensible, especially for a ruling party that prided itself as a Marxist - Leninist party. In short , the neo - liberal route was initially blocked.
Accordingly, it is important to note that attempts to contract - out public services were viewed as overtures towards privatisation of social services and this was treated with suspicion by the
7
top public polic y makers (Mudyarabikwa and Madhina, 2000:25).The socialist ideology,
though remained in the air, led to the loath of contracting out.
The contracting - out strategy was first introduced in the public sector of Zimbabwe in the
health and defense sectors in 1993 (ibid.). The objectives of the contracting - out were to
reduce the number of civil servants and public spending, in order to promote the indigenous business sector (industrial policy) , improve efficiency and effectiveness of service delivery , and mana gement. These two sectors commenced with contracting - out easy - to - monitor expenditures such as catering, laundry, security (manning premises) and equipment maintenance. In the case of the health sector, hospital or District Management Boards had the respons ibility of contract specification, tender management, evaluation and negotiation.
Although the policy to contract was adopted by government in 1994, the plans were abandoned until after the presidential elections of 1996 because the Zimbabwe government fea red antagonising its supporters, who constituted the majority of workers in the above services ( http://changezimbabwe.com/index.php ?) .
However, the question is : I n what way the supporters were going to be antagonised? The
country was emerging from ESAP era which had failed miserably. Workers and poor people
faced an unprecedented financial crisis during the early 1990s. For evidence of the miserable
ESAP failure during the 1991 - 1995 period of its implement ation, Bond and Manyanya (2002)
cite the ‘IMF riots’, including 1993 bread riots which broke out in high density suburbs of
Harare and in the city centre in Harare. Also, industrial strikes (railway workers 1992, Bank
workers 1993 and 1994, postal and tel ecommunication workers (1992 and 1994), teachers
and nurses 1996) became a common occurrence and mode of grievance expression across
economic sectors. Retrenchments of employees worsened their welfare. The contracting out
8 and commercialisation of services in local authorities resulted in a reduction in the quality of services as well as the skyrocketing of prices beyond the reach of the ordinary people.
Thus, in line with ZANU - PF’s espoused ideology of scientific socialism, the state in
Zimbabwe used local authorities as instruments of ensuring control of the commanding heights of the economy. Welfarism was adopted as an objective response to the perceived inability of the market to ensure equitable provision of social services such as water, energy, health and education in a post - colonial state setting. This ideology refutes neo - liberal assumptions about the neutrality of the market in the allocation and distribution of resources.
Hence, HCC’s poor service delivery was sub - optimal pricing structures. While these social mandates in most cases were not economically viable, they enabled HCC to execute its developmental roles that were very fundamental to socio - economic development.
The most known case of health care contracting - o ut is the Wankie Colliery Hosp ital (210 beds). A private company contracted by the Ministry of Health, Child Care and Welfare to service public patients in the remote district of Hwange and to act as a referral centre for the small Victoria Falls Hospital. The hospital is the epi - centr e for healthcare for two major companies: Zimbabwe Electricity Supply Authority (ZESA) and Wankie Coal Mine, employing a large population between them. The Wankie Colliery Hospital has experience in contracting out with both the private and public sectors. Firstly, the Wankie Colliery Hospital is contracted by two parastatal companies, ZESA and the National Railways of Zimbabwe
(NRZ) to provide health care services to their employees and their dependents. The ZESA and NRZ, as purchasers, were expected to pa y a negotiated but full cost fee for treatment and related expenses incurred by employees and their dependents, to Wankie Colliery Hospital,
9 the supplier of services. Prompt and regular reimbursement of expenses to the hospital reinforced the hospital’s c ommitment to the contractual arrangement.
Secondly, the private hospital was contracted by the Zimbabwe Government through the
Ministry of Health and Child Care (MoH&CC) purchasing clinical services for public patients due to absence of government healthcare facilities in the Hwange District. The nearest government hospital is 100 km away but serves less than half the district population.
The Wankie Colliery Hospital was more ideal for providing the service because it had excess capacity that could accommodate public patients together with the two companies’ employees and dependents. To sustain the contract, the MoH&CC gives the hospital the status of a district level facility and thereby challenges the provider to offer services of the variety and q uality expected of that level. The co ntract provides for the MoH&CC to reimburse the hospital at a negotiated full cost fee as is paid by the private utilities.
The foregoing case has highlighted problems with healthcare contracting. The contractual rela tionship between the public purchaser and the provider was strained by the latter’s prices that sought to recover full costs from the employment of expensive equipment. The purchaser viewed the prices as incomparably higher than charges at government distr ict hospitals. On a per case basis, MoH&CC reimbursement was a lot higher than that for government district hospital (as shown in table 1 below) resulting in delayed reimbursements to the providing hospital. At times, public sector managers discouraged pat ients from utilising the Colliery
Hospital in preference of the cheaper but distant government hospital at Victoria Falls. This distorted hospital utilisation (beds usage) and more importantly, discouraged Wankie Colliery
Hospital from contacting the Gover nment.
10
Table 1 .1 : Comparison of Fee Structure Between Government and Private Health Institutions as of January 1999 Private Sector Providers Public Sector Providers
General Avenues St. Clay Central Provincial District Practitioner s Annes Bank Hospital Hospital Hospital Outpatient Z$125 Weekdays - No out Not a Adults - Adults - Adults Consultation Z$257 patient benefit Z$52 Z$38 Z$24 Weekdays Children - Children - Children - nights - Z$60 Z$19 Z$19 Z$374 Weekends - Z$313 Admission to Twin Z$1012 Z$980 Adults - Adults - Adults - General Ward bedded - Z$120 Z$100 Z$60 Per Day Z$1179 up Children - Children - Children - to 5 beds - Z$901 Z$893 Z$60 Z$60 Z$60 Z$1070 More than 6 beds - Z$927 Not a benefit
Z$811 Surgery Z$186 fixed Z$186 fixed Z$186 Z$186 Major - Z$100 Z$25 fixed Charges fixed fixed Z$150 Z$45 Minor - Z$50 Source: Adapted from Ministry of Health and Child Welfare 2002
It is now accepted by policy makers, public sector managers, academics and funding agencies that contracting out the provision of public services to private agents allows public health organisations to focus on their core health responsibilities. Another advantage to contracting out is that the government could possibly benefit from the perceived efficiency of the private for - profit sector without the political risk of losing control over service provision and distribution (McPake and Hongoro, 2000). Fun ctional specialisation through specified roles by private catering, laundry and security providers yield higher cost - effectiveness for the public sector facilities. However, there has not been consideration for contracting out in other sectors of the econ omy, even where government was convinced of its underperformance like local government. Literature reviewed discloses that experience in
Zimbabw e is that most public agencies multi - source from the private sector for the easy - to - monitor services intended fo r formal contracting out (Tavenyika, 2006; Masunungure and
11
Zhou, 2006; Bond and Manyanya, 2003). However, Mudyarab ikwa and Madhina (2000)
observe that the government’s reputation as being bad debtor unable to timeously pay
creditors acts as a disincentiv e to attract profit - making companies to contract with the public
sector.
The role and institutional character of the local authorities have been questioned and the local
authorities have been under pressure to adopt private sector orientations (Manyanhaire et al .,
2009). The outsourcing or management contract of water, sanitation, waste removal and
various municipal services was already underway by the mid - 1990s, “thanks to a national
neoliberal policy for local authorities that the World Bank encouraged ZA NU - PF government
to adopt” (Bond and Manyanya, 2003:172). In some cities, like Harare and Gweru, municipal
managers were being aggressively persuaded by the World Bank (WB) , European Investment
Bank (EIB) , French Development Agency, US Agency for Internati onal Development,
British Department for International Develo pment, the German Aid Agency , the South
African Municipal Infrastructure Investment Unit, International Water Companies and Harare
Mercha nt Banks to promote contracting - out and public - private partnerships (PPPs) (Bond and Manyanya 2003, Mudyarabikwa and Madhina, 2000; Tevera et al. , 2003; Tavenyika,
2006). This persuasion for privatisation was well received by Ministry of Local Government,
Public Works and National Housin g; and Harare City Council as evidenced by increase d
desire to attempt contracting - out the refuse collection and transportation in 1996 (Bond and
Manyanya, 2003).
The catalyst for privatisation of municipal services was a 1995 directive by the Ministry o f
Local Government, Rural and Urban Development (MLGRUD) Secretary , “encouraging
urban local authorities to consider options for commercialisation, privatisation and
12
contracting in and out some or all of their services” (Plummer and Nhemachena, 2010). In
1996, the Task Force for Commercialisation of Municipal Services was established with three
Gweru City Council representatives. But the subsequent municipal privatisation of refuse
collection in Harare was widely considered to be “a disaster” ( Ibid: 7 ). In 1998, the Harare
City Council contracted out 56 percent of the refuse collection to some private companies
with the City Health Department retaining resp onsibility for the remaining 44 percent . The
rationale was to enha nce quality of services delivered to residents. However, it did not work
out as expected (Tevera et al. , 2003). As a result, Harare City Council (HCC) has
experienced decline in service delivery evidenced by the piling up of uncollected refuse at
undesignated sites. To arrest the situatio n, HCC decided to contract - out refuse collection and
transportation in 1998. The results w ere lamentable. The contracting - out was terminated after
an initial trial period in early 2000. Reasons given by HCC authorities included insufficient
collection truc ks by private companies, inadequate budgetary allocations by Treasury, non -
maintenance of refuse trucks among others. It is important to note here that since the private
sector was supposed to do the refuse collection and transportation, one cannot safely
conclude that the private sector failed to provide the service. Chapter Seven of this study
showed that HCC was culpable. However, there were also some factors outside the control of
HCC such as unfavourable macroeconomic variables, for example, hyperinfl atio nary
environment, fuel shortage and shortage of foreign currency.
According to the MLGRUD (2006), the chief setback with refuse collection was the
inadequate and shortages of refuse vehicles for collection of garbage. This was evident in
1999 when the HCC failed to collect and transport refuse. The HCC had only 7 out of its 90 trucks operating. This scenario was exacerbated by inadequate financial resources for equipment replenishment. This had been compounded in succeeding years by the critical
13
shorta ges of fuel and foreign currency. Furthermore, from 2000, the business became
unprofitable due to the prevailing economic downturn. There was also reported inefficiency
and dishonesty on part of the contractors and late payment of contract ors by the local
authorities. March 2000 report in a private newspaper, The Zimbabwe Independent 2000, claimed that the City of Harare had cancelled a contract with a refuse collection company,
Waste Management Services, citing fraudulent claims by the company. The contrac t, which had been in force since October 1997, was terminated on 31 March 2000 after months of haggling between the HCC and the Waste Management Services (The Independent, 2000).
These problems indicate that the market management model in the public sect or is not easy because it requires institutional change as well. Gerrish (2015:249) observes that “the creation of an effective market - based system of management within the public service depends upon the development of an appropriate institutional framewo rk within which it can operate.” Gerrish (2015) further observes that individuals who can effectively manage contracts would be:
i ndividuals who know ho w to write terms of governance and setting the rules for positive future interactions; i ndividuals who can signal consummate behaviour to sellers and are able to signal knowledge of sellers’ perfunctory behaviour; and i ndividuals who can coordinate communication between many diverse project teams as they work toward contract milestones (Gerrish, 2015:250).
The major conclusion reached by Gerrish (2015) in the book review of Brown et al. (2013)
was that the structure of the contract failed, not the people. Underscored here is that there was
little written about the particular actions of the people in moment s of organisational failure.
Coming to Harare City Council, though the private contractors were supposed to do the
provision of contracted out services, it cannot be concluded that the private sector failed to
provide the public services. There were other extenuating factors like shortage of fuel, foreign currency and hyperinflationary environment.
14
The foregoing paragraph throws some intriguing insights about contract management, private
sector capacity and local authority ability to pay. A rigorous study o f the contract
management capacity of local authorities and private sectors is missing from the contracting
out debate in Zimbabwe. This knowledge gap was filled in by using Harare City Council. The
following questions animate the study. What kinds of capa cities are needed to ensure
effective contract management? Will an improved contract management capacity improve
organisational performance of both purchasers and providers of public services ? There is
insufficient knowledge to establish that link effecti vely , but Brown and Potoski (2003b)
argue that even though problems with preparing contracts and managing markets cannot be
eliminated, governments are better suited to facing the challenges:
Governments that invest in feasibility assessment, implementatio n and evaluation capacity are not immune to the problems that can undermine contract performance. Rather, these governments will be better positioned to avoid these threats and to prevent full - scale contracting disaster (Brown and Potoski, 2003b:162).
Other critical questions are: What are the factors that promote or inhibit contracting out the
provision of public services to private agents? Why has there decreased interest in contracting
out? How does contracting out compare in practice with the expect ations set out in
contracting policy? Is it lack of contract management capacity? Who should be held to
account for the performance of the contractor and how?
According to a state controlled newspaper, the relationship between private companies and
the H CC became irreparable in 2002 to the extent that the commissioners who were running
the city at that time , recommended that the majority of the refuse collection contracts should
not be renewed at expiry in August of that year (The Herald, 2002). In 2000, HCC decided to
revisit the contracting out of refuse collection and disposal since no benefits had accrued to the authority. HCC “lost about Z$40 million over and above”
(www.allafrica.is sues/privatisation) what it paid out to the refuse collecting compani es, more
15 than twice its outlay when it operated the refuse collection in - house
( www.allafrica.issues/privatisation ). At the time of writing this thesis, refuse collection and transportation were being done by HCC through the Waste Department.
It is instructive to note that it was not only refuse collection and transportation which were contracted out. The HCC’s Turnaround Strategy of October 2004 , states that “ 38 services shall be contracted - out” of which only six (6) were contracted out namely, Rufaro Marketing,
Shalet coronation, grass cutting, refuse disposal, Harare quarry and grass cutting. All these contracts were terminated in 2008 for the following reasons: insufficient funds for equipment mai ntenance, asymmetric information that existed between vendors (contractors) and Harare
City Council, asset specificity problem; and the central government viewed the private sector as economic saboteurs (Manyanhaire et al ., 2009).
Likewise, in 1996 the Ha rare mayor signed a letter of intent to BiWater International
Company to repair water infrastructure worth billions of South African rands, but BiWater
International Company backed out when objections arose from various stakeholders and also due to profita bility concerns. A few years later, as Harare water was beset with quality, shortage and leakage problems, more multi - dollar PPPs proposals , were mooted by international agencies (Manyanhaire et al ., 2009: 123). Before 2000, Zimbabwe’s capital city had bee n run by appointed ZANU - PF mayor and commissions. City contracts went to cronies and so the “renationalisation” of municipal services was set in motion. So, it was mainly a failure of the contracting regime.
In a statement issued in September 2000, the Harare Council noted that it was “cheaper for council to undertake the refuse collection function itself than contracting out the service to
16 outsiders” (The Herald, 8 September 2002). Five firms were let go and the city purchased 13 new refuse collection v ehicles (ibid.). Amid the chaos, one hopeful sign was the May 2002 launch in Harare and Bulawayo of the Zimbabwe Anti - Privatisation Forum which made a variety of demands to municipalities including:
s crapping of all arrears on water payments for the poor;
e nding water cut - offs: water is a basic human right and not privilege;
s upplying free minimum amounts of water a day required for health and hygiene;
s upplying continuous and uninterrupted water to citizens;
i mplementing public works programmes to employ the unemployed at a living wage;
and
t axing the rich to fund the poor by introducing a progressive block tariff system
ensuring free line services cross - subsidised from the rich to the poor, from high - end
users to low - end users (Zimbabwe Anti - privatisation Forum, 2002:288 - 289).
In times of crisis, the Government of Zimbabwe had to intervene directly by way of providing additional financial support to local authorities. In 2004, the Reserve Bank of
Zimbabwe unveiled a $10 trillion (Zimbabwean Dollars) fund under the Parastatals and Local
Authorities Re - orientation Programme (PLARP) in which the local authorities could access funds to improve their service delivery in areas such as waste management (RBZ Monetary
Policy Statement, 2004). Harare City Council re ceived 32, 2 per cent of this money. In 2005 and 2006, local authorities throughout the country were availed a total of Z$286 billion and
Z$1,1 trillion, for water and sewage projects respectively under the auspices of the Public
Sector Investment Programm e(PSIP), the new Infrastructure Development Bank of
Zimbabwe (IDBZ) and the Zimbabwe Allied Banking Group (ZABG) (Government of
Zimbabwe, 2000). Instead of local authorities using the majority of this capital for intended
17
purposes, a large proportion was spent on salaries. At that time, the Government had
presc ribed a ratio of between 28 - 32 per cent of total recurrent expenditure for salaries, but
the majority of councils went on to overshoot this threshold by a wide margin due to pressure
exerted by empl oyees on respective council budgets. As a result, an overhaul of Harare’s
sewerage system was abandoned, leaving the already overloaded obsolete reticulation
infrastructure reeling under intense pressure from a population of approximately two million
peopl e.
Under the Inclusive G overnment, a more seri ous stance to adopt contracting - out was adopted.
Under the Short Term Emergency Recovery Programme (STERP) document, contracting out
was provided for under private sector invitation in areas such as local government service
delivery, power generation, dam construction, rail services, and national highways among
others (GoZ, 2009).
This was also reconfirmed under the Three Year Macroeconomic Policy and Budget
Framework (STERP II), which envisages the use of contracting - out for enhancing public service delivery (GoZ, 2010).
As a way towards implementation , there has been some noticeable progress toward s o perationalising contracting - out over the past recent years. Between 2009 and 2010, a series of workshops on contracting out were undertaken in Zimbabwe, focusing on the issues to be addressed for successful contracting out, drawing from expertise and best practices gained during the works from international experts. One critical recommendation from the worshi ps was the need to speed up the setting of the policy and institutional framework for contracting out, to allay fears from the private sector as well as introducing transparency into the process.
18
Following the workshops, the Government through the office o f the then Deputy Prime
Minister ( Professor Auther Mutambara), made significant strides in laying the groundwork for the take - off of Public - Private Part nerships (PPPs) and contracting - out. Critical documents were prepared including PPP Policy in 2010, PPP Guidelines 2010, PPP: Legislative Review for Zimbabwe 2010, and Institutional Framework in 2010. These d ocuments form the base upon which PPP and contracting - out would be structured, although they are yet to be adopted. At the time of writing this t hesis, the PPP and Contracting - o ut bill was before the
Parliament of Zimbabwe for deliberations.
The central theme emerging from this section is that HCC contracts were poorly managed.
There is little systematic thinking on the ‘how’ question especially concer ning the features of effective and efficient contracting out. One explanation for this omission is an underlying assumption that management is not problematic and makes little difference in the long term.
Management of contractual arrangements can affect v alue - for - money (VFM), quality an d service delivery initiatives.
1.2 STATEMENT OF THE PROBLEM
The overwhelming challenges of service delivery which confront Africa and many developing countries has led to a growing focus, both academically and technically, on the process and mechanics of contracting out the provision of public services to private organisation. Effective and efficient delivery, open markets and democratic governance broadly constitute the toolbox of solution for problems ranging from poor qu ality to expensive service delivery. However, African public services, as key instruments of delivery, are embedded in complex socio - economic and political networks which define the boundaries of policy implementation and development.
19
Contracting - out is d rawing increased attention among scholars in public management. Since
the New Public Management’s (NPM) advocacy on contracting - out, there has been
considerable research on its relative efficiency (Hodge, 1999, 2000; Dilger et al. , 1997), the implications to public sector contracting (Brown et al. , 2015 ; Romzek and Johnson, 2005), and public sector capacity to manage contracts (Brown and Potoski 2003a, Cooper 2003 and
Fernandez 2009). In Africa, key studies include Awortwi (2013), Batley and Larbi (2004),
Wo rld Bank (2004), McPake and Hongoro (2000), Palmer and Mills (2003), Obirih - Opareh and Post (2002) and Broomberg et al. (1997).
Despite compelling heuristic and empirical evidence from other developed and developing countries that contracting - out is viabl e and capable of injecting dy namism in the public sector; only a few countries in S ub - Saharan Africa have made appreciable impact in contracting - out their public services (Cohen and Eimicke, 2008). Many sectors in Zimbabwe like health and defense , contract - out a variety of services. Local authorities appear to be disinterested.
Despite the 1996 legislation empowering local authorities to contract out, only one local authority (Harare City Council) had done so from 1998 to 2000 and resumed again in 2003 an d abandoned the system in 2006. The whole project has since been abandoned. This was really “stubborn retreat ” ( McPake and Hongoro, 2000) and contracting out “policy vacillation” (Masunungure and Chimanikire, 2007). The lack of action by local authorities raises a question: why not? Why, then, has there been so little enthusiasm for contracting -
out? Heuristically, local authorities should be taking advantage of the benefits associated wit h
contracting out. Contracting - out is increasingly recommended to developing countries as the
only efficient way of allocating resources, reducing costs and improving efficiency in the
20 delivery of services of the local government (Zinyama, 2014b). However, empirical evidence regarding t he feasibility and effectiveness of contracting - out in this respect is almost completely absent in Zimbabwe as highlighted above. The growing use of contracting out as the most efficient method of service provision has arisen as the res ult of the need to i mprove efficiency and quality of service delivery . Most local authorities in Zimbabwe perform badly.
They suffer from a number of well - known bureaucratic pathologies that include inefficiency, poor leadership, lack of capacity and competitive bidding, rent seeking, corruption and poor service delivery. The need to improve efficiency and service delivery is therefore obvious.
The contracting - out reform within Harare City Council has yielded less than wholly impressive results. Exploring contracting - out exp eriences of Harare City Council may provide a source of valuable information for local government managers. The HCC attempts to contract out refuse collection and bussing failed to improve delivery of services due to severe capacity and capability gaps. It appeared as if the contracting out reform was designed to replace a sick and ailing local authority with weaker and more inefficient private companies. This was aptly observed by (Sadza, 2002; Madambi, 2011; Chikozho, 2013) when they said efforts to cont ract - out public services to private agents met with limited success due to lack of skills in contract management and also the award of contracts to private providers who did not necessarily have the required capacity. Therefore a rigorous analysis of the c ontract management process of HCC is still missing from the contracting - out debate in Zimbabwe. This study seeks to fill that knowledge lacuna. It is increasingly realised that contrary to neoliberal claims of “unmediated and frictionless”(Zhou, 2000:3) c ontracting out implementation processes, there are institutional and political barriers to reforms.
21
Disquieting is that the local government contracting - out reform, despite the support it apparently enjoys from political pronouncements, has been going on at a painstakingly slow pace. Policy reversals strikingly characterise Harare City Council. The growing cynicism was also well pronounced among Ministry of Local Government , Public Works and National
Housing (MLGPWNH) officials:
We sometimes get a feeling of being let down by certain people within local authorities who at times unnecessarily show blatant weaknesses, indecisiveness, lack of interest, indiscipline and outright incompetence (Late MLGPWNH, Permanent Secretary , Killan Mupingo).
What is even mor e intriguing is that, there was barely any convincing systematic research conducted in Harare City Council to unstitch the specific socio - economic - political complexities under which contracting out was to be implemented. As a result, there was modest eff ort to disentangle the institutional and political complexities within which contracting - out processes are embedded, thus sidelining the politics of contracting - out reforms.
Against this backdrop, the study interrogates the nature of contracting out, the role of tendering in contracting - out, its institutional and legal frameworks. The thesis of this study is that the nature of politics and character of leadership play primary roles in the success or failure of local government reforms. Contracting - out or p ublic sector reforms in general, no matter how well designed, resourced and implemented will have almost no chance of sustained success if it does not, first and foremost, allow for the real political motives of both central and local governments it seeks to improve. The result of any public sector reform is not a matter of skill or effort or chance. It is the deliberate choice of the regime. This led some authors to conclude that the dismal performance of public sector reforms is not attributable primarily to poor design or lack of national ownership (Kjaer, 2004;
22
Wohlgemuth, 2008) or inadequate institutional capacity. The understanding of this dismal performance would be incomplete where it does not recognise the over - riding impact of political factors (Cr ook and Manor, 1998). Van de Walle (2001) argues that some reforms will not be resisted as long as they do not hurt the interests of important clienteles.
Politicians, ideologues, advocates and opponents keen to advocate or protect their respective posi tions have monopolised it. Ideologues see contracting - out as a panacea for everything that they think is bad in government - making government smaller, more efficient and competi tive. By contrast, unions see contracting - out as a threat to their jobs, pay and conditions. Many elected officials see it as a threat to their role and power base while a few see it as an opportunity to make their mark. As a result , politics plays a central role in conceptualising contracting out. Thus, policy makers tend to ignore t he practical issues of how to do contracting - out well. This is not to down play the role of politics in contracting out. Politics permeates the selection of services for contracting - out, contract designs, the bidding and selection of the best bid, and management of relationships with private suppliers.
Electoral issues rather than efficiency usually motivate politicians. This encourages awarding contracts or tenders for political alle giances rather than skills and favouring a distribution of resources for political rather than efficiency grounds. Some researchers argue that contracting out is prone to corruption, with politicians awarding contracts to friendly firms who repay favours w ith campaign donations (Rosenbloom, 2015; Soludo and Obgu, 2004; Skalnes,
1995). Indeed, some suggest that a new form of political patronage has emerged with the increase in contracting (Foged, 2015; Monga et al., 2009).
Most models of contract management tend to focus on processes and leave the political context in the background. It is the argument of this study that the political framework plays a
23 very important role as does the process of contracting - out itself. Implie d here is that though contract management is a technical process, it is also politically charged. Attending to both technical and political dimensions , guarantees successful contracting out. The contracting - out process should be practical, focussing on the make or buy decisions, contractor selection, the complexities of contract management, performance measurement and management. Politics permeates all these issues. Contracting is a complicated process. Managers must learn how to write contract requirement s and elicit bids that obtain important services at the best price and quality. They must learn to work with, manage and measure the performance of outside for profit private , non - profit organisations and international organisations.
The interrogation of these issues enabled the study to methodically understand the factors that make or break the feasibility and practicability of the contracting - out in Zimbabwean local authorities.
1.3 RESEARCH OBJECTIVES
As is clear from the con text of the study outline d , the overall objectives of this study are twofold. The first is to investigate and describe Harare City Council’s experiences with contracting - out the provision of public services in order to better appreciate the factors that make or break the contracti ng - out process. In the same vein, to interrogate how it can be theoretically made more effective. The second is to document and evaluate contracting out features and institutional arrangements. The study’s specific objectives are to :
e xplore the fundamental features of the Harare City Council contracting - out process
encom passing the various contracting - out policies enacted, strategies employed and
the rationale behind those actions;
e xamine political, socio - economic, institutional and legal framew orks that were put
together to facilitate contracting - out;
24
a ttempt a detailed and critical review of the theoretical and global empirical literature
dealing with contracting out both in general and in particular local government
contexts so as to provide b ackground, context and methodological foundation;
d iscuss the theoretical lessons learned vis a vis existing literatu re in order to make
contracting - o ut better in Zimbabwean local authorities.
1.4 RESEARCH QUESTIONS
The c entral question in this study was : What are the experiences of Harare City Council with
contracting out the provision of public services between 1995 and 2014? In order to further
explore the main research question, the following guiding questions framed the research:
1. What is the rati onale for contracting - out?
2. What influences the make or buy decision in local authorities?
3. How does HCC manage the contract?
4. How enabling is the framework (statutory, institutional, legal, political,
constitutional or regulatory) of contracting - out ?
5. What kinds of capacities are needed to ensure effective contract management?
6. What mechanisms are in place to ensure the accountability of contracted
companies? and
7. Which factors determine the success of the contractual governance process?
The an swers to these and related questions helped in understanding the contracting out
process and in delineating the contours of ongoing contracting - out responses at the local government level.
1.5 WHY THIS STUDY?
The study was motivated by the observation that contracting - out is already being successfully used in developed and some developing countries for the provision of public services but it
25 has virtually failed in Zimbabwe’s local authorities and that there is no currently published analysis of how this ca n be made to work better in Zimbabwean local authorities. This is significant in Zimbabwe because the parastatal and local government sectors’ performances are deplorably below expectations. C urrent research efforts have proved inadequate in unraveling the causes of this scenario. An attempt by HCC to contract - out refuse collection was abandoned barely two years after adoption in 1998. Refuse collection was contracted out again in 2003 and was discontinued in 2006. Why this stop - go - stop or policy vacillati on?
Proper analysis is needed in order to unravel this phenomenon in order to strengthen policy interventions needed to strengthen contract management capacity in local government. Thus , there are potentially some practical benefits of this study. Girth ( 2014) observes that “the perils of organisational inattention to contract management are profoundly consequential - poor management leads to corruption, programmatic failure and compromised institutions”
(Girth 2014).
Furthermore, Greve (2008) suggests that in the wake of New Public Management reforms and as public - private partnerships have proliferated, it has become more important than ever before for public service managers to understand the contracting process and its institutional context. Brown and Pot oski (2003b) observe that “there is great need for systematic research, not only because of its scientific value but also because of its ability to improve the pract ice of contracting - out public service provision and consequently service delivery effective ness.”
Curry (2009) states that while contracting - out innovation may not ensure improvement in delivering its promises, it remains a critical variable for the new public governance movement . Van Slyke (2003) summarises the importance of this research on the competencies needed to ensure effective implementation of contracting out process.
26
Public management capacity requires personnel with contract management experience, policy expertise, negotiation, bargaining, and me diation skills, oversight and programme audit capacities and the necessary communication and political skills to manage programmes with third parties in a complex political environment (Van Slyke, 2003:296 - 297).
The obser vations by the foregoing author il lustrate that contract management capacity is
demanding and there is a link between the question of capacity and contract management
process. The results of this study may be utilised by HCC and other local authorities in
Zimbabwe in developing improved co ntract management capacities and systems,
environments and implementation strategies that promote effective implementation of
contracting - out reforms.
It is envisaged that the policy recommendations from the study would assist the Government
of Zimbabwe in general and the Ministry of Local Government , Public Works and National
Housing (MLGPWNH), in particular, in correcting the pitfalls embedded in the previous
contracting - out attempts . Without doubt, studies in contracting out in Zimbabwe are still very
scanty. Relevant studies include Manyanhaire et al. , 2009; Zhou, 2009; Mudyarabikwa and
Madhina, 2000; Tavenyika, 2006 ; Masunungure and Zhou, 2006 . These studies focused on
privatization or public sector reform o bjectives, effects and impact. They did not investigate the nature of contracting out, its modalities, contract management capacity, tendering processes; impacts, contracting - out frameworks and roles of competitio n in contracting out.
The present literature leaves a major gap in this important area of privatisation. This study intends to cover this serious gap in the literature with an attempt to review and document recent contracting out experiences in the global local government in a comparative context . In
addition, this study adds to the literatu re on the New Public Management doctrine (Osborne
and Gaebler, 1992; Hood, 1991), which has been criticised for being long on generalities and
ideology but short on empirical evidence (Savas, 2000; Greve, 2008).
27
The justification of this study also lies in the current dearth of research and published
material on contracting out processes in Zimbabwe. For instance, in his directive to
participants at a Gweru Seminar (December 12 - 14, 1997), organized by the Urban Councils
Association of Zimbabwe, the late Kil lan Mupingo, then Senior Secretary of the Ministry of
Local Government Rural and Urban Development observed with concern that:
The poor service delivery worries the government. We encourage urban local authorities to consider options for contracting in and out some or all of their services, privatization and commercialization. Research is therefore also needed to guide policy in the contracting out o f local authorities’ services.
Despite such calls, to date, there has not been any systematic study of the contracting out in
Zimbabwe let alone on the ongoing quest to improve public service delivery. The research
made so far was sponsored by the Government of Zimbabwe, through the MLGPWNH.
However, as with government commissioned researches, apart from the po ssible lack of
research freedom due to clientele dependence, the researches operate within specified terms
of reference and may therefore not capture the entire dynamics in the policy environment. In
fact, they tend to be pitched at the macro level and the refore concerned with procedural and
policy institutional matters at the expense of situational contexts of contracting out, for
example, (Masunungure and Zhou, 2006).
In cases where independent research has been conducted and published, they have tended to
be mere small sections under the general rubric of privatization. This tr end is reflected in the
works of Masunungure and Zhou (2006). Scholarly publications on contracting - out in
Zimbabwe , have generally taken the form of small articles, though referee d, too general in
analysis. They also tend to provide an “insider’s view” about the contracting - out
arrangement. Articles by Mudyarabikwa and Madhina ( 2000 ) , and Tevera et al. (2003) , fall within this category. Therefore, this research provides a balanced portrayal of all the nuances
28
that come to bear on decision makers as they design and implement contracting - out
initiatives.
Whether one favours or opposes contracting - out, its growth is indisputable in both the developed and developing countries. Those wh o are involved in the trade of training and advising public managers , should learn to comprehend and appreciate this management tool and edify public managers how to employ contracting - out more effectively. Therefore , the study adds to the theoretical lit erature on public sector contract management to enhance the effectiveness of public management and public managers.
The results of this study may contribute valuable insight and theory into the successful implementation of contracting out as a management tool for public service provision in the local government sector.
1.7 LIMITATIONS OF THE STUDY
Before venturing further, it is necessary to concede some limitations of the study. To
overcome the problems of non - availability and limitation of observed data, th is study relied
on respondents’ perception as an information basis for the empirical analysis. The analysis
relied greatly on perceptual data. The case study was limited to re spondents’ self - reported
perceptions of their experiences with contracting out initiatives. This was principally because
of the lack of objective measures of contract management data. Although there are concerns
regarding self - reported data, contracting r elationship has long been advanced through the use
of survey data (Fernandez, 2009; Hefetz and Warner, 2004; Lamothe and Lamothe, 2008;
Brown and Potoski, 2003a).
29
The scope of the study was limited to a local government context. The small sample size (one urban local authority , was selected from numerous urban and 71 rural local authorities), therefore, the results cannot be generalised to other units of government. There are no claims about government contracting with private provider at other levels of g overnment. Similarly, the sample does not include all local authorities, making results less generalisable for other local authorities. The results presented here should be tempered when generalising across sectors.
The ex ternal validity of this case stu dy, as Yin (2003) suggests, lies in “analytical generalisation” through replication in different contexts rather than “statistical generalisation” through inference from a sample to a population. In this sense, the findings might be used only for condition al and contingent generalisations (George and Bennet, 2005) to other local authorities. The study tried to achieve external validity through theoretical relationships where generalisations could be made. Implied here is that the study sought to expand and generalise theory not enumerate frequencies. Future studies are thus required to corroborate the conclusion s derived from this study.
Generalisability is also limited by the fact that the data were gathered from only one level of government. For one thin g, the focus is on the Harare City Council, not on all of
Zimbabwean local authorities. The local authorities differ themselves. Other local authorities are less politicised than Harare City Council. Insofar as time and other resources limit proper researc h to only one local authority, however, Harare City Council is a good choice.
However, a single case study can also be of value to practitioners in the local government field and all local authorities in Zimbabwe are operating in the same environment (pol itical, policy, institutional, socio - economic). This is achieved through “relatability” (Stake, 1995),
30 this is as important as generalisability. In any case, the business of a case study is particularisation not generalisation as observed by Stake 1995.
Th e real business of a case study is particularisation and not generalisation. We take a particular case and come to know it well, not primarily as to how it is different from others, but what it is, what it teaches. The first emphasis is o n understanding th e case itself (Stake, 1995:8).
Contracts with nonprofit organisations and other governments were i ncluded in this analysis,
16.7 per cent (one out of six) of the sample, therefore, the results are more applicable to for - profit contracting arrangements. The examination of only contracts with private service providers limits the external validity of the study inasmuch as it applies to the bro ader universe of service delivery options. More study is needed to determine conditions under which local authorities actively select for - profit over nonprofit, franchises, volunteers, in - house service and intergovernmental.
A related methodological issue of concern is social desirability bias. As many of the survey items refer to the behaviour and actions of public officials responding to the survey, they may be inclined to respond to questions in ways that cast themselves in a positive light. The public relations management was very visible in some of the responses from senior council officials.
Another methodological related limitation was that before and after , comparisons were difficult especially in the area of refuse collection and transportation due to absence of accounting data.
Another limitation is that materials rely on impressions that can be illustrated by reference to particular events and conversations. Personnel at upper echelons of the Harare City Council did not welcome close observation or detailed questioning about corruption, supervision, control or power. Some individuals were especially guarded in their comments, some did not
31 think in terms sufficiently abstract to describe patterns in discrete events and some had minds of great scope and flexibility and did well in analysing complex settings. Hence, the discussions relied on heavy inferences.
Another limitation which this study encountered was the lack of informa tion because some key respondents have since passed away, for example, the former Harare Mayor Solomon
Tavengwa and Permanent Secretary for Ministry of Public Work and National Housing,
Killian Mupingo. Moreover, accessing some of the former commission chairpersons or commissioners, Permanent Secretaries, chairpersons of rese arch institutes and private sector of selected organisations was not easy. This problem was alleviated by carrying out telephone/cellphone interviews or emailing the questions.
Another limitation is the use o f the observation method. When this researcher began , his care er as human resources officer, he was selected to be a member of the contracting out team for “Harare City Council and Zimbabwe Passengers Company Bussing Project”. While ser ving as a member of that team, he came in contact with HCC executi ve, mayor, councillors and council union. In talking with them, it became apparent to this researcher that, policy formulation in local authorities i s fraught with irregularities. This researcher was curious to know why this was so. This background definit ely affected the interpretation of findings though the researcher tried to be objective as much as possible. In the case of
CABS/ Old Mutual Budiriro Housing project, the researcher made some visits and saw cracking houses and interviewed some beneficiaries . In these two scenarios, the possibility of observer bias anytime d ata were obtained from observations , was inevitable.
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Chapter Four of this study provides global empirical evidence of contracting out for public services. The cases only provide illustrat ions and examples. Even if the study had sought representativeness, one should never generalise from so few data points. The cases were chosen for the lessons they could teach and they certainly provide an indication that the study has a great deal to lear n about effective contract management.
1.7 DELIMITATIONS OF THE STUDY
The delimitations utilised by the researcher in this study were determined by a desire to have a better understanding of the Harare City Council’s contracting - out processes. In order to gain the perspectives of contracting out experiences and processes, the res earcher only sought respondents in the study who were either involved in policy governance, formulation, implementation, monitoring or evaluation in the local government sector. The use of local authorities in this study did not allow the researcher to gain the views of those individuals in private procurement or outsourcing.
The study included only those organisations that matched the selection criteria established for the study . The criteria for selection included:
o rganisations/individuals whose core business is local government , public
service delivery , policy formulation, implementation, evaluation, advocacy
issues or possess expert knowledge on local government management. T his
was designed to guarantee reliability of information;
o rganisations/individuals that participated at the time of initiating the
contracting out the provision of public services by Harare City Council; and
o rganisations/individuals willing to participat e in the study .
33
The rationale for selecting the first criterion was to gauge the ability of participants to
accurately recall information regarding the contrcating out reform policy. The second
criterion is related to the role of the individual/organisati on in initiating or implementing any
change process. Because this study focused on public sector management reforms that change
the structure and culture of HCC, having the organisations/individuals who participated at the
time of the initiation stage was necessary to this study. The third criterion suggests that each
participant’s willingness to participate is critical to the successful completion of this study.
Since the design of this research involved the administration of a detailed survey
questionnair e and length in - depth interviews , participants needed to be willing to take time
necessary to respond.
The study was confined to contracting services from January 1996 to 31 December 2014.
Whether a contract was terminated or still running was not an issu e as long it fell within the
study’s timeframe. The study was concerned with contracting - out in urban areas and Harare
City Council was used as the case study. The following aspects of the problem were selected:
contract management process (policy formulat ion, implementation, monitoring and
evaluation), tendering processes, contracting frameworks (constitutional, political,
institutional, regulation, socio - economic) and accountability relationships.
1.8 ASSUMPTIONS OF THE STUDY
These were the postulates, p remises and propositions that the study accepted as operational
for purposes of the research. They included the nature, analysis and interpretation of the
study. This study included the following assumptions:
t he sample studied was representative of the total population of contrcating - out
experie nces within Harare City Council;
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the selected respondents in this study responded to the survey or answered all of the
interview questions openly, honestly and accurately. They also remembered and
indicated their perceptions in the use of contracting out the provision of public
services;
r esponses received from the participating HCC officials accurately reflected their
professional opinions;
the selected respondents understood the vocabulary and concepts associated with
contracting out and policy making as well as decision making in Zimbabwe in general
and local authorities in particular; and
t he interpretation of the data accurately reflected the perceptions and views of the
respondents.
Contracting - out process i s basically a political process. It is political because it is formulated
and undertaken with state structures. Its success or lack of it therefore invariably hinges on
the political commitment (will) of the political leadership. It is political because it entails
reallocation and redistribution of political goods (contracts, jobs, tenders) to various
contending groups in the polity. In this case, contracting - out reform constitutes the
negotiating arena within which the HCC managers, government officials, p olitical parties,
labour unions, private firms, and relevant stakeholders bargain ing and making promises. The
HCC is linked not only to th e parent ministry, but also to other agencies and departments
such as Ministry of Finance and Economic Development, State Procurement Board, the
Office of the President and Cabinet, regulatory bodies and usually the dominant ruling
political party and opposition political party council lors.
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Key policy decisions are generated as these policy actors interact with one another in the policy environment (discussed in Chapter Five of this study). Thus , contrary to neo - classical claims of an unmediated and frictionless relationship between/am ong these policy actors, this study assumes that there are substantial frictions and potential barriers to contracting out innovations. In this case, the key to a more meaningful grasp of any reform process lies in understanding the inevitable interaction between politics and economics.
1.9 ETHICAL ISSUES CONSIDERED
Most authors who discuss qualitative research design , address the importance of ethical considerations (Creswell, 2007; Lunenburg and Irby, 2008; Remenyi et al. , 1998). Ethical issues arise in all aspects of conducting research. It is obligatory for researchers to respect human rights, values and desires of participants during data collection, data analysis and interpretation, writing and disseminating the research findings. This researcher was guided by the advice given by Remenyi et al. ( 1998 ):
Research ethics is a very challenging subject which the research candidate has to face, and which if not addressed correctly , may cause the result of the research work to be considered tainted or even in valid (Remenyi et al ., 1998:115) .
In summary, the study sought to understand contracting - out the provision of public services to private organisations focusing on Harare City Council, Zimbabwe. This would inform both th eory and practice. The study was und ertaken with no intention , whatsoever, to inflict pain or harm the participants. The study was purely for academic purposes though the findings could be used for informing policy.
The study employed the following safeguard s to protect the participant s ’ ri ghts . F irstly, the research objectives were articulated verbally and in writing so that they were clearl y understood by the participants. Secondly , written permission to proceed with the study was
36 sought and received. Thirdly , the participants were informed of all data collection devices and activities. Fourthly , verbatim transcriptions, written interpretations and reports were made available to participants . Finally, the decision regarding participant anonymity rested with th e participant.
In seeking informed consent, the following informati on was provided to each research participant:
a statement that the study involved research, an explanation of the purposes of the
research and the expected duration of the interview or fi lling in a questionnaire and a
description o f the procedures to be followed; and
a statement that participation was voluntary and refusal to participate had no penalty.
However, informed consent was sought only for questionnaires and in - depth key - informant interviews. For secondary analysis of data and archival research of publicly observable data consent was not sought due to their classification of “minimal risk” (Rudestam and Newton,
2007:276).
Another human rights issue considered was con fidentiality. All participants in a research study must be informed about what happens to the data collected from them or about them and assured that all data will be held in confidence (Roberts, 2010). Closely related to confidentiality is anonymity which means there “are no identifiers that indicate which individuals or organisations supplied the data” (ibid: 35). In face to face interviews, the identities of participants were protected through use of pseudonyms, fictitious histories or global descripti ons. To guarantee these human rights, the study combined data gathered through a questionnaire instrument so that individual responses were subsumed under the
37 total aggregated data. Furthermore, to protect participants, fictional names or pseudonyms were u sed to ensure anonymity.
Every area of research has its own gatekeepers. These gatekeepers are generally concerned about the impact of the study on their organisations as well as the possible disclosure of confidential information outside the organisatio n. The study wrote letter s to individuals in authority i dentifying the extent of time, the potential impact and the outcomes of the study.
The researcher explained to both HCC officials and contractors that the study had received approval for the research project from department authorities but that their responses were confidential. The Harare City Council senior officials demanded to be furnished with the final copy of the findings. This demand will be honoured.
During the semi - structured interviews, dat a was recorded. However, the study obtained permission from the participants and explained why it was necessary to audio the interview.
The participants were informed that the recordings would be destroyed following data transcription. Paul Oliver (2008), in his book, The Student’s Guide to Research Ethics, offers a strategy for relaxing participants dur ing audio recording. Oliver (2008) recommends that the researcher should “place the tape or disc recorder within easy reach of the interviewee, and explain to him/her before the interview starts that they may use the pause button at any time….to consider their response to a particular question…or reflect” (Oliver, 2008:46).
Furthermore, participants could stop the recording if they wished (Ibi d.). Oliver (20 08) also suggests that interviewees be given the opportunity to listen to the tape at the end of the session and alter their words to more accurately expr ess their views. These advices proffered by Oliver (2008) were implemented by this researcher.
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Ethic al concerns are not limited to the treatment of human participants, but also arise during
the process of the collection, analysis and reporting of social research data. Data collected
should exhibit intellectual integrity and trustworthiness. Ethical issue s were also considered
in data analysis and interpretation. Data analysis is “making sense of the data and interpre ting
them appropriately so as not to mislead readers ” (Roberts, 2010:38). This involves two
ethical issues of fabrication and falsification of data. Fabrication is making up data or results whereas falsification is changing data or results to deliberately distort them and then including in a research report. Babbage (1969) cautions researchers against “cooking the data”, “trimming” the data, t hat is, massaging the data to make them look better. Huff (1954) advises researchers against “forging” the data, that is , the fabrication of data. According to
Remenyi et al. (1998:111), “a ny attempt to window dress or manipulate and thus distort the evidence , is of course unethical, as is any attempt to omit inconvenient evidence.” Remenyi et al. (1998:111) also poi nt out that those strategies are not useful or rational because “even when hypotheses or theoretical conjectures are rejected, the resear ch is perfectly valid.”
Implied here is that negative results still add to the body of knowledge.
In research, the accuracy of data is paramount. Therefore, the study tried as much as possible to avoid fabrication and falsification of data through being n onbiased, accurate and honest throughou t all phases of the thesis . This was done through validation strategies such as data triangulation through multiple sources that included semi - structured interviews, questionnaire administration, observations and docu ment analysis, and member checking - an ongoing dialogue with participants regarding data interpretations of their reality and meanings to ensure the truth of the data. Peer examination was also employed - where my Master of
Public Administration II (MPA) students served as peer examiners. These validation
39 strategies were designed to ensure internal validity of the data. These strategies are expansively discussed in Chapter Three of this study.
Furthermore, to avoid biasing the results, the researcher di d not communicate anything about the theoretical perspectives, their expectations or any working hypotheses on contracting out, even though the researcher was often asked his personal opinion about the subject.
The last ethical issue considered was plagia rism. The study was very mindful that plagiarism and copyright infringement are serious academic sins. The study tried to acknowledge the ideas and words of other researchers. The study was subjected to software that checks plagiarism and the similarity c heck report found four (4) per cent similarity. The ephorus report was submitted to the Department of Political and Administrative Studies of University of Zimbabwe.
1.10 ORGANISATION OF THE STUDY
This study is organised into ten chapters, a bibliography and appendixes in the following manner. Chapter One covers background to the study, statement of the problem, research objectives, research questions, why this study ? , limitations of the study, delimitations of the study, assumptions of the study and ethi cal considerations that guided the whole study.
Chapter Two presents a review of the literature, which includes principal - agent theory, transaction cost theory, public - choice theory, new public management (NPM) paradigm, market contestability, contractuali sation, political economy , contract management and a contract management theoretical framework.
40
Chapter Three describes the methodology used for this study. It includes the design of the
study, the case study methodology, the selection of participants, inst rumentation, data
collection, data analysis and validation of the study findings. Chapter Four describes the global contracting out reform s in order to provide the lessons of experience. It covers the methodological problems, empirical findings, specific country empirical evidence: European
Union experiences, United Kingdom, Local Government i nnova tions in American Cities,
l essons from American and United Kingdom experiences, Kolkata Metropolitan in India,
e mpirical evidence of contracting out in Africa, the lessons of experience and concluding
remarks.
The fifth chapter presents the Zimbabwe’s pol icy environment. It outlines Zimbabwe’s
political system, Zimbabwe’s socio - economic system (1980 - 2014), Zimbabwe policy making
landscape, policy institutional arrangements, determinants of policy formulation and
implementation, local government structures and systems in Zimbabwe, nexus of centre -
periphery structures, institutional structures and legal framework for local government in
Zimbabwe, administrative systems and social service delivery in local government in
Zimbabwe . Chapter Six describes the nat u re and dynamics of contracting - out within Harare
City Council. It contains legal and institutional frameworks, contracting out rationale,
contracted out functions, tendering processes, contract management and challenges of
contracting out processes. Chapte r Seven outlines the contracting - out of refuse collection and
transportation services both in 1998 and 2003. The contract documents, tendering processes,
monitoring and supervision, sanctions, contract duration, contract management problems and
contract m anagement capacity and political interference were described and discussed.
41
Chapter Eight deals with contracting - out innovations in sampled cases . The contracts
presented are Bill and Melinda Gates Foundation, CABS/Old Mutual Budiriro Housing
project, BiW ater International Company for Harare water project, Chemplex Corporation for
water treatment chemical, Easipark and City Parking, Airport road construction and Wilkins
Clinic . Chapter Nine presents the discussion and synthesis of findings. It covers polic y and management implications of study findings, contract management capacity, stakeholder involvement, strategic contracting out and contract monitoring. Chapter Ten provides a summary of the entire study, conclusions and recommendations for further resea rch. It
includes a synopsis of the problem statement, research objectives, questions, theoretical
framework and methodology. It also presents major findings, study recommendations and
areas for further research .
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C HAPTER TWO
LITERATURE REVIEW: CONCEPTUAL AND THEORETICAL FRAMEWORKS
2.0 INTRODUCTION
This chapter introduces the concepts of contract and contracting. It then goes on to examine the theoretical arguments that have occurred for why governments should contract out for
public services de livery and why they should sometimes abstain from contracting. The
primary objective of the study was to investigate and describe Harare City Council’s
experiences with contracting out the provision of public services in order to better appreciate
the fact ors tha t make or break the contracting - out process.
The study’s specific objectives are to:
i. e xplore the fundamental features of the Harare City Council contracting out process
encompassing the various contracting out policies enacted, strategies employed and
the rationale behind those actions;
ii. e xamine political, socio - economic, institutional and legal frameworks that were put
together to facilitate contracting out;
iii. a ttempt a detailed and critical review of the theoretical and global empirical literature
de aling with contracting out both in general and in local government contexts so as to
provide background information , context and methodological foundation; and
iv. d iscuss the theoretical lessons learned vis a vis existing literature in order to make
contracti ng out better in Zimbabwean local authorities.
The following guiding questions framed the research:
1. What is the rationale for contracting out?
2. What influences make or buy decision in local authorities?
3. How does HCC manage the contract?
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4. How enabling are the framework s (statutory, institutional, legal, political,
constitutional or regulatory) of contracting out ?
5. What kinds of capacities are needed to ensure effective contract management?
6. What mechanisms are in place to ensure the account ability of contracted
companies? and
7. Which factors determine the success of the contractual governance process?
The general theoretical rationale for contracting out relates to theories of why governments fail in the provision of public services. The last two decades have witnessed a dramatic re - evaluation of the structure and functions of government in relation to the delivery of public services (Manyanhaire et al. , 2009; Bryce , 2012).
In times of economic contraction, states face difficult choices. The two most common are : to increase taxes at a time of economic fragility or decrease public servic es when citizens need them most. More recently, states also have adopted a third option : contracting out. Starting in the mid - 1990s in Zimbabwe, the health sector and Harare City Council began to experiment with the idea of “competitive sourcing” and “ contracting - out” (Tevera et al. , 2003;
Tavenyika , 2006). Increased u se of competitive sourcing is expected to enab le local authorities not only to save money w hile delivering high quality services, but to increase their focus on critical, high priority services. With contracting - out, the client retains a “fair measure of control over the activities concerned, monitoring performance, imposing financial penalties and replacing the contractor in cases of poor quality, delays and lack of reliabi lity”
(Kasper, 2006:106).
44
The case for contracting - out rests on a number of neoclassical constructs about the
relationship between management incentives and market structure on one hand and
competitive bidding, asset specificity and ease of measurement on the other. However, a
closer analysis of these theoretical constructs indicates that these models do not go far enough
to capture possible institutional and political complex ities at the implementation front.
Contracting out has far reaching implications for the local authority, stakeholders, the public
and society at large.
These possible scenarios suggest that there is a political dimension to contracting - out. As
such, cont racting - out debates can only be meaningfully conceptualised within a broad array
of theoretical constructs which take into account their static and dynamic aspects. The main
argument is that , theoretical analytical frameworks should go beyond mainstream
ne oclassical liberalism to include political economy theoretical constructs.
Therefore, the chapter presents the rationale for conducting research on contracting - out.
Political and economic researchers have studied public sector management reforms, transac tions costs, principal - agent relationships, contract management and contestability of the market for several decades. These materials were reviewed within the framework of contracting - out. The study sought to build upon this body of research through the co mbined lenses of theoreticians and practitioners.
The following review of the literature represents the literature pertinent to this study, namely, contracting - out, transaction cost, principal - agent relationship, political economy, contract management, pu blic - choice and tendering. Specifically, Chapter Two is organised into seve n
sections: conceptual framework , theoretical framework, economic theories, political economy
45
discourse, theoretical framework of contracting - out, contract management capacity and
c hapter summary.
2.1 CONCEPTUAL FRAMEWORK
To avoid confusion, this section provides definitions and delineations to distinguish key
concepts: contract, contracting, contracting - out, privatisation, quality, accountability,
competitive tendering, and public services. Many people tend to confuse and mi x
privatisation and contracting - out in their studies, therefore , it is necessary to separate them
and show them as individual terms. The brief discussion of each concept follows .
2.1.1 What is a Contract?
It is an “agreement between two or more parties, especially one that is written and
enforceable by law.” ( www.merriam - webster.com ). “A contract is a legal instrument. Even so, great latitude is left to the contract ing parties to an agreement to have the tools to fashion and implement it. Negotiations resulting in a meeting of minds are the dominant dynamic in most contracting” (Cooper, 2003:13). A contract gives information about price, schedule, definition of the service and the amount of the service.
Cooper (2003) observes that “contracts in the business world….operate on a horizontal model, based not on authority but on a foundation of negotiations. The roles of relationship are established by mutual consent and can be enforced by either of the parties to the agreement.” (Cooper, 2003:12 - 13). He further contrasts this approach with a vertical approach where:
T he political process that produces the decision to contract, the appropriations to be used for that purpose, and the techniques of accountability to be employed to maintain oversight of contract operations , come from a vertical, authority - based processes starting from the coordination and flowing down through legislative
46
processes and administrative agen cies to the point where contracts are made and managed (2003:12).
The challenge for public managers, according to Cooper (2003) , is that they operate at the intersection between the horizontal and the vertical approach to contracts.
A contract, in the wo rds of the ne w institutional economics Williamson (1996) , is “an agreement between a buyer and a supplier in which the terms of ex - ante change are defined by a triple: price, asset specificity and safeguards, and which assumes that quantity, quality and du ration are all specified (Williamson, 1996:377). Asset specificity is “a specialised investment that cannot be redeployed to alternative uses or by alternative users except at a loss of productive value” (ibid.), and safeguard is “the added security featur es, if any, that are introduced in a contract in order to reduce hazards and to create confidence” (ibid.).
To this study, the contract is critical. The contract, therefore, becomes the formal mechanism through the expected level of quality is specified. A well - developed contract is the primary source of information for the contractor on the level of performance expected. As suggested by Malatesta (2014:656):
The contractor is accountable to council for performance in accordance with the specification. A p oorly written specification reduces council’s control over service delivery. Mistakes in a specification can be extremely difficult and costly to correct.
Implied here is that it is crucial that the service outcomes are clearly specified in the contract.
Where this is not done, the result may be unsatisfactory performance. It cannot be assumed that a contractor will deliver anything that is outside the defined scope.
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2.1.2 Contracting
According to Domberger (1998:12), contracting is “the design and implementation of
contractual relationships between purchasers and suppliers.” It is important to note that these
contractual relationships are rooted in the formal legal framework, the political and business
culture and in the informal ways that purchaser s, providers, employees and the users of
services view and practice of c ontracting. IU - SPEA (2014) advis es that contracting organisations should spend adequate time negotiating and crafting the contract document.
These issues are very central to Harare Ci ty Council. This study noted that during contracting, contracts should establish clear expectations, roles and responsibilities of the parties concerned. The devil is in the details or lack of details.
2.1.3 Contracting out
Contracting - out rests on the assumption that competition is required for effective public service delivery.
Br udney et al., (2005) note that;
Despite the apparent heterogeneity of the privatisation concept and the various methods for achieving privatisation, in the U.S. context especi ally, this term is usually taken to mean government “contracting out” or “outsourcing” with a for - profit firm, a nonprofit organisation or another government to produce or deliver a service. Although the job of delivering services is contracted - out, the se rvices remain public, funded mainly by taxation and decisions regarding their quantity, quality, distribution and other characteristics are left to public decision makers (Brudney et al. , 2005:394).
This comprehensive definition focuses on the notions of public control, funding and decision - making. OECD (2005) describes contracting - out as “the practice whereby governments contract with private sector providers for the provision of services to government ministries and agencies or directly to citizens on b ehalf of the government (OECD, 2005:131). The government is the principal and the contractor is the agent.
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2.1.4 Privatisation
Defining privatisation has turned out not to be as simple as the concept appears to be. To
Berg (1988), the concept of privatisation is a lot more complicated than the selling of state - owned enterprises, more so as there is no clean dichotomy between public and private sectors. Others have viewed the concept in a similar vein: as having predictability become a problem con cept (Heald, 1990:4), a fuzzy concept that evokes sharp political reasons (Bienen and Waterbury, 1989:617), a term used to convey a variety of ideas (Ramanadhan, 1992:4) and as an umbrella term covering a number of government microeconomic policies (Bishop and Kay, 1999:643). Mart ins (1993) views privatisation as change in the role, responsibilities, priorities and authority of the state, rather than narrowly to denote change of ownership. The difficulties implied by these perspectives notwithstanding, it i s possible to delineate two lines of definitions of privatisation: the broad definition and the narrow definition (Obadan,
2008).Broadly, privatisation refers to all policy initiatives and measures designed to alter the balance between public and private s ectors in favour of the latter (ibid.) and, hence strengthen or broaden the scope of private sector activity in the economy (Boorsma, 1994; Bouin and
Michalet, 1991).
Therefore , privatisation under the broad perspective involves: sale of a public enterpri se in full to private buyers; liquidation; management buy - out; privatising the management of state activities through contracts; transferring of the provision of a good or service from the public to the private sector while the government retains the ultim ate responsibility for supplying the service, for example, contracting - out, franchising and leasing; build - operate - transfer; and liberalisation or deregulation of entry into an activity previously restricted to the public sector
(Obadan, 2008:25).
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The nar row definition of privatisation refers to the transfer of majority ownership of state owned enterprises to the private sector by the sale of ongoing concerns or assets following liquidation (Kikeri et al. , 1994) or as the transfer of ownership and contro l of public enterprises to the private sector (Jones, 1991).
Inferred from the foregoing discussion, contracting - out is very different from pure privatisation. Contracting - out indeed, is a subset of privatisation at the micro policy level.
The government remains responsible for the service in terms of specification, monitoring and paying for it. The government maintains its ownership of assets and responsibilities but the discharging of these functions is conducted by a private firm or non - governmental org anisation (NGO).
2.1.5 Competitive Tendering
In competitive bidding, the government, before concluding that a private firm or nonprofit organisation would do the job, competes with them to determine which of the three would add more value to the citizens. Public choice theorists have promoted contracting - out as a mechanism to reduce government involvement in the production and distribution of public goods and services (Batley and Mcloughlin, 2010; Boss, 2000; Bienen and Waterbury, 1989).
The asser tion of public choice is that any monopolistic production is inherently inefficient and should , therefore , be exposed to the power of a competitive market (Boyne, 1998).
2.1.6 Public and Collective Provision of Services
This section discusses the concep t of public service provision. Public provision is “a municipality’s choice to provide a good or service: the decision to arrange for and finance a
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good or service” (Oakerson, 1987:167). Musgrave (1959), in his classic, The Theory of
Public Finance, simil arly notes the interdependent relationship between provision and production. Public provision does not necessarily require public production. The production choices involve technical issues including economies of scale, available markets of production supp liers and the available budgets for the new production technologies. At the same time, the decision of production is constrained by contracting and monitoring costs on external providers. The existing literature supports the notion that the attributes of s ervices
determine the ease with measurement and monitoring as well as dangers of opportunism in
cases in which markets are likely to have available pool of service suppliers (Brown et al. ,
2015; Joaquin and Greitens, 2012; Boyne, 1998; Chikozho, 2013).
Ma rket failure theory states that because the principal motive of firms is to make a profit,
there are some goods or services the market will not provide. There are others that it provides
but in smaller quantities than the society needs. The first of these goods are public goods.
These are goods that all persons in the commun ity can enjoy without paying , therefore , many
will not pay. Rather, they will choose to go along on a free ride that is, enjoying the good
without paying for it. Since the firm cannot co llect money for services rendered , it cannot
make a profit and has no interest in providing these goods.
Public goods have two properties: (a) the amount consumed by one person does not diminish
the amount available to others (b) there is no way to depriv e or deny anyone the right to
consume the good. The first is known as the principle of nonrivaly or nonsubtractability and
the second a s the principle of non - excludability.
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The public policy implication follows: the good, even though necessary, will not b e produced by the market, and some way has to be found to produce and pay for it since, in the extreme, if everyone free rides , there are no revenues from the sale of the goods to finance its production even though it is socially necessary (Bryce, 2012:14) .
Public service implies that government employees should place the best interests of their citizens/customers first, that is, honesty, integrity, equal treatment, due process and transparency. Underlined here , is that a public service is not about person al gain, it is about putting the public interest first.
Private firms are profit - seeking and the culture of the private sector considers the accumulation of riches to be a good thing, a measure of success and to some degree the mission of the organisation . Government is different and the culture of public organizations is different.
2.1.7 The Concept of Quality
In considering the effect of contracting out on service quality, it is important to comprehend what is meant by quality. Quality is variously perceived as “fitness for purpose”, “customer satisfaction”, “conformance to requirements” and “value for money. ” While no single definition captures the meaning of quality, the literature reveals a number of common elements.
Walsh (1991) suggests that the two key aspects of quality are whether the product or service
“conforms to specifications” for which it was i ntended. The Commonwealth Department of
Administrative Services (DAS) recognised both of these aspects:
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A quality product or service is the one best suited to the intended purpose, rather than the best money can buy. Essentially, ‘quality’ means fitness fo r purpose, or conformation to requirements”.
Judging the quality of the services delivered on both of these aspects is not easy however.
For many services , it is difficult to assess their quality because t hey are intangible compared to material products and they consequently cannot be easily stored, sampled for testing or measured (Walsh, 1991).There may be a further complication when an agency is purchasing services to be delivered to the community, for example, parks and home help.
For these services , it may be more difficult to judge whether the particular quality objectives are being met, because of three reasons. Firstly, for public services paid for out of taxation revenue, consumers are unable to express their views and prefere nces directly by using their market power (Fernandez, 2009). Secondly, the agency funding the service and determining the level of quality may have incomplete knowledge of whether the user of the service considers the service fulfils its intended purpose. Lastly, before and after comparisons of quality can rarely be made because of the lack of data on service quality prior to contracts being let (Domberger and Jensen, 1997). There is frequent absence of performance evaluation mechanisms prior to introducing contracting - out making before and after quality comparisons di fficult. Critics of contracting - out raised concerns that cost savings would be achievable at the expense of quality of service (Evatt Research Centre, 1997). This is the ‘quality - shading hypoth esis’ - lower contractor prices require a sacrifice in terms of performance (ibid.). A study by Domberger et al., (1995) focus on the quality - shading hypothesis: do contractors systematically shade quality after contracts are let in order to maintain profit ability in the face of reduced prices? However, Walsh (1991) argues that if quality deteriorates following contracting - out, it could be a problem of contract design or implementation and , therefore , preventable.
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As a result of these problems, standards of quality for public services are often difficult to
establish and maintain. It is important to recognise, however, that government agencies face
these problems whether they deliver the services themselves or contract - out the delivery.
Washington Roundtable and Washi ngton Research Council conclude that “contracting - out
public services is only attractive if the state can also maintain or improve the quality of
services” (2010:5).
2.1.8 The Concept of Accountability
Also a key question f or this study is how contracting - out affects accountability. This study
notes that accountability can be viewed from a number of different and valid perspectives,
but the discussion here draws on the principal - agent theory. Amagoh (2009:4) defines
accountability as:
At its cor e, accountability….involves: a defined capacity by some person or institution to call an authority into account, in the sense of having to answer for its conduct; a responsible authority or person with a duty to answer and explain such conduct; an agreed l anguage and criteria for judgment; and upward, downward and outward reporting or answering processes.
Furthermore, Wankhade and Debade (2006:13) assert that:
It is important to understand that this concept of accountability does not imply simply providin g information or answering questions, but includes setting goals, providing and reporting on results and the visible consequences for getting things right or wrong, including rewards or sanctions as appropriate.
In the public sector, there are multiple pr incipal - agent relationships. In the first instance, the principals are the citizens who pay taxes and elect governments. These elected representatives are the agents of the electorate. They in turn , act as principals when employing public officials (agents ) to manage the services. The service deliverer is in turn accountable to management. Accountability problems arise where the principal and the agent do not share the same objectives (Hibow, 2012). As the level of discretion provided to the
54
agent increases , the opportunity to diverge from the principal’s interests increases (ibid.). The
challenge for the principal is to design and implement mechanisms or incentives to induce the
agent to act in the interest of the principal, rather than pursue its own inter ests.
To overcome these problems, the principal must be able to exercise sufficient control over the
agent. To achieve this control it is necessary that: for each principal - agent relationship, it is
clearly established who was responsible for different as pects of the service; sufficient
information is readily available so that the performance of the various principal - agent relationships is transparent; and there is the opportunity for redress where substandard performance is identified and a capacity for t hat to be corrected or sanctions to be imposed
(Bryce, 2012; Dowd, 2011).
Kevin (2003) observes that contracting out enhances accountability through:
f orcing agencies to specify clearly the objectives of the service and clarify the responsibilities of the service provider, making it easier to identify who is responsible for different aspects of the service; p rocessing of contract specification and the establishment of objective performance criteria making it easier to measure the performance of the organisation delivering the service; and a s a result of improving the level of information on performance and th e opportunity to replace the service provider, that capacity to impose sanctions against non - performers increases .
Dowd 2011 observes that:
t he government/agency must be charged with and retain ultimate responsibility for the quality, appropriateness and effectiveness of the service. This will involve a change of emphasis to an administrative, regulatory and policing role. The government/agency must, however, in all circumstances, retain the role of ‘principal’ (Dowd , 2011:1).
It is important to recognise that contracting out does not allow a government agency to avoid its compliance and accountability obligations by simply taking this step. Nor does it remove
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the political sensitivities that surround many such transactions. On the contrary, government
age ncies remain accountable for both contracted out operations and the means by which they
are awarded.
2.1.9 The Concept of Competition or Ownership
Perhaps the most vexed issue in the contracting - out debate , is whether its impact on costs and
quality stems principally from the pressure of competition or the discipline of private ownership. Savas (1987) suggests that the public sector cannot be expected to deliver services as efficiently as the market, assuming one exists. The principal reasons are that publ ic - sector organisations are not client - oriented and have broader and often ill - defined public - service objectives and they lack incentives to perform. Also, because they are free from the
‘bankruptcy constraint’, they can go on performing poorly without fea r of the ultimate sanction of going out of business. Other commentators (Kevin, 2003; Brown & Potoski,
2005), however, have suggested that these are the ills borne by market structure: the public sector service provider has a monopoly. Private sector monop olies would perform no better: the spur of competition is what enhances performance (Bryce, 2012).
The evidence provides qualified support for the view that competition is the key. Domberger et al . (1986, 1987) , found that in cases where in - house teams bi d against private contractors and won, the level of savings achieved was substantial and often not significantly different from that realised by private contractors.
In their study of price and quality, Domberger et al. (1995) conclude that “the effect o f ownership (private versus public) on both price and quality was negligible relative to that of competition”. The public sector is generally construed as “less innovative as the private due
56 to absence of competition” (Raftopoulous and Mlambo, 2009:223). Therefore, the objective of contracting out is to remove politics from the process of service delivery, politics must be confined to the setting of initial service strategy and the specification of the services.
Contracting - out process consists of planning, the bid process, the evaluation and selectio n, monitoring and follow - up, dis putes and termination (Bayliss and Fine, 2008:215). However, this sequence postulated by Bayliss and Fine (2008) is embedded in politics. Politics is inevitable due t o the fact that politicians remain accountable for the performances of local authorities.
This study observes that the challenge for policy makers lies in achieving competitive neutrality between private and public sector tenderers so that competition is both effective and real.
2.2 THEORETICAL FRAMEWORK
A theory is an organised body of interrelated concepts, assumptions and generalizations that systematically explains regularities in behaviour (Lunenburg and Irby, 2008:122). Theory provides a framework to generate hypotheses or research questions. In turn, they guide significant parts of the research design, including the data collection, data analysis, and presentation and interpretation of the findings (ibid.).
This study departs from the model develope d by Brown et al., (2003). Brown and Potoski
(2003a) explain that the process of contracting - out the provision of services to private agents , is purely an economic one. They also point out that for contracting - out process to be successful; it requires eff ective contract monitoring, monetary considerations are a key factor in making contracting - out decision, capacity to management contracts, and competition in the supplier market.
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This study adopts some of the aspects in Brown and Potoski (2003a) approach. However, additionally others have considered the political dimension of contracting out the provision of public services. The theories discussed below provide the variables for this study.
Formal models of government contracting decisions and processes su ggest that the decision about whether to contract - out services provision should not be made without consideration of how the contracting process will work given the nature of the service and other relevant factors (political and economic).Both theory and e mpirical research also suggest that contracting for complex public services - in which it is difficult to fully specify job tasks and performance expectations, that is, a complete contract - presents greater risks, management challenges and costs to implem entation. In their study about Contract Capacity and
Management in Municipal and County G overnments, Brown and Potoski (2003a) consider two service - specific characteristics, asset specificity and service measurability, drawn from
Williamson’s (1981) transa ctions costs framework for analysing alternative contracting structures. They note that services with a greater degree of asset specificity require more specialised investments to produce them, thus barriers to entry and the risks of monopol y in service de livery , are likely to be greater. In these circumstances, contractual negotiations become critical, as the contracting parties determine the terms or mechanisms, for example, performance incentives o r conceptualising the contracting decision: organisationa l outcomes, environmental factors (political, market structure, economic conditions, external authorities, organisational structure(administrative rules, contractual arrangements) and management
(leadership, monitoring, control and accountability mechanism ) (Seddon Nicholas: http://books.google.co.zw/books?id=Xm3dXdZN/Sw ).
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The expansive theoretical framework discussion follows under the rubric of economic theories, New P ublic Management (NPM) pa radigm and political economy.
2.2.1 ECONOMIC THEORIES
In the 1970s, intellectual arguments were mounted by conservative economists that government was the economic problem , restricting economic growth and freedom. The contracting - out discourse is intellectually rooted in the neo - classical economic theories such as “transaction cost”, “principal - agent” theories, the theory of “contestability” (Walsh, 1995;
Boston, 1996), “new institutional economics” (Williamson, 1975) and “contractualism”
(Davis, 1 997; Hughes, 1998).
Strains of these theories are reflected in the “new public management” discourse (Bowman and West, 2009 : Andrews, 2003; Lane, 1999; Mongkol, 2008 ). By the beginning of the
1990s, a new model of public sector management was emerging in most advanced countries
(Farnham and Horton, 1996). The model had several incarnations, including “managerialism”
(Pollitt, 1993), “new public management” (Hood, 1991), “market - based public administration” (Lan and Rosenbloom, 1992), the “post - bureaucratic paradigm” (Barzelay,
1992) or “entrepreneurial government” (Osborne and Gaebler, 1992). Despite the diversity of names, they basically describe the same phenomenon. Hood (1991) sees managerialism in
Britain as a “determined effort to implement the “3Es” o f economy, efficiency and effectiveness at all levels of British government” and argues that (1991:1):
t he “NPM” has the following central doctrines: a focus on management, not policy, and on performance appraisal and efficiency; the disaggregation of publ ic bureaucracies into agencies which deal with each other on a user - pay basis, the use of quasi - markets and contracting out to foster competition, cost - cutting; and a style of management which emphasises, among other things output targets, limited - term con tracts, monetary i ncentives and freedom to manage .
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Osborne and Gaebler set out a ten - point programme for what they term entrepreneurial governments (1992:20):
Most entrepreneurial governments promote competition between service providers. They empower cit izens by pushing control out of the bureaucracy into the community. They measure the performance of their agencies, focusing not on outputs but on outcomes. They are driven by their goals - their missions - not by their rules and regulations. They redefine th eir clients as customers and offer them choices……They prevent problems before they emerge, rather than simply offering services afterwards. They put their energies into earning money, not simply spending it. They prefer market mechanisms to bureaucratic me chanisms.
The salient characteristics of the specific economic theories are expansively discussed below.
2.2.1.1 The Transaction Cost Theory (TCT)
Williamson (1985) points out that like the principal - agent theory; the focus of transaction cost theory i s the contract. The TCT views parties attempting to engage in exchange as contracting both the terms of exchange and their execution. The theory focuses on the role of the state in defining the basics of contractual arrangements (Zinyama, 2014a).
The TC T was developed by Williamson (1979, 1985) and the author called it “Transactions
Cost Economics (TCEs).” The author argues that every transaction in the market involves “a cost in addition to the price: finding the right supplier or negotiating the final purchase price.”
With regard to contracting - out, transaction costs include the writing of specifications and contracts, evaluating tenders and negotiating the final contract with the w inning tenderer.
This study construes such costs as the administrative e lements of the transaction. The transaction cost theory “provides a framework to guide government officials through the contract management process” (Brown and Potoski, 2005:327). In broad terms, transaction cost theory identifies services specific charac teristics that affect the efficacy of contracting - out. The costs of negotiating, implementing, monitoring and enforcing contracts are higher
60 when services have outcomes that are difficult to measure and when services require asset specific investments that increase the likelihood of monopoly markets.
Although direct government provision remains the predominant approach for delivery of services, the pull of potential efficiency gains, cost savings and service delivery innova tion has spurred contracting - out across levels of government (Warner and Hedbon , 2001).
Successful contracting - out requires public managers to undertake three complex sets of tasks: deciding whether to contract for a particular service (make or buy), establishing and implementing a proces s for outsourcing the service and managing the delivery of the service once a vendor has been selected. Mismanagement at any one of these phases risks contract failure. Public managers may inadvertently design a bidding process that inhibits competition am ong tenderers. Managers who neglect oversight responsibilities once a contract has been let , may fall prey to unscrupulous vendors who shirk their contract responsibilities (Milward and Provan, 2000).
As contracting - out has become more common and politica lly palatable, public managers have come under increasing pressure to be “smart buyers” and “smart managers” (Kelman, 2002b;
Kettl, 1993) of contracted service provision. Although many view contracting out as an arms - length relationship between the purchas er (the government) and the vendor, successful contracting out more likely , occurs when public managers are collaboratively engaged throughout the process (Gansler, 2002; Romzek and Johnston, 2005).
The transaction cost theory is a sound candidate for a f ramework that guide s decision - making about when to engage in contracting - out and how to manage contract relations once the contract has been let (Ferris and Graddy, 1991). According to Williamson (1981), transaction
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costs are the “comparative costs of plan ning, adopting and monitoring task completion under
alternative governing structures” (552 - 553). Transaction costs are the management costs
incurred in delivering of services and they occur under both in - house and contractual service
delivery. Transaction costs arise because of limited information, uncertainty about the future and the prospect that people or organisations behave opportunistically in their interactions with others (Coase, 1937; Williamson, 1981, 1996, 1997). In the case of contracting out, b ecause parties to a transaction cannot fully predict all possible future scenarios, they cannot fully specify contracts. When a contract is incomplete, the vendor may opportunistically exploit ambiguities in the contract to its own advantage at the expense of the contracting
organisation, with greater ambiguities leading to greater risk. To minimise such opportunism,
the contracting organisation must incur transaction costs, such as establishing performance
measures in the contract, monitoring vendors’ perf ormance and executing necessary
penalties.
Astute public managers should examine a range of factors as they navigate the contracting
process, including potential efficiencies and cost savings from contracting - out, the salience of
the service, the degree of political support or opposition to contracting and legal constraints
on contracting out (Carver, 1989; Lavery, 1999; O’Looney, 1998). Transaction cost theory
instructs public managers to consider another impo rtant factor: the nature of the service under
consideration of cost factors. Different services have different levels of transaction cost
factors. Williamson (1981) identified two service - specific factors: asset specificity and ease
of measurement. Asset specificity refers to whether specialised investments are needed to
deliver the good or service (Brown et al. , 2015). Ease of measurement refers to how easy or
difficult it is to identify performance measures and assess whether vendors fulfill the
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specifications of the contract in delivering the service. These two concepts are discussed in
detail below.
2.2.1.1.1 Asset Specificity
Asset specificity is an important reason why markets may turn uncompetitive. Services that require large specialised i nvestments that are difficult to adapt to other uses (i.e. specific assets) are likely to have few vendors. The problem is exacerbated when the government is the only buyer of the service. Specialised investments might include:
t he use of a specific locati on that is only movable at a great cost; t he use of highly specialised tools or a complex system designed for a single purpose; t he use of highly specialised human skills that cannot be put to work for other purposes; and t he requirement that the service r each the user within a relatively limited period of time or the quality of the service greatly diminishes (Brown et al. , 2015) .
Asset sp ecificity heightens contracting - out risks in future rounds of contracting - out. In effect, specialised investments raise entry barriers in subsequent rounds of contracts, creating monopolistic conditions in which a vendor can opportunistically exploit the contracting organisation by raising prices or reducing service quality with little risk o f penalty. In
response to high asset specific services, “governments may turn to internal services
production” (Brown and Potoski, 2005:329).
2.2.1.1.2 Ease of Measurement
Ease of measurement refers to the ability of the contracting organisation to judge vendor
performance or observe how the vendor delivers the service (Ibid.). Transaction costs theory
prescribes internal service production for difficult to measure services, for example, it is
easier to measure the quality of trash collection than mental health care services. Implied h ere
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is that the government cannot assess the quality of services it receives if it cannot measure
them.
The combination of high asset specificity and difficult measurement can severely complicate
specifying, monitoring and enforcing contracts. The risk o f contract failure is extremely high
when contracting with a monopolist for a service that resists easy performance measurement
(Van Slyke and Rock, 2004).
Scholars applying transaction cost theory to contracting - out have focused on the
government’s contr acting - out decision and the structure of the contracting process (Besley
and Ghatak, 2001; Lamothe and Lamothe, 2008). More recently, transaction cost theory has
been used to understand the third phase of contracting - out, which is, post contract
management (Brown et al. , 2015). This study observe s that transaction cost theory serves as an authoritative analytical instrument for comprehending a wide array of contracting - out decisions, procedures and processes. For instance, from this theory, it is clear tha t the contracting - out process is costly. It includes not only the structures, monitoring, bonding and residual loss costs of agency theory but also the costs of negotiation (Williamson, 1985).
Three important problems contribute to the costs of contractin g: (i) a “cooperation proble m” arising when a contract offer ed all parties gains relative to the absence of a contract. To achieve a mutually beneficial contract, however, the parties must expect transaction resources that include the prerequisites for negotiating and enforcing contracts, (ii) a “division problem” wh ich arises when different mutually beneficial conflicts offer different relative gains; and (iii) a “defection problem” which arises when non - compliance is in the self -
interest of any of the parties (Heckathan and Maser, 1987).
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The transaction cost theory is not without critics. The concept of transaction costs is not a
very clear one. What should be included when government is said to have minimised
transaction costs by reforming an institution like property rights or local government
structure? (Lane, 199 3; Zinyama, 2014a). There are those that espouse alternative
contracting frameworks that include factors not present in transaction cost theory. The
strategic competency approach, for example, argues that contracting decisions are driven by
governments’ c ore and peripheral competencies: governments should produce internal
services in their core competencies and outsource their peripheral competencies (Barney,
1999). The public values and rights approach familiar to many public administration and
legal scho lars argue that public managers should incorporate values beyond efficiency and
economy in deciding whether to contract - out, notabl e equality, accountability and efficacy
(DeHoog, 1997). Both the core competencies and public values approaches primarily pro vide
public managers guidance on whether to contract - out for particular services. However, they offer less practical direction on how to organise the bidding process or on how to manage service provision once the contract has been let.
Transaction cost th eory is sometimes criticised for assuming that vendors operate opportunistically, pursuing their self - interest with “guile” (Ghoshal and Moran, 1996). This assumption underlies many of the recommendations for caution in contracting out decisions.
To be fai r, transaction cost theory has evolved from its initial simplicity to provide a more complex account of organisational interactions (i.e. relational contracting - out under conditions of asset specificity ( Williamson, 1993), but it neglects the role of trust - based connections and networks among organisations. The growth of partnerships and collaborations, seen as networks among governments, private firms and nonprofits, suggest
65 that thrust and commitment to a policy goal, rather than a market exchange, can se rve as the basis for inter - organisational arrangements (Page, 2003; Thurmaier and Wood, 2002).
Transaction costs analysis is applied to elucidate contractual phenomena, to explain why some contracts exist and others do not and why the details of contracts vary. Institutions of the market are conceptualised as responses to problems of the organisation of information, of transactions and of property rights, under conditions of environmental and biological lays of uncertainty, opportunism behaviour and bounde d rationality. Hence, the eagle - eyed monitoring of contract implementation is critical.
Transaction cost theory is conceptually attractive as a framework for studying how local authorities choose to deliver services because it models internal versus exter nal production as a function of both financial and management costs (Coase, 1937; Williamson, 1981, 1996). In deciding whether to contract, local authorities balance production costs against the transaction costs or management costs associated with produci ng a service themselves or contracting for it (Foged, 2015; Scalar, 2000). A key assumption of transaction cost theory , is that in principal - agent relations, the agents, whether employees and contracted employees, are opportunistic and pursue their self - in terest with guile (Ghoshal and Moran, 1996).
Countering opportunism requires monitoring agents’ performance and sanctioning shirking, whether agents are acting under direct provision or contract. In this study, the transaction cost approach provided the be ginnings of a framework for i dentifying conditions under which contracting local authorities can harness the benefits of contracting - out for service management while avoiding the pitfalls of contractor opportunism. Local authorities need to maintain adequa te management capacity to protect against contractor opportunism.
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2.2 .1.2 The Principal - Agent Theory (PAT)
This theory deals with the transaction costs that arise in collective action. The following
questions will be answered: How does this relationship get legally and functionally
established and how does it work? What are the essential structural properties f or it to be
effective? How is the agent controlled? What is the nature of the contract or the interests that
bind? The principal - agency theory is reviewed to provide lessons on contract design and
management. The PAT has been applied extensively to a rang e of contractual relations
(Bertelli and Smith, 2010). The theory provides a framework for structuring and managing
contract relationships in order to explain the behaviours of two actors in an agreement
(Awortwi, 2013:298).The principal chooses to contra ct the agent for reasons of lower cost
and higher expertise than it can achieve in - house.
Information asymmetry is at the core of principal - agent theory. Agency relationship exists when a government (a principal) contracts with a vendor (the agent) for the delivery of goods or services in which the vendor has expertise (Finkle, 2005; Larbi, 2006; Brown et al. , 2006;
Halachmi, 2000). The theory tries to resolve the problem that arises when the desires and
goals of the principal and agent are in conflict and when it is difficult or expensive for the
principal to verify the agent’s performance. Such difficulties arise due to incompleteness of
the contracts, incomplete information and the problem of monitoring behaviour (Gauld,
2007). The theory assumes that the principal and agent are engaged in cooperative behaviour,
but have differing attitudes toward risk (Eisenhardt, 1989; Brown et al. , 2013). The theory provides a guide on how both parties can best structure a relationship to maximise the chances that t he goals of the principal are achieved. Central to this assumption is a belief that the agent does not share the principal’s goals and thus will not accomplish them adequately if left to its own devices, a behaviour referred to as “shirking”. According to Seddon (2014), it
67 is virtually impossible to eliminate shirking by the agent. Indeed, Kettl (1993) suggests that shirking exits irrespective of the degree of monitoring. Thus, the goal is not to completely eliminate shirking, but reduce it to a level, wh ich ensures that the goals of the principal are achieved.
Following these propositions, Kettl suggests that, in contractual exchange, a series of questions must be answered that flow from conflict of interest and monitoring problems.
Those questions relat e to defining the job, choosing the contractor, selecting incentives and sanctions and monitoring performance (1993: 24). A good contract document will, therefore, have the following clauses specified: contract specification, performance targets, monitorin g indicators, conditions of renewal, sanctions and enforcement mechanisms and conflict reduction mechanisms and the like (Domberger et al. , 1986).
Information asymmetry occurs when the agent has relevant information that the principal does not have. Such asymmetric information usually occurs with regards to possible quality and cost configurations of projects in the contracting process (Taylor, 2005; Finkle, 2005).
This raises the probability that the agent can behave in ways that enhances opportunism
(Bes sire, 2005; Eisenhardt, 1989). A consequence of such opportunism is agency costs, which are costs that arise when the agent acts self - interestingly, and in bad faith. Agency costs help to address contractual difficulties, which arise from information asymm etries and anticipated agent opportunism.
Agency cost covers all costs associated with addressing potential or actual opportunism and includes devising mechanisms to monitor agent behaviour and to ensure that the agent behaves as stipulated in the contrac t (Stan et al. , 2007; Wankhade and Debade, 2006). This
68 may consist of providing incentives and investing in monitoring of agent’s performance.
Studies suggest that incentive - based contracts can be used to motivate agents. Indeed, Zhao
(2005) concludes that when risk is moderate, more incentives should be used to motivate agents to act in the principal’s best interests. However, as the level of risk increases, more fixed fees and fewer incentives may be more effective. Two central problems in principal - agent relationships are moral hazard and adverse selection. Moral hazard refers to deliberate withdrawal of effort by the agent, since it is impossible for the principal to monitor all the agent’s actions (Gauld, 2007; Brown et al. , 2006; Muller and Turner, 200 5). Adverse selection involves the falsification of ability by contracted companies to the principal. This is done usually through inflating skills and capabilities so that the agent can be selected to perform the contract. Adverse selection occurs because , practically, the contracting organisation cannot fully verify skills or abilities of the agents at the time of awarding the contract (Nyman et al. , 2005; Rai and Kim, 2002; Zeng et al ., 2007). In the case of unobservable behaviour (due to moral hazard or adverse selection), the principal can discover the agent’s behaviour through incurring agency costs in information systems investments.
These systems may take the form of reporting procedures, budgeting systems, board of directors and added levels of mana gement (Zeng et al. , 2007; Wankhade and Debade, 2006).
Such investments reveal the agent’s behaviour to the principal.
The principal - agent model tries to determine whether the optional contract between the principal and agent is based on behaviour or outc ome. It assumes that contracted companies are more risk aversive than the principal (Eisenhardt, 1989; Gomez - Mejia et al. , 2005; Brown et al. , 2006; Nyman, 2005). A case in point is when the principal knows what the agent has done. Given that the principal is buying the agent’s behaviour, a contract based on behaviour is more efficient. An essential element of the task performed by the agent is the
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programmability of the task. Task programmability influences the ease of measurin g
behaviour. Programmability refers to advance specification of the agent’s behaviour
(Eisenhardt, 1989; Zeng et al. , 2007).
Alternatively, a contract can be based on ou tcome. Outcome - based contracts motivate
behaviour by aligning the agent’s preferences with those of the principal, but at the price of
transferring risk to the agent based on the level of outcome uncertainty. Other factors besides
behaviour can affect outc ome, such as, government policies, economic climate, competitors’
actions and so on (Zeng et al. , 2007; Stan et al. , 2007).
It seems reasonable to assume that when principals and agents engage in a long - term
relationship, the principal will learn about t he agent more easily, thereby reducing information asymmetry. In such a case, behaviour - based contracts are more appropriate. On the other hand, outcome - based contracts are more attractive in short - term principal - agen t relationships. These are very attract ive if information asymmetry between principal and agent is likely to be greater. Consequently, the length of the agency relationship is positively related to behaviour - based contracts and negatively related to outcome - based contracts (DeHoog and
Salamon, 2009; Gauld, 2007). Several studies indicate that long - term relationship enhances trust and contributes to better contracting outcomes. Indeed, Domberger (1998) suggests that contracting out appears to yield the greatest benefit when it combines market dis cipline with long - term, cooperative relationships, by building trust between both parties. Langfeild - Smith et al. (2000) also argue that close cooperative relationships can be an important contributor to the success of contract management.
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The theory , how ever, has some weaknesses. While the market approach produces interesting insights, market metaphors in the public sector often produce distortions because the markets themselves have imperfections. The government can rarely call on more than a few supplie rs
(Ayee, 2005; Zinyama, 2014a). These suppliers enjoy a near - monopoly in the market. Even in mundane services, like refuse collection, the number of potential contractors is often decep tively small (Lynn, 1987). Also strategic sectors of the economy like water and electricity are the monopoly of the central government.
The principal - agent theory is one - sided because it negatively characterises an agent’s behaviour as self - seeking and ignores agent loyalty, pride and identification under the principal’s goals (Zinyama, 2014a). It also omits opportunistic behaviour by principals
(Savas, 2000; Sclar, 2000; Romzek and Johnston, 2005). This is especially so in public services where politicians and bureaucrats stand to gain personally from colluding with priv ate agents. Literature on episodes of collusion and corruption of government contracts both in developed and developing countries is abundant ( Girth, 2015; Awortwi, 2013; Brown,
2012; Ayee, 2005; Khan, 1989; Kettl, 1993).
The principal - agent theory does n ot adequately recognise the role that power plays in organisational and political life (Perrow, 1986). Because it is based on market behaviour, it assumes relationships among equals with principals and agents , each seeking to develop an acceptable exchange . It neglects what Parsons (1960:41) calls “the central phenomenon of organisations.” It also neglects the considerable complexity in the environment of agencies and the many cross - cutting political pressures on administrators.
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Organisational goals are f ar more dynamic and evolutionary than the relatively static
principal - agent model tends to capture (March and Olsen, 1989). Members of the legislature,
for instance, may frequently change their minds about which goals administrators should
emphasise and ad ministrators themselves must set priorities among the often evolve in
collaboration between principals and agents.
In intergovernmental grant programmes, also, it is difficult to recognise who is the principal
and who is the agent. Different levels of gov ernment take different responsibilities for
different pieces of the same programme. The relationship here , is one of exchange than of
constitutional collaboration. While dynamic goals , theoretically , are possible to the model,
they move far beyond the stat ic principal - agent theory and enter into a realm of enormous
complexity (Ayee, 1994, 2005).
A recital of the weaknesses of the principal agent theory , should not be read as a vote in
favour of rejecting or ignoring it. Despite these limitations, the principal agent theory
represents an important breakthrough for public policy. The substantive point is that the
principal agent theory does address a probl em of very fundamental interest, that is, the
exploration of opportunism - rationally self - interested behaviour in conditions of st rategic interaction of decision - making, deficiency of information and uncertainty. It is inconceivable to think that public p olicy will not benefit from being rethought to accommodate the pervasiveness of opportunism.
On these bases, the theory is important to this study because it advises that the quality a nd effectiveness of contracting - out the provision of public services wo uld depend largely on the quality of the contract design and contract manageme nt provided by local authorities .
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The principal - agent and transaction costs theories have a clear message to convey for effective contractualisation in both the private and the p ublic sector: for contracting out to be effective in the eyes of the contracting party, the contract terms have to be precise and the product simple. The theories arrive, however, at different conclusions when it comes to optimal contract duration. In agen cy theory, emphasis is on the diff iculty of obtaining information, hence, effective contracts are those that are repeated. The broad lesson emerging from these conclusion s is that the agent has room to manoeuvre which he/she uses to his/her advantage. It i s in the principal’s interes t to reduce the agent’s room to manoeuvre or take care of production himself /herself , that decision depending on cost comparisons for each option.
2.2. 1. 3 The Market Contestability Theory
The market contestability theory discusses the threat of competition in a contestable market
(Gauld, 2007). It deals with the ease with which potential service providers can compete for the contract. This is one of the factors that public managers should consider before engaging in contr acting - out, since it facilitates competition among vendors. In contestable markets, competition for contracts can help overcome principal - agent problems (Lai et al ., 2007;
Muller and Turner, 2005). Even when only few firms are initially available to contra ct with, many firms would quickly become available if the price paid by government exceeds the average cost incurred by vendors. The degree to which the activity being contracted for is contestable , affects opportunism costs. This means that the higher th e level of contestability, the lower the likelihood for agent opportunism. When there is low contestability, a potential vendor would tend to offer services at a much higher price for two reasons. Firstly, the vendor cannot be quickly replaced and secondl y, there is a high risk of contract breach externalities (the potential risk when the vendor provides services that are related to a
73 network of other services). For example, a firm carrying out government computer operations may threaten to withdraw servic e s in a way that jeopardises the payment of all government cheques (Globerman and Vining, 1996; Gauld, 2007).
The service market only needs to be contestable in the sense of removal of ar tificial entry barriers and this prevent s monopoly abuse and guarant ee s efficient pricing practices by the monopolist. It is invariably the case that the conditions needed to satisfy the contestability model are rarely met in practice (Warner, 2012; Williamson, 1996).
2.2. 1. 4 New Institutional Economics (NIE)
The NIE st arts from the reality that information is rarely complete and that individuals have different ideas of the way in which the world about them works (Harriss et al. ,
1995).Transactions , thus , have costs associated with them which are assumed not to exist in the neo - classical model. These are the costs of finding out what the relevant prices are, of negotiating and of concluding contracts and then of monitoring and enforcing them. Hence, institutions are means of reducing these information and transaction cost s.
When economists started to realise that the real world exhibited few of the features of the theoretical world of perfect knowledge and perfectly rational choices in a perfectly competitive market the problem arose: how to explain the market when these conditions do not apply. This problem is important in the context of government contracting, since only rarely do conditions of perfect competition arise in the field of government procurement.
Hence, it is i mpossible to make well - informed and optimal dec isions.
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There is a body of economics concerned with the contractual relationships between parties in
the real world. This is called “The New Institutional Economics” although by now it is no
longer new. The underlying questions of this theory are: why d o organisations exist, and what
determines the boundary between one organisation and the next one?
The forgoing questions were first asked by Ronald Coase in 1937. Oliver Williamson
developed Coase’s work further to look systematically at the problems pos ed by the fact that
markets are not perfect. In a book published in 1975 , Williamson looked at the question: when is it better to purchase goods and services in the market and when is it better to produce them yourself, using your own employees? This is es sentially the question for government: when should they write a contract with an independent body for the suppl y of services and when should the government provide them using their employees? Under conditions of bounded rationality , not all information is known. The conditions in the market that
Williamson considered were:
c omplexity: the transaction is so complex that it is not possible to consider all options ; u ncertainty: not all possible futures can be predicted, so it is not pos sible to write a contract that takes them all into account ; l anguage; it is not possible to specify everything in language that both parties to contract can agree on ; s mall numbers: where there are very few suppliers, those in the market can engage in oppo rtunistic behaviours to the disadvantage of the purchasers ; i nformation impactedness: where one side to the transaction has more information, especially about costs than the other ; f irst - mover advantages: by which winners of a contract gain information that puts futur e competitors at a disadvantage and reduces the impact of competition in all future transaction ; and a tmosphere: the moral stance that parties to the transaction take, which may not be perfectly econom ically self - seeking (Williamson, 1975:40 ).
Williamson (1975) usefully draws these elements into a framework, called ‘Organisational
Failures Framework’, which is illustrated in figure 2.1 on page 76 :
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Figure 2.1: The Organisational Failure Framework
Human Factors Environment Factors
Bounded Rationality Uncert ainty Complexity
Information Impactedness
Opportunism Small Numbers
Sources: Adapted from Williamson, 1975: 40
This study also used this framework to interrogate the way contrac ting - out has developed in
Zimbabwe between the government (local) and private companies. In particular the human
and environment dimensions are very important in understanding the contracting - out. This
framework summaries critical variables identified in earlier theori es discussed.
The existence of bounded rationality results in the possibility of opportunistic behaviour and keeping secret private information. This leads to adverse selection and moral hazards b oth forms of self - interested behaviour made possible by im perfect knowledge. The problem for governments is: how to organise the tendering process when complete contracts are not feasible? Milgrom and Roberts (1992) describe one set of solutions to the problem of bounded rationality in the real world of real cont racts that can never be complete. The solutions are:
r elational contracts, through which long - term relationships are developed; e xplicit contracts, where shared objectives make detailed explicit contracts unnecessary; d eveloping commitment;
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e x - post renegot iation; d ealing with specific assets, which the contractor has bought solely for the purpose of fulfilling the contract; t he hold - up problem, where the buyer is completely dependent on a single contractor; p rivate information and pre - contractual opportunis m, whereby the contractor cheats the purchaser; m easurement costs; a dverse selection, where contractors only choose contracts, or parts of contracts, that can make big profits, leaving aside the rest; and s ignalling, screening and self - selection (Milgrom and Roberts, 1992:167).
From the foregoing discussion, this study reformulated the question for government: “how can governments ensure that contracting with the private sector avoid the dangers identified in the transactions cost theory, principal - agent theory, market contestability and new institutional economic s literature?” The answer is discussed by Sako’s framework. Sako
(1992) developed a framework for understanding contracting behaviour using two archetypal relationships, namely, Obligation Contra ctual Relationship (OCR) and Adversarial
Contractual Relationship (ACR). The former is where the two parties trust each other, work together for mutual benefit, share risk and do things for each other which go beyond the details in the contract. ACR is whe re there is low trust, the expectation that each side wishes to gain at the expense of the other and contracts are used to protect each side from the other.
Sako (1992) breaks down the contracting process into eleven elements: transactional dependence; ord ering procedure, length of trading, documentation, the approach to contractualism or contingencies, contractual trust; competence trust; goodwill trust; technology transfer and training; communication channels and intensity; and risk sharing.
2.2.1.5 C on tractualism
Any conceivable government service can be provided by contract either externally through private/voluntary sector providers or internally with other parts of government. Compulsory
77 competitive tendering was adopted in local government in the United Kingdom in the early
1980s and in other parts of the government later (Rosenbloom, 2015; ReRoux, 2007). There is some debate as to whether or not the new contractualism is another model of public service reform altogether. Davis (1997: 61 - 2) argues that there have be en two ideas at work :
The first, managerialism, sought to reform public administration while keeping many of its essential features. It drew on values and techniques developed in business to improve efficiency in government. Managerialism is an agenda now largely played out in most places….The second trend, the move to contracting has proved the more significant. It draws explicitly from economic theory. Contracting suggests it is not enough to import business practices. Government service s must be delivered by business, according to co ntracts won through competition .
It is quite arguable as to whether the contractual stage is something new and different or merely a continuation of managerialism. To follow Davis ’ (1997) argument , there hav e been three stages in the history of public sector change: the traditional bureaucratic model of public administration; the new public management model and the new contractual model.
There are some problems with this view. Despite the attractions of rega rding the new contractualism as a new kind of public sector management altogether, it is really a more extreme version of managerialism or new public management (NPM). The resort to contracts for everything was specified by Hood (1991) as part of the NPM m odel. Contracting out is part of the NPM approach that encourages governments to be more efficient and responsive by applying market strategies to public service provision (Hood, 1991). Hughes (1998:71) argues that “while the new contractualism takes it f urther, the groundwork and theor y derive from the NPM model”. Hughes (1998 :221 ) further observes that: “t here are problems in moving to contractual arrangements for the delivery of services if the rule of law and the enforcement of contracts are not well e stablished . ”
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This shows that where goals are vague and not able to be clearly set down in writing or where corruption is endemic, using contracts is not likely to be useful. This study observes that given that the old model allowed favouritism, it is likely that the contract process will not allow genuine competition.
While these economic theories provide a rich theoretical base for the adoption of contracting - out, they however do not capture the entire contracting - out discourse. This gap is filled in by incorporating views and arguments from “political economy” theorists (Rosenbloom, 2015).
What follows is an attempt to capture and situate these perspectives within the political framework of this contracting out debate.
2.2.2 POLITICAL ECONOMY DISCOU RSE
These are essentially theoretical arguments which draw their intellectual roots in classical
Marxist theories (Williamson, 1975). While there are variations in terms of interpretation and analysis within these theoretical constructs, they share a comm on belief in the inevitable link between politics and economics. Thus, in their view, contracting - out is a political process whose success/failure unavoidably hi nges on the prevailing economic and socio - political dynamics within the polity.
It is politic s that shape economic performance because it defines and enforce s the economic rules of the game. The reasons for the different outcomes have to do with the political context or what Khan (1989) ref ers to “a political settlement”, meaning the balance of po wer between the classes and groups affected by an institution.
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Contracting - out does not take place in a vacuum and can be highly politicised. Political and technical risks may affect the feasibility of contracting - out. The OECD Handbook (2010:18) , observe s that the challenge for the governments is “to assess key stakeholders’ incentives before deciding whether or not to contract - out.” The assessment can be done by asking the following questions: Who stands to benefit from the decision to contract out? Who are the potential losers? Will losers become a significant obstacle to the success of the process? What is their capacity to un dermine the process? The realis ation that transaction costs are a pervasive phenomenon of the real world produced a large subsid iary literature on the behaviour w hich Williamson (1975) labels “opportunism”, defines it as “self - interest seeking with guile .” The economics of agency can be used to analyse opportunism (Pratt and
Zeckhau ser, 1985). The political economy literature has b een recently dominated by the public choice theory. This theory is discussed below.
2.2.2.1 The Public - Choice Theory
There is a growing recognition that politics matters a lot in policy choices . I t is difficult to understand the process by which contracti ng out polic ies are made without characteris ing the political terrain . When the concept was first developed by ‘Public Choice’ economists in the early 1970s, the idea was cast as “conservative”. Over time, the ideology faded from the debate and leaders f rom across the political spectrum have successfully utilised private firms to deliver public services. The most widely known variant of this theory is Stigler ’s (1975) rationality theory. The basic assumption is a comprehensive view of rationality. Accordi ng to
Stigler (1975):
A rational man must be guided by the incentive system within which he operates. No matter what his own personal desires, he must be discouraged from certain activities if they carry penalties and attracted towards other if they carry large rewards. The carrot and stick guide scientists and politicians as well as donkeys.
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Public choice theory assumes that the society is composed of self - interested individuals who coalesce into organised interest groups. Once formed into groups, they use money, expertise, political connections, votes and other resources to extract benefits, or rents from government through lobbing activities, elections and other direct forms of involvement or through the imposition of rewards and sanctions on public of ficials ( Rosenbloom, 2015; Resh and
Marvel, 2013; Soludo and Ogbu, 2004;Stigler, 1975;Walsh, 1995). In short, at the heart of the public choice theory , is the self - interest maximisation hypothesis. There are four principles that underlin e the public choic e theory. These are: (i) public sector actors or officials behave as if they maximise their own interests, (ii) all social entities are fundamentally sets of individual actors; (iii) politics as voluntary exchange requires the making of an economic constit ution that is to guide the relationship between the state and the individual , and (v) political interaction is to be based on voluntary exchange (Ayee, 2005;
Lane, 1993).
After thirty years of public choice theory and attempts to apply it to governmental settings, results have been mixed ( Ayee, 2005; Self, 1993; Walsh, 1995). Markets do not work better under all circumstances. The public - choice theorists argue that the state is subject to “failures as is the market” (Walsh, 1995:17) because it is not a ne utral actor. Politicians do not work in the best interests of society as a whole. They have their own interests to pursue which are subject to conflicting demands and pressures from special interests. The elected or unelected public officials who are funda mentally concerned with remaining in power also complement the interest groups in capturing favoured status in the distribution of resources in the society.
To accomplish this, the officials consciously seek to provide benefits to a range of interests they believe will help them retain office. Politics in this setting , becomes the sum total of
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individuals seeking special advantage through public policy and individual officials seeking
to benefit from public office through re - election and rents.
Public choi ce theorists also argue that , the bureaucrats (who are supposed to implement directives from politicians) do not necessarily carry out the wishes of the politicians, even if the later do express the public good, because it is unlikely to be in the interest s of the
bureaucrats to do so. Such arguments highlight possibilities that contracting - out , may be
strangled from within the top political leadership, at ministerial or at the organisational level.
Each of these is a possible zone of obstacles. In this ca se, analysis of contracting - out
implementation should seriously take into consideration attitudinal factors. The theory
provides theoretical backing for taking activities out of the public sector. While this theory
has its own limitations, it nevertheless highlights the issue of “self - seeking” as a critical fa ctor in analysis of contracting - out, especially where tenders are concerned. The theory offers a coherent and relatively parsimonious explanation for seemingly irrational or inferior policies or decisi on - making by governments. Why should governments adopt public policies and programmes which are harmful to society, for example? The solution to the problem is to closely limit the activities to fall under the regulatory power of the state.
Public choice theory argues that competition is the key to public market efficiency (Tiebout,
1956). The study found that sometimes competition lack ed in the public sector. Lack of competition brings many problems. If competition is absent, more responsibility rests o n public regulation to ensure service quality. In economics, property rights theory argues that private providers will reduce service quality to enhance profits – especially if competition is not present (Hart et al., 1997).
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At best, it explains why thing s are the way they are and why the public interest is not often achieved. On the power of vested interests, it demonstrates the barriers to reform that are created by pre - existing policies and by the political relationships that they engender. It provides an explanation for the willingness of public officials to respond to the pressures and imprecations of lobby ing groups and other types of special interests.
However, the public choice theory has some flaws. Though it indicates the importance of the power - seeking motivations o f decision - makers, it is less able to illuminate the policy process itself and explai n how the motivations of policy - markets are developed or altered over time
(Turn and Hume, 1997; Lane, 1993). It is not able to explain how, why or w hen reform occurs, except through events or appearance of wise statesmen or technocrats who, for unexplained reasons, exhibit behaviour that is politically irrational.
2.3 THEORETICAL FRAMEWORK OF CONTRACTING OUT
This study discussed the contract design w ithin the principal - agent and transaction cost theories in which the government relies on contractors to deliver services and to achieve policy goals. Based on the assumptions of goal conflicts and information asymmetry between a principal and agent, the p rincipal - agent theory highlights particular agency problems – that is, the principal is subject to the agent’s self - serving opportunistic behaviours, including adverse selection and moral hazard. Accordingly, the m anagerial implications of principal - agent theory focus on the design of appropriate control mechanisms to guide the distribution of risk and uncertainty between the principal and the agent. The theoretical framework for this study was derived from the different theoretical contributions to the lit erature on government contracting discussed above. The theoretical framework consists of the following elements:
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c ontracting out policy (political sensitivity); s trate gic contracting and communication; t he contract; t he public service providers; c onsumption (consumers and customers); r egulation; and i nstitutions/institutional framework .
2.3.1 Contracting out Policy
Contracting - out rests on the assumption that competition is required for effective public service delivery. For many years, there has been a belief among policy - makers that competition is what public service delivery needs (Brown et al. , 2015; Gordon and Kelley,
2010; Dean and Kiu, 2002). Kettl (1993) calls this the competition prescription. Kettl
(1993:3) observes a trend that “substitu tes market for government control that replaces command - and - control authority with competition .” The competition prescription is quite simple. Let public services be produced on the market instead of being produced by public organisations in a hierarchy (G errish, 2015). Let private providers compete for contracts
(Dowd, 2011; DeHoog and Salaman, 2002). Award the contract to the bidder with the best combination of price and quality (Greenwood, 2014).
The competition prescription has many advocates. Savas ( 1987, 2000) sees privatisation as
“the key to better government .” The argument has always been that private providers deliver more efficient services at a lower cost because they are forced to compet e in the marketplace.
Similarly OECD (1997) , advocates fo r the injection of more competition into public services.
A summary of OECD’s policy recommendations are found in the report , Modernising
Government , that was published in 2005 which summed up the previous twenty - plus years on initiatives towards public m anagement reform, including contracting, in the OECD countries
(OECD, 2005).
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There is a reason why services were public in the first place. Public services are complex.
The more complex they are, the harder it is to specify a clear contract (Brown et al. , 2015;
Lavery, 1999; Johnston and Seidenstat, 2007; Williamson, 1985). Kettl (1993) calls this the
complexity problem. Competition is now relevant in many policy areas and is used for both
simple and complex services (Greve, 2008; Resh and Marvel, 2013; Gi rth, 2014).
Competition was used traditionally in the construction of schools and other public buildings
(Hodge, 2000). Social services are increasingly exposed to competition (Van Slyke, 2003;
Hibow, 2012; Chanie and Mihyo, 2013). Savas (2000:72 - 73) offer s an extensive list of areas
where contracting out has been applied in real - life contexts: from drug addiction treatment,
adopting, air pollution abatement, airport operation over paratransit system operations,
parking management and maintenance, parking e nforcement, parking lot and garage
operation to waste water treatment, water meter reading and maintenance, zoning and
subdivision control and zoo management.
A general contracting - out policy or more specifically a “competition strategy for public service delivery” (Gerrish, 2015) is a strategy or policy that governments follow in order to
ensure that public services are competitive. A competition strategy consists of cognitive,
normative and regulative institutions (Scott, 1995). Cognitive institutions pr omote the notion
that competition may be applied to public service delivery. Normative institutions argue that
competition and involvement of private sector providers are desirable policy for governments
to pursue and citizens to gain from as customers. Re gulative institutions build the competition
prescription into rules and regulations that guide companies’ and citizens’ behaviour. The
actors that support the ideas of competition include decision - makers in politics and business,
theoreticians and intellec tuals that give the idea of competition legitimacy, framers in the
sense of spin doctors and pollsters, and supporting groups of trade organisations and interes t
85 groups (Johnston and Romzek, 2010; Taylor, 2005; Fernandez, 2009; Curry, 2010). A competition strategy involves a frame of problems, policy and politics that may or may not combine in different ‘streams’ (Kingdon, 1995). Competition is seen as a solution to the problems of inefficiency and too much bureaucratization. The theoretical rationale behi nd contracting is important for its implementation success rate (Romzek and Johnston, 2002:
429).
Contracting - out was an important element in the efforts to make the Australian public sector more efficient and effective in the 1990s (Hodge, 2005). Austral ia practis ed a competition strategy under the Kennett Government in Victoria. The Kennett Government of the 1990s set a target of 50 per cent of tasks to be competitively tendered (Hodge, 2000). Also, contracting out was essential to the New Zealand experi ence as one of the ‘leading’ NPM countries in the world (Barzelay, 2001). Contracting out rested on the applicability of principal - agent theory and transaction cost theory in the New Zealand case (Boston, 1999).
2.3.2 Strategic Contracting and Communicat ion
In the literature on contracting - out, ‘contracting ’ is the concept of public sector managers.
Kettl (1993) calls this ‘smart buying’. The purpose of smart buying is that governments know what they want from their relationship between providers. Brown and Potoski (2003a) refer to the process of knowing what governments want and going through the steps of preparing the contracting process for feasibility capacity. Romzek and Johnston (2002) talk about having enough resources, to having in - depth planning for contractor performance measurement, intensive training for state contract management staff, evaluation of contractor staff capacity, and evaluation of contractor financial management capacity. Subsequent re search has confirmed that Kettl (1993) was on the right track. Brown and Potoski (2003a)
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view this as contract management capacity. Furthermore, Kelman (2002a) sees a
st rengthened strategic contract management approach where contract capacity is anchored
strategically in public organisations.
The go vernment should make a formal decision about contracting out (Brown et al. , 2013,
Amagoh, 2009; Bryce, 2012). This is often a political decision that stems from the ruling
coalition’s beliefs (Greenwood, 2014; Rosenbloom, 2015; Greve, 2008). Institutionali sing a
general contracting out policy involves politics (Greve, 2008:28). But a decision to contract -
out can also be based on pragmatic reasoning where a government decides that it wants to
have value for money (VFM) and to achieve the best service for the least cost (Huque, 2005;
Brown et al., 2006; Gordon and Kelley, 2010). Information collection is often, but not
always, a part of the process prior to the decision of contracting out. Some governments form
commissions (Brown et al ., 2013; Girth and Johns ton, 2011). Denmark had a commission in the early 1990s made up of representatives from businesses, labour unions and experts. The commission came up with recommendations after having made a thorough analysis of contracting out (Greve, 2008).
Designing a contract is about setting performance targets for public service delivery (Romzek and Johnston, 2002; Fernandez, 2007; Mwagike and Edw ard, 2013). Romzek and Johnston
(2002) conducted intensive case studies on contracting out in Kansas. They studied five
contracting out cases: (1) case management for elderly Medicaid clients; (2) Medicaid
managed care for welfare families; (3) employment preparation services for welfare
recipients (statewide); (4) employment preparation services for welfare recipients(pilo t
project), and (5) foster care and adoption services for children legally under state custody due
87 to child abuse or neglect. On the basis of their studies, they came up with a number of key factors that influence the effectiveness of contracts. Factor s wi th positive impact include :
l evel of competition among providers; r esource adequacy; p lanning for performance measurement; t raining for state contract managers; e valuation of contractor staffing capacity; e valuation of contractor financial management capacity; and t heoretical foundati on for reform.
Factors with negative impact include :
p olitical strength of client advocates; c omplexity of subcontractor relationships; and r isk shifting to the contractor (435 - 437).
At this stage, stakeholder participati on is critical. This involves about how to start a process where input comes from various sources: politicians, citizens, labour and the business world.
One possibility is to make a taskforce that deals only with the contracting issue (Awortwi,
2013; Girt h, 2014). Another strategy is to make an open process from the beginning and to invite input from the key stakeholders that will be affected by the contracting decision
(Gerrish, 2015; Greve, 2008; OECD, 2010). Because public managers do not always have a sufficient overview of the market and the opportunities it provides, such suggestions may come in handy and save the political decision - makers some time in scanning the market.
2.3.3 Communication Strategy for Contracting Issues
Contracting - out affects some groups in the environment. Public managers, therefore, need to have a clear communication strategy where the implications of contracting - out are spelled out. A communication strategy must last for the duration of the contracting - out process
(Greve, 20 08). The question of a communication element to the contracting process is perhaps one of the most overlooked issues both in the literature and the practice of 88 contracting - out. Often, policy - makers and public managers seem to assume that contracting is a t echnical matter once the political decision to contract - out has been taken (Rosenbloom,
2015). Nothing could be more wrong, as stakeholders in the organisational environment are eager to know in what direction the government is moving. Securing a clear co mmunication strategy seems to be of high importance to modern public managers. In the literature, the argument often goes that contracting out cannot be separated from its political context (Van
Slyke, 2003; Rosenbloom, 2015; Fernandez, 2007; Greve, 2008). If politics is a part of the game, th en communication with the key stakeholders and other organisational groups in the larger environment is a key challenge facing contract managers.
Communication can change for different phases in the contracting out process. First, it is necessary to know about the immediate consequences (Greve, 2008). Sending information to staff is of particular importance (Girth, 2011, 2014). Second, the citizens (customers) who are affected by a potential change of provider must b e notified and informed (Girth, 2014; Greve,
2008; Kelman, 2002a). Third, business and interest groups must be informed about the process before it begin s (Zinyama, 2014a; Bryce, 2012). Fourth, citizens at large must be informed about a potential change in the way the government delivers a service (Brown et al. ,
2015; Savas, 2000; Greve, 2008).
2.3.4 The Contract
The term contract has been already defined. In the literature, there is the distinction between neoclassical contracts and relational contracts. A neoclassical contract specifies targets, outputs and has clear sanctions. It is usually perceived as a proper contrac t: clearly written, clear goals and easily enforceable (Greve, 2008). Yet research show s that writing up a contract for future transact ions that cover all eventualities is not easy. The contract is also
89 hard to describe in detail. The monitoring and evaluation do entail hard work that results in added costs to the production of the service. In short, a neoclassical contract has the follo wing characteristics:
l ength between three and seven years; d etailed, legally binding and specific contract document/specification; c ontract contains detailed performance provisions for control; l imited flexibility, but contract may specify additional serv ice delivery against payment; and m echanisms spelled out in contract document for dispute resolution (Domberger , 1998:131) .
In relational contract, not all targets and objectives can be specified beforehand, nor can all outputs be anticipated. The relation al contract, therefore, specif ies procedures that will allow parties to deal with problems and challenges as they arise. A relational contract has the following characteristics:
l ength is variable - from ten to fifteen years is common; a greement between the parties spells out general purpose in contract document; c ontrol is achieved through cooperation. Penalties omitted. Sharing of benefits encouraged; f lexibility as the key issue based on full sharing of information; n o formation mechanism for dispute resol ution. Potential disputes resolved before conflict; and j oint venturing as contractors and the purchasers may form joint company to pursue goals (Domberger, 1998:131).
The dominant paradigm in the literature comes from the new institutional economics and within that framework there are principal - agent theory and transaction costs theory. It is important to note that it is not a complete and coherent theory about contracting. The literature consists of different approaches to contracting rather than formin g a fully developed theoretical framework. Principal - agent theory (PAT) is concerned with questions of contract design, governance and control while transaction cost theory is more concerned with efficiency and the proper institutional form of governance, given the transaction costs involved.
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PAT focuses on the relationship between a principal and an agent. In a classic formulation,
Jensen and Meckling (1976) explain the problem:
We define an agency relationship as a contract under which one or more person s (principal/s) engage another person (the agent) to perform some service on their behalf which involves delegating some decision making authority to the agent. If both parties to the relationship are utility maximisers, there is good reason to believe tha t the agent will not always act in the best interests of the principal.
The agent has several possible reasons for not complying with the principal’s wishes. This is due to the moral hazard problem and adverse selection. These two terms are more easily un derstood as hidden action and hidden information (Pratt and Zeckhauser, 1992). Lane sees principal - agent theory as informing a theory of contracting in the public sector:
One can look at the arrival of N ew Public Management and the extensive public sector reforms inspired by this theory from many angles. Here we examine the shift from long - term contracting, typical of bureaucracy and traditional enterprise, to short - term contracting, borrowed from private sector governance methods. Short - term contracting has three principal uses in the governance of the public sector: (1)contracting with service providers after a tendering/bidding process; (2) contracting with CEOs[Chief Executive Officers] of the incorpor ated public enterprises; and (3) contracting with executive agencies about what they should deliver (Lane, 2000: 129).
The principal - agent framework is relevant to the public sector and to contracting for public service delivery:
The key problem in agency relationships is to device a contract that motivates the agent to work for the principal at the same time as the principal pays a compensation that corresponds to the effort of the agency. Since effort tends to be non - observable there arises the problem o f fully and correctly specifying the contract guiding the interaction. Post - contractual difficulties can occur when an agent shirks - moral hazard problems - concerning hidden action. Or pre - contractual opportunism can occur when an agent hides information tha t is relevant to the negotiation and signing of a contract - adverse selection problems – resulting from asymmetric knowledge ( Lane, 2000:132).
What can principals do about the situation when agents do not necessarily follow orders from the onset ? The following statement summaries the opportunities for principals:
Agents are perceived as having distinct tastes (such as the desire to limit risk taking or costly effort), which they pursue as rational maximizing individuals. The
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principal’s job is to antic ipate the rational responses of the agents and to design a set of incentives such that the agents find it in their own interests (given the incentive system) to take the best possible set of actions (Miller, 1992:2, quoted from Milward and Provan, 1998).
Transaction cost theory is concerned with efficiency of governance structures. Activities should be organised in the governance structure with the least transaction costs. Transactions cost are costs associated with formulating, writing, monitoring and ev aluating contracts
(Williamson, 1985). Williamson sees transactions costs as the costs of running a contractual system. They are relational, not absolute figures (Greve, 2008). Williamson’s analysis also carries some implicit recommendations for the organ isation of public service delivery. To
Williamson, production will be carried out where the lowest transaction costs are. The arguments from transaction cost theory have sometimes been used to support those for contracting out public services to provider s, but this is a misunderstanding. The institutional framework of public service production should, in Williamson’s account, take place where transaction costs are minimised and if that is in the public sector, then a public sector solution may be preferre d. In other words, there is no inherent argument about private sector service provision in Williamson’s theory of transaction costs.
2.3.5 Public Service Provision
Kettl (1993) refers this to “whom to buy from”, what Romzek and Johnston (2002) refer to a s
“healthy levels of provider competition” and the “complexity of subcontractor relationships”, and Brown and Potoski (2003a) label “implementation capacity .”
Providers need to interpret the contract, hire the correct people, set in motion all the procedu res promised in the contract, and start to communicate with citizens who are going to
92 receive the service. The government withdraws somewhat during this part of the contracting process. The implementers take it over.
Providers may be different types of or ganisations. In the literature, it is common to distinguish between at least three types of providers: for - profit providers (firms), non - profit providers (voluntary organisations, not - for - organisations) and other public providers. A fourth possibility is a provider network or coalition (Greve, 2008).
2.3.5.1 For - Profit Providers
This is the most well - known category of providers of public services in alternative delivery arrangements. The for - profit company is often portrayed as the profit maxim iser, out t o make a quick buck in providing public services. While not wholly incorrect, companies have other goals. Fligstein and Mara - Drita (1996) emphasise how companies’ long - term goal is survival.
Companies do not always go for a quick profit, but are just as ke en to secure their place in the market in the long run. This fact will also influence companies’ relations to public sector organisations. Companies may follow a strategy of building up a long - term delivery partnership with the public sector. This leaves t he option of securing short - term contracts less attractive.
2.3.5.1 Non - Profit Providers
Governments have pursued relations with non - profit organisations for a long time. Non - profit organisations have a number of pluses to which governments are attracted : flexibility, access to specialised groups of citizens, innovative ideas and practices, and above all legitimacy (Bryce, 2012). Legitimacy is important, both in the eyes of the user, but also in the eyes of the surrounding community.
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A typical non - profi t organisation may be a voluntary organisation that provides certain
trusted services as part of its remit which the public sector finds useful. Examples could be in
areas of social work where Red Cross International is operating.
There h as been a trend t owards formalis ing the relationship between the government and non - profit organisations. This is where “contracts” enter the picture. In many instances, governments used non - profit organisations as public service providers in informal ways.
There was not a lways a formalised bidding process where non - profit organisations would have to submit their offers in brown envelops (Bryce, 2012; Dowd, 2011; Greenwood, 2014;
Bayliss and Fine, 2008). Relationships, instead, are formed as probl ems arise and therein lay
the flexibility so adored by public sector organisations and non - profit organisations alike.
2.3.5.3 Other Public Providers
Governments have an option to choose a public provider as an alternative private provider.
Van Slyke (2003) reports on how public managers formed public - public partnerships in New
York State as an alternative to a traditional contracting out approach. The reason was that
there were not enough capable private providers that responded to the request for proposals.
2.3.5.4 Provider Networks
A fairly recent phenomenon is the provider network (or provider consortium) (Girth, 2014;
Brown et al. , 2015). In a building or construction project, there is a main partner responsible
for the contract relationship with the purchaser, and a host of sub - providers. Public
purchasers can see the benefits of getting not only one, but several providers to deli ver the
services. In information technology service systems, the same practice may be identified. A
public purchaser may enter a contract with a main provider, but the provider, an IT company
94 may have links with several sub - providers from the IT industry that delivers the various components of the system.
2.3.5.5 Level: Local, N ational or G lobal
Providers operate at different levels of government too. Locally based companies may provide social services in local government. Some may be national companies . These providers do not enter a local government market only to stay in one particular area. The strategy of the provider is more likely to be oriented towards capturing market shares
(Johnston and Seidenstat, 2007). If a company enters a local governmen t market, it may want to use this market as a trampoline to move to other markets in the future (Greve, 2008). One example could be a national IT company that enters an agreement with a local government on how to develop a new IT - based pay scheme. The IT C ompany wants to see the IT system spread out to all the local governments potentially, while the particular local government may only be interested in the IT system to improve its own pay scheme administration. An increasingly visible phenomenon is the glo bal provider, that is, the provider that operates across borders. For instance, Microsoft Company is the world’s premier provider of computer software. The point is that the local purchaser or even the national purchaser will experience different power rel ations with the global provider than with a local or nationally based provider.
2.3.6 Regulation
The regulatory challenge is eminent in contracting for public service delivery (Brown et al .,
2015; Greve, 2008). The contracting out process is meant to lead to better performance.
Knowing if that objective has been reached is one of the key elements in the regulation of public services delivery. Kettl (1993) notes how governments must ask themselves “what has
95 been bought” once the providers have delivered th e services to the citizens and customers.
Romzek and Johnston (2002) call for intensive training for contract management staff so that they can conduct contract oversight and monitor the progress of service delivery. Brown and
Potoski (2003) talk about “ev aluation capacity” as the capacity to evaluate the contractor’s performance.
Generally, there are organisations devoted to regulation. The contracting out literature needs to pay attention to organisations such as national audit offices, auditors in local governments, ombudsperson, evaluation institutes and others who focus on what governments have been buying (Curry, 2010; Greenwood, 2014). However, the literature is not yet fully developed on these issues. In a model of contract management, attention to the regulatory framework is destined to be of the utmost importance in the future ( Brown et al. , 2015; Greve, 2008).
The regulation is predominantly concerned with the contract oversight of the purchasing organisation. The purchaser must know what has been bought, it must train contract oversight managers and it must possess the ability to evaluate the performance data.
Underscored here is that researchers and practitioners need to pay more attention to the regulatory aspect of contracting. Finding out “what has been bought”, as Kettl (1993) phrased it, is not a mundane task. Regulation that comes out of the contracting process, and how the contracting process has proceeded, is a highly important part of any approach to contract management.
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2.3.7 Th e Institutional Context
Contracts may be seen from an institutional perspective. Following North (1990), Knight
(1992) and others, institutions set formal and informal rules that enable and restrain human
action. Contracts are not enacted in a vacuum.
Ins titutional theory has developed tremendously over the past three decades. There are
various theoretical schools of institutional theory (Scott, 1995). The three most influential
schools are rational choice institutionalism, sociological institutionalism an d historical
institutionalism (Hall and Taylor, 1996). One way they differ is how they see actors. Rational
choice institutionalism sees actors as self - interested, and institutions are the outcome of the
various struggles. Sociological institutionalism see s actors as guided by norms and by logic
of appropriateness. Institutions in this version are not necessarily efficient. Historical
institutionalism has room for both self - interested behaviour and norm - following behaviour
and does not have a fixed view of the efficiency of institutional arrangements. In general, the
schools agree that institutions shape people’s actions, norms and cognitive schema of though.
When a contract is signed, there is more to the contract than what is written down in the single co ntract. The contracting - out process depends on the legal system, law in general and on the mechanisms connected with the enforcement of law. Implied here , is that contracts are contextualised by the formal rules which guide exchanges between organisations . These could be constitutional laws, but also laws such as contract law and competition law. This study construes formal rules as the formalised rules that structure the contracting - out process.
This could be anything from the structure o f Parliament, th e structure of M inistries, competition law, contract law, the structure of markets and other formalised rules that guide the process.
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The other types of institutions are informal. How people think about contracts and what they feel obliged to do when exp os ed to a contractual process may differ (Greve, 2008). These are rules that are not written down but remain a part of the expectations and traditions surrounding a contractual process. These could be anything from compliance behaviour to interpretations of changed relations between organisations because of written contract.
For the purpose of this study, a contract itself may be seen as an institution comprising both formal rules and informal rules. A contract, therefore, is an agreement between a purchase r and provider that contains enforceable formal rules guiding the behaviour of the organisations as well as informal expectations attached to the contracting out process. It is important to note here that contract management implies that managers and management systems must attend to both the formal rules and to the more informal rules to make contracting work.
All the concepts discussed above of the contracting out process are illustrated in figure 2.2 on page 99.
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Figure 2.2: A Contract Management Theoretical Framework
General policy on contracting out and level of political sensitivity
Institutional rules Strategic contracting and communication
Contract - Mix of formal and informal rules Formal - Short - term or long - term Regulation of institutions contracted - Provision of public services public service - Profit or non - profit provider delivery - Local, national or global Legal, political, provider managerial, Informal professional, Institutions Consumption among users/customers market, and ability to choose provider accountability
Source: Adapted from Greve 2008
2.4 CONTRACT MANAGEMENT CAPACITY
Poor contract performance can result from insufficient contract management capacity in any contracting out stages. Contracting is a highly complex process requiring multiple types of expertise from public managers (Lavery, 1999). “Effective contra ct management” is defined by Brown and Potoski (2003a:153) as “mitigating specific problems that can plague the contract process . ” The literature is replete with studies showcasing ineffective contract management. Auger’s (1999) study of state contracting , found that “respondents….. admitted that the performance standards being used in their contracting processes are often poorly developed, weak or ill - conceived. Organisational systems for appraising the work of contractors often focus on measures that just ify the work process rather than attempts to gauge service outcomes” (1999:449).
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Brown and Potoski (2003a, 2003b, 2004, 2005, 2006) argue that contract management capacity is needed in various phases of contracting out process. Brown and Potoski (2003a) di stilled contract management capacity into three components: feasibility assessment, implementation and evaluation of the contract. Feasibility assessment capacity is intended to ensure that a programme meet s practical procedures, political viability and co st - effectiveness
(Hsieh, 2012). Implementation capacity deal s with the capacity to bid on the contract, to select a provider and to negotiate a contract such as hiring staff to negotiate tenders and to create management systems for contracting (Brown and P otoski, 2003a; Kettl, 1993).
Evaluation capacity is the ability to evaluate the contractor’s performance. It includes procedures for collecting performance information and staff to conduct project audits (Brown and Potoski, 2003a).
Following the foregoin g studies, Yang, Hsieh and Li (2009) offered a nuanced view of capacity components. Paralleling the policy cycle, the authors distilled management capacity into four capacities, namely, agenda setting capacity, formulation capacity, implementation capacity , and evaluation capacity and then tested their relationships with contract performance . These authors further observe that “contracting outcomes are circumscribed by institutional and political constraints and imbalances can result when contractors become more adept than government managers at deriving benefits from the process” (Yang, Hsieh and Li, 2009).These contract management capacit y components are tabulated on page 101.
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Table 2.1: Adapted Contract Management Capacity Framework Capacity Core Q uestions from Capacity Capacity Components ICMA 1997 and 2007 Components in Components in Surveys Brown and Potoski Lang, Hsieh and Li (2003a) (2009) Agenda Setting “Has your local Feasibility Agenda setting government studied the assessment capacity “Is this an feasibility of adopting appropriate service private service deliv ery to contract out at within the past five this time?” years?” Response Code: No=0 Yes=1 Formulation “Has year local Implementation Formulation government undertaken capacity “Is this vendor the any activities to ensure right choice? Is the success in implementing contract written private service delivery?” well? Is the bidding No=0 process good? Yes=1 Implementation “Has your local Implementation Implementation government encountered capacity “How can we help any obstacle in adopting the contractor private service delivery?” succeed?” Response code: No=0 Yes=1 Evaluation “Does your local Evaluation capacity Evaluation government use any “Has the contractor techniques to fulfilled its systematically evaluate responsibilities?” its private service deliver y?” Response code: No=0 Yes=1 Source: Joaquin and Greitens, 2012: 198 - 199
In addition to contract management capacity, Lawther (2002) and Brown, Po toski and Van
Slyke (2015) advis e public managers to consider service complexity when contracting out.
Complexity in contract management has increased as government has purchased services, necessitating more complex decision making than just choosing vendors on the basis of p rice
(Shick and Weikart, 2009). Lawther’s framework (2002) describes three service complexity
101 scenarios as shown in table below, each demanding particular knowledge and skills from public managers or contract administrators.
Table 2.2: Service Complexity Scenarios and the Demand on Contract Management
Low Complexity Mid Complexity High Complexity Contractor has maximum Request for proposals Public - Private Partnerships discretion to choose service describes services and should be created, requiring delivery means scope of work in more all participants to be detail considered as equals No equipment or personnel Statement of work may Request for proposals restrictions specified specify equipment and provides general goals and restrict personnel results, inviting bidders to specific service delivery means No description of service Contract discretion to Competitive negotiations delivery means in the choose service delivery are expected bidder response means is limited Contract administrator (CA) CA will have sufficient Long - term commitments knowle dge about service understanding of service are expected more delivery means can be delivery means frequently minimal CA activities are minimal CA must check that CA staff need to work as a using sampling or milestones are met and team involved in all aspects management by exception deliverables are of of contract management approach appropriate quality Contract negotiations are Performance measures are CA and contractor will minimal needed to ensure contract jointly choose specific performance service delivery means, expecting that those may be over the life of the partnership No change orders are Conflict resolution skills are Education and training of needed more necessary. CA is a continual process Need for service manage change over life of contract, l eading to change orders. Source: Lawther , 2002:31
2.5 CHAPTER SUMMARY
The prin c ipal purpose of this chapter is to lay a strong conceptual and theoretical foundat ion for the entire study. It does so by reviewing extant theories about the contracting - out debate.
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These theories continue to be important and contain critical concepts that are applicable
throughout the study. The chapter has considered the various elements in the contracting
process. It has done so by presenting the elements as part of a coherent contract management
model as a heuristic device to conceptualise contract management holistically. The model
consists of the following elements: contracting - out policy, strategic contracting and
com munication, the contract itself, provision of public services, citizens as consumers,
regulation and the institutional contex t. Many of these concepts are well known in the
theories discussed in this study. The focus on communication is not something that is
generally valued, although communication may be hinted at implicitly by some of the authors
cited above. The focus on the institutional context was also noticeable. Contract management
is not only a technical process that is concerned with getting the performance measures right,
but a relatively complex affair.
The NPM movement calls for a range of reforms in delivering public services. Contracting -
out as one of the tools of NPM aims to increase the efficiency of the public sector through the
use of ma rket mechanisms by having the private sector deliver public services while the
government retains ownership of the service. However, while there are potential benefits, the
difficulties involved in the contracting out process have been highlighted. The ag ency and
transaction cost theories have a message to convey for contractualisation in the public sector,
for instance, for a transaction to be effective in the eyes of the contracting party, the terms
have to be precise and the product simple. The two mode ls arrive, however, at different
conclusions when it comes to optimal contract duration. The agency theory emphasises the
difficulty of obtaining information hence , effective contracts are those that are repetitive. The
broad lesson that emerge d from these conclusion s is that the agent has room to manoeuvre which is to his/her advantage. The transaction costs include ex ante costs: writing, bargaining
103 and ensuring compliance with an agreement; and ex post costs: poor preparation costs, when transactions dep art from what was agreed and disputed management costs in particular.
Therefore, the organisation involved has to put in place a governance and contract structure which protects transactions against the effect of opportunism. The chapter has discussed the major theories that have remarkably contributed to the development of the theoretical framework of contracting - out. The next chapter presents the research design and methodological perspectives of the study.
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CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGICAL PERSPECTIVES
3.0 INTRODUCTION
The primary goal of this study is to investigate and describe Harare City Council’s
experiences with contracting - out the provision of public services in order to better appreciate
the factors that mak e or break the contracting - out process. In the same vein, to interrogate
how it can be made more effective. Separate instruments to achieve the objectives were
utilised to this end. The methodology was employed to answer the research questions
formulated and pr esented in Chapter One of this study. The development of the research
design of this study made a series of decisions along four dimensions: (i) the purpose of the
research; (ii) the theoretical paradigm informing the research; (iii) the context or situati on
within which the research is carried out; and (iv) the research techniques employed to collect
and analyse data ( Durkheim , 2006:37). The study made the assumption that policy processes are undertaken within institutional and regulatory contexts. As suc h, policy processes are political. Implied here, therefore, is that any serious research on contracting - out should strive to capture the institutional and political contexts.
It should be noted from the beginning that any social science research is influe nced by the researcher’s value assumptions. Gulick and Urwick (1937) admit that the social scientist may be influenced by his or her “individual, personal value - interest” but if the “rese arch is scientifically done; the results may be used by people with different values” (Gulick and
Urwick, 1937:192). These assumptions constitute the researcher’s “frame of reference”
(Burrell and Morgan, 19 7 9:17) or the “lens through which researchers construe the world”
(Kuhn, 1970:13). Value assumptions in this way infl uence one’s choice of research problem,
methodology and framework of analysis.
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Any research must be preceded by a thorough search for relevant theoretical constructs (as demonstrat ed in Chapter Two of this study ). Theory guides the research process by sett ing forth a logically coherent set of interrelated propositions that might account for some phenomenon with which a researcher is interested in. This assertion is stated succinctly by
Rubin (1983: 6 - 7):
the objective of academic research, whether by sociologists, political scientists, or anthropologists, is to try to find answers to theoretical questions within their respective fields. In contrasts, the objective of applied social research is to use dat a so that decisions can be made .
The methods, re search instruments and frameworks that were adopted and discussed in this study were contextualised within these premises. The case study methodology was employed.
Both the qualitative and quantitative data collection instruments were used. The chapter is organised into eight sections: (a) research methodology, (b) design of the study, (c) case study methodology, (d) selection of participants, (e) instrumentation, (f) data collection, (g) analytical framework and data, and (h) chapter summary.
3.1 RESEARC H METHODOLOGY
Both the qualitative and quantitative strategies were employed by the study. This mixed methods design was useful because either the quantitative or qualitative approach by itself was inadequate to best interrogate and understand the contrac ting - out problem. According to
Johnson and Onwuegbuzie (2004:17), mixed methods research is “the class of research where the researcher mixes or combines quantitative and qualitative research techniques, methods, approaches, concepts or language into a sin gle study.” They further indicate that:
Mixed methods research offers great promise for practicing researchers who would like to see methodologists describe and develop techniques that are closer to what researchers actually use in practice (ibid:15).
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Mix ed research methods as the third research paradigm can also help bridge the schism
between quantitative and qualitative research (Onwuegbuzie and Leech, 2004). Johnson and
Onwuegbuzie (2004) further iterate eight distinct steps in mixed methods design: det ermine
the research question, determine whether a mixed design is appropriate, select the mixed
methods or mixed - model design, collect the data, analyse the data, interpret the data,
legitimate the data and draw conclusions, and write the final report.
Th e qualit ative approach to this study is appropriate because the study focuses on people’s experiences with contracting out processes from their perspectives. The study went into the field to collect data through in - depth, open - ended interviews, searching for written
documents and sometimes observation. The data were words that described people’s
knowledge, opinions, perceptions and feelings as well as detailed description of people’s
actions, behaviours, activities and personal interactions (Roberts, 2010) . The study also
focused on HCC’s contracting out processes in order to uncover and understand what lied
behind contracting out phenomenon that was not known.
Qualitative and quantitative approaches in a single study complement each other by providing
re sults with greater breadth and depth (Roberts, 2010:145). This study treated qualitative and
quantitative research methodologies as complementary and enriching each other.
Interpretation exists in every form of human thought and researchers ought to be awa re of
this fact whether conducting positivistic, naturalistic, qualitative or quantitative research. The
study used qualitative data to clarify quantitatively derived findings. Also quantitative data
were used to validate qualitative analysis.
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3.2 B ASIC BELIEFS OF ALTERNATIVE INQUIRY PARADIGMS
The worldview assumptions the researcher brought to the study, procedures of inquiry
(strategies) and specific methods of data collection, analysis and interpretation informed the development of design of the study.
A paradigm is “a set of basic beliefs that deals with ultimates or first principles. It represents a worldview that defines, for its holders, the nature of the “world”, the individual’s place in it, and the range of possible relationships to that world a nd its parts. The beliefs are basic in the sense that they must be accepted simply on faith; there is no way to establish their ultimate truthfulness ( Guba and Lincoln, 1994:106).
Guba and Lincoln (1994) distinguish three main attributes along which parad igms differ: ontology, epistemology and methodology. There are several insightful classifications of paradigms (Burrell and Morgan, 1979; Morgan and Smirchich, 1980), but for the purposes of this study, the most appropriate is the one provided by Guba and Lincoln (1994) . Table 3.1 below summaries these paradigms.
Table 3.1: Basic Beliefs of Alternative Inquiry Paradigms
Item Positivism Post - positivism Critical Constructivism Theory Ontology Naïve reality - reality Critical realism - Historical Relativism - there is real and reality is real, but realism - reality are multiple apprehendable only imperfectly consists of realities that are and crystallised constructed, probabilistically (refined) experiential local, apprehendable: it structures that specific and should be over time were dependent for approximated as sha ped by their form and much as possible, social, content on the but cannot be fully political, individuals and captured . cultural, groups holding economic and the constr uctions. ethnic and gender factors. Epistemol Dualistic (clear Modified dualistic Subjectivist Subjectivity ogy separation between and objectivist, interactive link findings are the knowing critical tradition, and mutual literally created as subjects and findings proba bly influence the investigation examined object of true. between the proceeds the study with no investigator influence in either and the
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direction or investigated objectivity, findings object, are true. findings are value - mediated Methodol Experimental/manip Modified Dialogic/diale Hermeneutic/dial ogy ulative. Propositions experimental/manip ctical, the ectical: social are tested in the ulative. Critica l di alog constructions can form of hypotheses multiplism between the be elicited and and are subject to (hypotheses are not investigator refined only empirical or logical verified, but tested and the through verification, against possible subjects of the interaction confounding falsification) inquiry must between and conditions are discovery is be dialectal to among controlled. Methods reintroduced as an transform investigator and employed are element of inquiry. ignorance and respondents; chiefly quantitative. There is a drive to misapprehensi constructions are include qualitative ons into more interpreted methods and do informed through research in more consciousness. hermeneutic natural settings. techniques, with an aim of creating more informed and more sophisticated new consensus. Inquiry Explanation: Explanation: Critique and Understanding Aim prediction and predict ion and transformation and control control : restitution reconstruction and emancipation Nature of Verified hypotheses Non - falsified Structural/hist Individual Knowled established as fact hypotheses that are orical insights reconstruction ge or laws probable facts or coalescing around laws consensus Goodness Internal validity Internal validity Historical Truthfulness or quality (isomorphism of (isomorphism of situatedness, criteria Criteria findings with findings with erosion of (credibility, reality), external reality), external ignorance and transferability; validity validity mis apprehensi dependability and (generalisability); (generalisability); ons, action conformability reliability (stability reliability (stability stimulus. and authenticity and reliability) and and reliability) and criteria (fairness, objectivity (does not objectivity (does enrichment, d epend on not depend on education, observer). observer). stimulation to action and empowerment. Source: Adapted from Guba and Lincoln , 1994:109 - 117.
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From a constructivist perspective, a single theory cannot possibly cover the asked questions
because there are multiple realities that are constructed in each particular environment. Also,
in constructivist paradigm one can ask broader quest ions than in positivist paradigm. Thus,
variables are not known beforehand and are created during the process of investigation,
through hermeneutic or dialectical interaction between and among investigator and
respondents (Gabrielian, 1999). Through in - dep th interviews and discussions, analysis of
documents and texts, a particular constructed world is interpreted: certain meaning is attached
to particular actions and the relationships between these new categories are examined. The
research in this approach does not only test theories, but also generates new theories, which are usually aimed at understanding and reconstructing of local knowledge, rather than explaining a generalisable behaviour. In fact, some argue that qualitative resea rch in this
respect sh ould be judged in terms of the range of its variations rather than generalisability
(Strauss and Corbin, 1990). While positivism in qualitative research is never dead (Miles and
Huberman , 1984), qualitative research has increasingly come to be seen as more interpretative, multialternative, relativism and constructivism, geared more towards understanding than explaining.
The constructivism and interpretivism worldviews approach to qualitative research , guided this study. These worldviews argue that individu als seek to understand the world in which they live and work. The study relied much on the respondents’ views an d understanding of the contracting out dynamics and processes of Harare City Council or local government in
Zimbabwe in general. Implied here is that the inductive research where meaning is generated from data collected in the field , guided this study.
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Lynn, Heinrich and Hill (2001) urge public management scholars to recognise the hierarchical nature of governance. They assert that phenomena, such as decisions, processes and outcomes at the policy level , are embedded in a multilevel governance arrangement and are endogenous to the broader context of governance (Ibid.; Wilson, 1993). In a similar vein,
Brown et al. ( 2006) have shed light on understanding of contracting - out decisions by pointing out that va lues, institutions and service markets are crucial factors affecting such decisions.
Consideration of such values and institutions is highly compatible with this study framework for analysing Harare City Council’s experience with contracting out. Public m anagers experience politically contentious stakeholders’ preferences and weigh relevant values in terms of externally as well as internally imposed political and legal constraints. These values are often codified into “constitutions, public laws and organi sational arrangements that determine the range of tools and resources that public managers can employ for service delivery” (Brown et al. , 2006:324). The Harare City Council share similar stakeholder preferences, demands from residents and institutional co nstraints. In terms of designing the study, t he case study methodology was employed to generate the data.
3.3 CASE STUDY METHODOLOGY
Case study methodology was used to interro gate and understand contracting - out processes in
Zimbabwe’s local authorities foc using on Harare City Council. This method was selected because it is a means to describe systematically, factually and accurately the characteristics of an existing phenomenon (Corbin and Strauss, 2008).In this study, the phenomenon includes contracting o ut frameworks (constitutional, legal, institutional, regulatory, socio - economic), tendering processes, contract management capacity, accountability relationships, service quality, cost savings and efficiency gains, employment effects, contract management
( feasibility studies, policy formulation, implementation and monitoring).
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A case study strategy was used as it is an established and well understood research approach
in public sector reform (Sawyer, 2005; Ramamurti, 1997; La Porta and Lopez - de - Silanes,
19 97).The study used Harare City Council to interrogate the performance of contracting - out
and to establish why some contracting - out projects were abandoned. The research specifically
examined the context under which contracting - out policy was initiated and implemented within the Harare City Council. According to Schramm (1971:184) :
the essence of a case study, the central tendency among types of case study, is that it tries to illuminate a decision or set of decisions, why they were taken, how they were imp lemented and with what result .
Roberts (2010) defines a case study as a detailed examination of an event that the analyst
believes it exhibits the operation of some identified general theoretical principles. Stoecker
(1991) defines case studies as those r esearch projects, which attempt to explain holistically
the dynamics of a certain historical period of a particular social unit. Unequivocal in these
definitions , is that the case study focuses on the topics of “decisions”, “individuals”,
“organisations”, “processes”, “programmes”, “institutions” and “events” as the chief centre
of attention of case studies. This is very important for this study. What, how, who, and why
contracting out policy decisions were formulated, adopted, implemented or shelved were t he
gist of this study.
Case studies emphasise detailed contextual analysis of a limited number of events or
conditions and their relationships. They provide a systematic way of looking at what is
happening, collecting data, analysing information and repo rting the results. Jensen and
Rodgers (2001) identify taxonomy of case studies comprising five types, namely: snapshot,
longitudinal, pre - post, patchwork and comparative. Yin (1994) makes a further distinction
based on the purpos e of a particular case stud y. Yin (1994) classified them as explanatory,
descriptive and exploratory. Explanatory cases aim at explaining causes underlying
112 phenomena. Descriptive cases aim essentially to document or classify a situation. Exploratory deals with fieldwork and data co llection undertaken prior to definition of the research questions and hypotheses. The study adopted the explanatory - descriptive case study approach.
To achieve what the above writers have postulated, the study was guided by the advice given by Stein (1948 ) :
It is useful for the student… to become immersed in the multifarious aspects of the public administrative process so that an awareness of its richness and variety becomes second nature (Stein , 1948 :109 ).
This immersion was achieved through using multip le sources of evidence, with data converging in a triangulation fashion and result. The evidence was obtained from existing documentary sources such as parliamentary investigations and reports, Auditor General reports, written minutes, full council resolut ions, memoranda and letters were integral part of the working of HCC’s administrative system. This strength is summarised by Yin (2003:8):
The case study’s unique strength is its ability to deal with a full variety of evidence: documents, artefacts, interviews, observations: beyond what might be available in historical study.
Furthermore, it benefits from the prior development of theoretical propositions to guide data collection and analysis as alluded to earlier in Chapter Two of this study. Casley and Lury
(1981) note that a case study provides detailed and in - depth analysis. Triangulation of various data collection techniq ues (semi - structured interviews and questionnaire) , helped this study to achieve detailed and in - depth data. It was also achiev ed through tracing and studying of relevant documents and records from Harare City Council, Ministry of Local Governm ent,
Public Works and National Housing , HCC reports, articles in newspapers, academic articles,
Portfolio Committee on Local Government , Ru ral and Urban Development and other institutions that deal with local governance concerns.
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Case studies are very flexible methods of research because their design tends to “lend itself to
exploration rather than to prescription or prediction” (Taylor et al ., 2011:27). Thus
researchers are free to discover and address issues as they arise in the course of the research.
Case studies focus on information based on particular contexts that can give research results
immediate impact. This emphasis helped to bridg e the gap between abstract research and
concrete practice and allowed comparison to be made between first hand observations and the
results obtained through other methods.
The quest for validity and reliability supports the adoption of case study methodol ogy. The
multifaceted approach of a case study, the involvement of significant number of people and
the substantial time spent by the researcher with the Harare City Council , offered the prospect
of good validity. A case study is most valuable when a resea rcher is trying to understand a
phenomenon within its context. Stake (1995) takes a firm stand in this regard and writes:
The real business of a case study is particularisation and not generalisation. We take a particular case and come to know it well, not primarily as to how it is different from others, but what it is, what it teaches. The first emphasis is on understanding the case itself (Stake, 1995:8).
Merriam (1995) argues that researchers who employ case study methodology should pay
attention to va lidity and reliability issues. One strategy of improving results reliability and
validity is triangulation. Triangulation refers to “a process of cross - checking, whereby data relating to a particular aspect is gathered using more than one method and/or sou rce” (Taylor et al. , 2011:29). Validity is enhanced by the process of cross - checking. Denzin (1984) further elaborates this concept by suggesting triangulation versions: d ata triangulation , i nvestigator triangulation , t heory triangulation and m ethodologica l tria ngulation.
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A seal of case study research is the employment of multiple data sources, a strategy which enhances data credibility (Patton, 1990; Yin, 2003; Tellis, 1997). The raison d'être for using manifold sources of data is the triangulation of evidence. As in all research, construct validity, internal validity, extern al validity and reliability are considered. Yin (1994) suggests using multiple sources of evidence as the way to ensure construct validity. However, external validity will be mor e difficult to achieve in a single - case study. This study tried to achieve external validity through theoretical relationships to enable generalisations (Tellis,
1997). The data from different sources were converged at the analysis stage. This
“convergence adds strength to the findings as the various strands of data are braided together to promote a greater understanding of the case” (Baxter and Jack, 2008: 554). With the concept of triangulation in mind, three lines of enquiry were pursued: analysis of do cumentary material, in - depth interviews with key informants and survey questionnaire.
It must be noted, however, that case studies provide “little basis for scientific generalisation”
(Yin, 2003: 10). “How can you generalise from a single case?” (ibid.). The case study approach has long been stereotyped as the weak sibling among social science methods.
Indeed, this study noted that a case study does not represent a “sample” and in doing a case study the research goal was to expand and generalise theories ( analytic generalisation) and not to enumerate frequencies. Case studies could be both single and multiple. This study adopted the single because only Harare City Council was only chosen. With careful design, a single case study can be of value to practitio ners in the same field of work. This line of reasoning focuses on the concept of relatability, i.e. the extent to which the research is authentic or true to life (Taylor et al. , 2011). It can be argued that if a practitioner who is working in a similar en vironment is able to relate his/her decision making to that described in the public case study research, then relatability has been achieved and that, this is as
115 important as generalisability (ibid.:28). Inspite of this suspected drawback, the findings fr om
Harare City Council would be extrapolated and exported to other local authorities in
Zimbabwe because the policy, institutional, political, legislative, social and regulatory environments would be the same.
Another criticism levelled against a case st udy is that it generates unreadable and indecipherable massive documents (Yin, 2003). This is not always true. There is a clear distinction between case study and ethnography. The earlier is not the latter (George and
Bennett, 2005) or “participant - observa nt” (Robson, 1993). This study dealt with this problem through prior development of theoretical propositions that guided data collection and analysis. This was done through research questions formulation. Lunenburg and Irby
(2008:64) underscore this by arg uing that:
A hypothesis/theory is to methods what a roadmap is to driving. Without it, all roads look the same, you can never tell for sure where you are, you waste a lot of time making wrong turns and getting lost and when you get where you are going, you may not know it.
Implied here is that any research endeavour must explicitly show the relationship between research problem, research objectives and research questions and methodology. This study formulated the research questions (in Chapter One) with th e comprehension that research questions have both substance (for example, what is my study about?) and form (Am I asking a “who”, “what”, “where”, “why” or “how”?). In short, case studies are the preferred strategy when “how” or “why” questions are being p osed, when the researcher has little control over events and when the focus is on contemporary phenomenon with some real - life context.
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3.4 SELECTION OF PARTICIPANTS
The purpose of this section is to describe (a) who participated in the study, (b) how the respondents were selected, and (c) how many participated in the study.
3.4.1 Who Participated in the Study?
The target population for this stu dy was the local government policy community. All
stakeholders in the contracting out of public services in local authorities constituted the target
population.
The study used Harare City Council as the case study. This is a single case study. However,
the contracting out decision and its context w as analysed in greater depth for the case of local
authorities using HCC’s following services: refuse collection and transportation, housing,
water, city parking, clinic (catering, security, cleaning) and roads services. These services
were selected from the five service delivery organs of HCC. The cases were chosen to achieve a balance in terms of quality of learning and expe rience, motives for contracting - out, types of institutional arrangements and the level of success or lack of it achieved. Full resul ts of the case studies are in Chapters Six, Seven and Eight of this study.
According to the City of Harare Strategic Plan (2012 - 2025), Harare City Council departments are pigeon holed into two groups, namely, Service Delivery organs and Planning, Regulato ry and Administrative organs. Service delivery organs are Harare Water Department, Amenities
Department (Waste Management Department), Roads and Public Lighting, Health Services; and Housing and Community Services. Planning, regulatory and administrative o rgans are
Finance (City Treasury), Urban Planning Services, Human Capital (Human R esources),
Corporate Services (Chamber Secretary), Emergency Services and Metropolis; and Town
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Clerk (Audit Manager and ICT). Furthermore, the selection of these cases is ju stified according to Unban Councils Association of Zimbabwe (UCAZ). The UCAZ ranks critical services that promote human development. These are refuse collection and transportation, housing, water, city parking, clinic services and roads services.
3.4.1.1 Waste Management Department
Waste management activity falls under the Amenities department headed by a Director.
Waste management services entail street cleaning, administering of public conveniences throughout the city except those for market places, co llection of domestic, industrial and commercial refuse for the whole city, safe disposal of refuse and management of the dump sites.
3.4.1.2 Water Reticulation
The need for funding in the water and sewer reticulation in Zimbabwe became glaring during th e 2008 - 2009 period when the advent of a cholera epidemic was attributed to the sorry state of the water and sewer reticulation infrastructure under the control of local authorities which saw the public resorting to the use of unclean water sources. This ha s been attributed to a host of problems which include limited capacity to replace and repair water pumps, to source enough chemicals to purify water as well as the inability to replace the dilapidated water supply network. For example, Harare is estimated to be losi ng 40 per cent of treated water through leakages (ZNCC, 2009).
With increased urbanisation, HCC faces water supply challenges mainly from inadequate investment in infrastructure. This is exacerbated by the low capacity of local authorities to collect billed amounts from residents that can be channe l led towards water infrastructure.
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Closing the gap between water supply and demand requires investments in rehabilitation of existing facilities and new water storage infrastructure (GoZ, 2013). The H CC can embrace contracting out the provision of various services such as billing collection, pump maintenance and repair.
The HCC has eighteen (18) district sub - offices. Eight of them fall under the suburbs that were covered by contracting out especially refuse collection and transportation. Hence, these eight district sub - offices were included in the study.
3.4.2 How the Respondents were Selected?
Sampling in qualitative research is “almost always purposive” (Lunenburg and Irby,
2008:176). Within the domain of purposive sampling , are a number of specific approaches useful in qualitative research:
c riterion sampling - selecting respondents who meet some criteria;
p urposive sampling - selecting respondents basing on their knowledge about
phenomenon under stu dy; and
s nowball sampling - this approach is most useful when a study is carried on a settin g in
which possible respondents are scattered or not found in clusters (ibid.).
Purposive sampling was used to identify key informants within the population that met specific criteria (criterion sampling).
All sample units interviewed in this study were from the entire local government policy community. The objective behind selecting a policy community that directly deals with local government matters , was to minimise sample heterogeneity. Snowball sampling was also
119 utilised. Here, the resear ch respondent identified one or more individuals from the target population. After the participant has been interviewed, he/she was used as informants to identify other members of the population, who were themselves used as participants. The criteria for participants selection included:
Organisations/in dividuals whose core business was local government public service
delivery regarding policy formulation, implementation, evaluation, advocacy issues or
possess ion of expert knowledge on local government management. This was to assure
reliability of information;
Organisations/individuals that participated at the time of initiating the contracting out
the provision of public services to private agents by Harare City Council; and
Organisations/individuals willing to participate in the study.
3.4.2.1 Rationale for Selection Criteria
The rationale for selecting the first criterion was the ability of p articipants to accurately recall information regarding the contrcating out reform policy. The second criterion is related to the role of the individual/organisation in initiating or implementing any change process. Because this study focused on public sect or management reforms that change the structure and culture of HCC, having the organisations/individuals who participated at the time of the initiation stage was necessary to this study. The third criterion suggests that each participant’s willingness to p articipate is critical to this study. Since the design of this research involved the administration of a detailed questionnaire, participants needed to be willing to take sufficient time necessary to respond.
3.4.3 How Many Participated in the Study? Rese archers use four major ways of making the decision: (a) heuristics, (b) li terature review,
(c) formulae , and (d) power analysis (Lunenburg and Irby, 2008:178). The study was guided
120 by heuristics approach which states that “for qualitative research use from 1 to 20 participants” (ibid: 179).The formulas was also utilised in determining an appropriate sample size. Krejcie and Morgan (1970) generated a model of appropriate sample size (S) required for given population sizes (N). Their model is based on a formu la originally developed by the
United States Office of Education. The formulas approach states that for smaller populations, say, N=100 or fewer, there is little point in sampling, survey the entire population.
The purposive sample for this study included fifty - two (52) participants. T able 3.2 below gives a disaggregation of the fifty - two (52) participants and the rationale for choosing them.
Table 3. 2: In - depth Interviews Conducted with Key - Informants
Instituti on/individual Number of Participants Rationale Harare City Council 7 (Town Clerk, Mayor, - Policy and by - laws Chamber S ecretary, and Head implementers. of Departments whose services are /were contracted out: Waste Management, Road Construction, Housing and C ommunity Services and City Healt h Department.
Ministry of Local 2: Minister, Permanent - Ministry provides the Government , Public Secretary . legislative and policy Works and National framework within which Housing government units operate. - Administers all the Acts and Statutory Instruments promulgated in the Local Government area Parliament: 4: Parliamentary Portfolio on - Exercises surveillance over Local Government and Urban the entir e local government D evelopment Chairperson , domain. Deputy Chairperson and two - Holds public discussions other members . on service delivery and governance issues. It also conducts investigations and findings are tabled before the National Assembly. It also makes recommendations. Harare City Council: 4: E lected councill ors both - make council resolutions -
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former (2 ) and current (2 ) by - laws HCC committees that sh adow - represent contracted out services residents/ratepayers
Harare Province and 5:(1)Provincial A dministrators, - represent the central Districts (1 )District A dministrator , government at local level (1)Harare M etropolitan - policy implementers Minister of Provincial Affairs
Contacted out Private 10 Enc ore Consolidated (Pvt) - These were the contracted Companies Ltd, Broadway Waste companies to deliver public Recovery (Pvt) Ltd, Cleansing services. and Environmental Services - From the agent’s (Pvt) Ltd , Chemplex perspective, they furnished Corporation, Easihold (Pvt) the researcher with practical Zimbabwe , MNF challenges of contracting Environmental Services (Pvt) with the Harare City Ltd, Davexcorp Marketing Council. (Pvt) Ltd, Bill and Melinda Gates Foundation, CABS and Old Mutual , and Pioneer Transport (Pvt) Ltd. Auditor General’s Office 1: Auditor - General This is the external publ ic auditor of local authorit ies in Zimbabwe.
Residents Associations 5: Urban Councils - Police the activities of the Associations of local authorities pointing Zimbabwe (UCAZ), Combined out any transgressions and Harare Residents Association excesses. (CHRA), Harare Residents - Represent residents in Trust (HRT) , Zimbabwe Local policy and decision making Government Association thereby strengthening local (ZILGA), Transparency governance. International Zimbabwe (TIZ)
R esearch Institutes 3: Southern Africa Policy - Carry out local government Economic Series (SAP ES), researches and the Local Governance Community MLGPWNH commissions Capacity Building and studies with research Development Trust institutes. (LGCCDT) , Municipal - Organise workshops and Development Institute For seminars on local Eastern and Southern Africa government issues. (MDIESA) State Procurement 2: Chairperson and deputy - Supervises tendering Board(SPB) chairperson p rocedures conducted by local authorities entities to ensure compliance with relevant Acts.
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Former Harare City 2: HCC Commission - To get first - hand Council Commissioners Chairperson and M ayor. information and their and Mayors opinions on HCC contracting experiences . Harare Municipality 2: Chairperson and V ice - - HMWU is a key Workers Union chairperson stakeholder that can (HMWU) promote or oppose contracting exercises. Academics 4:Lecturers specialised in local - They have researched and government and general public written a lot about policy policy formulation and formulation and implementation impl ementation. They informed the study about policy form ulation and implementation dynamics in Zimbabwe Members of the Inter - 2: Members - It promoted the Ministerial Committee privatisation and on Commercialisation contracting out programmes and Privatisation in Zimbabwe. (IMCCP) Ministry of 1: Minister - Ensures that when tenders Indigenisation and are awarded, equity and Economic fairness considerations are Empowerment taken into account.
In addition to these participants, the researcher attended the fol lowing conferences and
workshops where nine (9) local government experts were interviewed.
3.5 INSTRUMENTATION
This section describes the “psychometric adequacy” (Lunenburg and Irby, 2008:181) of the
quantitative and qualitative instruments used in the stu dy. Each description includes: name of
the instrument, authors, key references, purpose of the instruments, and responses format, for
example, Likert scales, yes/no, open - ended, and validity and reliability (Heppner and
Heppner, 2004). All of the aforemen tioned key points provide important information about the instruments as well as their reliability and validity.
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3.5.1 Quantitative Instrumentation 3.5.1.1 Survey Questionnaire
To evaluate contract management capacity, rationale for contracting - out and the challenges encountered during contracting - out, the study followed the methodology first used by Brown and Potoski (2003a) , later refined by Yang, Hsieh and Li (2009), which views contracting capacity as a framework consisting of agenda setting (deciding what to contract - out), formulation (deciding how to contract - out), implementation (helping the contracting effort succeed), and evaluation (assessing whether the contracting effort actually succeed). The study asked respondents to choose response s that suit their choices. This approach is directly corre sponding to this type of framework. Likert scale, multiple choices and Yes/no responses were also used in designing the survey questionnaire.
The study started gathering data with a survey to get a broad perspective and then selected cases to study in - depth by conducting open - ended interviews. The study developed a questionnaire by creating a matrix in which research questions were on the left side and the questionnaire items on the right. The table below shows an alignment matrix.
Table 3.3 : Alignment of Research Questions and Variables with Questionnaire Items
Research Question and Variable Questionnaire Item(s)
Research Question 1 Section B: Items 1, 2,3,4,5,6 Variable: Contracting out Functions Research Question 1 Section B:Item 7 Variable : Total Budget Research Question 1 Section C: Item 8 Variable : Contracting out Rationale Research Question 2 Section D:item 9 Variable : Contracting out Bases Research Question 3 Section D: Item 10 Variable : Feasibility Study Research Question 3 Section D: Item 11 Variable: Public Procurement Guidelines Research Question 3 Section D:12, 13, 14 Variable: Criteria for Selection of V alid
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B idders Research Question 4 Section E: Item 15 Variable: Contractors Research Question 5 Section F: Items 16, 17 Variable : Agency S election Research Question 6 Section F: Items 18, 19 Variable: C ontract A rrangements Research Q uestion 7 Section F: Item 20 Variable: Political interference Research Question 8 Section G: Items 21, 22,23 Variable: Contract Monitoring Research Question 9 Section G: Items 24, 25 Variable: Contract Monitoring Costs Research Question 10 Section H: Item 26 Variable: Contracting E xperience Research Question 11 Section H: Item 27, 28 Variable: Supply Market Research Question 12 Section H: Items 29, 30, 31, 32 Variable: Quality Research Question 13 Section H: Item 33 Variable: Feasibility Study Research Question 14 Section H: Item 34 Variable: Accounting System Research question 15 Section I: Items 35, 36 Variable: Future Contracting out Research Question 15 Section I: Item 37 Variable: Challenges Research Question 16 Section J: Items 38 Variable: Legal I nstrument Research Question 17 Section J:Items 39, 40a, 40b Variable: Contracting F actors Research Question 17 Section J: Item 41 Variable: Oversight Research Question 18 Section J: Item 42, 43 Variable: HCC Capacity C onstraints Research Question 19 Section J: Ite m 44 Variable: Political, Institutional, Legal and Regulatory C ontexts
3.5.1.2 Field Testing of Survey Questionnaire
Pre - testing a survey questionnaire is a vital stage in preparing for a self - administered survey in order to identify and correct weaknesses, ambiguity and invalidity of questions. The study conducted a two - stage procedure pre - test because Converse and Presser (1986) recommend a minimum of two pretests. The first procedure was a review of the questionnaire draft by
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Fa culty of Social Studies PhD students for detecting content validity of measurement items .
After significant changes were made to the questionnaire based on the critiques and suggestions, the second pre - test with a new draft was conducted with six participants from
Harare City Council. The instrument was administered to six participants to jud ge its validity.
The participants selected were not involved in the study but were like those in the study. The participants who, after completing the questionnaire, were asked to provide feedback on navigation within the survey, technical difficulties ex perienced, clarity of instructions, typographical or grammatical errors and general observations. The field test results and test participant feedback supported the validity and clarity of the survey and data collection methods.
The respondents were asked to respond to the following questions about their field test experiences:
p lease describe any technical problems that you encountered while attempting to navigate the survey from page to page? ; o verall y , how easy was it for you to navigate the survey from page to page? ; w ere the directions clear and easy to understand? If not, how can they be made easier? ; w ere there any typographical errors that you discovered? ; and p lease share any other comments or suggestion s you may have that would help make this surv ey more successful?
Following the field test, the questionnaire was revised and redrafted by dropping ambiguous and irrelevant questions to reflect the various recommendations and comments from the field test respondents (Appendix D ).
3.5.2 Qualitative I nstrumentation
In - depth key - informant interviews, documentary search and cursory observation were qualitative instruments employed in this study. Each of these instruments is discussed below.
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3.5.2.1 Direct In - depth Interviews
The study used semi - structured, open - ended interviews with the fifty - two (52) participants.
Merriam (1998) defines semi - structured interviews as those that evolve from inquiry composed of a mix ture of both structured and unstructured questions. The unstructured questions were open - ended to allow the participants more freedom and creativity to respond to the questions (Sowell and Casey, 1982).
The semi - structured interview approach provided reasonably standard data across participants but also allowed the researcher the f lexibility to probe answers more deeply and gather more information than is found in a structured interview (Gall et al. , 1996). To relate the study to previous work with contracting - out, questions from contracting - out materials were reviewed to create the interview questions. Six sets of interview questions were developed: one set for the HCC officials, former council commissioners and mayors, one set for contracted companies, one set for residents associations, one set for State Procurement Board, one se t for the Ministry of Local Government, Public Works and National Housing (MLGPWNH) officials, one set for Parliamentary Portfolio on Local Government, Public Works and
National Housing (See Appendix E for interview questions).
All the interview questions were directly correlated to the research questions and based upon the theoretical framework discussed in Chapter Two of this study. Questions were designed to allow participants an opportunity to reflect upon the contracting - out processes.
3.5.2.1.1 Inte rview Pilot Study
The pilot study was conducted within the HCC. Four participants were selected from council departments that were not included in the sample. The participants were selected because
127 their departments once contracted - out certain services suc h as quarry and were willing to cooperate in the study. They were interviewed using the interview guide. The interview guide was designed to examine procedures of contracting - out and the viewpoints of those most involved in the process – HCC officials, Min isters, Members of Parliament, SPB, Contractors and resident associations. This information was crucial in evaluating the theoretical perspectives. All four sessions were tape recorded with permission of the participants.
Appropriate changes were made in the instrument to clarify the questions and to provide an easier format for recording answers for purposes of limiting the data to that which was most pertinent to the study. Some questions were expan ded to include more prompts and feasibility issues.
The modified interview schedule was field tested using two participants from HCC. The field test used face - to - face interview to simulate the actual data collection process. In addition to responding to the interview schedule, these two participants gave feedb ack on the interview schedule by answering the following questions:
Is the interview schedule too long?(if yes, what would you suggest be dropped) ;
Are the directions and wording clear and unambiguous? (If not, please note directi ons
and words that are unc lear);
Is the format conducive to ease of response? ;
Do some of the questions need to be rephrased or dropped? ; and
Are there additional questions that I should ask? (If yes, which question (s) would you
suggest) ?
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As a result of the field test, no substantive changes were made to the interview schedule.
Only minor modifications in wording were needed to make the questions flow more smoothly
during the interviews.
3.5.2.2 Documentary Search
Another qualitative research instrument used by the study was the analysis of records or
documents. The objective of collecting secondary data was to develop variables to capture
the dynamics of contracting - out such as institutional factors, political, competition,
regulation, accountability and socio - economic f actors. Data were gathered through a
comprehensive review of archival documents, policy documents on legislation, speeches and
reports, government gazettes, HCC resolutions, media releases, analysts’ reports and previous
research studies on contracting - out . Randolph (1981) defines a document as “something
written, inscribed, which furnishes evidence or information upon any subject, as a
manuscript, title - deed, coin…” This definition identifies the important characteristic that a
document’s content is inform ation and evidence. Wilkinson and Bhandarkar (1977) specify
two categories of documents, namely, primary and secondary, though the distinction is
blurred. Primary documents are “compiled by writers either at the time of occurrence of the
event or afterwar ds and provide first - hand information” (Taylor et al. , 2011:115). Examples
of primary documents are letters, personal diaries, autobiographies, statistical data, budget
speeches and reports. The secondary documents are “derived from primary, contemporary or
retrospective sources” (Taylor et al. , 2011:115), for example, historical studies based on actual documents, census data, and survey reports and statistical digest.
The study sought for contracting - out policy, that is, the official policy, found in do cuments
and legislation and policy statements (council resolutions) that local authorities follow to
129 contract - out the provision of public services to external providers. The following documents were looked for: academic literature, reports and professional publications, HCC records
(copies of the contracts, the minutes about the winning bids, any amendments to contracts, protocols, correspondence, inspection checklists and performance or progress reports), applicable memoranda, circulars from the parent min istry, official statistical records, historical records and newsp aper articles. Academic journal articles were sought first because these documents comprise d primary sources that contain ed firsthand accounts of research.
Furthermore, academic journal artic les are subject ed to peer review processes. The following peer review process taken from the University of Zimbabwe Publications is an example:
Each paper submitted is reviewed by the editor for general suitability for this publication. If it is judged sui table two reviewers are selected and a double blind review process takes place. Based on the recommendations of the reviewer, the editor then decides whether the particular article should be accepted as it is, revised or rejected.
The study searched for b oth findings and research methods from academic journals. For the discussion on different concepts, models and theories at great length, academic books were consulted. Browsing online catalogues and abstracts were searched.
From the documentary material, the study derived a detailed understanding of the background to each contracted - out service, such as, refuse collection and transportation, housing, airport road construction , city parking, water treatment chemicals and clinic services. The analysis of doc uments showed why the contracting - out had been considered necessary and how the contract specifications had been approached. It was valuable to be able to analyse the progress of the contracting - out over their entire time - scale without being dependent upon the memories of those involved. Sources of documentary information were: Head s of
Departments, project managers, memoranda, minutes of meetings, documents giving departmental parameters, HCC resolutions, audit reports, government publications, artifacts,
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newspaper clippings, reports by contracted companies and Parliamentary Portfolio reports
and investigations.
3.5.2.3 Observation
The study initially had no intentions of using this instrument. Due to the background of the
researcher (demonstrated in Chap ter One under limitations of the study) and other
developments that happened during the data collection, it was inevitable to incorporate this
instrument. However, there was no systematic use of the instrument. When the news broke
out that CABS/Old Mutual houses constructed in Budiriro high density suburb were
developing cracks, the researcher went there for a week, interacted with the beneficiaries and
interviewing them.
3.6 DATA COLLECTION PROCEDURES
The study employed a variety of instruments in order to gather as much representative and
detailed information as possible within the theory and on the practice of contracting - out local
government services around the world, both developed and developing countries.
Data collection began in September 2013 and was completed by July 2014. On September 9,
2013, q uestionnaire surveys (Appendix D ) were delivered to fifty respondents from Harare
City Council. A cover letter was included describing the pur pose of the research (Appendix
A ). Respondents were assured tha t neither their personal identity nor the identity of their
positions would be released in any part of the thesis . The respondents who had not responded
within two week s received a follow - up letter/e - mail call from the researcher. By 20 October
2013, there were a total of thirty - two completed surveys, giving 64 per cent response rate.
However, three questionnaires were not properly completed, were unreadable and were discarded leaving only 29 and a response rate of 58 per cent. A major disadvantage of
131 ques tionnaire studies is a low response rate. “Response rates for p ersonal interviews are about
95 per cent , whereas survey return rates are usually between 20 per cent and 40 per cent ”
(Roberts, 2010:156).The study used two strategies to improve the response rate. Firstly, an introductory letter was sent to the respondents on the legitimacy and value of the study, its benefit to him or her and guarantees of confidentiality and provisio n of a copy of the results upon successful completion. Secondly, two follow - ups were used.
This study employed a qualitative and quantitative methodology of data collection and analysis. This is concordant with Yin’s (2003) recommendation to use multiple sources of evidence that can connect the questions asked to the data collected and conclusions drawn.
The discussion of these two methodologies follows.
3.6.1 Qualitative Data Collection Methods 3.6.1.1 Documentary Search
By revealing how collateral researchers handled related issues under their investigation, literature search sharpened and broadened the researcher’s appreciation of the problems central to this study. It also helped to solidify the researcher’s methodological framework by revealing t echniques used elsewhere to deal with related problematic situations.
The literature search started with a review of the theoretical underpinnings of current debates on contracting - out reforms. Analysis of the various theoretical strands within this frame work provided a rich theoretical base for this study. This in turn provided a broader global context for discussing and analysisn g issues related to contracting - out reforms. Its major advantage was that it alerted the researcher to the pitfalls of adopting a single theoretical framework for this study. The data culminated in Chapter Two of this study.
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The literature search also entailed review of cu rrent literature on contracting - out experiences across the world. This literature search helped the researcher to appreciate the practical challenges and problems associated with contracting out experiences in other jurisdictions. It also helped the researcher to relate theoretical claims to realities on the ground. This, therefore, expose d their adequacies or lac k of them in specific contexts. For example, review of implementing scenarios in a number of Southern African countries , revealed that contracting - out reforms are inherently entrenched in political and institutional obstacles. The data regarding global exp eriences formed Chapter Four of this study.
The starting point of the study involved library search at the following levels:
Policy level: an examination of the pieces of legislation in place, for example, constitution, statutory or regulatory framework, ministerial policy statements and contracting - out policy documents, Hansard (official verbatim record of debates in the Zimbabwean Parliament),
Harare City Council resolutions, Urban Councils Act, parliamentary debates, Competition
Act and State Procureme nt Act, and/or tender procedures or guidelines.
Implementation level: literature search/internet exposed the researcher to the issues central to this study such as survey reports, that is, Ministry of Local Government, Rural and Urban
Development reports , Harare City Council financial statements before and after contracting - out, HCC letters, memoranda, agendas and study reports, World Bank (WB) reports, seminar papers and essays, Urban Councils Association of Zimbabwe (UCAZ) reports, Combined
Harare Res idents Association (CHRA) reports, Parliamentary Portfolio Committee on Local
Government reports, Harare City Council procurement reports/minutes, reports and publications by professional bodies and government agencies. Views/perceptions of academics and r esearchers were implored from newspaper articles, editorial comments,
133 periodicals, media reports, minutes of meetings within HCC, files of correspondence in all departments, records with data concerning residents, employees, records of financial nature, bo oks, unpublished seminar material and use of relevant websites.
Through this phase of data collection, emerging themes were identified and additional ideas and attitudes were highlighted so that they could be incorporated into Phase II, that is, semi - s tructured interviews.
3.6.1.2 Semi - structured Interviews
The study used Zimbabwe as its case study. The research specifically examined the contexts under which contracting - out processes were implemented in Zimbabwe. The empirical data gathering commenced with an exploration of the Zimbabwean policy environment.
The field research particularly examined the prevailing socio - economic challenges, policy instruments in place and the institutiona l, legal and regulatory frame works governing the contracting - out processes. This was designed to establish a data base for assessing state commitment in creating the requisite enabling policy contexts. It al so helped to assess contracting - out feasibility i n local authorities, within the Zimbabwean polity.
Data relating to the issues raised above were collected and sifted from interview responses from Ministers, Deputy Ministers, Permanent Secretaries, Town C lerk, and administrative officers principally dra wn from HCC, contracted companies, residents associations, implementing units, Ministry of Indigenisation and Economic Empowerment, State
Procurement Board, Parliament of Zimbabwe, Auditor General and academics.
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These key - informants, comprising primary and subsidiary policy makers, provided a rich
source for information relating to policy formulation and implementation procedures. It also
provided up - to - date hands - on experience on the practical probl ems associated with
contracting - out. However, data coll ected from these key - informants had to be viewed with
caution as responses generally reflect ed the official position whic h was not a true reflection
of the scenarios on the ground.
Semi - structured in - depth interviews were conducted with key informants as tabulated in
Table 3.2 ( on page 121 ) above. The views and perceptions of key - informants about the experiences and processes of contracting out were collected through the in - depth interviews.
The study used an interview schedule with a set of pre - determined questions in a set sequence. An interview schedule is a “formal list of questions used in interviews to aid in the systematic collection of data through questions” (Taylor et al. , 2011:76). The content,
wording and sequence of an interview schedule are fi xed in advance and serve as a guide for
gathering information pertinent to the research.
3.6.2 Quantitative Data Collection Methods 3.6.2.1 Survey Q uestionnaire
The survey questionnaire included sections that asked about service production arrangements , contract management capacity, contracting out functions, procedures for contr acting - out, who do you contract - out to, how contracted companies managed, benefits of contrcating - out, policy environment (political, institutional, legal and regulatory), expe ctation s and challenges of contracting - out. The detail in the survey , made it possible to check key information for consistency and completeness. The first phase of data collection included the administration
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of a questionnaire of 45 questions (comprising both exploratory and closed questions see
appendix D ) to a survey sample of fifty (50 )participants .
The study used a questionnaire to obtain a holistic picture of the nature, experience and
performance of contracting - out process in local authorities. The open - ended questions
solicited detailed information on policy issues of contracting - out in Zimbabwe. The closed -
ended questions were used to evaluate the views/opinions of participants on specific key
issues such as, contractual frameworks, political, inst itutional, regulatory, competitive
bidding and other factors that affect the implementation of contracting - out policy. These contractual framework questions were rated on Likert scale of low level (1 - 5) and high level
(6 - 10).
Extensive follow - up efforts ( by email and letters ) were used to increase the response rate and the completeness of the data from respondents. Respondents were given two weeks to return the inventory and only 17 out of 50 were returned by that deadline giving a thirty - four (34) per cen t return rate. A new deadline of two more weeks was sent out reminding respondents to return the inventory. The second round resulted in a return rate of sixty - four (64) per cent with a total of thirty - two (32) surveys returned. Three, however, were disca rded because they were not properly completed. Only a quota of the questions was completed. Thus, only 29 questionnaires were valid. Hence, the final response rate was 58 per cent.
3.7 DATA AND ANALYTICAL FRAMEWORK
This section presents the ways used fo r data presentation, analysis and interpretation. The study utilised a qualitative and a quantitative methodolog ies of data analysis. Data analysis
136 consists of “examining, categorising, tabulating, or otherwise recombining the evidence to address the initi al propositions of a study” (Yin, 1994: 89). This study was guided by the objectives formulat ed in Chapter One. The research findings on the case study were both quantitatively and qualitatively analysed. This entailed use of tables, graphs, historical and content analysis. Where historical analysis was used, the researcher made use of pre and post reform scenarios.
3.7.1 Qualitative Data Analysis
The qualitative analysis of data comprised analysis for similarities and differences, coding and categorisi ng and constant comparison. The study used constant comparison method defined by Patton (1990) as “grouping answers…to common questions and analyse d different perspectives on central issues” (1990:376). This approach was used for document analysis, a techn ique in qualitative research, for comparing significance, meaning, and relevance within a particular context and phenomenon. Using the constant comparative method, interviews were compared to each other as they were collected to determine similarities and differences.
Categories were formed, coded and triangulated for both the open and closed ended response data. Themes were determined for each research question and those themes were compared to each other for further analysis. Additionally, themes from the data were compared to existing literature on contracting - out theories, theoretical framework (Chapter Two) and global experiences (Chapter Four) of this study. The constant comparative method is a research design for multi - data sources similar to analytic induction in that the formal analysis begins early in the study and is nearly completed by the end of data collection (Bogdan and Biklen,
1998).
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Where content analysis was used, the researcher utilised conceptual models built from the review of literatu re from various countries. One such conceptual model/typology is the model developed by Hirsch (1995a) for contracting - out reform processes. The model outlines the requisite conditions which should be in place for reforms to succeed. These are political, institutional, legal, regulatory, accountability, production, efficiency and cost, and fiscal pressure. Although Hirsch (1995a) uses this model to analyse the decision to contract - out solid waste disposal, the model is typical of models developed to explai n the contracting - out decision for different types of services. Consequently, the model is potentially generalisable to other services and to other contexts.
In addition, this information can inform policy makers about which factors to target in crafting programmes to promote further contracting - out. This model is very useful because it acknowledges the political dimension of reforms. This model was used in conjunction with
Wilson’s (1993) internationally rated model which prescribes criteria for assessi ng reform progress. According to Wilson’s (1993) model, successful reforms are characterised by the existence of enabling institutional, legal and regulatory frameworks, programme transparency, local participation and high profile commitment on the part of the government.
When analysing secondary data, the study was guided by Harol d Lasswell’s (1965) basic question : “who says what, to whom, how and with what effect?” (Lasswell, 1965:12). This was important for thematic formulation. Triangulation was used in the analysis of qualitative data. It was used to test one source of information against other sources. If two sources give the same messages then, to some extent they cross - valid ate each other. If there was a disc repancy, its investigation help ed in exp laining the p henomenon of interest. This improve d the “quality of data and in consequence the accuracy of findings” (Rob son, 1993:383).
Themes were used to analyse quali tative data.
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In short, to wade through volumes of qualitative data, the eight - step strategy formulated by
Creswell (2009), Lunenburg and Irby (2008) and Tesch (1990) for systematic coding
processes to analysis textual data guided the study. The study distilled the eight steps into five
in order to analyse interview transcripts as outline d below.
Step 1: Initial Reading of Transcripts
After all 47 tape - recorded interviews were transcribed; the researcher reviewed all the data twice before developing a preliminary list of categories, themes and patterns. Several prominent themes emerged fr om the initial reading. Each theme was given an initial coding.
Step 2: Organisation and Coding of Responses
Next, the responses were sorted and grouped by research question. The researcher read through all the responses for each research question, highli ghting pertinent information and developed a master coding list of responses categories. Within each research question, response categories were counted by frequency.
Step 3: Review of Total Transcripts and Final Coding
Using the master coding list develo ped in step 2, the researcher coded the full transcript of each participant, noting when second or third references were made in a response category.
The coding list was then finalised.
Step 4: Completion of Data Analysis and Report of Findings
The analysis of each response to research questions and analysis of each interview transcript were conducted. This resulted in themes, patterns and categories for the research questions.
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Step 5: Review of Total Transcript to Ascertain Validity of Findings
The researcher reviewed all the transcripts a final time that the findings and the main themes
and patterns were consistent with the data. A comparison of the literature was made to
determine which findings were supported or not supported by the literature.
3.7.2 Quantitative Data Analysis
Where necessary, these qualitative analytical frameworks were supplemented by statistical
data outputs from Statistical Package for Social Scientists (SPSS). Responses were input into
Statistical Package for Social Scient ists (SPSS) version 9.0 for each of the thirty - two (32) respondents. Data were analysed by using the SPSS 9.0 programme to run statistical tests.
The frequency and percentage of responses were displayed using descriptive statistics and tables. For example, responses from the research surveys were tabulated in order to assess the frequency distribution of scores on specific key issues. Cross - tabulations were used to show relat ionships between two variables. For example, responses from the research survey we re tabulated in order to assess the frequency distribution of scores/responses on specific key issues. These scores (ratings) were then interpreted within the context of findings from semi - structured interviews with key - informants, from periodicals, press articles and seminar papers. This helped to provide meaningful context to these scores.
3.7.3 Validation of Findings
3.7.3.1 Qualitative
Both internal and external validity as well as reliability of data are critical for any study.
Validity implies l ogic and well - grounded principles of evidence. At the beginning of
Campbell and Stanley’s (1963:5 ) cited in Gabrielian (1999) , discussion of validity , it is clear
140 that “internal validity is the sine qua non . ” In contras ts to internal validity, external validity asks the question of generalisability or to what extent the findings of a study can be applied to different groups, settings, subjects and under what conditions can this study be generalised.
Triangulation (Lincol n and Guba, 1985) , is a process used in qualitative studies to address questions of validity. The researcher must consciously utilise designs, which seek counter patterns as well as convergence if data are to be credible (Lather, 1991). Denzin (1978) ident ifies three basic types of triangulation: data triangulation, investigation triangulation and theory triangulation.
In guaranteeing internal validity, semi - structured interviews, document and observation data were triangulated. In addition to the responses from the interviews, the case data from archival records su ch as council resolutions, memoranda , strategic plans, newsletters, minutes, by - laws, reports, annual financial and budget statements, audit reports and other such documents were reviewed . These records were reviewed to validate or extend the statements made by various participants. This study employed data triangulation by interviewing Harare City Council officials, contracted companies officials, State Procurement
Board (SPB), residents associations, Ministry of Local Government, Public Works and
National Housing (MLGPWNH), Auditor - General, Office of the President and Cabinet
(OPC), academics, Parliament of Zimbabwe (Portfolio Committee on Local Government),
Harare Municipal Workers Union (HMWU), local government organisations: Zimbabwe
Local Government Association (ZLGA), Unban Councils Association of Zimbabwe (UCAZ) and opinion shapers to obtain their perspectives on contracting out the provision of public services in local authorities i n general and Harare City Council in particular. Generalisability is promoted when replication is done with other participants and matched as closely as possible with those who share same problems (Gay and Airasian, 2000).
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Memb er checking and peer examinin g were used to ensure internal validity. For member checking, the participants checked the data analysis. The study ensured that there was an ongoing dialogue with participants regarding interpretations of the participants’ reality and meanings so that da ta value was true. The study used second year Master of Public
Administration (MPA) students as peer examiners.
To further validate the findings, drafts of each case (refuse collection and transportation, housing, water treatment chemical, Airport road, c ity parking) report were submitted to the head of departments or coordinators. They each reviewed the presentation of data for the contracted service. There was overwhelming concurrence with the researcher’s findings.
Based on the comments from departmenta l heads or coordinators, minor corrections were made regarding the contracting - out processes, and the responsibilities of the HCC and contractors. There were also clarification of a factor that impeded refuse collection and transportation contracting - out a nd an addition to the factors impeding contracting out of water treatment chemicals.
Theory triangulation is the use of multiple perspectives and theories to interpret a single set of data. To this end, the transaction cost theory, principal - agent theory, New Public
Management (NPM), market c ontestability, public choice and NIE did exactly that. “Tying emerging theory to existing literature , enhances the internal validity, generalisability and theory level of the theory building….” (Eisenhardt, 1989:545).
To ensure reliability, the study provided a detailed account of the focus of the study, the participant’s position and basis for selection. Furthermore, multiple methods of data collection and analysis were used to strengthen reliability. Lastly, data co llection and
142 analysis strategies were reported in detail in order to provide a clear and accurate picture of the methods used in this study.
3.8 CHAPTER SUMMARY
This chapter has managed to restate the objectives of the research and present the research qu estions. The participants were chosen through purposive sampling of HCC officials, contracted services, residents associations, SPB, Parliament of Zimbabwe, Ministry of Local
Government, Public Works and National Housing, former mayors, and academics. The selection of the participant sample from the target population was discussed. In addition, the validity and reliability of the instruments were presented. The data collection procedures and response rates were also discussed. Finally, the methods of data a nalysis for each of the research questions were presented. Results of the data analysis are presented in chapters:
Four, Five, Six, Seven and Eight.
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CHAPTER FOUR
CONTRACTING - OUT REFORM: THE LESSONS OF EXPERIENCE
Definition of a fool, doing the same thing over and over but still expecting different results, is obviously a cliché but has never lost relevance
4.0 INTRODUCTION
One of the research objectives of this study was to review related literature about both the theoretical and the global e mpirical experiences of the contracting - out reform as stated in
Chapter One. The theoretical dimension of the foregoing objective was dealt with in Chapter
Two of this study. This chapter is designed to deal with the empirical dimension of contracting - out . The cases were not selected as typical cases, representative of the average contracting experience. Rather, they were selected for the richness of the lessons they provide to theory, contract management practitioners, governmental policy makers, academic s and researchers. At the practical level, the cases provide evidence of both the complexity of contracting - out and its growth in the public sector the world over. This study is of the view that there is need to get beyond these discussions of the value o f contracting and move on to a more robust discussion of effective contract management.
The following questions guided the preparation of this chapter. What has been happening across the globe? How has contracting - out been used? What are the precondition s? The chapter is organised into five sections. The first section looks at the methodological problems associate d with the study of contracting - out. The second presents empirical findings in general. The third section discusses the specific country empiric al findings from the
European Union, United Kingdom, United States of America, India and Africa. The fourth section presents the lessons of experience gleaned from reviewed case studies. The last section gives the concluding remarks.
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4.1 METHODOLOGICAL PR OBLEMS
Before presenting the findings of key empirical analyses of the impact of contracting - out, the methodological difficulties in the assessments are first explained. The literature reveals that attempts to assess the impact of contracting - out and draw more rigorous and general quantitative conclusions are beset with a number of methodological problems (Parker and
Kirkpatrick, 2005; Fine, 2005).These problems include:
Data availability and measurement. This is the first problem facin g any research into
c ontracting - out. The poor accounting data facing local authorities prior to contracting
out make evaluating consequences on the private provision of public services difficult
(Fine , 20 05).
The variables to measure when assessing performance may not be obvious.
Contracting - out may be found to have improved performance, or not, depending upon
the objective of contracting out and the performance measure s used. For example,
measuring changes of cost reductions tend s to flatter contracting out if under state
production non - profit goals were deliberately pursued, for example, higher
employment or lower prices (Parker and Kirkpatrick , 2005). Thus, where empirical
research compares profit - based performance indicators, which is often the case, the
public sector i s judged by the criteria of the private sector.
Determining causality is an important issue in empirical work. But where the
relationship between performance and policy is unclear, it is difficult to assess the
impact of contracting out programmes. Perfor mance may change because of other
economic events (policy, institutional and structural) occurring at the same time with
contracting out. Identifying the precise separate effects of contracting out then
becomes problematic in the absence of necessary indep endent data and flexibility
(Parker and Kirkpatrick , 2005). In particular, most privatisation (contracting out
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included) programmes in the developing world have been implemented in the context
of wider economic reform programmes entailing deregulation, lib eralisation and other
macroeconomic policies. It can be very difficult to separate the effect of contracting
out from these other policies that are often implemented simultaneously.
Notwithstanding the above problems and difficulties, a plethora of empiric al studies of th e impact of contracting - out have appeared in the past three decades. The extent of their reliability is, however, another issue. And not only is the literature heavily on description, but
Fine (2005) considers it more or less arbitrary stat istical exercises.
4.2 EMPIRICAL FINDINGS
The major findings of the survey were outlined along with a few other main results. The studies have generally taken the form of firm - level or case studies of a small sample of firms, sectoral studies and country - s pecific or multi - country studies. Most of the cases were drawn from developed (World Bank definition) countries and focussed on municipal services. The studies were partial, in that they concentrated mostly on costs. Most studies (Savas, 2000;
Brown et al. , 2015; Domberger, 1998; Greve, 2008) found that private production was cheaper than public, but they tended to conclude, as one study put it, that “it is not so much the difference in….ownership but the lack of competition which leads to the often observe d less efficient production in public firms (Awortwi, 2013).
Around 1960s/1970s, academic studies such as those by Hirsch (1965b) and Collins and
Downes (1977) concentrated on the mathematical properties of cost functions associated with contracted out se rvices.
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Savas (1977) examines the effect of competition on the costs of providing a range of municipal services in US cities. Savas, an early advocate of ‘privatisation’, discovered that competition tended to reduce costs by between 15 and 29 per cent, wh ile Dowd (2011) finds that cost reductions were as high as 41 per cent, in some cases.
The flow of empirical studies grew in the 1980s, fuelling the controversy and strengthening the resolve of policy - makers interest on bringing market forces to bear upon the supply of public services. There are problems, however, in interpretation of the evidence. The sources of these problems are estimating changes in costs, measuring changes in quality and distinguishing the effect of competition from that of ownership (Domberger and Hall,
1997).The discussion of these problems follow.
4.2.1 Cost changes
Estimating changes in costs as a result of contracting out is complicated by the fact that one may not be comparing like with like. Contracting out brings with it changes in service specification requirements. Experience has showed that many government agencies and local authorities did not have formal specifications of service requirements prior to their first contracting initiative (ibid.).For meaningful cost comp arisons, other fact or s have to be held constant, which they seldom are. So comparing the price of a new private sector service contract with the historic costs of public provision may be misleading.
In the United Kingdom, the first study to analyse the im pact of competitive tendering on refuse collection costs was made possible by comparative data from Chartered Institute of
Public Finance and Accountancy. The results showed that those local authorities that had put the service out to tender and awarded th e contract to a private sector had achieved savings of
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22 per cent on average, allowing for all other factors influencing costs. These findings have been corroborated by subsequent research by Szymanski and Wilkins (1993), who found that savings were maint ained at around the 20 per cent mark even after the introduction of compulsory competitive tendering in local government. However, the results of a questionnaire survey of 40 English local authorities conducted by Walsh (1991) found that respondents estima ted the savings to be much lower - around 6 per cent.
The international evidence is broadly in agreement with the British findings. In 1996, the
Australian Industry Commission , an economic advisory body, conducted a major study on the effects of competitive tendering and contracting by public sector agencies. The study noted that the distribution of reported savings across the studies was rather wide. However, what is striking to note about these results is that the most frequently reported magnitudes of co sts savings lie in the ranges of 10 - 20 and 20 - 30 per cent. This is entirely consistent with the conclusions based on UK data.
Contrary to the commonly held view that contracting out results in cost savings, the evidence in support of this is mixed. Hirsch (1995b) reviews literature on contracting out urban services in the United States and notes that whereas research exists in support of the cost savings claim, the researches in support of the efficiency gain claim less robust. Lavery
(1999) finds support for cost savings claim, arguing that cost savings in private firms are generally due to the use of fewer employees. Boyne (1998) finds deficiencies in the methodology of many empirical studies that find support for efficiency gains through contracting out.
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However, when research does adequately support the efficiency gain of contracting out, it is
tied to the degree of competition in the tendering process - more competition leads to
increased efficiency.
4.2.2 Services Q uality
Before and after comparison s of quality can rarely be made because of the lack of data on
service quality prior to contracts being let. The Australian Industry Commission’s study
reviewed over a dozen international studies and took evidence from contractors, unions and
other interes ted parties. On the basis of that information it concludes that: “the improvements
in quality reported after (competitive tendering and contracting out) appear to arise because
of a much clearer focus on what is required in the service, improved performanc e, monitoring
and the ability to choose among alternative providers” (Industry Commission, 1996:124).
This conclusion echoes with assessment of Walsh (1991) that if quality deteriorates following
contracting out, it could be a problem of contract design o r implementation and therefore
preventable.
4.2.3 Competition or O wnership
Savas (1987) suggests that the public sector cannot be expected to deliver services as
efficiently as the market. The principal reasons are that public sector organisations are no t client - oriented and have broader and often ill - defined public services objectives, for they lack incentives to perform, as they are free from bankruptcy constraints, go on performing poorly without fear of the ultimate sanction of going out of business. Kay and Thompson (1986), however, suggest that these are the ills borne by market structures: the public sector service
149 providers have a monopoly. The private sector monopolies would perform no better: the spur of competition is what enhances performance.
The evidence provides unqualified support for the view that competition is the key. In their study of price and quality, Domberger et al. (1995:69) conclude that “the effect of ownership
(private versus public) on both price and quality was neglible relat ive to that of competition.”
The table 4.1 bel ow illustrates some contracting - out studies undertaken by various researchers.
Table 4.1: Summary of Empirical Findings on Contracting out Public Service Delivery Author Main Contribution Comments
Savas (1987) Privatisation: Savas’ original analysis of Savas still publishes on The Key to Better the theme of privatisation contracting - out and Government broadly understood . privatisation. Savas’ knowledge of contracting out is deep, but his work is often biased in a pro - privatisation direction. Kettl (1993) Sharing Power First study that took Kettl’s work has since contract management inspired work on contract capacity seriously and management capacity and identified the ‘smart buyer strategic contracti ng problem . ’ management . Milward (1996) Identification of ‘the The hollow state has Symposium on the hollow hollowing out of the state’ become a metaphor for state as one of the consequences wha t was going to happen of contracting. Later with the public sector is confirmed in empirical public service delivery was studies in Arizona, USA . contracted out too much. Recent study has focussed on governing in the hollow state. Critics assert that the state is not hollow and the contracting only goes on in margins of the public sector. Domberger (1998) The Domberger did the original Domberger’s work was Contracting Organisation empirical study of ground - breaking because of contracting in the 1980s that his commitment to established the controversial assessing both the public 20 per cent rule. Domberger sector and private sector
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composes contracts in the practice, but the work has public sector with not been followed up in the outsourcing in the private literature. sector. Hodge (2000) Privatisation Meta - analysis on the Hodge’s work managed to effectiveness of contracting break new ground in out based on studies of all providing empirical available statistically based assessment for what was results published in English . often an ideological discussion on the pros and con s of private sector involvement in public service delivery. Lane (2000)New Public The first full treatment, if Lane’s work has been Management somewhat controversial, of criticised for being too NPM as a theory mostly of informed by the principal - contracting - out. Lane gives agent theory, but his work full treatment to the does contain criticism of challenges faced in public this principal - agent theory man agement by the contract as well and is not a agenda . complete endorsement of the theory. Fortin and Va n Hassel A work that firmly placed Their work has tried to (2000) Contracting the contracting in the emphasis what effects NPM framework of the NPM and contracting ha ve on the also considered the public overall function of the law implication of the public sector and to what contract. extent public and private law collide. Romzek and Johnston Romzek and Johnston have Their model forms the basis (2005 ) Effective contract tried to make a preliminary for further revisions and Implementation and model of effective contract tests, but the elements for a management management more robust theory of implementation and contracting are there. accountability based on empirical studies in Kansas, USA. Brown and Potoski (2003) The research tries to show Builds o n earlier ideas by Contract Management that the contract Kettl, seeks to take contract Capacity management capacity is management seriously as a needed on a variety of subject of its own and not variables. Aims towards an just as a subset of the NPM empirically based theory of agenda. government contracting. Jang and Feiock (2003) Exam ines the fiscal Institutional settings set Fiscal Implications of implications of contracting rules that define the context Contracting out Local out decisions and the sector in which policy decisions Services: A Heckman choices for contracting. are made and implemented. Selection Model Approach Although contracting the delivery of municipal
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se rvices has been attractive to local government because it often promises substantial cost savings, the past on local governance choice did not always hold that contracting out choices had positive impact on reducing municipal expenditure. Nellis (2003) Pr ivatisation Observes that there is strong The institutions include in Africa: What has association between contra ct enforcement and Happened? What is to be institutional density and commercial dispute Done? ca pacity and positive settlement through lawful, contracting - out result, in peaceful means, a degree of efficiency, quality and regulatory capacity and a equity terms. public administration that meets modicum standards of predictability, competence and probity and thus lowers transactions costs. Germa, Fageda and Warner A meta - regression analysis Empirically tested if there is (2010): Is Private of solid waste and water a systematic support for the Production of Public services. claim that private provision Services Cheaper than of wat er distribution and Public Production? solid waste collection services achieves lower overall costs than public provision. Source: Compiled from Savas (1987 ), Kettl (1993) , Milward (1996) , Domberger (1998) , Hodge (2000) , Lane (2000) ,Fortin and Hassel (2000) ,Romzek and Johnston (2005),Brown and Potoski (2003) ,Jang and Feiock (2003) ,Nellis (2003), Germa et al. (2010)
Comprehensive analyses of the available global findings have suggested a more complex and rich story. Hodge’s (2000:233) analysis suggests an average savin g of around six per cent for contracting public sector services overally - a figure markedly lower than twenty (20) per cent often quot ed by proponents of contracting - out. However, Hodge (2000) finds evidence for savings betw een 19 per cent and 30 per cent in the specific areas of garbage collection, cleaning and maintenance services, thus rejecting the notion that large cost savings can be made through contracting reform. For many other services, particularly those more difficult to define and measure, lit tle or no savings were found. And in line with the efficiency ideal,
152 the promise of “20 per cent savings” has become mythological in the public sector reforms hymn book.
However, as the old adage goes “cheaper is not always better.” On the matter of serv ice quality, the sparse empirical global evidence indicated that on average, service quality was unaffected by contracting - out (Hodge, 2000:156). Seidenstat (1996) concludes that services provided by the private sector were, at worst, the same quality of government services but often better than government provided services. Taking these two studies together, one can conclude that contracting - out either saves taxpayer money without sacrificing quality or saves money and actually improves quality. However, quality was sometimes better, sometimes not. The implication of this was that the claims of both sides of the contracting - out debate were extreme. Service quality was not, as a rule, generally improved, as claimed by one side, or generally reduced, as cla imed by the other.
Another critical finding from the meta - review was that contracting either in - house or outside the organisation both led to cost savings. Thus, service specification and competition appeared to drive efficiencies, rather than the sector doing the work.
4.3 SPECIFIC COUNTRY EMPIRICAL EVIDENCE
This section presents country specific empirical experiences in European Union , United
Kingdom, Unit ed States of America, India, Ghana and Tanzania.
4.3.1 European Union Experiences The use of contr acting - out in the European Union (EU) , has been increasing since the early
1990s, with the United Kingdom pioneering the process. It was taken up by Portugal, Spain,
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Greece, the Netherlands, Denmark and Sweden, with other countries following suit.
Co ntrac ting - out processes are generally perceived as having been successful and evalu ations support that contracting - out has achieved higher levels of efficiency and a comparable and even superior service. This positive performance is built upon certain strict re gulation and administrative perquisites. If these are absent, there is a distinct likelihood that contracting - out would be unsuccessful (Asian Development Bank Institute (ADBI), 2011:11).
Risk distribution is also a determining factor in the use of contra cting - out. The distinguishing feature between standard public procurement procedures and different types of contracting - out forms is the distribution of risks. The kind of risk - sharing used , determines the type of contractual agreement. This has been revie wed in a European Commission document on regional policy (European Commission , 2003). It specifies which contracts are most suitable for which kind of projects, developing a ‘best practice’ guideline. Other public intergovernmental institutions such as the Organisation for Economic Cooperation and
Development (OECD) and the World Bank seek to propagate the use of contracting - out and public - private partnerships (OECD, 2007). The risks are double - dimensional. Firstly, performance and availability risk related to the (mis)match between the contractual specification and the final product. Secondly, governance risks, where the public authorities are unwilling or unable to adhere to the contractual obligations, stipulated terms and conditions. These are multiplica tive in nature because their impact results in a much greater degree of uncertainty.
There is a need to identify elements which would affect private participation in the provision of public services. These include: legal capacity of the parties and the le gal requirements of the state to provide services; general legislation determining the role of the private sector in
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providing public services; the ability to provide guarantees to the private contracting parties
over the period of their involvement; trans parency of national laws; administrative capacity to
negotiate and follow the contractors; provisions for dispute settlement; clear competition and
antitrust legislation; open and clear procurement procedures with very clear project
specification requireme nts; rights to step in the event of project failure and availability of
alternative contractors; and credit standing of the public sector counterpart (OECD, 2007;
European Commission, 2003).
4.3.1.1 Legal - Institutional Contracting out Framework in Europea n Union (EU) Member States
Each member state has a different approach to contracting and there is no overarching
definition across the EU. It covers a wide range of contractual arrangements between the
private and the public sector aimed at operating and delivering public services. Some
countries have well dedicated law or regulation, others a comprehensive legal contracting - out framework and yet others no legal provision at all.
An important factor in the development of successful contracting - out in member states is the existence of a special ised unit promoting contracting - out and public - private partnerships
(PPPs). “Partnership UK” in the UK , is at the forefront of promoting contracting - out in the
UK and abroad. Czech Republic created and established “Contracting - out and PPP”.
4. 3.1.2 European Commission Guidelines for Contracting Out
The decision t o use or not to use contracting - out , lies in the hands of member states. The EU is neutral as to whether or not public authorities choose to provide a public service themselves or entrust it to a third party. However, the involvement of private parties in public
155 works or services is regulate d at EU level. The law on public procurement aims to create an internal market in which the free movement of people, goods, services, as well as the right of establishment and the principles of equal treatment, transparency and mutual recognition are guara nteed. The current legislation on public procurement comprises:
d irective 2004/17/EC of the European Parliament and Council coordinating the
procurement procedures of entities operating in the water, energy, transport and postal
services sectors;
d irectiv e 2004/18/EC of the European Parliament and Council on the coordination of
procedures for the award of public works contracts, public supply contracts and public
service contracts; and
c ommission Regulation (EC) No. 1564/2005 establishing standard form for the
production of notices in the framework of public procurement procedures pursuant to
directives 2004/17/EC and 2004/18/EC of the European Parliament and Council
(European Commission , 2004).
The EU framework notes also the different requirements of the partners in an agreement. It is clear that the private sector seeks profits while the public sector has considerations relating to maximising social welfare as well as equity. The public sector has, therefore, an obligation to ensure that services for the population are improved, projects are concluded faster and state budget expenditure is reduced.
4.3.2 United Kingdom
Since 1980s, competitive tendering for the provision of local authority services has been an increasingly important part of United Kingd om (UK) central Government’s programme for
156 fundamental reform of local government. By the end of the 1980s, local authorities in
England , Wales and Scotland were compelled under legislation dating from 1980 and 1988, to subject most “blue collar” or manual services to competitive tendering by private contractors (Paddon, 1993). Compulsory competitive tendering for local government was introduced in 1988, on an initiative from central government, as a form of public service provision.
Central government in Britain from 1979 attempted to encourage both more contracting - out of services and an increased use of competitive tendering by local authorities. It made competitive tendering compulsory before a local authority could consider using its own in - house work force in 1988 (Paddon, 1993; House of Commons, 2014). This legislative framework set requirements on ‘how’ the process of contracting - out was to be undertaken
(ibid.). The basic framework was established in the 1980 Planning and Land Act , to cover categories of local government building, highways and civil engineering work (Paddon,
1993).
The 1988 Local Government Act extended the same basic framework to seven “defined services”, all of them in areas of manual activity: refuse collection, street cleaning, building cleaning, catering in schools and other institutions, other catering, grounds maintenance; and the repair and maintenance of vehicles. These services are summarised in table 4.2 on page
158 .
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Table 4.2: Services Subject to Con tracting out Under 1988 Act
Service Brief Description Refuse Collection Household and commercial waste . Building Cleaning Excluding dwellings, old people’s homes, children’s homes . Other Cleaning Street cleaning, emptying litter bins, gully empting . School and Welfare Catering Includes all catering in schools, residential establishments, day centres and meals on wheels . Other Catering Preparing and serving meals and refreshments in staff canteens, theatres, sports centres . Maintenance of Grounds Gra ss cutting and tending, planting and tending trees, flowers, weeding . Vehicle maintenance Repairing and maintaining vehicles other than for police and fire service and excluding damage repairs . Sports and Leisure Managing all sports centres and facilities such as swimming pools, tennis courts, athletics grounds . Sourc e: Summarised from Cirrell and Bennett , 1990
The 1988 Local Government Act also empowered the Secretary of State to add more services to the list of defined services, and this was done with the addition of the management of sport and leisure facilities to the list later in 1988. The 1988 legislation established how contracting - out was to be undertaken regarding contract advertisement, work specifications and the minimum number of pr ivate contractors to be invited to tender.
There were also prohibitions on local authorities acting “anti - competitively” during the process, which was broadly defined as “anything which actually has the effect or is intended or likely to have the effect o f restricting, distorting or preventing competition” (Paddon,
1993). Subsidiary legislation following the Act placed further limits on how local au thorities conducted contracting - out process, for example, minimum and maximum periods for the duration of con tracts in each service.
Local authorities were prohibited from taking into account “non - commercial matters” in awarding contracts (Paddon, 1993). The Act listed eight issues that could not be considered in
158 the process of awarding contracts. These included workforce related matters (pay, conditions and training offered to workers), terms of subcontracting and involvement in industrial disputes. However, circulars were issued from time to time on: what financial costs could be taken into account in evaluatin g tenders, the size of contracts which would be appropriate to offer, how race relations and health and safety issues could be incorporated and a range of other detailed issues concerning the process of awarding contracts. The circulars have been employed to draw attention to practices by local authorities to either circumvent legislation or to comply with the letter but not the overall intention of the legislation (House of Commons,
2014).
4.3.2.1 The Compulsory Competitive Tendering Regime
There were rules for compulsory competitive tendering process. They included:
a dvertising - all contracts with a total value in excess of around $300 000 had to be
advertised in the European Journal to encourage European wide competition;
t iming - minimum and maximum per iods for each stage of the bidding processes;
o verhead costs - national guidelines for comparing the costs of public sector bids
against the private sector; and
p acking and contract conditions. There were regulations to prevent “anti - competitive
behaviour” by cities and counties, that is, inclusion of contract conditions that
discouraged or distorted genuine competition and; appeals and complaints - procedures
for investigating allegations of anticompetitive behaviour. The purpose of these rules
was to create a level playing field between the public and private sector contractors.
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4.3.2.2 The Policy Basis of Contracting - Out
Contracting - out has been part of two related political currents: the reorganisation of local government as part of a radical revision o f the operation of the post 1945 Welfare State and privatisation. Contracting - out emerged as part of a political programme for privatisation with two explicit economic objectives and implicit political objective (House of Commons, 2014).
The macroeconomic objective was to limit the growth of public expenditure (ibid.). The covert political objective has been to contribute to the changing balance of influence of trade unions in the public sector. The local government became a focus for macroeconomic policie s to limit the growth of public spending following the economic crisis in Britain in the mid - 1980s and the resulting agreement reached with the International Monetary Fund (IMF), a condition of planned spending by the Labour Government were directed predom inantly at the capital spending programmes of local government in housing and education. The stated intention was to move local government from a role of being a major direct provider of services, to that of being an enabler.
The revised policy emphasis w as encapsulated in the central government’s White Paper “The
Citizen’s Charter” that had four main themes for public services: quality, choice, standards and value. It sets out the government’s future plans for more privatisation, publication of performanc e results for local and national government, changes in payment system for public employees and further contracting - out.
4.3.2.3 Institutional Framework
National Co - ordinating Committee (NCC) on contracting - out, whose membership includes the local author ity based associations, Local Government Management Board (LGMB) and
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Local Government Implementation Unit (LGIU). It promoted a comprehensive and strategic approach to contracting - out under the title of “Don’t Panic”. The approach started with the need to assess and reassess what was required for a particular service, and how it met the social and political priorities both of the local authority and its community. It emphasised the importance of delivering service based strategies in collaboration between l ocal authority, councillors, service managers and people to deliver services. This overarching strategy was then worked through at every stage of the process of awarding contracts. The process of awarding contracts had seven stages: r eview policy and curre nt service provision ; f inalise specifications for service ; advertise for interested contracts; prepare short list from interested contracts; invite short listed contractors to tender; receive and evaluate tender submissions; and award contract.
Chartered Institute for Public Finance and Accounting (CIPFA) , the professional body of public sector accountants and treasurers in the UK , is central in contracting - out. For the 1988
Act, CIPFA convened a widely based Competition Joint Committee (CJC) whose members hip includes the Local Authority Associations in England, Wales and Scotland, with representatives from most of the professional bodies whose members manage the local authority services defined in the Act.
The Audit Commission , an independent but governme nt sponsored body established in 1983, oversees the auditing procedures of local government and undertakes general value for money reviews of local government services. It interprets what is and is not outside the terms of the 1988 Act. Its interpretation of the crucial area of “anti - competitiveness” has been particularly tendentious and criticised by both CIPFA and the Local Authorities Associations.
As this suggests, there are substantial differences of interpretation of the law. Furthermore,
161 the Local Go vernment Act of 1992 empowered the Audit Commission to publicise performance indicators for local authorities and to monitor performance in regard to these indicators (Sturgess, 2012).
4.3.2.4 Contracting - out and the Management of Services
Contracting ou t requires four different functions to be fulfilled:
a policy function: deciding on overall policy, allocation of resources;
a ‘buyer’ or ‘client’ function: writing specifications for contract, preparing contract
documents, awarding and monitoring contracts;
a ‘provider’ or ‘contractor’ function: carrying out the work: producing annual
accounts and reports and meeting the require d financial rates of return; and
c entral support functions: providing technical advice and support on legal, financial
and human resources (Paddon , 1993:130).
In all local authorities, attempts were made to prepare these structures and processes be fore the process of contracting - out for 1988 Act defined services was commenced.
The management changes within departments and sections have been determined in terms of new skills and additional staff have been required for the various stages of the tendering process. These new skills include: writing service specification, preparing tender documents and documentation, preparing contracts, evaluating potential contractors and establishing market intelligence on relevant market sectors, evaluating tenders agai nst appropriate criteria, awarding contracts, managing contracts once awarded including monitoring the performance of contractors against the specifications, negotiating with contractors over
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modifications to contracts, failures to meet specifications and where necessary imposing
sanctions including fines and, potentially, contract termination (House of Commons, 2014).
Local authorities identified the need to obtain access to or develop their existing management
capacities in the areas of: marketing, specif ications, contract law, contract evaluation,
management accounting and contract management (ibid.).
4.3.2.5 Contracting - out and the Cost of Services
Prior to the 1988 Act, studies by the Audit Commission and academic studies claimed to
identify cuts in t he cost of services when services were contracted - out. Audit Commission
undertook a study in 1984 about refuse collection and concluded that average costs where
refuse collection had been privatised were lower than the average for direct service. An
academ ic study of contracting - out in refuse collection in 1984 - 85 claimed to have identified costs that were 22 per cent lower where the service had been contracted - out, with no evidence of an adverse effect on the quality of services. The Audit Commission estim ated that up to 80 million British pounds of efficiency improvements in corporate stemmed from the use of contractual measurements (Audit Commission 2007:http://www.audit_commission.gov.uk).
4.3.2.6 Contracting - out and Employment and Industrial Relations
It has had major implications for levels of staffing, for pay and payment systems and for
overall conditions of employment. Where contracts have been awarded to private contractors , there was an associated loss of employment in the contracting side of the authority. The redundancy costs which this would impose on the local authority are additional costs which need to be taken into account when assessing the tender from the in - house service against those of external contractors (Blatchford and Gash, 2012). One of the UK Central
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Government’s policy objectives o f privatisation and contracting - out has been to deconstruct the systems of nationally negotiated wage and conditions of bargaining. In local government, the Local Authority Association (LAA), public sec tor trade unions and the majority of local authorities have been resistant to the pressure to move away from this structure.
Private contractors reduced the labour costs of providing services by about 25 per cent. They continued to pay similar basic rates to those provided for by local authorities but made substantial savings in pensions, sick pay, overtime working and bonus schemes. Th ey succeeded in making savings o n national insurance by greater use of part - time staff.
4.3.2.7 Evaluation of the United Kingdom Experience
The UK experience has thrown some insights that may be helpful for Harare City Council to improve its future contracting - out. Contracting - out had positive consequences. There is comprehensive evidence that contracting - out leads to cost savings though they were modest.
Another insight is that competition is healthy. This was evidenced in competitive bidding for services such as refuse collection, cleaning and grounds maintenance. In areas such as housing management, finance and human re sources management services , there was no competition due to weak market. Another striking insight observed , is the determination by management to challenge the status quo and think creatively. However, most local governments have been unimaginative in the ir approach to contracting out. Thus viewed this way, local authorities should construe contracting - out in a strategic perspective.
Another important observation is the essence of careful preparation. Though the experience results here are mixed, the UK legislation on contracting - out prescribed a common approach for contracting - out process as follows: publication of notice; expression of interest;
164 questionnaire and outline details; formal notification of interest; invitation to tender; tender submission; evaluatio n and award of tender and the successful bidder begins work.
Other insights UK experience offers include cutting red tape, independent contract management; and competence in service contracting. The local governments that scored successes with co ntracting - out had adequate contract management capaci ty. Contract management needs competencies in institutional design, political communication, awarding contracts, implementation, quality checking and dialogue, controlling, evaluation and regulation. Thi s calls for contract managers to be better educated and trained in the contractual arrangements mechanics.
4.3.3 Local Government Innovations in American Cities
The “Re - inventing Government” initiatives of the 1990s (Gore, 1993) , led to a series of innovations and reforms in local government management. Reforms involve process improvement, reforms in policy or programme design and organisational change. The City of
Chicago parking enforcement programme was mooted in 1994. The prog ramme exemplifies a systems approach to problem - solving, a politically driven comprehensive planning process and a turnaround model. Before the turnaround, parking enforcement in Chicago was a failure.
People parked illegally and paid only 10 per cent of the fines. Despite public sentiments, the bureaucracy was un able to re - think the problem as there was general disbelief among city employees and the public , that plans would be translated into action (City of Chicago, 2004).
Two critical elements led to th e turnaround: strong political will in the form of the newly - elected Mayor Richard Daley (Singh, 2005) and the decision to bring in an outside team.
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Daley made parking reforms a priority and set deadlines for action (Mathesian, 1994).
Nevertheless, a numbe r of organisations had portions of the parking problem and they had to be persuaded to go along of the new system. Thus, when 42 data entry clerks in the police department were made redundant by the new system, new positions were found for th em, which mean t nobody had been fired. The results were swift: the new system increased revenue and reduced costs and travel speeds in downtown Chicago increased by 15 per cent within two years (City of Chicago, 2004).
4.3.3.1 Washington Roundtable and Washington Rese arch Council: Thrive Washington Report
The Great Recession changed fiscal conditions in Washington State in 2008. The impact of falling revenues an d structural budget deficits elicited a near universal call for a transformative shift in state government ( Washington Roundtable and Washington Research
Council, 2010).
According to House of Commons Public Accounts Committee (2014), S tates faced a collective budget shortfall of approximately US$250 billion between the fiscal years 2009 and 2011. After addressi ng a US$9 billion shortfall in 2009, the Washington S tate immediately found itself confronted by an additional US$2.7 billion shortfall in 2010 (ibid .).
Looking forward, it projected another US$5, 7 billion shortfall for the coming biennium.
Washington’s s tructural budget shortfalls require d the state to seek new solutions to contain spending while preserving the quality of public services.
Starting in the 1980s and accelerating through the 1990s, the Federal G overnment, state governments and local governments began to experiment with the idea of “competitive
166 sourcing” and “contracting - out”. Washington State saved money while delivering high quality services and i ncreased its focus on critical and high priority services such as education. Two important reasons for contracting - out were cost savings and improved quality of service. It was the win - win possibility of better se rvices at lower costs that made contracting out attractive.
Examples of contracted - out serv ices include d airline operations, property tax assessments, bus service, maintenance of public buildings, day care centre , debt collection, fire protection, legal service s , e - government services, waste collection, parks and recreation, parking services and website hosting ( Washington Roundtable and Washington Research Council, 2010 ). The
Thrive Washington R eport (2010) cites three contracting - out sussess stories , namely :
t he administration of Florida under the Governor Jeb Bush who used contracting out
duri ng his eight - year tenure (1999 - 2007) saving more than US$500 million and
avoiding more than US$1 billion in estimated future costs ( Ibid. 201 0:3). The
Governor created the State’s Council on E fficient Government which developed a
centralised process for e valuating when and where contracting out was appropriate;
Chicago Mayor, Richard Daley, leveraged contracting out to generate more than
US$3 billion in upfront payments in 2005; and
f ormer Indianapolis Mayor, S tephen Goldsmith, identified 400 city services and
opened more than 80 city services including trash collection, pothole repair , water and
waste water services to competitive bidding.
The Washington Roundtable and Washington Research Council (2010:94) advise that when measu ring the success of contracting - out , one should ask agency heads how much they saved after adopting the pr actice. The Internal City/Count y Management Association found that city
167 administrators repor ted cost reductions of 15 to 20 per cent. When the Council on State
Government s polled agency heads about 15 per cent repo rted savings greater than 15 per cent, 20 per cent reported savings of 10 per cent and 60 per cent reported savings in the 5 per cent range.
The Thrive Washington Report argues that the question of how much is s aved depends on a host of variables including the type of service, how diligent the state is in procuring good deals, how competitive bid process, the size of the state budget, the percentage o f the budget that is contracted - out and h ow much is saved by co ntracting - out.
4.3.3.2 City of Indianapolis, Indiana Experience
Organisational performance was improved through the introduction of competition.
Indianapolis Mayor , Stephen Goldsmith , initially advocate d of privatisation as a means of reducing the costs of government (Gurwitt, 1994). His conviction gave rise to the city’s competition and costing programme, which won an Innovation Award in 1995 (City of
Indianapolis, 1995). The competition and costing invo lved three steps: firstly, a volunteer advisory committee from the business community that helped to identify services that would present good opportunities for competition. Secondly, a consulting firm costed out the services as conducted in the public sec tor, in particular identifying overheads, to ensure a fair comparison of private and public sector bids. Lastly, the services were opened up to bids from both the private and public sectors. In addition, the union helped workers prepare their bids (Husock, 1995).
When the public sector employees were the winning bidders, they were allowed to keep some of the cost savings (Osborne and Plastrick, 1997). The end result of the programme had been
16 8 cost savings of US$10 million in annual operating expenses , a red uction in the public safety workforce by 30 per cent and the identification of one - time savings of US$123 million. This initiative and its success es won Goldsmith Governing Magazine’s Official of the Year’s award in 1995 (Perlman, 1995).
The most signific ant opposition to the programme came from middle management as they were found to be a major contributor to the overhead costs. For public sector bids to be competitive, middle management positions had to be substantially reduced.
The Mayor, Goldsmith se t up the Service , Efficiency and Lower Taxes for Indianapolis
Commission (SECTIC) composed of nine businessmen. The objectives were to make the government more efficient, reduce costs, cut waste, eliminate unnecessary services and pass appropriate services to the private sector.
The Mayor introduced activity based accounting (ABA) system in order to identify how much each city service and activity cost. Traditional cost accounting made it difficult to understand the cost of activities.
These changes led t o improved fiscal position, employees’ working conditions improved significantly, the management was replaced by a group of young, energetic people from the private sector and, effective performance management processes and systems were developed.
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4.3.3 .3 Evaluation of the Indianapolis Experience
Costs and benefits : the contracting programme saved money. It helped to contain expenditure and restore d the city’s fiscal position. It contained tax increases.
Tools and Processes : One of the most impressive a spects of the Indianapolis approach has been the emphasis on putting sound management processes in place before embarking on a major contracting programme. Many other cities had begun their contracting without really knowing how much in - house services cost a nd what standards of service were being achieved, for example, New York, Baltimore and Chicago (Lavery, 1999).
Strategies: There are important lessons here for Harare City Council. Indianapolis adopted a much more strategic approach to contracting - out . The features of the Indianapolis strategy include d :
p utting the necessary infrastructure in place first, for example, systems such as
activity based accounting (ABA) and performance measurement were developed in
advance of contracting (Lavery , 1999). This enabled Indianapolis to make objective
d ecisions about making or buying goods and servic es;
i t carried out a comprehensive review of services. Indianapolis undertook a careful
review of all of its services over a period of time using SELTIC. T he review involved
recording what was done, what assets the city held and what were the alternative
options. This encouraged a more rational approach to contracting out ;
p ublic/private competition was accep ted by Indianapolis as valuable; and
d eveloped a c lear vision: contracting was part of a much wider vision for local
government in Indianapolis. Some services were defined as core services that needed
to remain in - house, for example, fire and police. The rest were subject to review and
testing.
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The decision - making environment : The city was less politicised than other mid - western and northern cities (Lavery, 1999). The city had less radical unions than New York, Chicago and Philadelphia. Indianapolis did face resistance but not the prolonged strikes o f Atlanta.
Indianapolis had a strong Mayor charter which meant more power to push proposals through.
The Goldsmith administration took management very seriously. He was a part - time lecturer of Public Administration at the Universitie s of Indiana and Harvar d and had written extensively on government and public administrati on. Unlike many other Mayors, Goldsmith knew what was required in management terms to make contracting - out work that is, putting in place more accurate information, recruiting private secto r managers rather than lifelong public officers who had supported his campaign and delegating responsibility to his executives to get on with the job. As a result, Goldsmith created a strong managerial culture among senior executives.
4.3.3.4 GEOR G IA, USA, Atlanta Experience: When Contracting out Really Doesn’t Work: Atlanta’s Water Contract
Atlanta demanded to privatise its water services in an attempt to solve a fiscal crisis rather than to deal with a water supply or quality problem. It engaged a mu ltinational, for - profit corporation , called United Water Services.
Announcing the contracting - out innovative, then Atlanta Mayor , Bill Campbell , said that
“this day really marks the beginning of a partnership which will result in tremendous savings that w ill reduce the amount of water our customers will have to pay in the future” (Lavery,
1999). The Mayor further stated that “Our citizens and ratepayers will benefit by improved technology and more effici ent and innovative approaches in management. This wi ll be a win - win situation for all involved” (United Water Services, 1998).
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At the same time of the water contract, the Mayor was “philosophically opposed to privatisation.” He also ma intained that “privatisation was a government’s admission of failure. Go vernment ought to be able to accomplish projects as efficiently as business”
(Ramage, 1998). In fact, early in his tenure as Mayor, Campbell signed an agreement with municipal workers that he would not contract out city jobs unless faced with a fiscal emer gency (Savas, 2005).
Campbell turned to water privatisation because of a colossal budget deficit, a water system needing major revamp and the prospect to save the city about $30 million a year in operation and maintenance costs by contracting with a priva te entity (Ramage, 1998). He also faced mandates to upgrade the city’s three waste water treatment plants totalling $1 billion in capital expenditures, which would translate into a near doubling of water and sewer rates for consumers (Savas, 2005). After c areful analysis and a two - year battle with opponents, the city entered into a 20 - year partnership with United Water Services.
Despite the early promise, privatisation failed. In August 2002, the new Mayor, Shirley
Franklin, presented United Water Services with a detailed report charging that the company would default on its 20 - year contract in ninety days if major im provements were not made and Mayor Franklin instituted a performance scorecard to monitor the contractor on a daily basis. The city charged th at: the contractor was providing poor water quality, not fixing leaks, not maintaining or reading meters on a timely basis (leading to revenue losses), and failing to provide the city with the information it needed to monitor the contractor (Cohen and Eim icke,
2008). Past supporters of contracting - out reported dozens of constituent complaints of brown water and advisories to boil the water before drinking.
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On January 24, 2003, United Water Services Atlanta and the City of Atlanta announced that they had r eached a mutual dissolution agreement for the contract they signed in 1999 (Suez,
2003). In 2003, the City of Atlanta began the process of recreating a public utility with the
Department of Watershed Management to run the city’s water system.
4.3.3.4.1 Wh at Went Wrong in Atlanta?
Soon after cancelling the contract, city officials blamed the contract itself. “There were too many grey areas,” said the new manager of the city of water system (Whitt, 2004). For example, there was no timetable for fixing leaks in the system (Cohen and Eimicke, 2008).
Secondly, the numbers did not add up. The contract initially promised annual savings of $20 million a year to the city, but the independent audit before the cancellation showed actual savings closer to $10 million (Cohen and Eimicke, 2008). There were numerous complaints about water quality, maintenance and management (Arrandale, 2003). The gap between the estimates and actual experience was the result of the absence of good data to establish a baseline. The city ha d either failed to keep proper records or to collect the required data in the first place.
Thirdly, the Mayor Campbell’s bad governance factor. The Mayor Campbell was very corrupt. On August 21, 2006, former Mayor , Bill Campbell , entered a federal correct ional institution in Miami to begin serving two and a half years on three tax charges (Scott, 2006;
CNN.Com, 2006). A five - year investigation of corruption in the Campbell administration in
Atlanta resulted in ten criminal convictions, including Campbell’s top two deputies (Whitt,
2004). Campbell had accepted a $12 900 trip to Paris from United Water Services in 1999.
Campbell later signed $80 million increase in the contract, which was subsequently
173 disallowed (Whitt, 2004). Lastly, the city failed to carry out its regulatory responsibilities, monitoring and enforcing the terms of its contract with United Water Services.
4.3.3.4.2 Why Contracting out Worked Better in Indianapolis than in Atlanta?
Stephen Goldsmith, the former Mayor of Indianapolis, pursued competition not privatisation, permitting city agencies to compete with private companies to deliver city services (Savas,
2005; Osborne and Hutchinson, 2004). One of Indianapolis’s most successful contracts with a private vendor involved the city wastewa ter treatment facility. The winning bidder in 1993 -
1994 was a private partnership that included United Water Services, the same company that failed in Atlanta. The city saved $72 million under the first contract through 1999, more than the $65 million prom ised by the United Water Services contract, pollution control standard violation dropped by 60 per cent, time lost from accidents decreased by 91 per cent, wages and benefits increased from 9 to 28 per cent over comparable city job titles and sewer rates w ere held constant (Savas, 2005). The number of employees dropped appreciably, from 321 to 196, owing to the application of state - of - the art technology (ibid.). No employees were retrenched due to the contract.
Indianapolis’s contracting - out of waste water services is recurrently cited by proponents of privatisation, contracting - out and reinvention because it was a well - run public service that became considerably better and cheaper under private management. Atlanta entered into its contract with United Wate r Services with a year of Indianapolis’s renewing its contract with the same contractor. How wa s it possible for two American cities to obtain such dissimilar results by the use of the same contractor concurrently?
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In late 2006, Goldsmith noted that “when Atlanta began the process of outsourcing their water sewer system, we (Indianapolis) volunteered to donate the information we had learned about the contracting of waste water treatment over the past six years. Atlanta did not want the help” (Goldsmith, 20 06). “As Mayor Goldsmith told us, ‘When we started out, we tried to copy the best practices we could find in other governments and in the private sector. It seemed very odd to me that Atlanta administration did not even want to talk to us” (Cohen and Eimic ke, 2008).
What were the key fundamentals of the waste water project in Indianapolis? According to
Goldsmith (2006) , the key to their success were strong team of inside experts reporting directly to the Mayor and empowered to speak with his authority, a c ommission of private sector entrepreneurs to oversee all competitions, a sense of urgency based on the belief that if the city did not do more with less it would lose its tax base to the surrounding suburbs and a clear recognition that trade - offs are inher ent in all decision - making (Cohen and Eimicke,
2008).
On the contract itself, Indianapolis team had negotiated a good contract, but a good contract is only the beginning. A good working relationship is the key to success. “A great contract cannot make up for a bad relationship and if the relationship is solid, the contract document itself matters much less” (Goldsmith, 2006). This required contracting parties to act in good faith.
Indianapolis overcommunicated with all stakeholders, including the general public. In
Atlanta, Mayor Campbell kept the details private and the process was more of a war with stakeholders (Cohen and Eimicke, 2008) than collaboration.
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4.3.3.5 New York City Experience: Careless Contracting: The Problems of D esigning a Contracting Sy stem to Avoid Corruption
Contracting out in New York City (NYC) has traditionally been non - competitive . There have been strong allegations of Mafia control and a number of corruption cases (Curry, 2009).
NYC had four major actors in the contracting proces s:
t he City Council, the legislative body, which agrees the mayor’s budget;
t he procurement policy board (PPB): advisor on the operational framework and
establishes the rules for contracting;
t he Mayor responsible for identifying areas to be subjected to contracting out, contract
selection and contract management; and
t he comptroller, who registers contracts to enable payments to be made and auditing
the contract system.
There was high level of oversight in the contracting - out process. Nine agencies had ov ersight responsibilities. The contracting process comprised four elements:
d eveloping the service specification;
i dentifying who is interested in doing the work; selection of the approved contractor;
n egotiation with the preferred contractor to finalise al l aspects of the contract; and
o btaining the required approaches from the various oversight agencies within the city.
There were five contracting methods used in New York City, namely, competitive sealed bids, requests for proposals, sole - source negotiations, renewals and arrangements for small purchase.
The contract decision - making in the New York City , was guided by: value for m oney, competence, integrity, fairness, equity and city policies.
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4.3.3.5.1 Problems of C ontracting out in New York City
Time consuming approach: contract ing - out in New York City was slow and inefficient.
Contract award could take up to double or treble the amount of time needed in other jurisdictions (Lavery, 1999). This was due to the amount of oversight, parallel internal oversight, sequential and duplicative nature of review, valu e of paperwork, unproductive public hearings (ibid.).
Quality of contract m anagement: New York City devoted a significant amount of time to contract award. Contract management appear ed to be largely neglected. This scenario was attributable to few incenti ves for good performance, poor specification and inadequate data
(Lavery, 1999).
The level and quality of competition: competition for city work appears healthy and improving (ibid.). The comptroller believed that a minimum of three bids was needed to ens ure a reasonable level of competition. However, many private sector organisations view ed the City of New York as customer of last resort. This means that many of the better firms were not prepared to bid for city work. The reasons include: t he complexity a nd time - consuming nature of th e city’s contract award process; t he city was construed as a late payer; and the city was construed as unfair and partial in its contracting process (Shirely and Walsh,
2000).
Fraud and corruption: New York City’s history inc luded a number of high profile cases of fraud and corruption. A number of key elected and appointed officials in the Koch administration were imprisoned following the revelations of a bribery ring in relation to parking violating contracts.
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Value for money and contracting: the city wanted to avoid scandals rather than to ensure
good service and value for money. The cost of oversight agencies alone exceeded $200
million per year and these agencies add little value to contracting.
4.3.3.5.2 What lessons can be gleaned from New York City Experience?
Political management is institutionalised in New York City. What were supposed to be managerial issues became political decisions such as whether a contractor can meet the contract and the selection of contractors.
Organisational culture is vital in any change taking place . There was high de gree of risk aversion. There were much great er penalties for making mistakes - being criticised within the agency or by an oversight agency, an elected official, or the press or being fired if the postholder is an executive position. There were no incentives to perform well. Officials were not judged and paid on results. There was lack of trust because the contracting pr ocess emphasised control and tried to eliminate judgment and discretion. Obsession with the process since compliance with rules , was the order of the day in the city. Managerial
subse rvience, that is, the tradition of political management, political appointments and the
ease with which ‘disloyal’ senior managers were replaced , discouraged managers from
speaking out and defending a managerial agenda.
Strong unions. The major union in t he city was the Association of Federal State, County and
Municipal Employees (AFSCME), with the other significant unions being those of the fire fighters, police and teachers. The city was highly unionised, with virtually all non - senior management posts fi lled by union members. Unions helped to get the council to pass “Local
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Law 35” which allowed the council to hold a hearing where the mayor proposed contracting -
out a service currently performed in - house.
Overloading the contracting regi me: the contracting project had many objectives - from achieving value for money right through to minimising corruption and promoting local firms, monitoring business and equal opportunities. Some of the objectives were desirable, but their cumulative impact was serious.
In formation problems: the city lacked relevant and timely information to manage the contracting process. There was no proper contract budget in place; hence, it was not possible to track expenditure accurately. Performance information was patchy in many case s and non - existent in some areas.
In conclusion, the problems of New York City experiment with contracting , revealed very well why the black box of contracting arrangements processes and systems is crucial.
4.3.3.6 Lessons from United States of America and United Kingdom Experiences
Both countries have demonstrated that a contracting out strategy is critical to avoid muddling through. However, the majority of USA local authorities adopted a piecemeal approach to contracting out. Evidence for planning i s visible as evident in the City of Indianapolis of
USA.
English local governments have moved from being service delivery organisations to enabling councils that arrange services through external and internal contractors. Gleaned here is that
179 local govern ments act as enablers and facilitators of private agents in the provision of public services.
Secure foundations are a vital ingred ient for successful contracting - out and for effective service delivery. Accurate information on current costs and performanc e is also critical. In the absence of quality and reliable information, it is nigh impracticable to make reasonable decisions about make or buy. This can result in the wrong decisions either way – contracting - out a service resulting in higher costs or keeping an expensive service in - house because not all of the relevant costs were included in the original assessment. An impressive example here is the success story of City of Indianapolis. Poor service information on service performance would make it dif ficult to produce an intelligent service specification and it makes contract management problematic. The best ways to avoid these problems are activity - based accounting and performance indicators as evidenced by City of Indianapolis. The City of Atlanta ne ver undertook a feasibility study when it contracted - out water services and the project was a total disaster.
A strong lesson for Harare City Council is the need for a more flexible approach to contract packaging. Too many local governments transfer a pub lic monopoly to a private monopoly.
Greater use of partial and multiple contracts as practis ed by many U.S. local governments , avoid monopoly situations from arising. This approach would also allow many more small and medium - sized firms to compete for loca l government.
Contract management in most local government is weak. The evidence is clear cut in terms of weak specifications and minimalist monitoring. Who should do the contracting? Contract management in the broadest sense is highly politicised in man y local governments. This
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needs to change if contracting is to be truly effective. Contracting - out needs to be
professionalised.
Contracting - out, however, is no panacea for local government problems. However, where it is
well executed, it can improve valu e for money significantly. The most important feature of
best practice is to adopt a strategic approach to service delivery. Other essential
characteristics of best practices include developing good information on costs, standards and
performance.
4.3.3.7 Kolkata Metropolitan, India
Municipal reforms were initiated between the years 1995 and 1998. The then Municipal
Commissioner , Asim Burman , began the reforms by computerising most of the internal administrative systems (MIS) in the corporation (Amita, 20 05). This resulted in increased efficiency and reduced corruption within the system.
In 2001, the Indian state’s faith in the privat e sector , helped to initiate private sector projects.
Kolkata took a long time to accept private investments in the state’s economy. In this case, the partnership effort was between local government, the Kolkata Municipal Corporation and
Excel, a private firm to convert waste into marketabl e products. Two basic steps had been taken to streamline the process of garbage collecti on in the city. These were: collecting the refuse directly from homes; and reducing the number of open garbage points in the city. All bio - degradable and medical waste in the city was separated at source, transported in secured vehicles and disposed at sep arate landfills (Amita, 2005). Garbage collection in the city was done through private carriers who were paid on a per - ton of - waste - handled basis.
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Maintenance of street lighting was another service which was handled by private agencies in
exchange for adv ertisement rights. The revenues collected from parking zones were used for
maintenance of roads and footpaths. Parks and traffic islands were maintained by private
business houses in exchange for display rights.
4.4 Empirical Evidence of Contracting out in Africa
Public sector reforms and contracting - out in Sub - Saharan Africa (SSA) reality have both
success and failure stories. In Senegal, for instance, success factors include strong political will and good leadership throughout the reform process, with min imal government interference. The processes themselves were well - designed, allowing for flexibility and innovation when necessary. Economic Commission for Africa (ECA) (2005) reports how expansion of water supply in rural Ghana has been successful. Factors included strong political leadership and clea r legislation specifically the Acts of P arliament from 1998 that defined the policies and roles of most sector agencies. Reform of public reporting in
Mauritius has been successful through a committee with both the expertise and wide - ranging representation of various groups in formulating standards (ECA, 2005).
In some countries, however, reforms have been afflicted by problems of nepotism, inefficiency, poor coordination, poor management and institutional capa city shortfalls, bureaucracy and political interference, and declining public service ethics which result ed in inappropriate practices such as corruption which undermines merit and increases the cost to public service users (Ibid.). The dis cussion of selec ted contracting - out experiences in Africa follows.
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4.4.1 Ghana
Ghana was among the first countries in Sub - Saharan Africa (SSA) to adopt market - driven public sector reform policies. These included the New Public Management approach in the mid - 1990s. The prescription from the World Bank and other donor agencies pressed specifically for contracting - out public services to private suppliers. The chief objective was that contracting - out would free the public sector of peripheral duties and enable it to focus o n core roles, harness the power of market and competition, raise standards and reduce costs
(Awortwi, 2013). Awortwi (2013) undertook a comprehensive study of local government solid waste collection service contracts in Ghana.
To ensure Local Governments in Ghana effectively manage contracts, the Ministry of Local
Government and Rural Development (MLGRD) in collaboration with Urban Environmental
Sanitation Programme (UESP) of the World Bank, developed project wide capacity building and training programmes for local government officers (Awortwi, 2013). The outcome was a model of what contract document s for contracted - out solid waste collection services should look like. The model sets out issues which the Ministry of Local Government and Rural
Development c onsiders crucial in defining the exchange relationship with agents, including preparation of contract bids, evaluation and award of contracts.
The contract preamble requires agents to demonstrate to local governments that they have the required expertise, personnel and technical resources to provide solid waste collection service on the terms and conditions set forth. The following clauses were clearly defined: scope and specification of services, obligations of the contractor, performance monitoring and m easurement indicators, payment terms and adjustments in prices, sanctions for poor
183 performance, settlement of disputes, duration of contract, opportunity for renewal and termination (Awortwi, 2013).
4.4.1.1 Ghana Process of Awarding Contracts
The Urban E nvironmental Sanitation Programme and model contract document require contracts to be transparent, through open and competitive bidding. This allows Local
Governments to compare agents’ proposals, information on their capacity to deliver and reduce risk of non - compliance by unreliable agents. Competitive bidding makes local government procedures strategic in obtaining prior information about agents comparing rates and selecting the best bid (Awortwi, 2013).
Awortwi (2013) observed that despite competitive bidding, Ghana uses four other processes, namely:
a gents’ connections with people in higher authority, thus usurping local government
control over terms;
c ontrac t renewal of existing contracts with no fresh bidding at all;
g entlemanly agreements based on mutual planning and negotiation, document as a
Memorandum of Understanding (MoU); and
l ocal Government in - house delivery (contracting - in) which did not pass through any
of oth er processes (Awortwi, 2013 ) .
The Ghanaian contracts are characterised by the fol lowing elements:
d efinition of contract terms and scope of work;
f inancial incentives to agents ;
c ontract duration - four (4) years; and
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c onflict of interest, collusion and corruption (ibid.).
The written contracts were tainted with collusion and corruption. The contracting - out reform in Ghana was flawed. The tender procedures were chaotic and hostage to vested interests, quality of service and corporate governance did not improve.
4.4.1 Tanzania
In the past decade, Tanzania’s public sector contra cted - out the delivery of some services in areas of health, education, solid waste collection, revenue collection, information technology, cleaning, security and infrastructure (Nkya, 2004). In Tanzania, non - core services such as grounds’ maintenance, secur ity, revenue collection in local authorities, solid waste collection and disposa l and cafeterias are contracted - out to the private (Nkya, 2004; Ngowi, 2006).
4.4.1.1 Public Sector Reform in Tanzania
The first public sector reform era was from 1962 to 1970. These emanated from the realities of ind ependence and sovereignty. The S tate provided all the power to manage the political, economic and social affairs of the society (Mwagike and Edward, 2013:159).
Decentralisation reform from 1972 - 1984 was the se cond. A number of committees were established in the villages, wards, districts and regions, as vehicles for people’s participation
(Ibid). This resulted in decentralisation of power by the central government for all social services and economic developmen t activities (Mwagike and Edward, 2013).
The third reform was the Public Sector Reform Programme (PSRP) (1987 - present) which was in line with the global development mantra of “structural adjustment” and the experience
185 of NPM. The drive of PSRP was spearhe aded by the President’s Office - Public Service
Management (PO - PSM). The PSRP has been active in reforming health, education, local government, remunerations and recruitment (United Republic of Tanzania (URT), 2007). A centr al component of the PSRP was contr acting out and public - private partnership. Tanzania has several activities under public sector contracting. For instance, the collection of parking fees in urban areas and rubbish collection and disposal in almost all local government authorities are now u ndertaken by private firms (Nkya, 2004).
Tanzania , however, encountered three major challenges to the scope, speed and quality of service s delivered through contracting - out. These are:
the identification of reliable and trustworthy private organisations w ith which to form
partnership - many private operations were not legally registered (Ngowi , 2006);
government officials have yet to acquire the necessary knowledge and skills to deal
with private partners who are often more business savvy (Njuwa , 2007); an d
Public institutions in Tanzania are bedevilled by bureaucracy and financial
bottlene cks (Mwagike and Edward, 2013 ). A study by Ngowi (2006) on contracting -
out in Tanzania reports the bottlenecks as public sector characteristics of bureaucracy,
inefficien cy and ineffectiveness, lack of incentives, creativity, dynamism and
vibrancy, generally show response and corruption.
Major challenges or factors that determine successful contracting out include staff capacity
(knowledge and skills ) in feasibility assess ment, implementation and evaluation , prior contracting experience and financial capacity (Mwagike and Edward, 2013).
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4.5 THE LESSONS OF EXPERIENCE
Before drawing any conclusions from the global experiences, one should first of all establish the general caveat about the practice of lesson drawing. For the study’s purposes, drawing lessons about the contracting - out is a practical exercise. It is concerned with making theoretical and policy prescriptions which can be implemented with a fair expectation of s uccess. In the words of Rose:
Lessons…. are tools for action. Politicians know what they would like to achieve, but the existence of a political majority for a goal is no assurance that politicians will know how to design a programme that achieves this goa l. Borrowing a programme that is effective elsew here is no guarantee of success ( Rose, 1993: ix).
It is essential, when considering whether to follow policy approaches used elsewhere, to understand what circumstances and to what extent these approaches wo uld work effectively in other jurisdictions. Enthoven (1990) , writing about health policy in 1990, could easily have been referring to the public sector reforms when he stated that:
The really interesting questions are how to identify and design politically feasible incremental changes in each country that have a reasonably good chance of making things better. Each country can get useful ideas from others about how to do this (Enthoven, 19 90:58) .
Given the inte rnational nature of contracting - out reforms, it is unavoidable that policy makers in one country would seek to learn from programmes that appear to be successful elsewhere.
In this respect, the case studies reviewed by this study might well be viewed as a laboratory for the contracting - out r eforms experiment. However, the obvious but important point is that any attempt to draw lessons from the experience of others , must take full account of the historical, cultural, social, economic and political environment pertaining to both the country see king lessons and the countries whose experience is being examined. For example, in the
Central European nations, there has been a significant shift toward privatisation, something that has also taken place to a significant degree in the UK. However, there are dangers in
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making comparisons as the UK experience is not easily transferable. The privatisation
programme pursued in Britain since 1979 was geared toward reducing public expenditure and
increasing economic efficiency through the expansion of market fo rces in a mixed economy.
In central Europe, privatisation has been aimed at moving countries away from Communist -
style systems of government toward the development of new market - based structures and
arrangements. As such, there are limits to the practical lessons that British privatisation may
provide for central European countries. So, with this caveat in mind, what lessons can be
drawn from the global experi ences discussed in this chapter for local authorities in
Zimbabwe?
Firstly, a clear pictu re that e merges from the USA, UK , NYC, Washington State, Ghana,
Tanzania and India experiences is that leaders hip is pivotal. The contracting - out and compulsory competitive tendering were central government initiatives which had set requirements for, often very rel uctant, local authorities. Lungu (2005:84) has insisted in his study of public service reforms in Malawi , that “leadership is the engine that drives change” and according to Lungu, it “… requires a compelling vision that will inspire and mobilise others to achieve their best”. In the sampled case studies discussed above, it was clear that where the degree of success was very high, as in the City of Indianapolis, it was true that
leadership from government provided the necessary space and stewardship for that level of
success. In other cases, as in Atlanta, it is clear that there was no champion leading the
change and no commitment from empowered aut horities to push the contracting reform
forward.
Secondly, capacity was critical in policy design and implementation. Capacity was adequate
in terms of financial resources, human resources, governance systems, programme
188 development, management and evalua tion. In each case study, it was clear that this was a major factor, either as a constraint or as a supportive element in the achievements recorded.
Thirdly, the framework of cont racting - out and compulsory competitive tendering was through legislative pres cription and proscription covering all the stages in awarding contracts.
The effect of this is that the response by local government has tended to be legalistic starting with the letter of the law. Elements of the legal framework which are crucial in contr acting - out implementation, were however, not closely defined, for example, in the prohibitions on acting “anti - competitively” and the exclusion of “non - commercial considerations.” This led many local authorities to give importance to guidance issued by pro fessional bodies, external monitoring bodies for local government (Audit Commission, 2007). Furthermore, social and political considerations in private provision of public service were not considered.
Fourthly, private sector realities. The private sector is not an immediate shining example of performance virtues.
Fifthly, the role of regulation is explicitly fundamental. Reforming the public sec tor, in general and contracting - out in particular, require a very carefully designed system. In
Zimbabwe, priva tisation was introduced without any governing legislation (Zhou, 2012).
This created loopholes that le d to the predominance of administrative discretion, selective implementation and personalisation of decisions.
Sixthly, the challenge for policy makers l ies in achieving competitive neutrality between private and public sector tenderers, so that competition is both effective and real. The seventh lesson is to ensure valid comparisons. It is important when considering proposals for
189 contracting - out that all alternatives, which may include continued in - house provision, be comprehensively evaluated.
Lastly, overcoming resistance is crucial. In the Chicago and Indianapolis cases discussed, politicians were either proponents of management reforms themselves or s upporters of public servants who were implementing management reforms, for example, Mayor Richard Daley in
Chicago and Mayor Stephen Goldsmith in Indianapolis.
It is clear from the case studies that reforms have to be very carefully planned. Policies have to be flexible and adoptive. Stakeholders have to be involved, engaged continuously informed about the goals, progresses, outcomes and constraints of reforms. To maintain progress reform, there is needed to build, accumulate and retain capacity in terms of skills, financial resources, materials and equipment, to ensure there are strong leadership and management teams that can provide direction and keep all stakeholders inspired and eager to achieve the desired outcomes. All these elements need to be enshr ined in and supported by legislative and regulatory frameworks.
4.6 CONCLUDING REMARKS
What can safely be said about the empirical findings on contracting - out so far , is that they are far from being conclusive. As Parker and Kirkpatrick (2005) correctly co nclude, the r elationship between contracting - out and performance improvements , is complex and superior post - contracting out performances is not axiomatic, Indeed, one may be tempted to recall Bouin and Michalet’s conclusion in the early 1990s to the effec t that:
The literature on comparative performance of public and private firms suggest that, although the results would seem to favour the private sector, there is no decisive evidence as regards the impact of the ownership of the enterprise on economic per formance. In fact, none of those studies is able to compare two enterprises, one public, the other private, with identical regulatory frameworks in the same sector of
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activity and in the same country. The results are, therefore considerably weakened and ca nnot provide a satisfactory ju stification for contracting out (Bouin and Michalet, 1991: 133).
While it cannot be concluded that contracting - out is a panacea (Greve , 2008), a general
consensus seems to have emerged that the enhancement of competitive forces and effective
regulation are equally, if not more important than ownership (Park and Kirkpatrick, 2005;
Curry, 2010; Obadan and Jerome, 2004). Competition generate s an efficient allocation of
resources, reduces management slack and stimulates managerial and worker efforts, leads to
cost - reducing investments or quality improving expenditures (Koning, 1997). Finally, there is
a clear need for further studies on the im pact of contracting - out, particularly in Africa where,
apart from the theoretical prediction, not much is known about the economic and social
eff ects. The impact of contracting - out has yet to be comprehensively assessed in many
developing countries, partic ularly Sub - Saharan Africa. Empirical knowledge of the impact of contracting - out in Africa is very limited , unlike other developing regions and particularly the industrialised countries. Also, little evidence has yet been adduced on the broader effects of
c ontracting - out on service delivery performance. It will be interesting to know the role of
competi tion in contracting - out outcomes.
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CHAPTER FIVE
ZIMBABWE: POLICY ENVIRONMENT
5.0 INTRODUCTION
This chapter presents a synthesis of the findings about the Zimbabwe policy environment and the state of Zimbabwe local government structures and systems. Policy documents, various reports, relevant literature and data gathered from various key - informants would be anaysed.
This enables the study to achieve objective number two stated in Chapter One of this study:
To examine political, socio - economic, institutional and legal frameworks that were put together to facilitate contracting - out. The characteristic s of the policy environment, its dynamic evolution over time , has an impact on the effectiveness of policy design and implementation. Implicitly, once Zimbabwe gets its politics right and chooses the right policies and institutions, Zimbabwe’s contracting - out would be on autopilot.
This chapter advances the argument that policy processes cannot be adequately analysed outside the environmen t in which they occur (Anderson, 1984). The environmental contexts under which state institutions operate influence their actions. They set the limits and give direc tion to what policy makers, practitioners and analysts can effectively do. Implied here is that environmental contexts have the capacity to either enable or disable national policy processes. Within each policy environment , there are arrays of state and non - state actors involved in varied policy processes in the form of research, monitoring, regulating, reviewing, analyzing, a uditing, investigating, lobbying, advocacy and training, among others.
In Zimbabwe, the colonial factor, despite futile attempts to wish it away by some scholars, remains a decisive factor influencing the trajectory of post - independence policy making. A t horough review of major policies in Zimbabwe over the decades (Reconciliation Policy,
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Indigenisation and Economic Empowerment Policy, Land Reform Policy, Education Policy,
Labour Policy including the Zimbabwe Agenda for Sustainable Socio - E conomic and Socia l
Transformation (ZIM - ASSET) ), glaringly point s to a nation that is struggling to come even with its historical aftermath. Zimbabwe, a former British colony, achieved its independence through a protracted armed struggle. The ‘liberation factor’ underlies t he mind - set of its citizens and the national leadership. It underpins the Constitution and national policies such as War Veterans Compensation Fund and Heroes status conferment. Underlined here is that analysis of policy decisions and choices in Zimbabwe s hould not miss these underlying historical considerations.
This chapter is organised around five thematic areas: (i) Zimbabwe’s political system, (ii)
Zimbabwe’s socio - economic system, (iii) Zimbabwe policy - making landscape, (iv) local government stru ctures and systems in Zimbabwe, (v) challenges Harare City Council faces, and (vi) chapter summary.
5.1 ZIMBABWE’s POLITICAL SYSTEM
Zimbabwe achieved independence from colonial rule in April 1980, only after a violent revolution. Although political power had been won, the control of the economy remained firmly in the hands of the settlers and the multi - national corporations (MNCs) (Chakaodza,
1993). This inhibited the emergence of a clear - cut system. The Zimbabwe African National
Union - Patriotic Front (ZA NU - PF) party led by Robert Mugabe won the elections in 1980 on a programme of transforming the country along the socialist path of development.
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However, transforming the system from capitalist to socialist paths proved elusive for the
ruling party. The go vernment tried to maintain some features of a capitalist market economy
and also tried to borrow some features of the socialist planned economies. The later
manifested in the Zimbabwe government playing a much more decisive role in the public
sector.
Thus, Zimbabwe’s political system could be best described in the early years of independence
as a mixed capitalist and planned socialist system. In most cases, however, such a choice
combined the worst, not the best, features of capitalism and socialism. It often prevented
Zimbabwe from adopting “honest - to - goodness” economic policies. At the same time, the choice of the mixed economy prevented the country from pursuing its goals in a truly socialist framework since mixed economy institutions are often mor e capitalist than not. Underlined here is that policy processes are extremely sensitive to the politics of the day.
The political turmoil from 2000 to 2009 seriously diminished organizational capacity for policy formulation and management in Zimbabwe. It induced a culture of ad - hoc - responses to urgent problems, leaving little room for more fundamental and long - term policy analysis, consultation, de sign of effective implementable strategies, monitoring and evaluation. Short - term crises tend to receive top priority, leading to grossly inadequate analytical and administrative effort being given to the development of policy making. Since 2000, policy making in Zimbabwe , has just been slipping from one expedient to another without tackling underlying proble ms. This usually leads to policy decisions that are well - intentioned but ill - conceived. Politico - economic stability should obtain in the policy environment so that policy consistency and prediction can be ascertained.
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5.2 ZIMBABWE SOCIO - ECONOMIC SYSTEM ( 1980 - 2014)
An often overlooked issue in the national policy discourse , is the link between the state of the
economy and national policy making. The level of economic development affects the
availability of resources and the way they are allocated/distribu ted across ministries and
departments. Zimbabwe is currently experiencing severe fiscal space limitations , arising from
an under - performing revenue sources, liquidity crunch, erratic power supplies, low capacity utilization, limited access to offshore cred it lines, and a debt overhang of around US$10
billion to the IMF, the World Bank and the African Development Bank (GoZ, 2014) .
Zimbabwe’s fiscal challenges are exacerbated by the fact that it is currently using a basket of
foreign currencies and , therefore , cannot use the money printing route to fund budget deficits.
Budgetary allocations are generally characterized by huge under - funding variances across
ministries. These economic and fiscal distress conditions do not augur well for the realis ation
of the w ell - intentioned goals of the ZIM - ASSET . It is a truism, that public policy without
funding is indeed a nullity. However, efforts that are currently taken by the fiscal authorities
to create conducive environment for investment , are a welcome development. Z imbabwe is
currently on an IMF - Staff - Monitored Programme (SMP). The announcements in the 2014
Nati onal Budget that Government would maintain the multi currency basket and that it would
reimburse funds that were appropriated from foreign currency accounts ar e also positive. This
section is divided into four periods: the 1980 - 1990, 1991 - 1998, 1999 - 2008 and 2009 - 2014.
These are briefly described below.
5.2.1 1980 - 1990 Era
The new black government adopted Growth with Equity in 1981 as the first post -
independence economic policy statement. As outlined in this economic policy statement,
Government’s objective was to implement policies based on socialist, egalitarian and
195 democ ratic principles. Explicit in the economic and social goals of Growth with Equity was the assumption that the economy would grow at a fast rate enough to generate sufficient revenue to fund national projects. This optimism was a result of the boom that wa s experienced from 1980 - 82 as a result of the ending of the war, excellent weather, the lifting of trade sanctions, an influx of foreign aid and decreases in defence outlays. The economy experienced dramatic growth, an 11 per cent econom ic growth rate in 1 980 and 9, 7 per cent in 1981 (GoZ, 1985). This optimism which evidently manifested in the Three - Year
Transitional National Development Plan (1982 - 1985) and the First Five Year National
Development Plan (1986 - 1990) was, however, short - lived as two major r ecessions set in.
There was a major drought in 1982 - 84. The drought coincided with a world recession and contributed to a balance of payments problems.
At the same time, however, there were tremendous strides achieved in the social development sector. Acc ess to education at all levels expanded phenomenally during the 1980s. The free - for - all basic education policy saw the rapid growth in schools and student enrolment. For example, in 1980 there were 3 160 primary and 200 secondary schools. By 1990, the numb er o f primary schools went up by 43 per cent to 4 350 and secondary schools by 76 per cent to
1520 (Karach, 2002). The health service sector also grew significantly during the 1980s
(UNDP, 1997). The health spending, as a share of GDP, increased from 2 per cent in fiscal
1980 to a peak of 3 per cent in fiscal year 1990 (ibid.).
The parastatal sector grew to deliver affordable essential services. Within a decade, the parastatal sector in the country had expanded from 20 in 1980 to over 40 by 1990
(Masunungu re and Chimanikire, 2007:15) with the majority being monopoly companies in which the government had 100 per cent or majority equity shares (Zhou, 2000). These
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parastatals spearheaded multiple developmental, promotional, regulatory, redistributive and
alloc ative goals most of which could only be achieved through subsidy policy that enabled
parastatals to undertake and provide services to the public. Most parastatals made huge losses
in their operations.
It is pertinent to note that though the first decade w as marked by the centrality of the state as
a player in the formulation and implementation of development policy, there is no consensus
as to whether Zimbabwe did have a deliberate socialist policy thrust or it was a case of what
Bond and Manyanya describe as Mugabe’s trade mark: “talk - Left, act Right” (Bond and
Manyanya, 2002: xiii).
In short, during this decade, Zimbabwe experienced mixed fortunes in its economic
performance. The average annual growth rate was 4.1 per cent between 1980 and 1985, and
4, 6 per cent between 1985 and 1990 (GoZ, 1986, 1990).
5.2.2 Economic Structural Adjust ment Programme (ESAP): 1991 - 1995
The fundamental question here is why the state in Zimbabwe adopted ESAP at the time it did.
There were many push ing factors that accoun ted for this radical policy shift by the government. For one thing, the whole of the 1980s decade was marked by a distinct and strong rightward movement in ideology that culminated in the triumph of global capitalism with the collapse of empirical socialis m in the former Soviet Union and Eastern Europe.
Closely linked to these external variables, was the role of the international financial institutions (IFIs) and among these, the World Bank and International Monetary Fund (IMF).
These external forces operat ed in liaison with the local pressure groups that viewed privatisation as a key economic and fiscal recovery strategy to the economy whose budget
197 deficit was increasingly becoming unsustainable. However, these IFIs did not force
Zimbabwe to adopt ESAP. The country enjoyed considerable policy autonomy and, thus, the
IFIs were “influential rather than instrumental as regards the decision taken to adopt a structural adjustment programme at the end of 1990” (Jenkins, 1997:598). In 1987, the
Reserve Bank of Zimb abwe (RBZ) was faced with a severe foreign currency squeeze and decided to substantially reduce foreign currency remittances (halving them from 50% to
25%) (Nhema, 2002).
There were also other macro - economic fundamentals that were out of joint by the end of the first independence decade. Nhema elaborates:
At the macro - economic level, GDP per capita had remained stagnant for much of the first decade o f independence. The balance of payments sank into deficit while the foreign debt - service ratio ballooned. Subsidies to inefficient parastatals rose from around 40% of the budget deficit to 60% by 1987, leading one local observer to call for a serious re - evaluation of the nature and operations of state - owned enterprises in the country. Corruption thrived while the public payroll swelled to several times its previous size. The quality of administration declined because party sympathisers, qualified or not, occupied key positions in both state - owned enterprises and government ministries (2002: 127 - 128).
Within th e local policy, the unification of the former rival ZANU - PF and Patriotic Front -
Zimbabwe African People Union (PF - ZAPU) parties had the paradoxical effect of marginalising the unified party from key policy decision - making processes. The introduction of the executive presidency at the end of 1987 also saw the centralisation of economic policy making in the Presidency, the Minister of Finance and Economic Development, and the
Minister of Industry and Commerce (Masunungure and Chimanikire, 2007). It was this t riad that was now in charge of economic policy formulation and implementation (Ibid.). Not only was the public not consulted let alone involved in the formulation of policy, but even;
“…middle ranking members of ZANU - PF and Parliament itself were marginali sed (Jenkins,
1997:588).
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Another factor that led to the adoption of ESAP was that the period coincided with the
ascendancy of technocrats over ideologues in Cabinet (Masunungure and Chimanikire,
2007:19). In fact, according to Bond and Manya nya, ESAP was i ntroduced by the late
Finance Minister, Bernard Chidzero, and a very small group of technocrats. It also saw the entry of the World Bank as a key player in the country’s economic policy - making, invariably on the side of the economic interest groups (Confe deration of Zimbabwe Industries (CZI),
Employers’ Confederation of Zimbabwe (EMCOZ), Commercial Farmers Union (CFU),
Zimbabwe National Chamber of Commerce (ZNCC) and Zimbabwe Bankers Association
(ZBA). Indeed, Bond and Manyanya claim that the key documents were prepared by the
World Bank in 1987 and then revised so that a majority of the Cabinet concurred. The technocrats in Cabinet and the state bureaucracy, the powerful economic lobby groups and
WB together constituted a powerful pro - adjustment coalition .
Another contributory factor in the adoption of ESAP was that the economy was under stress.
The socialist - oriented development strategy was not delivering jobs and the need for a new strategy that would presumably ease the growing unemployment was a ver y persuasive argument used by the Cabinet technocrats to persuade their colleagues to support ESAP.
The last but not least factor was that it was reasoned in policy circles that there would be little resistance from outside government, the united ZANU - PF and the private sector. The labour movement was deemed to have been tamed and, therefore, too feeble to effectively resist
ESAP. Sachikonye elaborates:
The calculation of the ZANU - PF government was that the trade union movement was not yet politically powe rful enough to lead a strong anti - ESAP coalition .I ts organisational capacity to mobilise even nation - wide industrial unrest against the new economic dispensation was judged to be weak ( Sachikonye, 1995:46).
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He further avers that:
The marginalisation of th e [labour] movement in the design and implementation of ESAP was complete…..It reflected the state’s calculation that the labour movement would not succeed in obstructing or derailing the programme. In the short - term, this calculation has been more or less vindicated; opposition to ESAP by the ZCTU has been ineffectual. Amendment to the Labour Relations Act in 1992 sought to weaken the unions through the legislation of splinter unions and shifting power to work - place based works council (Ibid.:127).
It is in this context that an accord was reached on a policy framework paper, the Economic
Structural Adjustment Programme (ESAP) and by July 1990, implementation had started in earnest. The adoption of ESAP marked the first and major policy change in post -
indep endence Zimbabwe.
5.2.2.1 Did ESAP Achieve its M andate?
ESAP was introduced in three stages, the first two being in July and September 1990 and the
third in January 1991. In July 1990, the Government unveiled the Economic Policy
Statement: Macroeconomic Adjustment and Trade Liberalisation . The second stage used
privatisation as the flagship facet of the five - year phase of ESAP. The third stage of ESAP
was in January 1991 when the Government announced the more detailed version of the
programme, Framework for Economic Reform, 1991 - 95. The Government of Zimbabwe and
WB had promised to deliver remarkable benefits:
a chieve annual GDP growth of 5 per cent over the period 1991 - 95; r aise savings to 25 per cent of GDP; r aise investment to 25 per cent of GDP; achie ve export growth of 9 per cent per annum; r educe the budget deficit from over 10 per cent of GDP to 5 per cent by 1995; and r educe inflation from 17, 7 per cent to 10 per cent by 1995.
Did ESAP achieve these targets? The verdict on ESAP was that it was a devastating failure.
Bond and Manyanya (2002) unequivocally argue that ESAP in reality “failed miserably.” The
200 table below gives a comparative performance of key economic indicators between the first decade and ESAP’s period (1991 - 1995).
Table 5.1: Zimbabwe’s Economic Performance: 1980 - 1995 Economic Indicators 1980 - 1990 (%) 1991 - 1995 (%) Real GDP growth 4.2 2.8 Average annual inflation 12 26.6 Employment growth 1.9 0.12 Manufacturing/GDP 20.35 16 Agriculture/GDP 16.2 14 Mining/GDP 4.3 4 Savings/GDP 18 23 Investment/GDP 17 21.7 Budget Deficit/GDP - 3 - 5,8 Export growth 0,2 0,1 Exports/GDP 23 41 Source: Central Statistical Office, Reserve Bank of Zimbabwe (various publications)
In their critique of the economic programme in Beyond ESAP (1996 ), the Zimbabwe
Congress of Trade Unions (ZCTU) reported t hat their average member was 38 per cent poorer than in 1980 and 40 per cent poorer than in 1990.
Workers and poor people faced an unprecedented financial crisis during the early 1990s. The s ocial wage fell sharply , thanks largely to new cost recovery policies for health, education and many other social services. The trends generated by Zimbabwe’s exemplary social policy during the first decade of independence - reducing infant mortality from 86 to 49 per 1 000 live births, raising the immunisation rate from 25% to 80% and life expectancy from 56 to 62 years, doubling primary school enrolment, among others - witnessed ominous reversal (Bond and Manyanya, 2002:37).
For evidence of the miserabl e ESAP failure during the 1991 - 1997 period of its implementation, Bond and Manyanya cite the ‘IMF Riots’, including 1993 bread riots which broke out in high density suburbs of Harare and in the city centre in 1995. Also, industrial
201 strikes became a common occurrence and mode of grievance expression across economic sectors. The largest industrial strikes involved railway workers (1992), bank workers (1993 and 1994), postal and telecommunications workers (1992 and 1994). Public sector workers, inter alia, te achers, nurses and civil servants went on strike in 1996. Even plantation and farm workers, who for ages had been pliant, went on strike in an unprecedented show of anger.
In the parastatal sector, privatisation of parastatals led to the retrenchment of many employees, worsening their welfare, as there were no social safety net mechanisms in place.
Over 300 workers were retrenched when Air Zimbabwe was commercialised in 1994. The
Cotton Company of Zimbabwe reduced its permanent workforce from 3 000 to 500 between
1994 and 1998 and the Grain Marketing Board retrenched half of its 2 500 workers within a year in 1998. Most retrenched workers were forced into the informal sector to survive.
In other sectors, the contracting - out, outsourcing and commercialisa tion of services in local authorities resulted in a reduction in the quality of service as well as the skyrocketing of prices beyond the reach of the majority, resulted in the non - collection of refuse for days, although contractors continued to receive fee s. In September 2006, the Harare City Council was forced to officially terminate refuse collection and transportation contracts with three private contractors offered the job in 2003. The contracts were due to expire in Ma rch 2007, but the companies had no t been doing work for Council because of a dispute on bin prices and other related reasons. The companies breached their contracts and had failed to collect and transport garbage since July 2005. More information about refuse collection and transportation is presented and discussed in Chapter Seven of this study.
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This study noted that ESAP eroded the living standards of the people due to squeeze on their
incomes. This observation is supported by price increases of basic commodities such as
maize - meal, bre ad; beef and milk were substantial in the period 1992 - 1993. This led to a wave of bread demonstrations by consumers.
Experiences in Zimbabwe and, indeed, across Africa irrefutably demonstrate that the decision to adopt neo - liberal development strategies w as misguided. Not only did the reform programme impact negatively on the welfare of the Zimbabwean majority, but also substantially reversed most of the gains in the first decade of independence with respect to the provision of and the majority’s access t o, educational and health services. The role of the state in the first decade was marked by elements of a distributive and welfarist state.
However, with the advent of ESAP, there was a r adical and unexpected rupture of the role of the state from an inter ventionist to a laissez faire one. To many, this marked an unwarranted and silent surrender by the state and those in control of the state, of their contractual social responsibilities , not only to defend the interests of its citizens, but also to advance them.
ESAP was officially pronounced dead and buried in 2001. At the burial of a former cabinet
Minister at the National Heroes Acre, President Robert Mugabe sentenced ESAP to death by pronouncing:
….enough is enough. ESAP is no more. We can’t bury it her e (at National Heroes Acre) It is destined for some hidden bush somewhere…
Apparently, President Robert Mugabe had been a reluctant convert to the ESAP gospel of the
World Bank and the IMF. After the official end of ESAP in 1995, the Government crafted its
‘home grown’ economic programme, Zimbabwe Programme of Economic and Social
Transformation (ZIMPREST) covering the period 1996 to 2000. This is covered under the next period below.
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5.2.3 1997 - 2008 Period 5.2.3.1 Zimbabwe Programme of Economic and Social Transformation (ZIMPREST)
The Government of Zimbabwe in 1998 replaced ESAP with what it described as a ‘home - grown’ reform package, Zimbabwe Programme of Economic and Social Transformation
(ZIMPREST), 1996 - 2000. It sought to mitigate the social costs of ESAP by pursuing economic empowerment and poverty alleviation by generating employment and encouraging entrepreneurial initiatives.
It identified parastatal reforms, public service reform and financial services sector reform as the major elements of the unfinished business under ESAP. Striking to note is that it is under
Z IMPREST period that contracting - out of refuse collection and transportation and water privatisations , were mooted in Zim babwe. The contracts of BiWater International Company
(1997), GKW (1996) and European Investment Bank (EIB) (1999) demonstrate the keenness of the Zimbabwe government to embrace privatisation of urban water. The detailed and expansive discussions of these contracts are in Chapter Eight of this study. Government of
Zimbabwe through ZIMPREST argues that any reform programme ought to make provision for unpredictable eventualities such as droughts rather than trying to react to them as was the case with ESAP. In summary, ZIMPREST sought to achieve the following:
u rgent restoration of macro - economic stability(low inflation and interest rates and a
stable exchange rate);
f acilitating public and private savings and investment needed to retain growth; and
p ursuing economic empowerment and poverty alleviation by generating employment
and encouraging entrepreneurial initiatives (GoZ, 1998).
Furthermore, ZIMPREST specifies what it termed “a minimum target growth scenario’’.
Specifically it sought:
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a consistent reductio n in the budget deficit (from 10 per cent to under 5 per cent of
GDP with a correspon ding fall in inflation (from 20 per cent to a single digit level by
2000) ;
a sustainable improvement in savings and investment performance (higher domestic
savings, more e fficient investment, and an average level of at least 23 per cent of
GDP); and
a continuous growth of exports of at least 9 per cent per annum.
Despite the optimism that was exuded from the policy statement, its economic and fiscal
targets were hardly real ised. For instance, GDP averaged 2.5 per cent against the envisaged 6 per cent by 2000 while budge t deficits increased to over 20 per cent by 2000. Growth in jobs
fell below the 42 000 minimum planned in ZIMPREST. This is not surprising because
ZIMPREST wa s stillborn. It was launched in 1998, two years after its official adoption. In
between the official end of ESAP and the launch of ZIMP REST occurred what many
believed was the beginning of Zimbabwe’s economic plunge. This refers to the financial
meltdown o f 14 November 1997, now known as ‘Black Friday’ when the Zimbabwean
currency fell from around Z$10 to below Z$30 to the US dollar over four hours of trading
time. The Government of Zimbabwe worsened the socio - economic through deployment of
the army to the Democratic Republic of Congo (DRC) in August 1998. This was a disastrous
and ruinous military adventure which burdened the national fiscus.
ZIMPREST’s implementation was, therefore, behind schedule right from the onset. It was
also launched at a time of macroeconomic and fiscal hardships. Under the prevailing
conditions, the programme was not adequately resourced. In addition to this, ZIMPREST was
too multi - focussed. It sought to achieve too diverse issues, namely employment creation, institutional refo rms, land reform, decentralisation and poverty reduction.
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Also judging from past experience, it was unlikely that the projected 6 per cent annual growth
rate would be achieved. Real G DP growth decelerated from 8, 5 per cent in 1996 to a - 2 per
cent in 1999 and a projected 4 per cent in 2000. Two years into ZIMPREST, the budget
deficit was still 10 per cent , with inflation well above 50 per cent w hile unemployment was around 60 per cent . The export sector performed poorly. In fact, in terms of the US$, exports collapsed from about 12 per cent in 1996 to about - 20 per cent in 1999. There was also a mismatch about the supply and demand for foreign currency. Foreign exchange reserves also deteriorated quickly with the situation getting to worse levels by th e year 2000. While its targets were clearly spelt out, ZIMPREST did not have clear - cut plans to realise its intents.
ZIMPREST was also short - lived, as its goals were abandoned in the wake of another programme, the Millennium Economic Recovery Programme (ME RP).
5.2.3.2 Millennium Economic Recovery Programme (MERP)
It was launched in August 2001. MERP was a short - term 18 - month economic recovery programme whose main objective was to restore economic vibrancy and address the underlying macro - economic fundamen tals through enlisting the participation of business, labour and civil society in government programmes. The burden of adjustment was on fiscal policy measures, to reduce expenditure and enhance revenues. This was to be accompanied by appropriate monetary policy aimed at price stability. In summary, MERP, the restoration of macro - economic stability was to be achieved through the following set of measures:
c onsolidation of the fiscus; p rice stabilisation; e xchange rate stabilisation and resolution of the fo reign exchange crisis; d eepening of financial sector reforms; l owering of interest rates; a cceleration of public enterprise reforms; p rotection of vulnerable groups in society; and
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e stablishment of implementation, accountability and monitoring of institutions; and building confidence (GoZ, 2000).
Unfortunately, MERP was rendered ineffective by the withdrawal of support from Zimbabwe by most of the international donor community and international financial institutions. It was also overtaken and over shadowed by the fast - track land reform programme aimed at redistributing land to thousands of landless black majority.
In fact, MERP met the fate of previous programmes, as the economy continued on its precipitous decline. Budget deficit had risen above 14 per cent. Unemployment also worsened due to spates of company closures. In February 2003, Government launched yet another 12 - month stabilisation programme, the National Economic Revival Programme
(NERP).
5.2.3.3 National Economic Revival Programme (NE RP)
It was aimed at redressing what the Government referred in the policy document as ‘current challenges.’ Despite the early hopes raised under this programme, it also failed to revive the ec onomy. Real GDP declined by 8.6 per cent in 2003 and by about 2. 5 per cent in 2004.
A griculture also declined by 3.3 per cent.
Overally, the economy experienced severe declines in the value of the local currency, shortages of local bank notes, fuel and basic commodities such as maize - meal, bread, milk, cooking oil, so ap, salt, margarine and sugar. Financial and banking institutions were also hard hit by a spate of unethical business practices which saw banks such as Barbican Bank, Time
Bank, Royal Bank, ENG Capital and Inter - Market Building Society either closed or pla ced under curatorship. In order to regulate and arrest economic decline, the Government, through the Reserve Bank of Zimbabwe, adopted a New Monetary Policy on 18 December 2003. The
207 improved position of 2004 derived from the implementation of the monetary policy since its adoption. As a result of the monetary policy thrust, inflation declined from 623 per cent in
January 2004 to 209 per cent by October 2004. The inflation target of 200 per cent by
December 2004 was met. However, inflation worsened from 2005 and by September 2006, it had soared to an uncharted territory of over 1200 per cent, the highest in the world.
5.2.3.4 Macro - E conomic Policy Framework (MEPF) (2005 - 2006)
It succeeded NERP in 2005.While this policy was built on the Ten - Point Plan crafted in 2002 focussing on agriculture and was also expected to consolidate lessons drawn from NERP, this did not materialise. The major focus of the MEPF was ‘Towards Sustained Economic
Growth’ (GoZ, 2005), expansive monetary policies between 2003 and 2 008.
In 2006, the state introduced NEDPP, which the then Minister of Economic Development described it as the “the right formula.” NEDPP was an overly ambitious programme that sought to turn around the economy within six to nine months. It also expected to raise US$2.5 billion in cash or in the form of investments within 90 days. However, hardly a month after its launch, the optimism that accompanied the programme , fast lost steam. It was difficult to sell because there was no broad - based consultation wit h society. The public came to know about the programme on the day of announcement. Furthermore, NEDPP was laden with contradictions. For instance, it refers to a conducive investment destination at a time the state was introducing a controversial indigenis ation and economic empowerment programme in the mining sector.
5.2.3.5 Monetary Policy Statements (200 7 - 2008)
Between 2007 and 2008, basic commodities disappeared from the market. This was attributable to unfeasible pricing rules and unbearable macroecono mic milieu. The Reserve
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Bank of Zimbabwe, through the Mid - Term Monetary Policy Review Statement of October
2007 , introduce d the Basic Commodities Supply - S ide Intervention Facility (BACOSSI) in
order to heighten the production of basic commodities. The BACO SSI was “a crisis
management intervention in the aftermath of the mid - 2007 price blitz” (GoZ, 2008). This quasi - fiscal intervention was designed to avert the probable collapse of companies. It demonstrated that Zimbabwe was characterised by policy contradi ctions and conflicts.
Furthermore, the availability of basic commodities was also improved through the creation of
Foreign Exchange Licensed Warehouses and Retail Shops (FOLIWARS) and Foreign
Exchange Licensed Oil and Diesel (FELOPADs). These policies lega lised businesses to sell goods and services in foreign currency.
The nature of policy making under the 1997 - 2008 era , can be described as implement first and formulate and adopt later. The majority of policies were implemented on the basis of political sl ogans such as the Look East Policy. Gleaned from these economic policies is that policies were being crafted, abandoned, redesigned and discarded with haste to the extent that the economy had become an experimental guinea pig. The study noted that the fail ure of previous economic programmes was due to lack of shared national vision and inclusiveness in terms of stakeholder participation. The most important conclusion from the sections discussed so far is that there is a wide gap between the designed policie s and their implementation. The yawning gap is evident when the texts of the policies or reform documents are compared with the implementation outcomes. Some of these programmes remained paper tigers. The dominant trait of all the policies was that they we re not implemented except as propaganda instruments , not for turning around the economy.
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5.2.4 The Transitional Period: 2009 - 2013
The African Union (AU) and the Southern African Development Community (SADC)
intervened in Zimbabwe to unlock the electora l deadlock following disputes over the
outcome of the 2008 harmonised general elections. The elections were characterised by large
scale political violence, intimidation and complaints of political fraud which infringed on
political participation and expre ssion.
On the 9 th September 2008, the three major political parties then in Zimbabwe , signed the
SADC mediated Global Political Agreement (GPA), paving the way for the formation of the
Inclusive Government (2009 - 2013), under which executive power was shared amongst the
three main political parties, ZANU - PF, Movement For Democratic Change - T svangirai
(MDC - T) and Movement For Democratic Change - Mutambara (MDC - M) (GoZ, 2008). The
terms of the GPA called for the division of political p ower and authority between the O ffice
of the President and the Prime Minister, a cabinet constituted by the three main political
parties in terms of the seats they won in the parliamentary elections of March 2008, writing
of a new constitution as well as other technical institutions supportive to the creation of
peaceful conditions for future elections, end to politi cal violence and economic stabilisation.
Although the power sharing government stabilised the socio - economic situation, its tenure was largely contentious, with political parties fighting to gain political advantage over their opponents. The lack of mutual understanding and commitment to the GPA hampered the full implementation of the settlement, leading to new elections in 2013 , whose outcome was consequently disputed by the losing opposition. The period was characterised by inter - party political squabblin g. This was evident in the formulation and implementation of the indigenisation and economic empowerment policy.
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On account of the bloated structure, the Inclusive Government was overly consumption - oriented, comprising 71 ministries, deputy ministers and governors. This figure was too high and unsustainable for an economy and population of Zimbabwe at a time when the economy was still in distress and the Treasury was broke. As a result, there had been very little inflow of investment and capital into the country as most potential investors were sceptical and risk - averse and adopted a wait - and - see mode.
The political and economic uncertainties contributed a lot to a dearth of competitiveness in the economy. Policy making was entrenched in political expedie ncy and survival rather than long - term socio - economic welfare. For instance, debt cancellation of all water and electricity debts by Zimbabwean local authorities and Zimbabwe Electricity Supply Authority (ZESA) in 2013.Policy making was “highly unpredictab le, exclusive, top - down and short - range in focus” (Zhou and Zvoushe, 2012).
5.3 LOCAL GOVERNMENT STRUCTURES AND SYSTEMS IN ZIMBABWE
The current local government set up in Zimbabwe is a product of both the colonial era and post - colonial reconstruction of centre - local relationships. In 1980, Zimbabwe inherited a system of local government divided on racial grounds. The system consisted of Rural
Councils and Urban Councils for the White settler population on the one hand and African
Councils for the black po pulation. The two types of local authority were managed under different ministries, the Rural and Urban Councils coming under the Ministry of Local
Government and Town Planning, whilst African Councils came under the Ministry of
Internal Affairs.
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At ind ependence, the government mooted the reorganisation of local government. The first measure was the 1980 District Councils Act, which consolidated the more than 200 fragmented African Councils. The new Urban Councils Act repealed the previous Urban
Councils Act and brought about the Urban Councils Act (1980), which included African
Townships, now known as High Density Areas, under the Act and extended the vote in local elections to lodgers.
The second measure was the 1984 Prime Minister’s directive , which w as enshrined in the
1985 Provincial Councils and Administration Act. This Act provided for the appointment of provincial governors and for changes in the organisation and planning functions of local government. The central desire of the directive was to d efine the administrative structures at provincial and district level and the relationship and channels of communication between all participants in development in order to achieve coordinated development of provinc es and districts. This was achieved throug h planning, participation, coordination and implementation through a bottom - up system , based on a hierarchy of local institutions at village, ward, district and provincial level.
The 1988 Rural District Councils (RDC) Act provided the legal basis for the amalgamation of the two types of rural local authority into a single Rural District Council with the purpose of removing racially based development as well as strengthening the role of local government in rural areas. It was only in 1993 that amalgamation was fully realised since there was a lot of resistance from the former Rural Councils who had more resources and had enjoyed more autonomy during the colonial era. During the early 1990s , a number of studies were carried out including the Strategic Plan fo r RDC Capacity Building and Financing RDCs. This resulted in the national RDC Capacity Building Programme , which started in 1994 with
212 basket funding from various donors. Ideologically , there were also shifts within central government, as it embraced struct ural adjustment programmes. There was reduced funding for social infrastructure and encouragement of more private and civil society participation in development.
The table below provides an overview of the main local government legislation passed in
Zimba bwe since independence.
Table 5.2 : Key Legislation in Zimbabwe’s Local Government
Legislation Purpose 1980 - Amendments to the Urban Councils Repealed the previous Urban Councils Act Act and brought about the Urban Councils Act (1980) which included African townships, now known as High Density Areas and extended the vote in local elections to lodgers 1980 - District Councils Act Repealed the previous Act and brought together the much small, African Councils into 55 larger and more viable District Councils. Th ey lacked autonomy and resources. Brought under the Ministry of Local Government. 1984 - The Prime Minister’s Directive The directive outlined decentralised co - ordinating development structures from village to provincial level, led to establishment of 6 000 Village Development Committees (VIDCOS) and 1 000 Ward Development Committees (WADCOS) with elected members. They wer e formalised under the Provincial Councils and Administrative Act in 1985. There were the District Councils with elected members and the District Development Committee chaired by the District Administrator, mainly made up of civil servants, chair persons o f council committees and NGO representatives. There were Provincial Councils, political bodies chaired by the Provincial Governor, with one chief, representatives from each local authority in the province. The Provincial Development Committee was an execut ive body chaired by the provincial administrator, made up of provincial heads of
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ministries, chief executive officers of all local authorities in the province and key representatives of NGOs. 1988 - The Rural District Councils Act The Act brought about a un ified system of local government in rural Zimbabwe, by combining the Rural Councils and District Councils into one local government structure with 64 functions inter alia: development, education, health, water and sanitation, roads, housing, natural resour ces and development of the district centres. 1997 - Urban Councils Act Amendments Introduction of Executive Mayors 1998 - Traditional Leadership Act Implemented in 2000. Restored power of traditional leaders and reducing the power of elected leaders. 2013 - C onstitution of Zimbabwe Amendment Enshrines and gives local government a (No.20) constitutional status. Sources: Various Respective Governments of Zimbabwe Acts
In 1998, the government enacted the Traditional Leaders’ Act but was implemented in 2000 restoring the powers of traditional leaders and reducing the powers of elected leaders. The
Traditional Leaders’ Act gives the chiefs, headmen and village heads , the following powers: to co - ordinate development; to allocate land as agents of the Rural Dist rict Council; to manage natural resources; to preserve and maintain family life and culture; to keep population records and try a range of crimes; and to maintain a good standard of health and education; and to collect all levies and taxes payable to the c ouncil.
President Robert Mugabe spoke about these structures, at the Association of Rural District
Councils (ARDC) s econd Biennial Congress in 1999 “These changes attempt to link traditional leadership to the democratically elected Rural District Council structures in a manner that will remove rivalry, tensions and conflicts and promote consultation and teamwork between them” (ARDC Newsletter, July 1998).
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Zimbabwe is a unitary, democratic and sovereign republic , divided into ten provinces namely
Harare, B ulawayo, Mashonaland West, Mashonaland East, Mashonaland Central, Midlands,
Masvingo, Matabeleland North, Matabeleland South and Manicaland (Constitution of
Zimbabwe Amendment (No.20) Act of 2013). The provinces are made up of 92 councils, that is, thirty - one urban councils and 61 rural district councils. Essentially, the councils are the local authorities and they are made up of wards. Urban councils are further divided hierarchically into cities, municipalities, towns and local boards.
5.3.1 Legal Framework and Institutional Structures for Local Government in Zimbabwe
Chapter 14 of the Constitution of Zimbabwe Amendment (No.20) Act, 2013 provides , for
“Provincial and Local Government” which is a departure from the previous era where local governmen t was created through legislation which was administered by the Ministry of Local
Government giving the Minister unfettered powers. Section 264 (1) makes it clear that
“whenever appropriate, government powers and responsibilities must be devolved to provin cial and metropolitan councils and local authorities which are competent to carry out those responsibilities efficiently and effectively.” However, the criteria for establishing competency are not cast.
Part 3 of Chapter 14 provides for local government s tructures and functions. These are classified into Urban Local Authorities and Rural Local authorities. Section 276 (1&2) gives the functions of local authorities as:
Subject to this constitution and any Act of Parliament, a local authority has the right t o govern, on its own initiative, the local affairs of the people within the area for which it has been established and has all the powers necessary for it to do so.
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These constitutional provisions place emphasis on the independence of local authori ties an d this independence , is derived from the constitution and not necessarily at the benevolence of the Minister responsible for local government. Further to that, the local authorities are being mandated by the constitution to have the powers which enable the m to govern their jurisdictions and this , removes room for interference from the parent ministry. The provisions also remove the unfettered powers of the responsible Minister to reverse or rescind council decisions or to determine the extent to which local authorities make decisions and resolutions on their own. The section also empowers local authorities to make decisions, rules and regulations and by - laws without having to seek express approval from the Minister. This gives the local authorities sufficien t space and discretion to make decisions in the interest of local residents within their jurisdictions.
5.3.2 Policy Institutional Arrangements 5.3.2.1 Inter - Ministerial Committee
These comprise officials from relevant ministries who are experts in the ir areas of operation.
In many instances, the inter - ministerial committees are the first forum where a Ministry’s
new policy or position stance is discussed. The recommendations of the inter - ministerial
committee are passed on to the committee of Permanent Secretaries, who in turn pass their own recommendations to Cabinet.
The purpose of the inter - ministerial committees is to bring together government officials with relevant qualifications, expertise and experience, so that they can help improve on a polic y position being advocated by a Ministry. These committee meetings also , help a M inistry to
fully understand how its actions impact on other government ministries. As and when
necessary, the inter - ministerial committees can co - opt other organisations to at tend their
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meetings. Such organisations include the parastatal sector, local authorities and residents
associations.
5.3.2.2 Committee of Permanent Secretaries
From the inter - ministerial committee, policy papers and their recommendations are forwarded to the Committee of Permanent Secretaries. This committee also discusses the policy position papers, and the recommendations drawn up by the lower committee.
Essentially, the committee of Permanent Secretaries fine - tunes the recommendations from the
lower committee , so as to come up with a policy position that is in line and dovetails with the
overall government development objectives. In other words, the Committee of Permanent
Secretaries makes sure that all government ministries operate as a single and c oherent unit in
the execution of government tasks. The recommendations of the Committee of Permanent
Secretaries are forwarded to Cabinet for final decision.
5.3.2.3 The Cabinet
The Cabinet has a final say o n the formulation of policy as well in its imp lementation.
Whereas the inter - ministerial committees run by officials who base their recommendations on
financial and economic analysis, as well as on the day - to - day operations of ministries, the
Committee of Permanent Secretaries takes that into account, but in addition addresses the
political implications of the new policy thrust. History has shown that the Cabinet often
makes decisions based on political expediency without taking due regard to the economic and
financial implications of those decisions. Such decisions are at times cause for concern to the
bureaucrats who would be well aware of the severity of the economic and financial
implications of such action. However, this has to be understood in the context that Cabinet
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M inisters are politicians who se driving motive is to please their electorate and stay in power.
Thus often, bureaucrats’ influence is limited as their function is simply to advise the politicians.
But the extent to which economic consideration overshadow political considerations is a function of the magnitude of political threat resulting from adoption of certain policies. An interesting example in this regard is the formulation of Vision 2020 in Zimbabwe. The
Government of Zimbabwe hired a consultant to undertake nationwide consultati ons with officials from the National Planning Commission so as to draw up the vision.
The vision 2020 document was finalised about a year before general elections scheduled for the year 2000. The document placed a lot of emphasis on the need for good gove rnance, transparency and accountability, which were lacking in government.
The Cabinet felt that the issues were too sensitive and critical of government, especially in light of the parliamentary elections that were forthcoming. The document was revised s everal times until the consultant disowned its contents on the grounds that they were no longer reflecting the ideas of the people consulted. In this case, the government perceived considerable political threat in that opposition parties could use vision 2 020 as a basis for criticising the ruling party in the areas of governance, transparency and accountability. In spite of the importance of the vision in guiding long term national development, the document was suppressed for political expediency.
During t he run - up to the 2000 parliamentary elections, the President increased the salaries of chiefs from Z$2 000 to Z$10 000 and those of sub - chiefs from Z$600 to Z$5 000 just after the 2 000 parliamentary elections. Ex - combatants were drafted into a reserve arm y and their
218 monthly allowances doubled from Z$2 000 to Z$4 000. All these expenditures had not been budgeted for , but were found to be politically prudent in light of the Presidential elections to be held in early 2002. These examples demonstrate that poli tical considerations predominate in the policy making process.
5.3.2.4 Ministry of Local Government, Public Works and National Housing (MLGPWNH)
It provides the policy framework within which local authorities operate . With increased pressure for government Ministries to concentrate on core business, t he Ministry tries to play an enabling rather than controlling role in local government. In the area of capacity in policy formulation, it has been observed that a major p roblem that the Ministry has faced has been its own transformation from being a regulatory agency to a facilitating agency. The perceived ways of doing business prior to contracting out appear to have been carried over into the post - contracting - out era. Th e major problem experienced by the Minis try was to let go the power it once wielded in the pre - contracting era. Having been use d to giving rules and regulations and seeing them followed, the MLGPWNH found it difficult to listen and take ideas from
HCC and the private sector. As one official from Harare City Council remarked , the “minister continued peddling in the tendering process.”
5.3.2.5 Local Government Board
This is a six - person board appointed by central government to oversee the operations o f loc al authorities and approve the appointment or dismissal of senior council employees. The board is made up of two civil service commissioners, a representative from Association of Rural
District Councils (ARDC) and the Urban Councils’ Association of Zimbabw e (UCAZ). It is
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also involved in research, training and advocacy in order to strengthen local governance in
Zimbabwe.
5.3.2.6 Research and Consultancy Services
The use of consultants in those areas where the HCC does not have capacity is necessary. A
nu mber of research studies have been undertaken for the government with the use of both
local and foreign consultants. However, at times, the government does not make use of the
research results. Most of the results used by the government tend to be from gov ernment -
initiated research work. There is also a tendency for government ministries to prefer foreign
consultants to local ones. In many cases, local consultants are more knowledgeable about the
Zimbabwe situation than the foreign consultants, which enable them to produce research results that are better and more applicable to the country. It is therefore not surprising that the indigenisation programme is pushing for more tenders for indigenous consultants.
5.3.2.7 Residents Associations
Residents associations have become active players in promoting their interests and challenging councils to become accountable to them. Examples include Harare Combined
Residents Associations, Zimbabwe United Residents Association, Urban Councils
Association of Zimba bwe and Harare Residents Trust.
5.4 OVERVIEW OF SERVICE DELIVERY
Some of the residents expressed their anger through various platforms (Facebook, twitter,
articles in newspapers) arguing that:
t here is no water, roads are littered with potholes and there is no street lighting, they
have failed and do not deserve another chance;
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t he roads are in a poor state, but instead of the council putting their energies there,
they prefer to hire more people to clamp kombis and taxis;
t he council says we owe them rate s, this is because at first we used to pay but we
stopped when we realised that nothing was changing, so we started directing our
monies to more pressing issues;
Masunda should go, even the councillors must go, all of them must be fired. Potholes
are every where, garbage is uncollected and there are sewer bursts all over the place;
I stay in Mbare and the situation there is terrible. The roads are impassable and that
has damaged our cars. I cannot describe those as potholes, because some of them are
as deep as graves and the councillors are not doing anything; and
h e must go. As it is, I can hardly drink tap water and they expect me to pay rates.
Representatives from residents organisations such as Harare R esidents Trust , attacked former
Mayor, Muchadeyi Masu nda, for defending the Town Clerk’s US$ 37 000 salary per month.
The residents associations felt that such utterances were irresponsible, reckless and insensitive.
5.5 CHAPTER SUMMARY
This chapter has managed to discuss the policy environment in which pol icy making and implementation occur in Zimbabwe. This environmental context is critical for understanding contracting - out dynamics in Zimbabwe. The interaction involving the policy environment and policy decisions was fairly noticeable in public policies f ormulated and implemented in
Zimbabwe since 1980.The reformation of policies from 1990 , was an outcrop of the new
public management movement to introduce managerialism and marketisation imported from
the private sector. However, liberalisation prescriptions confirmed themselves as the
proverbial medicine that kills the patient. Minimal tangible results were delivered as the
221 economy continued to deteriorate. The chapter has presented and discussed the Zimbabwean policy environment, socio - economic system, policy making process, local government structures and systems in Zimbabwe and challenges Har are City Council faces. Efforts to instill a performance ethos in the public sector have been difficult. Key approaches to public sector reform have been liberalisation, commercialisation, privatisation and contracting - out.
These reforms failed to deliver quality services and corporate governance in the public sector.
This is the environment upon which contracting - out was operating in. The socio - economic and political realities shape, enable or disable public sector reforms. The next c hapter presents the c ontracting - out projects by Harare City Council.
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CHAPTER SIX THE NAT URE AND DYNAMICS OF CONTRACTING - OUT WITHIN
HARARE CITY COUNCIL
6.0 INTRODUCTION
Th is chapter presents contracting - out dynamics within Harare City Council. The purpose of the study was to understand, in greater depth, various dimensions of contracting - out as practised by Harare City Council. The principal objective of the study was to investigate and describe Harare City Council ’s experiences with contracting - out the provi sion of public services in order to interrogate how it could be made more effective. It also sought to do cument and evaluate contracting - out features and institutional arrangements. The study’s specific objectives were to :
e xplore the fundamental features of the Harare City Council contracting - out processes
encompassing the various co ntracting - out policies enacted, strategies employed and
the rationale behind those actions;
e xamine political, socio - economic, institutional and legal frameworks that were put
tog ether to facilitate contracting - out;
a ttempt a detailed and critical review of the theoretical and global empirical literature
dealing with contracting - out both in general and in local government contexts so as to
provide background, context and method ological foundation;
d iscuss the theoretical lessons learned vis - a - vis existing literature in order to make
contracting - out better in Zimbabwean local authorities.
This chapter presents the findings gathered through survey questionnaire, interviews and d ocumentary search. Respondents had a leeway to choose more than one answer to some of the questions and, therefore, the percentages do not always add to 100 per cent .
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6.1 STATUS OF CONTRACTING - OUT
75 percent of the respondents that responded to the questio nnaire argue d that Harare City
Council should contract out almost all services. The strong incidence of contracting - out is on refuse collection, city parking, housing, roads and water areas. Of those contracted services, the contracting - out budget represe nts significant, with 17 per cent of respondents stating that it represents more than 20 per cent of their budget. Of those departments that do not contract, high costs and difficulties to access expert advice represent the biggest obstacles. But, 63 per cent of surveyed HCC departments that do not currently contract - out could see a role for contracting - out in future, which confirms the current importance of contracting - out and privatisation debates in government.
The HCC middle managers were asked a bout their attitudes on council contracting out the provision of services to external agents. The findings show that they generally:
s upp ort council contracting - out (52 per cent ) ; and
f avour in - house producti on (48 per cent ) .
About 47 per cent of middle HCC managers report ed that the greatest challenge of contracting - out was the difficulty of holding contracted companies accountable for their performance.
Overally, most respondents (76 per cent ) reported that contracts produced poor quality se rvices to residents. However, there is minimal consensus among respondents about cost savings.
6.2 L EGAL FRAMEWORKS FOR CONTRACTING - OUT IN HARARE CITY COUNCIL
There are numerous pieces of legislation governing contracting - out in local authorities as demo nstrated in the previous chapter. There is no specific policy on contracting - out. The 224
various Acts of Parliament housed in various departments guide contracting - out. Implied
here , is that contracting - out processes are governed by a body of law or set of regulations that
applies to all public contracts. The Government of Zimbabwe did not establish the
overarching legal framework but local authorities operate as actors within an exogenous
system of procurement laws and regulations. The striking observation made by the study was
that the contracting - out policy is heavily fragmented.
The findings ind icate that the key legal instruments in the man agement of contracting out in
local a uthorities are Constitution (53 per cent), rules, by - laws and rules (49 per c ent), policy
documents (45 per cent ) and Acts of Parliament (46 per cent . Of these, 41 per cent of the respondents contend ed that these frameworks were in the form of p ermane nt institutions while 3 8 per cent reported the presence of temporary i nstitutions in place to manage contracts.
6.2.1 Constitution of Zimbabwe (Amendment No. 20) Act, 2013
The legal regulation of public procurement in Zimbabwe is constitutionalised. Section 315 of the Constitution of Zimbabwe Amendment (No.20) , provides for procurement and other governmental contracts. Section 315 (1) of the Constitution provides that state institutions and public entities (local authorities included) must contract for goods and services in a manner that is transparent, fair, honest, cost - effective and competitive. Provision is created, therefore, in the Constitution of Zimbabwe for the use of procurement as a policy or empowerment tool. The principles of fairness, value - for - money (VFM) and transparency are internally regarded as the cornerstone of good procurement practice ( www.uncitral.org ).
Their inclusion in the constitution is highly commendable. This demonstrates that state
225 institutions are bound by the most essential elements of a good procurement system when they contract for goods and services.
6.2.2 State Procurement Act [Chapter 22:14]
The State Procurement Act covers all state institutions and local authorities are included. The
Act is used to empower economically disadvantaged groups of the Zimbabwean s ociety.
Firstly, preference may be afforded to persons historically disadvantaged by unfair discrimination on the basis of race, gender or disability. Underlined here is that the State
Procurement Act is a policy instrument for the implementation of the in digenisation and economic empowerment laws. This affects the awarding of contracts and tenders during the contracting out processes.
6.2.3 Public Finance Management Act [Chapter 22:19]
The purpose of this Act is to promote sound management of: Ministries , designated corporate bodies and public entities , Constitutional entities , and Statutory F unds . Harare City Council falls under “public entities” .The Act becomes the referral po int in terms of the HCC ’s budgeting and finance accountability. Section 4(3) gives this Act superiority over any other
Act of Parliament that is inconsistent with this Act. The Act provides that the Treasury shall manage and control public funds. Section 6 (1) (b) states that :
(1) The Treasury shall, subject to this Act and any oth er enactment — (b) determine the manner in which public resources shall be accounted for .
Thi s Act clearly mandates the T reasury to control public funds and to demand accounts of same. This position is emphasized by Section 6 (2) and its proviso.
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This section should be read together with Section 288 of the Urban Councils Act [Chapter
22:19] which provides for estimates of any financial year by the finance committee for the approval of the council and if approved, it is forwarded to the Minister as antic ipated by the
Public Finance management Act, Section 47. This framework governs the contracting out of the provision of public services.
6.2.4 Urban Councils Act [Chapter 29:15] and By - laws
Harare City Council makes use of competitive bidding for contract s over US$50 000.00 as well as for long term contracts. A competitive bidding process generally consists of different stages: the compilation of bid documents, the invitation of bids, briefing sessions where necessary, handling of bids after submission, ev aluation of bids and reward of contracts, administration of contracts and proper record keeping.
HCC has a committee system to oversee different stages of contracting out processes: tender formulation committee (TFC), tender verification committee (TVC), tender adjudication committee (TAC) and procurement committee (PC). These committees comprise both council officials and ward councillors. These committees are discussed below.
6.2.4.1 Tender Formulation Committee (TFC)
The TFC is mandated to draft contract specifications for the services to be procured by the
HCC. The TFC consists of one or more council officials preferably the head responsible for the function involved and councillors. The tender documents prepared by the TFC , factor in general con ditions of the contract, Treasury Instructions and the Constitution. Tender documents usually require bidders to disclose or register their conflicts of interest in the transaction when submitting their bids. The bidders’ annual audited financial statement s for
227 the past three years are needed. Moreover, a certificate stating that the bidder has no undisputed commitments with HCC is also required. The Urban Councils Act compels local authorities to exercise highest degree of objectivity in drafting contract specifications so that all potential bidders can partake. The provisions relating to the drafting of specifications generally ensure fair treatment of bidders and competition that is sufficiently wide. Skewed specifications trounce fairness, transparent an d competition as required by the Constitution of
Zimbabwe.
6.2.4. 2 Tender Verification Committee (TVC)
The TVC is responsible for the evaluation of bids submitted in response to the public invitation for bids. The TVC consists of officials from the depart ment requiring services and councillors. The evaluation of bids is done in accordance with the specifications formulated by TFC. It goes company by company checking the specifications, audited financial statements, company profile, technical support and sa mples. The TVC evaluates the ability of each bidder to execute the contract. However, the meaning of ability is not defined in the
Urban Councils Act. Generally, the definition provided by the State Procurement Act applies.
Section 34 (1) (a) of the State Procurement Act views ability as the possession of the technical knowledge and capacity of the bidder, experience and track record of the bidder, nature, quality and reliability of the service rendered, price, financial resources and equipment.
After ver ification, the fund accountant and the head of a respective department would be called to have glance at the conclusions made. Once a preferred bidder is identified, the committee submits the bid to the tender adjudication committee a report and recommenda tion regarding the award of the bid.
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6.2.4. 3 Tender Adjudication Committee (TAC)
It considers the report and recommendation of the TVC. It can either make an award or prepares a report and a recommendation to the procurement committee to approve the award .
If the TAC fails to make a final award or recommends a preferred bidder to the procurement committee, it has to make a recommendation to the procurement committee about how to proceed. The composition of TAC consists of four senior officials of council and four councillors. It is a requirement that one or more of the council officials should possess technical expertise and/or financial expertise.
In considering the report and recommendation of the TVC, the TAC must act independently from the TVC. The re gulation prohibits a member of the TVC and TFC or an advisor of these committees from being a member of the TAC. Since the TAC acts independently from the
TFC and TVC, may reject the recommendations of the TVC and award the bid to another bidder. It is sug gested that this could happen if the TAC is of the view that the TVC’s recommendation does not sufficiently indicate that all relevant factors have been taken into account and the recommendation does not symbolise a logical and justifiable conclusion based on all relevant information at the TVC’s disposal. This scenario is rampant with procurement committee. There is, however, no duty to report if the decision of TAC is rejected by procurement committee in order to rectify any irregularities in the process. The procurement committee (PC), moreover, exercises a general supervisory role over the TFC,
TVC and TAC.
It is critical to note that there is no overlap in the membership of the TFC, TVC and TAC. It would be simply illogical for the same persons who mak e recommendations on the award of a bid to also consider and approve those recommendations. In practice, it is foreseeable that it
229 may be necessary for members of the TFC and TVC to present their reports and recommendations to the TAC and clarify any uncer tainties. In doing so, however, it is important to ensure that such members have no voting powers on the TAC. During the study, there was no indication that any person serving on TAC had technical expertise. There is no reason why at least one of them coul d not be a member of the TAC and the other a member of the TFC.
The study observed an irregularity and glitch in the ways these committees work. The study noted that in some cases the TVC meeting s took place on the same day as the TAC meeting and conclude d late in the afternoon. In the documents seen by this study, it appeared that the
TAC meeting took place immediately after the TVC meeting. Moreover, on the same day, the
TAC made its recommendation to the PC. The PC considered the recommendation and made a final decision. The PC also wrote a letter to Broadway Waste Recovery (Pvt) Ltd informing it of its success in the bid process the very same day. This study suspected, too, that this was done after business office hours and with ostensibly unwarranted a lacrity. The TAC was further urged to make a decision without delay. Viewed thus from the case facts, it was unclear why HCC moved with this speed.
Interviewed senior HCC officials reported that the rationale for TAC to move with haste was to accelerate a tender decision required by the parent Ministry of Local Government, Public
Works and National Housing. They reported that it was necessitated by the fact that the
Cleansing and Environmental Services (Pvt) Ltd contract had previously been renewed twice a nd the prolongation of the practice was objectionable. The explanation was improbable and extremely difficult to believe because the contract was extended on a month - to - month basis.
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The study, moreover, found that the TAC was not provided with a written r eport or recommendation by the TVC. It appeared that at the meeting of the TAC, a member of the
TVC was present and this TVC member highlighted a few conditions that were mentioned at the TVC meeting. The TAC was, in other words, not provided with the con tents of the deliberation s , conclusions and recommendations of the TVC. It also appeared that when questions were asked at the TAC meeting regarding the award of the contracts to Broadway
Waste Recovery (Pvt) Ltd, such questions were never answered.
6.2.4. 4 Procurement Committee (PC)
From 2012, when the Government of Zimbabwe through Treasury centralised public procurement, the PC makes a recommendation to State Procurement Board (SPB) for approval of an award and the SPB reports back to PC to award t he successful bidder.
6.2.4. 5 The Supervisory Role of the Procurement Committee (PC)
The PC is obliged to approve the tender specification drafted by the TFC prior to the public invitation for the bids. The PC also has a general supervisory role over the TFC, TVC and
TAC. All the three committees are under the supervisory and control of the PC. What precisely, however, is th e extent of the PC’s supervision role over the three committees? In particular, is the PC entitled to make changes to the conditions, specifications, rules that are set down for carrying out the process, inter alia, selection, qualification or adjudication criteria or other bid procedural formalities? Is the PC entitled to instruct the TFC, TVC and
TAC to evaluate and adjudicate bids bas ed on such changes? The study observed that the PC had vast powers to come up with various changes. For instance, if the Ministry of Local
Government, Public Works and National Housing comes up with some changes, it would automatically become the responsi bility of the PC to make sure that the proposed changes are
231 incorporated. The study observed that this could have been a deliberate leeway manipulated by politicians to award contracts and tenders to their friends and supporters. The study observed that th e procedures within the committees in evaluating and adjudicating the bids were very questionable. The legal framework, therefore, desires a lot of improvements.
6.2.4. 6 Observed Challenges
Request for proposals of documents were difficult to understand. Bidders did not consult or seek clarifications on unclear requirements. This means that HCC sometimes could not get bids that were responsive to the tender specifications. However, companies whose bids were unsucces sful were generally called for debriefing to clear negative perceptions.
Most tenders especially big ones were affected by political interference either at the midst or towards awarding the tender. The study was informed that phone calls could be received from very senior politicians and bureaucrats directing the senior council management to award tenders to certain companies even if t hey were unqualified. The council sometimes was directed to waive certain conditions citing the indigenisation and economic empowerment policy. The technocrats who refuse d to comply with directives from the top risked suspension or expulsion.
Bureaucratic pathologies were entrenched in the contracting - out process. Th e tendering process sometimes was tedious and long. It could take six months for one contract to be approved , especially after centralisation of the procurement in the year 2010.
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6.3 CONTRACTING - OUT INSTITUTIONS
The respondents reported that the role of the Ministry of Local Government, Public Works and National Housing consists mainly of three top functions: policy formulation (9 1.7 per cent), regulation (87.5 per cent ), and oversight (80.8 per cent ). The following institutions were involved in contracting - out processes: Treasury, State Procurement Board (SPB), residents associations, Office of the President and Cabinet (OPC), Privatisation Agency of
Zimbabwe (PAZ), Parliamentary Committee on Local Government, Ministry of
Indigenisation and Economic Empowerment, media, international financial institutions (WB an d IMF), Reserve Bank of Zimbabwe (RBZ), political parties (both ruling party ZANU - PF and main opposit ion political party that has 90 per cent of councillors in local authorities),
Environmental Management Agency (EMA) and Zimbabwe National Water Authority
(ZINWA). The contractin g out institutional framework was a heavily crowded arena.
In 1998, ZIMPREST recommended the establishment of a high powered institutional framework to pursue privatisation and commercialisation urgently. However, the privatisation and commercialisation process itself has been slow. This affected the other sub - sets of privatisation like contracting - out. The study noted that the absence of an enabling legal framework imposed serious constraints on the privatisation and contracting - ou t processes. Because of thes e shortcomings, the contracting - out process was driven by multiple bodies which ranged from the HCC itself, international financial i nstitutions (mainly WB and
IMF) and parent Minist ry to the OPC. The contracting - out institutio nal arena was very defective and crowded. It also lacked objectivity and transparency.
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6.4 CONTRACTING - OUT RATIONALE
The HCC officials infor med the study that contrcating - out was adopted in response to the changes in the fiscal and political environments. The fiscal stress encouraged HCC to explore alternative service delivery arrangements. HCC’s revenue raising capacity was limited by central government’s policy caps on th e property tax, water and refuse charges.
Apart from the cost reductions arguments, the HCC sought to improve quality of servi ce delivery through contrcating - out service areas such as refuse collection, hospital cleaning and laundry, catering, street cl eaning and bus services. According to one former Town C lerk interviewed by this study, th e other purpose for contracting - out was, “the dearth of capacity induced by fiscal constraints and brain drain.” Implied here is that HCC contracted - out the provision of certain services in order to address limited in - house capacity. The officials at the
Ministry of Local Government, Public Works and National Housing (MLGPWNH) argued that contrcating - out initiatives were designed to improve service quality to ensure tha t citizens enjoy their constitutional rights to access quality services. The MLGPWNH officials also report ed that the 2003 re - contracting - out was designed to encourage growth of indigenous companies in line with indigenisation and economic empowerment laws . Gleaned here , therefore, is that from the perspec tive of the MLGPWNH , contracting - out was part of industrial policy. However, from the perspective of HCC, contracting - out was i ntended to reduce costs and 41 per cent of HCC officials said that it helped t o reduce costs and improve quality though for a short per iod. The failure of contracting - out especially refuse collection and transportation was attributable to socio - economic environment obtaining in Zimbabwe between 1997 and early 2009. The study observe d that the genesis of socio - economic crisis in
Zimbabwe coincided with the introduction of contracting - out reforms.
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Interviews with HCC officials, residents associations and industry revealed two essential
rationales for contr acting - out services to private sector companies. Firstly, to save on labour
costs. Secondly , to sidestep and circumvent the council bureaucracy. The problems with these
justifications are that sidestepping the bureaucracy means overstepping the legislative
requir ements that protect workers from exploitative labour conditions and upholding
performance standards for services delivery.
The documents contained in the refuse collection and transportation files showed that the
HCC adopted contracting - out as a service d elivery alternative to deal with the problems of
mismanagement of public service provision. The 1997 contracting - out the provision of refuse
collection and transportation services was mooted upon a ministerial directive. Therefore, the
problems were politi cally oriented rather than technically oriented. Implied here is that , these
problems could not be resolved without political assistance. The study discovered that the
HCC was not the unresponsive dinosaur as described by neoliberal analysts. The HCC has
t he potential to innovate, modernize and respond to consumer concerns, as well as be
efficient, cost - effective and fiscally austere. The political climate limits the room for HCC to
contrive.
The study also found that HCC contracted - out some services to co mpensate for general in -
house lack of resources and to improve service quality. All of these reasons appear to be far
more important than to reduce costs, although a lack of in - house resources would indirectly point to cost cutting rationale. Costs conside rations were important but were not given priority at the expense of quality. Legal requirements or the need to improve flexibility or control were some of the less impor tant reasons why HCC contracted - out public services to private companies.
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The in - depth interviews with the key - informants and survey findings indicated that HCC does not have a long - term strategic perspective to the question of contracting - out. 53 per cent of the respondents indicated to the study that HCC never actively studied the advanta ges and disadvantages of contracting - out over carrying out functions in - house. For instance, both
HCC’s 2004 , Turn Around Strategy and 2012 Strategic Plan (2012 - 2025) documents seen by this study , had no even a single reference to contracting - out or even p rivatisation in general.
However, some departments like waste management have taken a long - term approach by identifying a set of core functions that should be performed in - house and instituted formal guidelines and procedures for hiring, monitoring and pe rformance measurement. Other dep artments such as human capital and city health have adopted a more ad - hoc route, w hereby services were contracted - out on a need basis and formal guidelines were not present, though during interviews, officials from these dep artments insisted that a strategy for contracting out has been developed. When the researcher asked for a copy, the departments could not furnish the researcher with a copy of the contracting - out strategy.
6.5 BASIS OF CONTRACTING OUT
Seventy - two percent (72%) of the respondents were of the view that contracting - out has been do ne in an ad - hoc manner. There was no a well - documented strategy for contracting - out. The concept of strategic contracting formulated by Kelman (2002) , does not exist in Harare City
C ouncil’s management vocabulary. Strategic contracting - out is important because it places contracting - out right at the centre of any government’s public management strategy. This means that top executives in the public sector must be aware of contracting as a phenomenon and cannot always delegate that responsibility to lower li ne managers. Only 17 per cent of the respondents said that HCC has a well - documented contracting - out strate gy against an
236
overwhelmingly 72 per cent who said the approach is ad - hoc. The figure below shows the
basis of contracting - out within HCC.
Figure 6.1 : Basis of Contracting - Out
17% Well Documented Strategy 72% Ad - Hoc Basis
Source: Field Data
Respons es to the question in figure 6.2 below , support the above argument that contracting
out has been an ad - hoc exercise.
Figure 6.2 : Has any comprehensive risk and legal assessment been done to ascertain what functions can or cannot be contracted out within legislative requirements and interest of the stakeholders? 3% 7% Yes 7%
No
Not Taken but Plan to undertake 72% Cannot Say
Source: Field Data
Those who said yes were referring to cost - be nefit - analysis carried out in 2002. However, it was merely a cursory and perfunctory financial assessment done by the City Treasurer department. The assessment did not cover the service to be contracted or remain ed in - house.
Furthermore, the study observed that the City Treasurer Department had no clearly stated
237
terms of reference to guide the assessment. The affected Waste Management Department was
not involved.
6.6 SERVICES CONTRACTED - OUT
The survey findings revealed that in practice, the functions most contracted - out include d road maintenance, refuse collection and transportation, city parking, municipal security, catering, laundry and housing. Respondents were asked to identify some of the services that HCC can contract - out. They indicated that the foll owing services are amenable to contracting - out: operation of parking lots/parkades, water meter reading, repair of water pipeline networks, both residential and commercial solid waste collection, street cleaning, vehicle towing and storage, parks, landscap ing and maintenance, tree trimming, collection of delinquent taxes, street repair, water treatment, operation of libraries and, sewage collection and treatment.
6.7 WHO WERE THE CONTRACTORS?
The Harare City Council contracts - out the provision of service to for - profit organisations, not - for profit organisations, other public organisations and international organisations. By and large, HCC contracts - out the provision of public services mostly to private organisations which have the unique and specialised se t of skills that are required for tasks. Private companies also try to maintain service quality in order to protect their reputations. Such reputation effect would also impact on the performance of local public services and private companies would be reluc tant to let poor performance affect their global brand. Responding to the question: If both public and private sectors could provide the same service, who do you think would do a better job ?, 64 per cent of the respondents were of the view that the private sector would be competent to provide public services. Only 28 per cent supported the public
238 sec tor for the same. A paltry of 8 per cent , did not know the best. The responses are illustrated in the figur e below.
Figure 6.3 : If both public and private sectors could provide the same service, who do you think would do a better job?
8%
Private Sector 28% Public Sector 64% Don't Know
If designation is taken into account , the study revealed that the senior management believes that the private sector can do a better job. Sixteen out of twenty - four (about
67%) of HCC senior, middle and lower management said the private sector. The table below presents the views of key HCC officials after factoring in designation.
Table 6.1: Designation: If both public and private sectors could provide the same service, who do think would do a better job?
If both public and private sectors could provide the same service, who do think would do a better job? Private sector Public sector Don't know Total Designation Top Management 9 5 0 14 Middle 6 2 1 9 Management Lower 1 0 0 1 Management Total 16 7 1 24
Source: Field Data
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6.8 SELECTION OF CONTRACTORS
The HCC uses either competitive sealed tenders or a combination of sealed tenders and negotiations to award contracts. Sometimes it uses unsolicited offers. Such methods of selection help the HCC to leverage market competition and keep the contracting out costs under check. The study noted that there is strong attraction to noncompetitive contracting, despite th e appearance of open competition. The next chapter of this study has shown this.
The large number of contract extensions and renewals without competition demonstrated this.
Many of the HCC officials interviewed stressed that they wanted to be able to selec t their contractors without being solely wedded into price. The figure below gives the methods of awarding contracts for external delivery of public services.
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Figure 6.4 : How Are Agencies S elected for C ontracting out?
Competitive Sealed 7% 10% Tendering 24% Negotiation
48% Combination of the Two Unsolicited Offers
Source: Original research based on th e data obtained from HCC
About 66 per cent of all sampled contracted companies informed the study that HCC was
not willing to disclose the method used for awarding the contract to the external providers.
This means that there was very low transparency for contrcating - out the provi sion of public
services that culminate d in high risk of corruption and inefficiency of service provision.
Residents associations, Parliament of Zimbabwe and MLGPWNH observed that HCC did
not perform very well its oversight functio ns. Furthermore, some were of the view that
awarding contracts in the absence of competitive bidding r esult ed in specters of corruption.
6.9 PRICE FACTORS VERSUS NON - PRICE FACTORS
The most criterion upon which HCC makes its selection of con tractors is price (49 per cent),
in addition, (47 per cent ) as surance of timely delivery, (41 per cent) assurance of quality, (38
per cent) quality of performance and 43 per ) record of performance. Public sector managers
often face pressure to select service providers on the basis of price. There is a strong culture
amongst those that procure services for the public sector , that they must tender for all services
and accept the lowest bid in the interest of probity. Contractors may submit unrealistically
low bids in an attempt to establish market power by eliminating potential competitors. The study discovered that the best d eal was not measured by any one criterion. Although price
241 was a factor frequently considered, other critical issues included efficiency, effectiveness, equity, responsiveness and responsibility. Furthermore, these different criteria are frequently in confl ict. A determination as to what constitutes a good deal requires a process of working through a set of trade - off among these factors.
There are three common methods HCC uses to choose contractors. These meth ods are briefly discussed below:
The Lowest Cos t, Most Responsive and Responsible Bid M eth od
The bid goes to the lowest bidder demonstrating the financial and operational capability and history of performance. In addition, the bid is satisfactorily responsive to the requirements and questions of the re quest for proposal (RFP). In this method, all sealed bids are opened at the same time and the lowest bidder is chosen.
Qualification - based Bid M ethod
Bidders are ranked according to the qualification criteria set - out in the RFP and then , eliminated in ord er one by one through the process of negotiation. In this method, the company wins not by the lowest cost bidder , but by being the most qualified. Qualification trumps over everything else.
The Best Value Method
Contracts are selected based on the best a nd highest interest of the state being served. The study observed th at the total return to the HCC or the best value criterion, not cost, is determinative. The highest cost bidder may be accepted if the returns are also highest. Value and return trump cost .
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The figure below illustrates the percentage weight given for price variables in contracting out.
Figure 6.5 : How much weight, in percentage , is appropriated for price selection variables in contracting - out?
17% 28% 0 - 20% 21% - 40% 49% 41% - 60%
Source: Field Data
49 per cent of the respondents were of the view that price c onsiderations range between 21 per cent and 40 per cent. 28 per cent said that the price range is 41 per cent and 60 per cent .
This shows that price was considered seriously when awarding contracts.
In ord er to compete for a local authority contra ct, the State Procurement Act, S ection 405, states that a qualified or responsible bidder is one who: (1) has adequate financial resources to perform the contract or the ability to obtain such resources, (2) is ab le to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and government business commitments, (3) has a satisfactory performance record, (4) has a satisfactory record of integrit y and business ethics, (5) has the necessary organisation, experience, accounting and operational controls and financial skills or ability to obtain such organisation, experience, controls and skills, (6) has the necessary production, construction and technical equipment and facilities, and (7) otherwise qualified and eligible to receive an award under applicable laws and regulations.
However, the majority of contracted companies as shown in Chapters Seven and Eight of this study were not qualified using the St ate Procurement Act framework.
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6.10 LENGTH OF CONTRACTS
The study noted that in terms of contracts length, HCC favours short - term contracts. A few of the HCC respondents argued that this maintains the pressure on contracted companies to innovate and stay competitive. But the roll - over contracting pattern of HCC , raises the explicit contracting - out costs for the HCC, which, i n general, can be as high as 5 per cent of the contract value as noted by Harare Residents Trust official. With long - term contracts, there are implicit contracting costs like the costs associated with renegotiations to resolve unforeseen events, which can be higher than the explicit costs. The use of short term contracts help to reduce this cost. However, in a socio - economic and politic ally stable environment, long - term contracts are workable. The use of discrete contracts also helps to minimise the hold up costs that result from opportunistic behaviour by contracted companies.
The study observed that HCC on many occasions awarded contra cts whose life spans , ranged between one and seven years with the option of extending the contract for a specified period.
6.11 SELECTION CRITERIA
The choice of selection criteria is as important as the choice of contractual method, especially where quali ty of the service is hard to describe and measure. If too much weight is given to the price variables, good contractors can be gradually driven out of the market. To resolve this adverse selection problem, HCC uses screening criteria that place lower weigh t on the price variables and a much higher weight on non - price variables. Likewise, contracted companies are extremely careful about their reputation, as a means to signal their quality and commitment. The study observed that, overally; non - price variables receive 58 per cent weight in the selection matrix of Harare City Council.
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6.12 CONTRACT PRICING
The fixed price contract approach was used by HCC. The price of contracts place the cost
risk on sellers since the price is set at the time of contract awar d and create incentives for the
seller to determine the characteristics and capabilities of the product before , signing off on
the contract since the information influence the costs of production (Brown et al ., 2015).The
fees were fixed (59 per cent of the respondents) in advance and the contractors bore the risk for any unforeseen costs. The costs were adjusted periodically, usually annually to recognise inflation. The socio - economic environment that engulfed Zimbabwe between 1997 and 2008, where hyperinfl ation rendered useless the rational application of economics , affected the fixed price approach. Prices were changing daily if not hourly. The figure below shows the responses to the question: Are your contracts based on fixed price, schedule of rates or c ombination of the above?
Figure 6.6 : Are your contracts based on fixed price, schedule of rates or combination of the above. 70% 59% 60% 50% 40% 30% Are your contracts based 17% 20% 14% 10% 0% Fixed price Schedule of Combination of rates the Above
Source: Field Data
6.13 COMPETITION
When asked about their ability to find other contractors, HCC officials reported that:
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it was hard to find high qualit y and competent contractors (49 per cent ) ; and
t he number of contract bidde rs tends to reduce overtime (22 per cent ), because
con tractors buy each other out (17 per cent ).
These assertions were explicit in refuse collection and transportation as discussed in the next chapter of this study.
6.14 CONTRACT PERFORMANCE
The ways in which respondents reported measuring contract performance varied significantly. Respondents reported that contract ors tend ed to fall short in performance primarily in the areas of quality, service con tinuity and responsiveness. 68 per cent of the responden ts agreed that performance challenges appear ed at the beginning or midway through the contract implementation . Respondents also indicated that in many cases, HCC was highly dependent on the contract that was failing to meet performance threshold. This is illustrated in the next chapter that deals with refuse collection and transportation services.
This could be probably explained by the fact that refuse collec tion and transportation require specific refuse investments (Brown et al., 2015), asset specificity (Williamson, 1981;
Zinyama, 2014a).
6.15 CONTRACT MONITORING
In local authorities, contracting - out is a highly regulated activity. There are rules on advertising, the bidding process and the steps that must be taken to review a bid. Once a contract is awarded, there are rules governing the ethics of interaction between councils and contractors.
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In t erms of contract monitoring, 21 per cent of the respo ndents said that the HCC monitors
the contracted - out services while underway. This reflects that HCC has a high risk aversion and consequently increased need for detailed safeguards. The choice of monitoring arrangements is also related to the pro blem of q uality measurement. 35 per cent of the
respondents reported that performance monitoring was mainly done through ‘monitoring b y
exception’. The HCC was mainly following complaints from residents or key stakeholders.
This shows that performance monitoring wa s passive. In some cases, ther e were follow - up
monitoring (24 of the respondents ). This being said, the cost of contract monitoring is ra ted
as reasonable by 86 per cent of the HCC district officers who had the mandate to monitor
contracts once they were l et. The figure below shows various responses to the question: How
are the firms that are contracted monitored?
Figure 6.7 : How are t he firms that are contracted monitored?
Direct monitoring (while 10% 21% work is underway)
Follow - up monitoring 35% (work completed) 24%
Monitoring by exception (following any complaints)
Source: Field Data
6.16 CONTRACTING - OUT IMPACT
The HCC’s experience with contracting - out has been quite negative. Around 60 per cent of the departments that were interviewed reported that their experience with contract ing - out has been below expectations. About 40 per cent of the HCC officials interviewed felt that when compared with in - house service provision, contracting - out has helped them to improve
247 quality and at the same time reduce costs, although many of the respondents to this question found it difficult to answer.
The study observed that several residual and unintended gains but equally powerful in terms of improving HCC’s overall effectiveness have been realised in housing and city health as illustrated in Chapter Eight of th is study. The residual gains were not just li mited to cost reduction, contracting - out also hel ped HCC to exert better control over the outcomes. There is extensive literature why this happens (Mwagike and Edward, 2013; Domberger, 1998).
6.17 OBSERVED CONTRACTING - OUT CHALLENGES
The chief challenge that emerged during the in - depth interviews with ke y - informant s from
HCC was budget constraints. Seventy per cent of respondents to the survey, rate of budget constraints as the most significant challenge to future contracting - out practice. A few of the respondents argued that la ck of appropriate consultan ts was the main challenge. The HCC officials reported that the supply market for private companies especially for refuse col lection and disposal services was not sufficiently deep. Only 6 per cent rated the supply market as being abundant. The nature of th e work that is being contracted - out, asset specificity investments and high startup costs were cited as major problems. However, other respondents saw contract specification as a major challenge. Nearly 90 per cent of the HCC officials rated
‘ difficulty in contract specification ’ as one of the top f ive challenges and more than 5 per cent could not comment on t he effectiveness of contracting - out in improving quality. This reflects the problem of difficulties in contracting - out in improving quality, associate d with difficulty in measuring the quality element of the performance. One respondent argued that the challenge of quality measurement could be traced to lack of in - house core skills to specify
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targets, indicators and to monitor contracts. One of the key - i nformants summarised some of
these factors thus:
City of Harare fears that lower costs may be at the expense of inferior quality and so it becomes more aware of the quali ty dimension of the contracting - out than when they were being in - house. There is an asymmetry of expectations between City of Harare and private companies, with the former expecting more from the latter than they would from its own waste management department.
The foregoing noted proble m is exacerbated in cases where the core in - house skills are rather
limited in terms of effective specification and monitoring of the work. This in turn impacts
negatively on HC C’s experience with contracting - out in terms of improving its legitimacy
and co mpetence.
Some respondents view ed HCC as an unqualified bureaucracy t o deal with complex
contracting - out processes. A good administration presupposes the existence of three prime
prerequisites: efficiency, competency and service delivery (Rosenbloom, 2015 ). When
bureaucracy is less skilled as espoused in the findings, there is a very high likelihood that its
service delivery mechanisms would be compromise d. Overally, an overwhelming 87 per cent
of the total respondents felt that there is gross incompetency , very low levels of dedication
and lack of accountability from HCC officials . The HCC employees were blamed for a serious lack of devotion to the work they do. For example, the employees in the Waste
Management D epartment were always accused of not perfor ming as per residents’ expectations . Only a paltry percentage, 13 per cent, thought that there was efficiency and commitment from the systems of HCC.
The study discovered that most of the respondents had bachelor’s degrees, followed, by those who had dipl om as from polytechnics. About 20 per cent of HCC’s employees held masters degrees (Master of Public Administration (MPA), Masters of Business Administration
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(MB A) or Leadership (MBL)) while 5 per cent held Ph D degrees. However, the two Ph D degrees holders are in Human Capital Department and one in Town Clerk’s D epartment. The study observed that t he HCC has a young - looking and inexperienced degreed staff. The interviews with senior HCC offi cials indicated that the HCC has highly educated cadres who have to o much book knowledge and not enough applied knowledge. As a consequence, they have difficulty in utilising book knowledge on the ground. The study noted that those who directly dealt with tendering processes , have no training in public procurement except generic training in supply and purchasing. There fore, they lacked the competencies to design and implement sound policies in a public sector setting. The study noted that university programmes (both Bachelors in Public Administration and MPA) do not teach public procurement within the context of public sector setting. University of Zimbabwe is no t spared on this fatal omissions and commissions. This needs urgent attention.
Additionally, the HCC has an acute problem of the working poor. Low and delayed sal aries and wages have resulted in poor morale and shirking amongst workers, rampant moonlighting has led to low productivity, high staff turn - over and susceptibility to corruption.
At the time of w riting this thesis, HCC’s employees had six months without a salary. This was very dangerous. It led to frustration and demoralisation. This researcher met face to face with indifference, arrogance and rudeness from some of the workers who construed this researcher ’s presence as an intrusion into their private li ves.
6.18 LEVELS OF POLITICAL INTERFERENCE
Sixty - six per cent of the respondents were of the view that political interference in contracting processes was pervasive and massive. There has been a tellingly evident of excessive and detrimental political interference by individuals in the management of
250 contracts. The re has been frequency of interference in matters of detail and in individual cases. If politicians intervene in casework, delay or corruption is inevitable in contracting out processes. Fairness suffers and public confidence in the objectivity of the whole of contracting - out would be undermined. The figure 6.9 below , summaries the views and perceptions of the respondents regarding political interference.
Figure 6.8 : Leve l of Political Interference in Contracting - out D ecisions?
7% 17% None Moderate 66% High
Source: Field Data
6.19 O PPOSITION TO CONTRACTING - OUT
Contracting - out was adopted with public interest in mind, not the profit motive and the spirit of entrepreneurship. As such, the study observed that contracted private companies were driven by profit motives , hence cutting corners on service unless HCC could closely monitor the private companies’ performance. The in - dept h interviews with key - respondents from
HCC officials revealed that HCC had no problems with Bill and Melinda Gates Foundation as compared to C ABS/Old Mutual contract. The problem of shirking was well pronounced in the profit - oriented contracts. It is commonly argued that the HCC contracts with nonprofits especially for social services were effective because nonprofits were less likely than priva te firms to shirk their responsibilities or to cut corners.
To the question, “Why HCC contracts with nonprofits?, one key - informant promptly replied,
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Greater trust because the cost of transacting (particularly the monitoring my own emphasis) business wit h the nonprofit is lower than it is with the private firm. The profit motive drives private firms into service compromising or even dishonest performance. For example, refuse collection, contractors were more inclined to cheat in order to show greater pro fitability, allow executives greater compensation, satisfy shareholder expectations and increase the firm’s access to capital as its performance expectations attract investors.
But isn’t the cost and frequency of inspecting, reporting and monitoring not r oughly the same for both firms and nonprofits since both are required to fulfill these on equivalent schedules, given that neither the State Procurement Act [Chapter 22:14] nor Urban Councils Act
[Chapter29:15], gives special concessions to nonprofit? Howe ver, the study observed that there is trust (convergence of interest and expectations through common values and common goals) between the HCC and nonprofits. The private companies’ objective as alluded to earlier is profit maximisation and providing housin g may be a means toward making such profits. The HCC’s and the non - profit’s objective is the provision of housing to improve public welfare. Their primary objective is the same. Hence, th ere is convergence of interests and above all trust.
This study obse rved that trust may mean confidence, “City of Harare trusted that Bill and
Melinda Gates Foundation would do the job perfectly”, remarked on of the HCC officials.
The less reliability or confidence the HCC has in a contractor, the greater its actual and pr ospective transaction costs. It needs to monitor, to develop and to agree upon strict milestones and criteria and it must expect to close down prematurely if the contractor fails.
One reason for failure is what Williamson (1981, 1979) refers to as ‘contrac t maladaptation’ that is, picking the wrong institution for the job. Among two equally qualified entities, the wrong choice may be that of selecting the company with lower convergence of interest and the ultimate cost of choosing incorrectly is the cost of failure. The cost of failure, that is, cost of starting over again minus the salvage value. But, an important aspect is that cost is what
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Jensen and Meckling (1976) refer to as the ‘residual cost’, - the reduction in the economic
welfare of the principal (community or public) due to the failure of the agent.
The interviews held with Harare Municipal Workers Union (HMWU) representative
disclosed that HCC employees were very skeptical about contracting - out the provisions of refuse and transportation service s. They argued that contracting out cannot be separated from its neoliberal roots. “It is a policy designed to benefit capital not workers and residents”, one
HMWU official lamented. All the three HMWU officials interviewed agreed that contracting -
out unde rmines the quality of service delivery to high density areas and working conditions
for workers.
To the question, “What is the position of Harare Municipal Workers Union on contracting -
out the provision of public services li ke refuse collection, water?”, O ne radical respondent
promptly replied, “As HMWU, we are not in support of demonic contracting - out because
private companies will always be here to make money. If private companies fail to make
profits, they will be gone.” Another respondent put the same view a little more cautiously:
“The major reason of HMWU’s objection to contracting - out is that public service delivery
should not become a profit - making venture.” The study observed that HMWU has been marginalised from consultations and eventually felt al ienated from contracting - out policy.
Hence, HMWU did not own the contracting - out initiative. This lack of consultation and consensus building in the design of the policy , undermined its credibility and made its ownership difficult.
Furthermore, the HMWU r aised the issue of accountability. The HMWU rejects the idea of separating the service authority from the service providers. The major argument advanced
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was that proper accountability between the community and their elected representatives ,
would only be b uilt if municipalities are responsible for ensuring that everyone has access to
services and for delivery of those services. This is consistent with literature consulted as
illustrated in Chapter Two of this study. Greve (2008), for instance, argues that p rivate sector
delivery undermines public accountability and turns communities into individual atomised
customers. In contrast, “public sector delivery prioritises meeting the needs of communities
and strengthening democratic lines of accountability between communities and municipalities
above other considerations” (Rosenbloom, 2015; Greve, 2008).
The HMWU argued that HCC management has been too quick to turn service delivery over
to the private sector whenever it encounters a crisis, instead of investigati ng other methods of
delivering public services. A key e lement of HMWU proposal involved a participatory
process for front line municipal workers to identify obstacles to effective service delivery and
develop plans to overcome those problems. The study obs erved tha t the HMWU’s proposal
challenged the HCC’s motivations for contracting - out and the implementation of such
policies. The HMWU argues that there is nothing inherently inefficient about the public
sector that prevents it from being cost - effective or denies it the capacity to use new technology.
6.20 ROLE OF STAKEHOLDERS
International Financial Institutions
International financial institutions greatly influenced the adoption of contracting - out by HCC.
The HCC became a “rubber stamp” for decisions made by others like World Bank. The study
discovered that the decision to mount major economic reforms in Zimbabwe dates back to the
beginning of the 1980s. Soon after independence , Zimbabwe hosted the Zimbabwe
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Conference on Reconstruction and Development (ZIM CORD) in March 1981. The objective
of the Conference was to attract aid from international donors so that Zimbabwe could close
both the resource and trade gaps in order to meet its socio - economic targets. The hosting of
ZIMCORD marked the gen esis of Zimbab we’s dependence on external funds for its socio -
economic development. Underlined here is that the Government of Zimbabwe in general and
local authorities in particular adopt and implement policies dictated by the donors. Even if
local pressure groups screa m against certain policies, the government generally proceeds.
This is contrary to the view that democracy is about interest group politics.
Residents Associations
In terms of citizen participation in decision making, the study results noted that there ha ve
been references to people’s participation in most of the government’s policy documents , inter alia , Growth with Equity, the Prime Minister’s Directive of 1984, the Local Government
Acts, ZIMPREST and Thirteen Principles to Guide the Decentralisation pr ocess. Contrary to these policy positions on residents participation in policy formulation and implementation,
HCC is found wanting. The study discovered that HCC does not appreciate the need for more public consultation and participation in policy develop ment for wider ownership of the implementation.
The study noted that even though HCC is reluctant in consulting residents, some of the residents associations were well organised and have developed excellent organisational skills to confront HCC effectivel y. The case in point is Combined Harare Residents Association
(CHRA). Though the HCC and ratepayers have a common aspiration regarding the governance of Harare, the two bodies have tended to be suspicious of each other. The dialogue between HCC and CHRA is poor and leaves much to be desired. The CHRA, for
255 instance, in 2000 felt that ratepayers’ objections of certain policies and representations were generally ignored by the HCC. Residents were being short - changed and were not getting value for the money th ey paid in form of rates and other charges. The cost of living in
Harare , was escalating vis - à - vis an endless deterioration of the provision of services to ratepayers. As a consequence of this displeasure in respect of the handling of council affairs,
CHR A drafted a petition which 11 950 Harare Residents signed and handed the same to the
Minister of Local Government and National Housing on 4 December 1998. The petition read:
We the undersigned Ratepayers, Residents and Tenants of Greater Harare call on the Minister of Local Government and National Housing to immediately remove from office the Executive Mayor and the entire Council of Harare for failure to ensure good governanc e in the Greater Harare area and gross incompetence and mismanagement.
To make sure that the petition was fully understood by the signatories, the text was also in
Shona and Ndebele. Subsequent to the CHRA petition, on 25 February 1999, the Minister of
Lo cal Government and National Housing suspended the City of Harare Council in accordance with Section 114 (1) of Urban councils Act [Chapter 29:15] as amended by
Section 38 of the Local authorities Election Laws Amendment Act No. 21 of 1997.
The study, ther efore, observed that the role played by CHRA was very instrumental in the dismissal of Harare City Council councillors including the Executive Mayor. In pursuit of its vision: To be an effective watchdog and a vehicle of good governance in Harare and a mod el for advocacy, CHRA assigned three individuals to sue the Harare City Council in 1999 for unlawful increasing rates. The case was filed w ith the High Court which judged in favour of the ratepayers. Documents seen by this study showed that CHRA went to ch allenge the commission running the affairs of the HCC about the fate of council - built Z$80 million mayoral mansion. It advanced the position that the property should only be taken by a
256 democratically elected council and not the ministerially appointed comm ission. To consolidate this position in the process of molding good governance in Harare, CHRA has affiliated itself to the Zimbabwe United Ratepayers A ssociation (ZURA) a nd has established an advocacy c entre.
The message from CHRA case , is clear and loud that HCC cannot afford to sidelined reside nts associations in contracting - out processes if success is to be guaranteed. At the time of writing this thesis, Harare Residents Trust (HRT) managed to mobilis e residents to delay payment of water bills until HCC furnished HRT with Exim Bank loan agreements. The council complied within a week. Implied here is that , Harare has now active residents associations. Also, Urban Councils Association of Zimbabwe (UCAZ) , has been instrumental in highlighting the shortco mings of local government legal and constitutional framework for the promotion of democratic local governance. However, these active residents associations should avoid being co - opted by c ouncil management. Three quarters of UCAZ recommendations on local government are now enshrined in the Constitution of Zimbabwe
Amendment (No.20) of 2013.
Councillors
Another i ssue raised during interviews with representatives of residents associations , was the incompetence of councilors. Residents were disappointed by the failure of many councillors to represent their interests, report back on council policies and account for public finance.
The study observed that party politics does not appear to have a positive factor in citizen’s participation in local governance. For instance, HCC has violated the law by failing to produce audited financial accounts and it has used most of the funds for salaries, perks and
257 allowances rather than for infrastructure and services. Astoundingly, the councillors tolerated the shoddy beh aviour by bureaucrats.
The study noted that there were frequent newspaper coverages about financial problems in
Harare City Council. Below are examples:
i. t he Executive Committee of Harare City Council appointed staff on political rather
than professional grounds, create unnecessary personal assistant posts (the Mayor had
15) and gave themselves extravagant allowances far higher than the rates set by the
Minister of Local Government (Various newspapers);
ii. t he council illegally allocated municipal land to the mselves (29 out of 46 councillors
allegedly got land) and to off icials and political colleagues; iii. he council had a distorted sense of priorities. Instead of spending public money on
building housing for the homeless (85% of Harare residents are lodgers), pr oviding
adequate water, sanitation and refuse collection services and repairing roads full of
potholes and broken street light, they spent more than Z$80 million( US$50 million)
on a mayoral mansion (U NDP Report 2000, HCC documents); and iv. t he council incurr ed a massive and unnecessary debt of Z$2 billion, by failing to pay
contractors and council workers, tax, NSSA and medical aid (HCC Budget Speeches,
Newspapers, and Residents Associations Reports).
The councillors lack capacity in terms of leadership, a s ense of mission, management systems, structure, openness and accountability. Some of the councillors do not have sufficient grasp of technical and professional issues to make meaningful contributions in the management of HCC. The study discovered that all councillors receive orientation course.
Moreover, this study through interactions with some councillors discovered that most
258 councillors comprehend ed their roles and council procedures. However, their capacity is limited in relation to understanding the ne eds of the wards as a whole, professional and technical skills; and communicating effectively with their constituents, consulting them, mobilising them, expressing themselves confidently in council me etings and influencing decision - making. These problems, the study observed, emanated from the Zimbabwean political and electoral system that is characterised by systemic violence and intimidation.
Hence, the courageous and brave people partake in the electoral process es. As a result, only unqualified grade sev en and ordinary level (of course some with out five ordinary subjects) and rank marshals , contest and find their way to Town House.
Concluding the roles of stakeholders, there is still lack of balance in participation by key stakeholders as the HCC has the biggest space in terms of power and resources. Marginalised stakeholders still need space in an arena that is highly politicised. Residents associations still lack human, organisational skills and financial sustainability to adequately engage in governance at local level.
6.21 CHAPTER SUMMARY
In this chapter, an introduction was given regarding the purpose of the study and its objectives. This was followed by an expansive legal framework for contracting - out, institutional, contracting - out rationale, basis of contracting - out, contracted - out functions, contractor selection, contract performance and monitoring, impac t and challenges of contracting - out, level of political interferenc e and opposition to contracting - out. The re sults revealed that contracting - out processes are very complicated. The next chapter presents and analyses the qualitative data obtained from the refuse collection and transportation contracts and semi - structured in - depth interviews.
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CHAPTER SEVEN CONTRACTING - OUT REFUSE COLLECTION AND TRANSPORTATION SERVICES
7.0 INTRODUCTION
The challenge of waste management has been a growing concern for the central government, local authorities, environmentalists, researchers and communities at large. Rapid urbanisation as a result of high rural to ur ban migration has resulted in high population densities in both formal and informal residential areas with the consequent increase in the amount of waste generated at household level, yet there has not been the requisite collection and disposal services to meet the rising challenge. Chaotic solid waste disposal put the health of residents at risk as open waste dumps are prime breeding sites for houseflies, rats and other vectors of communicable diseases.
Waste dumps are a source of environmental problems such as noxious odours and smoke emissions resulting in rampant increase in acute respiratory infection. Leachat es from poorly managed landfill sites pollute the underground water. Once admired as the Sunshine City on account of its tidiness, Harare has lo st its sparkle.
It was in 1997 that Harare Cit y Council commenced contracting - out the provision of refuse collection and transportation to private agents. This was in response to the parent Ministry’s directive that required al l local authorities to contr act - out the provision of certain services in order to save costs and improve service quality. This was prompted by the fact that in - house servicing had administrative and financial burdens , like payroll administration, fringe benefits, overtime, transport and sick leave.
The study, therefore, presents results about refuse collection and transportation within HCC.
The study encountered some problems during data gathering. Some of them were that the
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1997 refuse collection and transportation contracts were no n - existent. The study relied much
on what the respondents told the researcher, internal correspondences, academic
papers/articles, HCC reports , inception and progress reports prepared by contracted
companies , full HCC resolutions/minutes and newspaper arti cles. Establishing the costs of
refuse collection and transportation was difficult. The major problem encountered was that it
was not clear how operating costs were calculated. The study relied on the secondary data
reported by the HCC but it failed to co nfirm what components of operating costs were
included. The HCC failed to furnish the study with the following refuse collection costs
components: capital expenditures, equipment and vehicle replacement, vehicle maintenance,
fuel and lubricants, salaries a nd wages, fringe benefits, administrative overheads and
insurance.
7.1 BRIEF BACKGROUND of HCC’s WASTE MANAGEMENT
From 1980, HCC set up production units, defined production technologies and offered refuse
collection and transportation services to resident s free of direct charge. The cost of delivery
was paid through general local government revenue , usually, a central government grant. In
1991, residents were asked to pay a ‘user fee’ introduced under the Economic Structural
Adjustment Programme (ESAP) framework. As economic conditions worsened in the mid -
1990s, insufficient capital and operating funds , led to regular breakdown of vehicles, plant and equipment, demotivated management personnel, inappropriate organisation and planning, failure to enforce waste and sanitation by - laws and negative residents’ attitudes. The ability of the Harare City Council to deli ver refuse collection and transportation services deteriorated sharply. The situation reached a cr isis level in 1996 , when only 10 per cent of households had front - gate collection (HCC Reports, 1999, 2002). The rest of Harare residents had no access to wa ste collection and transportation service at all and simply dumped their rubbish
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anywhere. Underlined here is that by 1996, about 90 per cent of the total refuse generated
was not collected. The public viewed HCC’s Waste Management Department as inefficien t
and ineffective. Following the 1996 World Bank sponsored seminar on “Privatising
Municipal Services in Zimbabwe”, the entire delivery role of local authorities was questioned
and the alternative of private contractors gained momentum. In 1997, the Minist ry of Local
Government, Public Works and National Housing (MLGPWNH) directed HCC to contract -
out the provision of refuse collection and transportation services to private companies on a
competitive basis. The MLGPWNH a dvised HCC to maintain about 20 per ce nt capacity to
manage and make emergency interventions in the event of failure by the private sector
(Interview with MLGPWNH official). This means that HCC was supposed to have skills in
the management of standard contracts and to implement strong and effe ctive monitoring,
supervision and performance measurement systems.
Presented below are the HCC contracting - out experiences , with refuse collection and
transportation services between 1998 and 2006. Content analysis of six contract documents , was complem ented by ana lyses of HCC reports, news sources, contracted companies’ reports,
Parliamentary Portfolio Committee on Local Government investigations and reports, various
reports of HCC committees (Tender Formulation Committee, Tender Verification
Committee, Tender Adjudication Committee, Procurement Committee) and in - depth
interviews with key - informants, organisational materials such as strategic plans, annual
financial and budget statements. To maintain the confidentiality of sources of information,
no nam es were used for the individuals involved.
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7.2 CONTRACT DOCUMENTS
The HCC used five contract documents, namely, conditions of tender and contract, tender
form, qualifications of conditions and remarks, schedule of prices and details of offer, and
specif ication. The quality of contract specification is a critical ingredient of contracting - out process . It determines the kind of relationship between the Harare City Council and the contractors. Of importance to this study , was the contract specification No. DHS01/2002 titled: “Collection and Transportation of Domestic and Commercial Refuse from specified areas for a period of fours”, that is, 1 st January 2003 to 31 December 2007. The contract specifications covered: scope of work, vehicles, manpower, prices, financial statements, tender validity, cancellation, compliance with council’s tender condition and further information. These contract specifications did not animate with literature (Cooper, 2003;
Brown et al ., 2015). The milestones and deliverables to be met were not mentioned. No clauses to do with payment, force majeure, modifications and performance bond. The brief dis cussion of these contract specifications follow.
7.2.1 Scope of W ork
The tender ers were expected to collect and transport domestic and commercial refuse from domestic and shopping centres within the specified areas in accordance with the standards set out in the Waste Management By - laws Statutory Instrument (SI). 559 of 1981 as amended,
Public Health Act [Chapter 15:09] and Public Health By - Laws Notice No. 582 of 1962 as amended and any other subsequent laws. However, all medical waste from surgeries, hospitals, clinics, pharmacies and pharmaceutical laboratories were collected by HCC.
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7.2.2 Vehicles
The tenderers were expected to provide a minimum of five roadworthy vehicles for the
execution of the works. Furthermore, the proof of ownership or lawful possession and
certificates of roadworthiness were to be furnished to City of Harare authorities. The
vehicles were to be of a mini mum of 7 tonnes.
7.2.3 Manpower
Tenderers were required to provide a complete schedule of staff and maintain sufficient
manpower to execute works. The personnel engaged were expected to be given suitable
clothing such as overalls, gloves and boots and the same to be kept in good condition.
7.2.4 Prices
The prices were quoted in Zimbabwe an Dollars including all charges and sales tax. The prices quoted and agreed to at the time of signing the contract were to be valid for a full calendar year. In addition, the tenderers were to specify factors taken into account in coming up with the price.
7.2.5 Financial Statements
All tenderers were required to enclose their 1999, 2000 and 2001 audited financial statements and bank statements , for the last six consecutiv e months. Information about credit facilities arrangements was also needed.
7.2.6 Tender Validity
Tenderers were expected to be bound by the tender , for a period of eight weeks from the
closing date as advertised.
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7.2.7 Cancellation
The HCC had the right to cancel the contract without prejudice to any r ights if the contractor breached the terms of the contract.
7.2.8 Co mpliance With Council’s Tender C ondition s
Council’s general conditions of purchase and tender were to be followed.
7.2.9 Further Informat ion
Tenderers who required additional information on the technical information were free to contact the Assistan t Director of Health Services by telephone.
The table 7.1 below , summaries the study’s analysis of 2002 contract specifications for domestic an d commercial refuse collection and transportation.
Table 7.1 : Specifications for Collection and Transportation of Domestic and Commercial Refuse Contractor Comments 1.Cleansing and Environmental - specifies location, size of vehicles, Services (Pvt) Ltd frequency of collection per week, number of bins - Number of trips to the dumpsite - gives the city the right to terminate the contract if the work is unsatisfactory, but this was not defined. - duration of the contract - seven years 2.Encore Consolidated (Pvt ) Ltd - specifies number of households to be served and excluded, collection routes, handling of refuse, the schedules, supervision - Also specifies the equipment e.g. skip bins for home industries, maize roasting points, green markets, illegal dumping point s - mentions the need for the contractor to have ‘sufficient’ equipment but these terms were not defined. - duration of the contract was not stated 3.Broadway Waste Recovery (Pvt) - specifies areas, size of containers, Ltd frequency of refuse collection, num ber of
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households - duration of the contract - two years - number of vehicles - number of loads - frequency of collection per week - charges per bin, monthly charge 4.MNF Environmental Services (Pvt) - Specifies areas, frequency, tasks, hours Ltd - Does not specify equipment - duration of the contract - three years 5.Davexcorp Marketing (Pvt) Ltd - Specifies areas, frequency, tasks, hours - requires adequate number of employees - duration of the contract - five years Source: Field data: Various contracts of the above companies co ntracted by Harare City Council
In every contract, the inputs (resources, personnel, equipment, and facilities) and processes
(tasks) were spelled out in detail, for instance, the number of households, nature of services and frequency of collections per week/month. However, the outputs were not clearly stated.
Of concern , was how these companies were awarded tenders. After the advertising processes were undertaken, thirteen (13) companies responded to the public invitation to tender. The opening and verification of the bids was done on the 10 th of September 2002. The study noted that of the 13 companies that bought the tender forms , only six finally submitted and tendered. These six companies were Encore Consolidated (Pvt) Ltd, Broadway Waste
Recovery (Pvt) Ltd, Davexcorp Marketing (Pvt) Ltd, MNF Environmental Services (Pvt) Ltd,
Pioneer Transport Holdings and Cleansing and Environmental Services (Pvt) Ltd.
The minutes of the Tender Formulation Committee (TFC) of HCC seen by the study re vealed that two bids from Encore Consolidated (Pvt) Ltd and Broadway Waste Recovery (Pvt) Ltd were declared ‘regular’ by the TFC on the grounds that all conditions had been met and be forwarded for further consideration by the Tender Adjudication Committee (TAC). These two tender bids were forwarded to City Health and Works for technical appraisal as well as
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City Treasurer for financial appraisal. Meanwhile, it is important to note here that these two
companies had existing contracts with HCC. In one corre spondence seen by this study, the
HCC management advised the full council meeting that , they should retain the two
companies because they had continued providing services during harsh economic
environment. This gives weight to Sako’s (1992) obligation cont ractual relationship (ORC)
where the parties do things which go beyond the details in the contract due to trust
relationships.
The other four companies were declared ‘irregular’ on the grounds that they did not comply
with the requirements. The TAC found the following weaknesses in each of the four
tenderers:
1. Davexcorp Marketing (Pvt) Ltd
It provided two vehicles instead of a minimum of five roadworthy vehicles.
It did not give proof of ownership or lawful possession. The company only mentioned
that i t leased the vehicles.
No certificates of roadworthiness were furnished.
Did not state the tender validity period.
It provided only 2001 financial statements when required for three years (1999, 2000,
and 2001).
2. MNF Environmental Services (Pvt) Ltd
It h ad no vehicles but had only attached a letter confirming that the supplier Roadtrux
Zimbabwe would sup ply the quantities which HCC required.
Did not submit proof of ownership or lawful possession.
No certificates of roadworthiness received.
No mention of a minimum of seven tonnes.
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Did not provide bank statements for the 3 years, only submitted for the year 2001 and
further provided the projected Income Statement for the year 2003 which was not
required.
3. Pioneer Transport (Pvt) Ltd
It had no vehicles.
Did not state proof of ownership or lawful possession.
No certificate of roadworthiness submitted.
Did not state that vehicles were of a minimum 7 tonnes.
Did not state tender validity period.
4. Cleansing and Environmental Services (Pvt) Ltd
Did not furnish proof of ownership.
No certificates of roadworthiness.
Did not state tender validity period.
The most intriguing issue the study observed was that the HCC’s full council resolution was made to award the contract for the removal of refuse to these six comp anies including those four that had failed to meet the contract specificatio ns and requirements. This revealed that the market supply for refuse collection and transportation services was very limited or the contract specifications were slanted to discour age participation by other players. Of the 13 companies that had bought tender forms, only six finally submitted. To further complicate the situation, Pioneer Transport (Pvt) Ltd withdrew its bid and the three other companies
(Cleansing and Environmental S ervices (Pvt) Ltd, Davexcorp Marketing (Pvt) Ltd and MNF
Environmental Services (Pvt) Ltd) wrote to the Harare City Council raising concerns about the allocation of areas for refuse collection and transportation quarrelling that the allocation of areas was not fair as some contractors had been allocated very large areas and others very
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small areas. Hence, they argued, it was uneconomical for them to operate and they requested
HCC to revisit the matter. The correspondence seen by this study from Cleansing a nd
Environmental Services (Pvt) Ltd to Harare City Council complained that “the current
contract was terribly in favour of one or two contractors, thereby raising eyebrows.”
Broadway Waste Recovery (Pvt) Ltd and Encore Consolidated (Pvt) Ltd had already
ac cepted the offers right away.
Sixty - seven per cent (4 out of 6) of t he representatives of contracted companies interviewed
informed the study that “a number of people had complained about the tender pointing out
that it was tailor made to favour then curr ent and existing contractors.”
A deep and methodical analysis of the tender specifications showed that paragraph 3.1
stipulates that the prospective tenderer should actually own and possess the refuse removal
trucks and furnish evidence of the same with t he tender. As regards the paragraph 3.1 of the
tender specification which reads: “The tenderer shall undertake to provide a minimum of five
roadworthy vehicles for the execution of the works in respect of the proof of ownership or
lawful possession and c ertificates of roadworthiness must be furnished. The tenderer should
refer to the draft contract for further vehicle related requirements.” The study observed that
the se tender conditions tilted in favour of the then existing contractors. It does not need a rocket scientist, to wonder why a tenderer should be compelled to procure such task - specific vehicles before being awarded the tender. This study observed that the stipulation went against the spirit of tendering and lends credence to accusations that t he tender specifications were aimed at maintaining the status quo. Furthermore, the study observed that the above condition s had the effect of discouraging the participation of new players in the contract. The study also noted that some new players who sub mitted their tenders, in spite of this condition,
269 had their bids declared irregular by the Tender Verification Committee (TVC). The study observed that the above specification s and conditions were illogical and irregular. It was, in fact, adequate to null and void the tender. Furthermore, the Municipal Procurement Board noted that the tender specifications were flawed in that the specifications appeared to be prohibitive to new players as some of the specifications could not be met by new players
(Municipal Procurement Board Minutes seen by this study). In addition, the Municipal
Procurement Board noted that there was need to stimulate competition but did not support the idea of floating a fresh tender as it would delay the process further. The study observ ed that re - tendering, however, is permissible within the laws that govern public procurement in
Zimbabwe. For instance, Clause 20 of the Financial Regulations Part V , provides that:
I f after the receipt of tenders, it is found necessary to depart from the original specifications or conditions of tender, fresh tenders shall be called on the basis of an amended specification or conditions except where the council by resolution sets forth the circumstances and declares that it would be against the best interes t of council to invite fresh public tenders on the basis of an amended specificati on or conditions.
The Municipal Procurement Board also recommended to the HCC executive that notwithstanding that only two companies had been declared regular during the ten der v erification process, the HCC was supposed to accommodate more players in the refuse collection and transportation contract and approve the deviation from the current tender specification and proceed with the adjudication of all six companies (inclusiv e those declared irregular at the tender verification stage) that responded to the tender as provided for in
Clause 20 of the Financial Regulations Part V and as summarised in Clause 20 of Part 11 of
Council’s TAC. It is the argument of this study that a potential bid winner does not have to own a truck, but the council should demand statements of financial worthiness and details of what truck would be bought, where and delivered when, should the tender be accepted.
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On the other hand, the issue of minim um of five vehicles makes sense , considerin g Council’s
experience with 1997 to 2001 contract ing - out experiences. The HCC wanted to make sure
that contractors had sufficient vehicles that offer continuity in cases of breakdowns as well as
to ensure adherenc e to stipulated time tables. The issues of capability and capacity , are very crucial in contracting - out. These demands were designed to ensure that the image of the
Council as well as the interests of the ratepayers were maintained through satisfactory per formance by the contractors. One HCC official said “the team had the view that the tender specification was , made in the interest of Council taking into account , the previous
administrative processes, the implementation challenges, the need to focus ahead and come
up with a contract that was operationally effective.”
The study, therefore, concluded that since the tender was an open one, what was required were conditions that would clearly expose the tenderers’ financial and administrative capacity to under take the task and in the case of new players, the capacity to procure the right vehicles at the right time to effectively deliver the services. However, there was no basis to call for the submission with the tenders of proof of ownership and legal possessi on of ownership or roadworthiness of the trucks. These conditions had the effect of disqualifying all new players from tendering. Indeed, the conditions were strongly against new entrants and highly subjective. This resulted in “thinning the market” (Warne r, 2012). It explains why out of thirteen companies that bo ught the tenders, only six (46 per cent) submitted and the seven (54 per cent ) chickened out.
Due to these sentiments from bidding companies, the Council decided to revise the contract.
On the 25 t h October 2002, council officials and representatives of the refuse collection bidding companies agreed on the need to come up with a common tariff/rate to be used as the
271 bin price and the time required by bidders who had no vehicles to procure such vehicl es. The tariff/rate of Z$90, 00 was adopted as the price per bin for refuse collection contracts for the period January to December 2003.
Tenderers who had no vehic les and compactors , were given ninety days from the day of award to procure the vehicles f ailing which would result in offer being withdrawn. As for the number of vehicles, the following information was given:
Davexcorp Marketing (Pvt) Ltd was a new player and would provisionally acquire ten
(10) vehicles that would be ready fo r use within nine ty days from the date of award of
tenders.
Cleansing and Environmental Ser vices (Pvt) Ltd had to procure five compactors.
Encore Consolid ated (Pvt) Ltd had to procure twelve compactors and eight skip
trucks.
MNF Environmental Services (Pvt) Ltd was a new player and would provide seven
compactors by March 2003.
Pioneer Transport Holdings was also a new player who woul d provide the vehicles
within ninety days from the date of award of contract.
Broadway Waste Reco very (Pvt) Ltd had to purchase six compactor s and coul d
provide up to twenty vehicles.
7.3 CONTRACT AWARDING PROCESS
The State Procurement Act [Chapter 22:14] requires , contracts to be fair, transparent, through open and competitive bidding. Among other things, this allows local authorities to compare agents’ proposals, information on their capacity to deliver and reduce risks of non - performance by unreliable companies. Competitive bidding makes local authorities
272 procedures strategic in obtaining prior information about agents and comparing rates of selecting the best. However, analysis of both the 1998 and 2003 refuse collection and transportation contracts revealed that four other processes were also used by Harare City
Council, namely:
c ontracted companies’ connections with political or bureaucrats in higher authority,
consequently usurping the Constitution of Zimbabwe, State Procurement Act, Urban
Councils Act, Public Finance Management Act and HCC’s control over terms,
specifications and requirements;
c ontract renewal without fresh bidding at all except for formality and window
dressing;
g entlemanly agreements based on mutual planning and negotiation, documented as a
Memorandum of Understanding (MOU); and
i n - house delivery by Waste Management Department (contracting back - in) that did
not pass through any of the other processes .
The study observed that with the exception of the refuse collection and transportation, non e o f the housing, clinics, water reticulation and water chemical contracts passed through a competitive bidding process. The sole - source approach was used. The contracts that were awarded to contracted companies in both 1998 and 2003 appeared to have been influenced by politics.
7.4 CONTRACT TERMS, DEFINITION AND SCOPE OF WORK
The principal - agent theory suggests that it is important to have a contract that defines clearly the relationship and division of responsibility between the principal and the agent. The HCC contracts were not comprehensively written. The terms used in the contracts, the work scope
273 and obligations of both parties were not properly defined. This is illustrated in the table below.
Table7. 2 : Contract Process, Definition of Contract Term s and Scope of Work Contract Name Open Proper Definition and Tendering S cope of Work 1.Cleansing and No No Environmental Services (Pvt) Ltd 2.Encore Consolidated (Pvt) No Yes Ltd 3.Broadway Waste Recovery No Partially (Pvt) Ltd 4.MNF Environmental Yes Partially Services (Pvt) Ltd 5.Davexcorp Marketing (Pvt) Yes No Ltd Source: Field Data Notes: Yes: contract competitively tendered, terms clearly defined and specified targets No: contract indicators not specified Partially: neither one nor two were specified
7.5 FINANCIAL INCENTIVES TO COMPANIES TO DELIVER SERVICES
Many of the contract documents of the contracted organisations disclosed that in the event that payments were delayed beyond two calendar months, the companies would be entitled to interest. However, the magnitude of the interest was not stated. All interviews with representatives of contracted companies revealed that HCC took a long time to agree to price adjustments to reflect the impact of inflation.
Some of the reasons often cited as disincentives by contracted private companies included the
HCC’s reputation as being a bad debtor, a client who did not timeously pay creditors and had inappropriate infrastructure from which to provide services upon contracting. The study observ ed that companies feared that Council habits were not promotive of their profit and commercial intentions. The study discovered that contractual relationship s between the
274 contracted companies and the HCC were strained by the former’s prices that sought to recover costs from the employment of expensive equipment.
The HCC was aware that once contracted organisations bought refuse trucks, they could not use them for anything else except collecting waste. Since investing in a highly asset specific service is regarded as a sunk cost (a cost which cannot be recovered quickly), providers are only likely to make that investment if there is low uncertainty around future demand or policy or the HCC guarantee s a long - term contract. This creates the problem of monopol y over the assets raising barriers to market entry and constraining future competition. The HCC , therefore, becomes vulnerable to a single or oligopoly supplier who may threaten to withdraw from the contractual relationships, raising prices or reducing qu ality. The council could reduce opportunistic behaviour by owning the assets and only contract - out the management or operation of the service.
Given the instability and crisis of the Zimbabwean currency (from 1997 to early 2009) and delays in adjusting f ees, contracted companies wanted contracts to be pegged in US dollar, meaning that as the Zimbabwean currency lost value, contracted organisations we re paid the dollar equivalent to Zimbabwean currency. The HCC was expected to bear this foreign exchange ri sk, hence guaranteeing the contractors stable value of their investments. However, the HCC objected vehemently to this requirement.
7.6 CONTRACT MONITORING AND SUPERVISION
Contract monitoring is necessary to ensure that contracted companies deliver a leve l of service that confirms to HCC’s prescriptions, contracts’ specified monitoring indicators and means of verification (Huque, 2005). With the exception of Encore Consolidated (Pvt) Ltd
275 and Davexcorp Marketing (Pvt) Ltd contracts, where clear performance indicators were set, provisions for monitoring just stated that “the contractor shall allow the City of Harare unimpeded access to its offices, records and also allow inspection of vehicles and equipment.” Items listed for monitoring were only input indica tors, rather than outputs. Input indicators are good as far as pre - qualification criteria are concerned, but after a contract is awarded, emphasis on performance ought to shift to outputs. Table 7.3 below shows the assessments of monitoring indicators and supervision.
Table7.3 : Monitoring and Supervision of Contract Implementation
Contract Name Monitoring Supervision Indicators S pecified 1. Cleansing and Environmental Poor Poor Services (Pvt) Ltd 2. Encore Consolidated (Pvt) Ltd Good Good 3. Broadway Waste Recovery (Pvt) Ltd Poor Poor 4. MNF Environmental Services (Pvt) Poor Fair Ltd 5. Davexcorp Marketing (Pvt) Ltd Good Fair Notes: Good supervision - roles of HCC as supervisors and contracted companies clearly s tated Good monitoring - performance assessment indicators clearly specified Poor - indicators fuzzily worded or unspecified at all Fair - indicators are partially fulfilled
Furthermore , the responsibility for monitoring and supervision was blurred between the HCC and contracted organisations . However, this breach not only occurred, but appeared to have been pre - meditated in some contracts.
7.7 SANCTIONS
A contract is expected to contain an explicit list of penalties that will be insured if the rules are not followed. All the refuse collectio n and transportation contracts had cancellation of the contract as specified sanctions. However, deterrence lies not only in the existence of sanctions, but also in how severe they are. In the case of Cleansing and Environmental
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Services (Pvt) Ltd’s servic e contract, the company had to pay twice the service cost for each premise missed on any collection day. The table below presents the sternness of sanctions.
Table 7.4 : Severity of Contract Sanctions
Contract Name Sanctions Outlined Sanctions Severity 1. Cleansing and Yes High Environmental Services (Pvt) Ltd 2. Encore Consolidated No No - existent (Pvt) Ltd 3. Broadway Waste Yes High Recovery (Pvt) Ltd 4. MNF Environmental Yes Moderate Services (Pvt) Ltd 5. Davexcorp Marketing Yes Low Notes: Yes - contract sanctions clearly defined No - sanctions unspecified High - cost of default high er than that of compliance Low - sanctions not severe enough to deter willful default
The study noted that the sanctions imposed on contracted companies were not severe enough to deter the companies from non - compliance and non - performance. For instance, the agreements state: “the contractor shall pay the sum of US$126 as liquidated damages to the
Harare City Council for each and every day that the contractor shall fail or refuse to perform its duties.” Considering that a contracted company was paid a fixed monthly sum of
US$8 140 irrespective of the quantities of waste collected, this meant that each day the company collected waste, the HCC paid US$678. If the compa ny failed to collect waste for a day and was fined US$126, its profit was still more than three times the penalty.
7.8 CONTRACT DURATION
The length of a contract period in refuse collection is related to the life of the technology used in the service prov ision. Reviewed literature on solid waste services revealed that the normal contract duration is not beyond five (5) years, that is, the viable lifespan of rubbish trucks
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(Brown et al ., 2015; Awortwi, 2013; Cuttaree et al. , 2009). As a rule of thumb, the s horter the
duration of the contract the stronger the potential for competition in the market, because the
contract will be subjected to more frequent bidding (Domberger and Jensen, 1997). Longer
contracts may mirror monopoly relationships thereby exposing local authorities to the risk of
contracted companies of shirking their responsibilities. The study provides some support for
this contract length argument.
The duration of all the contracts by HCC, with the exception of the Cleansing and
Environmental Services (Pvt) Ltd, provide d sufficient time for agents to recove r investment
costs. The HCC did not have standard contract duration as the table below illustrates the
duration of the six contracts.
Table 7.5 : Contract Duration
Contract Name Contract Perio d Notification Period (Years) for Termination(Months) 1. Cleansing and 7 12 Environmental Services (Pvt) Ltd 2. Encore Consolidated (Pvt) Not specified Not specified Ltd 3. Broadway Waste Recovery 2 6 (Pvt) Ltd 4. MNF Environmental 3 3 Services (Pvt) Ltd 5. Davexcorp Marketing (Pvt) 5 Not stated Ltd 6. Pioneer Transport Pvt Ltd * Not stated Unspecified
* Pioneer withdrew before signing the contract.
7.9 CONTRACT RENEGOTIATION , RENEWAL AND TERMINATION
A renegotiation clause in the agreements or contracts gave the contracted companies an assurance that when the financial inducements in their contracts became detrimental to their effective service delivery, they could call for adjustments. The contracts p rovided a clear
278 formula e to be used in the event of rises in the cost of labour, fuel and lubricant, plant and equipment. Considering the fact that the prices of these items were very unstable between late
1997 and 2006, the renegotiation clause reduced th e concern many contracted companies had about investing their money in refuse collection and disposal business. Table 7.6 below illustrates these issues.
Table 7.6: Contract Renegotiation, Renewal and Termination Contract Fees C ontract Period Termination Name Renegotiation Renewal Conditions Chances 1. Cleansing Yes Yes Yes and Environmental Services (Pvt) Ltd 2. Encore Not stated Not stated Not stated Consolidated (Pvt) Ltd 3. Broadway No No Yes Waste Recovery (Pvt) Ltd 4. MNF Unclear Unclear Unclear Environmental Services (Pvt) Ltd 5. Davexcorp Yes Unclear Not Stated Marketing
The study observed that while HCC provided one of the best financial incentives to the contracted companies, it did not have a clause for renewal after the expiry of the contract.
Implied here is that regardless of contracted companies’ performance, the co ntracts could not be renewed. The implication of this institutional commission was that ongoing investments and efforts during the later stages of the contract were deterred in business terms. The inclusion of conditions under which contracts were to be te rminated, as well as prior notification period, reassures contracted organisations that their agreements would not be
279 arbitrarily abrogated. However, the 12 months prior notification clause in the contract of
Cleansing and Environmental Services (Pvt) Ltd was exceptionally long.
7.1 0 RELATIONSHIP BETWEEN CONTRACT DESIGN AND QUALITY OF SERVICE DELIVERY
An analysis of the set of issues that were appropriate to contractual exchanges showed that the Encore Consolidated (Pvt) Ltd contract with HCC was properly written. It was followed by MNF Environmental Services (Pvt) Ltd. The table below shows the assessment of the quality of contract designs in refuse collection.
Table 7.7 : Assessment of the Quality of Contract Designs in Refuse Collection.
Contract Name Indicators of Good A B C D E Contracts Contract D efinition (w=3) 27 27 27 24 27 Contract Process(W=4) 24 8 0 0 0 Financial I ncentives 35 45 30 35 30 (W=5) Duration, Renewal & 16 18 20 20 0 T ermination (W=2) Monitoring & S anctions 78 60 60 54 30 (W=6) Settlement of Disputes 6 6 6 6 6 (W=1) Total Weighted S core 186 164 143 139 93 (204) Note s : weight of contract clause/variable A - Cleansing and Environmental Services (Pvt) Ltd B - Encore Consolidated (Pvt) Ltd C - Broadway Waste Recovery (Pvt) Ltd D - MNF Environmental Services (Pvt) Ltd E - Davexcorp Marketing
Minutes seen by this study about refuse collection , indicated that HCC’s old contracts had many problems. Some of the problems highlighted were:
t he wording and practical application of clauses 8.6 and 8. 7 relating to price
escalations;
t he arb itration and litigation clauses;
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t he provision relating to termination in th e event of a breach (Clause 24);
payment of invoices (clause 21);
l ack of a clear provision describing what constitutes a breach and s anc tions thereof;
and
l ack of a clear provision relating to the role and extent of supervision of the
contractors by Council officials and the sanctions for refusal of cooperation by
contractors.
Because of these problems, the HCC drafted new contracts to promote the spirit of cooperation and transparency. Some of the new provisions designed to improve contract design were:
d uration of the contract (clause 2): the contract fixed the duration to two years from
four years. This was contrary to what contractor s wanted. The council made these
changes to the contracts without consulting the contracted companies. The contracted
companies came to know about contract modifications when they were asked to sign
new contracts. The contractors were not happy because the duration was too short to
recoup invested capital outlay. However, council countered this by saying the
contracts could be renewed;
p erformance bond (Clause 3): the council introduced a performance bond which was
not featuring in the old contracts. Howeve r, the contractors queried whether the bond
was necessary at all and if it was, they argued that the 10 per cent was too heavy and
instead adv ocated for 2 per cent . Council official advised the contractors that because
of past problems, a performance bond was a necessity and they should meet half wa y
at 5 per cent, not 2 per cent;
r ate of payment (clause 4): the new contract provided for negotiation of a fixed rate of
payment for the whole year. The contractors felt that this was not practical since they
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we re bound to have increases in their inputs especially fuel, labour, maintenance and
spare parts. They wanted a provision for price escalation whenever there was an
increase in those inputs. However, HCC insisted that contractors should as much as
possible factor in all those anticipated increases when negotiating the price at the
beginning of the year since the Council’s budget could only be reviewed once per
year. The study observed that HCC was not practical considering the prevailing
unfavourable macro - e conomic factors obtaining in Zimbabwe where inflat ion was
terrorising the economy;
p enalties for breach by the contractor (Clause 11): The contractors wanted clause 11.2
to amend to read “No penalty shall be imposed where the breach was caused by an act
of God or factors outside the contro l of the contractors like riots; ” and
o ther issues: The HCC asked the contractors about the possibility of ignoring
outstanding disputes for payments and asked if they could not start on a new sheet by
writing off the disp utes in view of the fact that they were caused by flawed contracts.
The proposal was not agreeable to contractors.
The evidence from refuse collection and transportatio n contracts showed that the contracts were poorly designed. This is consistent with most of the literature. Kettl (1993) found in the
United States of America (USA) - ineptitude, poor planning and contract design as major causes of contract failure. However, the results did not confi rm that while poor contracts would increase the chance of failure, good contracts do guarantee success. The study noted that issues of communication were overlooked by HCC. In the literature, the argum ent often goes that contracting - out cannot be separated from its political context (Rosenbloom, 2015;
Van Slyke, 2003). If politics is a part of the game, then communicating to the key stakeholders and other organisational groups in the larger environment is a key challenge facing HCC.
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7.11 ASSESSMENT OF CONTRACT DOCUMENTS
A maximum score of three (3) points was given to indicators that were clearly stated in contract documents. Table 7.7 above , illustrates the assessments of contract documents. The score allocation reduces to zero for contracts without specific clauses and whose process seems dubious (not followi ng laid - down rules). Lessons from principal - agent theory suggest that monitoring and sanctions are the most important indicators that any principal - agent contract should have. In the analysis of what constitutes a good contract, a higher weight is allocate d to monitoring and sanctions. The weight of the indicator is then multiplied by the score.
To compare the effects of contract document on the quality of refuse collection and transportation that contracted companies deliver, residents associations and c omplaints lodged by residents to HCC, parliamentary investigations and articles written by researchers were sought and analysed and matched with companies. The HCC officials were asked to identify the contracted companies that were the best performers and the worst performers.
The analysis revealed that properly written contracts did not provide the best quality services.
The relationship between contract design and quality of service delivery was weak and did not confirm the assertion that a properly writt en contract document is positively related with high quality outputs.
In fact, the relationship between contract design and performance is not well understood and has attracted little research. Domberger and Hensher (1993) constructed a simple model relating contracted performance (contract compliance, users’ perception of delivery quality and composite performance index) to four variables (bid selection, contract type, monitoring and enforcement). The results show ed that contracts awarded to the lowe st bidder did not
283 have a significant influence on any of the performance indicators. However, when contractors were screened prior to tendering, the recorded performance rating was between 1 and 2 points higher on average than when they were not. Similarly , when reputation was applied as the dominant selection criterion, performance was up between 1 and 1.5 points. They concluded that contractor selection and contract enforcement mechanisms appeared to be the significant factors that influence contractual p erformance. The monitoring variable turned out to have insignificant influence on performance. They explained that “this is not entirely surprising when the lack of precision in the measurement of monitoring activities is taken into account”
(Domberger and Hensher, 1993:447). In the Harare City Council study, none of the indicators of a good contract document had any positive relationship with the quality of service delivery as assessed by residents associations, complaints by residents, parliamentary inves tigative reports, articles written by researchers, and academics. There are multitude reasons that account for this inverse relationship, inter alia, contract manage ment challenges , conflict of interest, corruption and the HCC’s incapacity to reorganize an d manage a monopsony market.
These factors are discussed below.
7.11.1 Contract Management Challenges
The act of writing a good contract document is different from the act of managing it. The
HCC contracts, once signed by public administrators had been n eglected. The HCC’s monitoring of contracted companies was poorly managed. Although many of the contracts made contracted companies liable to pay fines if they defaulted all failed to create any incentives for the HCC employees at district offices to prope rly follow up complaints by residents. The HCC had monitoring mechanisms in place. The Council inspectors were at two levels , that is , ward and district levels. The inspectors were expected to monitor directly contracted companies and attend to complaints from residents. There was massive
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connivance between contracted companies and these inspectors. The case in point , was
Encore Consolidated (Pvt) Ltd. The HCC instituted investigations in 2004 and the findings
revealed the same. Interviews with some distri ct officials indicated that they had no vehicles
to move around , hence , they were relying on complaints brought to their offices by residents.
Logistics to facilitate monitoring were poor in all contracts. Considering that HCC waste
management employees we re poorly paid, vigilance was unlikely. The inability of HCC to
regularly pay the contracted organisations undermined its ability to enforce sanctions or
terminate contracts when the contracted companies breached some of the agreed terms. In
fact, the stud y found no record in HCC to show that contracts have even been sanctioned.
The HCC senior officials had little latitude for action and decision - making. If unhappy, HCC
could not terminate the contracts because many of the contracted companies had politica l connections with people in higher authority especially central government. The company letter heads seen by the study revealed that the names of either board chairpersons or board of directors for Cleansing and Environmental Services (Pvt) Ltd, Encore Co nsolidated (Pvt) Ltd and Broadway Waste Recovery (Pvt) Ltd were of very senior politicians in government and former HCC mayors. Furthermore, the study observed that HCC could not impose sanctions because it did not have the capacity to take over the refuse collection and transportation service s due to absence of contingency capacity. Responding to the question why HCC preferred to negotiate with existing providers for continuous delivery of services, HCC officials argued that trust and reciprocity were at t he centre of their contract management with contracted organisations.
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7.11.2 CONFLICT OF INTEREST
The properly written contracts were tainted with corruption and collusion. For instance, the
Cleansing and Environmental Services (Pvt) Ltd contract was intended to be confidential, but
when it leaked out to the public, serious questions on conflict of interests were raised. The
Town C lerk of HCC was a member of the board of directors of the Cleansing and
Environmental Services (Pvt) Ltd when the contract was awarded. Other members of the board of the company were known members or sympathiser of the ruling political party,
ZANU - PF without any experience or expertise in waste management. The Cleansing and
Environmental Services (Pvt) Ltd contra ct became an untouchable private company to HCC in a supposedly principal - agent relationship.
Several episodes of corruption and conflicts of interest were told during the field survey and in - depth interviews with key - informants. The HCC and the Cleansin g and Environmental
Services (Pvt) Ltd contract evidently disregarded most of the clauses in the contract because both felt unaccountable to anyone. This outcome seems to be consistent with a World Bank report which suggests that “contractual provision of services is most likely to succeed when the contract increases transparency and accountability” (World Bank, 2010).
The 1998 HCC’s tender procurement was an example of corruption. It was a classic procurement scam, needing only two parties for it to work . One party was at the top of government, powerful enough to silence doubting minions and ignore institutional checks and balances. The contracted companies informed this study that contracts had to be put to open tender, forcing even the greediest of supp liers to stay within the realm of the reasonable.
Advertisements were placed in newspapers, competitive bids conducted, technical competence established and the companies who came forward knew they were subjected to
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due diligence before the HCC made the de cision. However, the company that did not meet
the requirements was awarded the contract. There were allegations that the then Town C lerk
and the Minister of Local Government decided to give the company the tender because it was
owned by indigenous entrepr eneurs.
The study observed that in most cases HCC uses single sourcing, opaque negotiations and
loosely worded contracts justified on the grounds of national security. In the absence of
competitive bidding, it was not possible to ascertain how the contrac t sums were determined
and accepted by HCC as fair and cost - effective.
No diligence had been carried out. The study discovered that no implementation schedules
were agreed. The prices were ridiculously inflated. The non - availability in most cases of detai led contract specifications made it difficult to verify what was delivered.
7.11.3 HCC’s INCAPACITY TO RESTRUCTURE REFUSE MONOPSONIC MARKET
The refuse collection and transportation market in Zimbabwe can be explained as
monopsonic, where the HCC is the s ole buyer facing few suppliers. While this can
compromise open - market competition, a monopsony market does empower the buyer to stimulate competition through the use of competitive bidding and short - term contract
durations, with renewal of contract dependi ng on previous performance. Domberger et al.
(1986) concludes that where tendering has been introduced it has resulted in significant improvement in the efficiency with which refuse services are provided. Their finding is consistent with the growing body o f literature that points to the importance of competition in inducing agents to act efficiently. However, the findings of this study show that the HCC did
287 not use this mechanism in its letter and spirit. Only one out of the five (5) general contracts was c ompetitively bid.
Instead of the two (2) to four (4) - year contract duration usually required by HCC for contrcating - out agents , Cleansing and Environmental Services (Pvt) Ltd and Davexcorp
Marketing (Pvt) Ltd , were signed for seven (7) and five (5) - years respectively. This immediately shut out competition for an inordinate period and once awarded, contracts wer e routinely renewed. When contr a c ting - out merely replaces a council monopoly with a private one, efficiency gains would be limited. The poor quality of refuse collection and transportation both for 1998 and 2003 contracts , confirm the widely held assertion that in the absence of competition providers become sluggish.
7.11.4 CONTRACT LEGAL BINDING AND MUTUAL TRUST
The refuse collection and transportation by HCC’s waste management department was done without a contract. In certain specific circumstances, negotiation, mutual planning, goal congruence and flexibility in contractual relationship is good for service delivery. The principal - agent theory operates in the form of command and control regulation that accords limited moral responsibility to the contracted companies. In contrasts, negotiated agreements could commit agents morally because of their active participation and involvement in th e target - setting and design of the scheme (Fernandez, 2007).
The study observed that between 2009 and 2011 the HCC collaborated with community based organisations (CBOs) to collect solid waste in low - income areas such as Budiriro,
Kuwadzana, Dzivarasekwa, Mabvuku - Tafara, Kambuzuma, Highfield, Mbare, Warren Park,
Hatcliffe and Glenview. The CBOs wanted to do a good job for its own sake. They only
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sought permission from HCC to do it and a mandate to police against indiscriminate waste
disposal. Some of the CBOs representatives interviewed informed the study that their
operations in low - income suburbs were hampered by lack of resource support from HCC
management and politicians. As a result, the gesture collapsed and was discontinued.
7.11.5 COST SAVINGS TO HCC FROM CONTRACTING OUT
The question of efficiency gains is at the heart of contracting - out. If the efficiency gains
associated with the entry of a private operator do not translate into higher investments or
lower prices, where do they go? One possible explanation is that , services are initially so underpriced that even significant efficiency gains do not produce a financial equilibrium or justify lower prices. Instead, the efficiency gains translate into better operational performance, such as, reducti ons in staff salaries and benefits. Another explanation may be that the private operator reaps all the gains through profits. Given the lack of properly instituted regulatory environment in HCC, which often lacks sufficient capacity for supervising contrac ted companies, they made huge profits for services not rendered.
The literature shows that contracting - out should culminate in cost savings. The studies of
(Savas, 2000; Brown and Potoski, 2006) report cost savings efficiency. Sanghi et al . (2007) found o ut that public refuse c ollection and disposal was 50.9 per cent more expensive than private collection in a sample of 205 Canadian cities. Sava’s (2000:147) report, based on a variety of studies from different nations, shows that “s avings average about 25 per cent for the same level and quality of services, after taking into account the cost of administering and mon itoring the contract.” Hodge’ s (2000) meta - analysis of contr a c ting studies , yield s similar estimates of 8 to 14 per cent c ost savings through contracting - out. However, other researchers by Batley and Mcloughlin (2010) and Sclar (2000) , found that cost overruns,
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corruption and erosion of residents’ voice militate against the so - called sa vings accruing from
contracting - out. Harare City Council’s experience confirms to this trend. Analysis shows that
HCC paid more for refuse collection and transportation under contracting - out than in - house
production.
Furthermore, one of the most cited piec es of evidence that contracting - out refuse collection
redu ces costs , is the study by Domberger et al. (1986). They found costs dropped by 22 per cent through competitively bid. Even authorities who chose the existing in - house operation among all the bidd ers secured a cost - saving of 17 per cent. They concluded that competitive
tendering was the key.
These findings do not hold for HCC. The refuse collection contract to MNF Environmental
Services (Pvt) Ltd which was awarded after competitive bidding, set charges between 3 and 5
times higher than co ntracts that were not competitively bid.
Furthermore, the study observed that when HCC talks about savings, it usually mean
programme savings rather than general reductions in expenditure. It is very difficult to
establish what happens to programme saving s. For example, in the City of Indianapolis the
service levels for the trash collection and waste water treatment contracts remained broadly
the same while producing substantial savings.
7.12 STAFF REDUCTIONS
The clear improvement in operati onal performan ce of contracting - out in refuse collection was
encouragin g for proponents of contrcating - out. But the results also confirm one reason that
introducing the private sector so often , provokes fierce political resistance and political
290 hostility. The labour pro ductivity gains were linked to a reduction in staff num bers.
Following the contracting - out of refuse collection average employment fell by 24 per cent in
2003. In other words, on average, HCC uses more employees than privately run to produce the same level of output. Policy makers, therefore, need to weigh the trade - off between an increase in output and quality, and a reduction in staff. Confirming a key finding of previous contracting - out research, the study finds strong evidence that employment decreases substanti ally as a result of contracting - out. This was shown by results of HCC.
7.13 CHALLENGES ENCOUNTERED BY CONTRACTED COMPANIES
Once tenders are awarded, the next is execution. During the transition handover( from Harare
City Council ) - takeover (to priv ate companies), certain inevitable and unforeseen problems develop ed. The HCC’s understanding of the challenges of refuse collection as stated in its documents seen by this study were ranging from fuel shortages to awarding of tenders. “The inability was n ot totally of our making but was related to handover - takeover by different contractors who had won the tenders”, one HCC official defended. The HCC was referring residents to private companies for explanations as to why refuse was not collected. The HCC fa iled to understand that it had a social contract with the Harare residents. Hence, it was accountable to the residents. It was a misnomer to abrogate this obligation. The study observed that referring residents to any particular private company was dishono rable and unethical. It was the responsibility of the Council to make sure that the service was delivered.
The HCC documents seen by the study enumerate some of the problems that affected refuse collection and transportation as:
These include erratic supp ly of fuel by Noczim to both the contracted companies and council. Shortage of foreign currency vital for procurement of spare parts and components for the refuse collection vehicles and the adverse macro - economic fundamentals that made servicing of vehicl es extremely difficult.
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The study noted that due to vehicle breakdowns and service schedules, vehic les available were on average fourteen daily instead of eighteen.
An inter - departmental memorandum dated 26 June 2003 states that “for the past eight weeks, contractors did not collect refuse in their respective areas due to lack of fuel from National
Oil Company of Zimbabwe (Noczim). The study observed that the contractors were failing to timeously collect refuse due to negative macro - economic variable s like galloping inflation
Zimbabwe was experiencing then. The HCC got to a point where it threatened to withhold payment for waste management services for non - collection of refuse. The box below shows
HCC’s news release which appeared in one of the daily state - owned newspapers giving reasons to the residents as to why garbage was not collected.
Box 7.1: A nnouncement on Refuse Collection
CITY OF HARARE ANNOUNCEMENT ON REFUSE COLLECTION The C ity of Harare wishes to advise all residents of Harare that due to the erratic fuel supplies the city and its refuse collection contractors might fail to stick to their usual garbage collection schedules.
Kindly bear with us during this period and stop dumping garbage in open spaces. It is recommended that you bury uncol lected garbage in pits excavated in your properties in the interim.
We sincerely apologise for the inconvenience caused .
7.14 INCAPACITY OF CONTRACTED COMPANIES
The examination of the contracts between Harare City Council and contractors indicated that
some companies’ (MNF Environmental Services (Pvt) Ltd and Pioneer Transport Pvt Ltd)
inexperience in refuse collection and transportation services was a significant factor in the
failure of the contracts. Both HCC and Pioneer Transport officials gave diff erent reasons for
the costly failure of the Pioneer Transport Company’s contract. Pioneer Transport officials
292 readily admitted that they under - estimated the special nature of the refuse collection and transportation industry. Although the company had vast experience in the transportation of goods, it found the highly specialised refuse collection and transportation collection equipment, the people who operated it and the culture of the HCC formidable challenges. It also admitted that it regarded the contrac t as simply another transport contract. It is important to note here that HCC picked an inappropriate contractor.
The HCC awarded refuse collection contracts to companies without capacity to deliver, for example, some contracted companies had no vehicles to undertake the job. The HCC officials interviewed informed this study that in 1997, HCC had contracted four companies to carry out refuse collection but they had no capacity. Correspondence seen by this study from MNF
Environmental Services (Pvt) Ltd go ing to HCC indicated that the contracted company was requesting permission to delay commencement of work with about ten (10) weeks. This was more than two months. This was necessitated by the fact that Kingdom Leasing, the bank, which had agreed to finance the project, later on had made a decision to stop lending to all new projects due to macro - economic uncertainties. The company was trying the off - shore borrowing as an alternative financing. The documents also revealed that borrowing from the local bankin g sector was very costly with interest rates around ninety percent.
Residents ass ociations felt that contracting - out was the fulcrum around which various rent - generating niches were created and tapped by ZANU - PF dependent elite to the detriment of rational service delivery. The HCC officials dipped their snout long and deep into the public trough. These neo - patrimonial patron - clientelistic relations were attested by rampant procurement and tend ering scandals. The contracting - out policy was reduced t o the pursuit of the personal interest of officials and the buying - off of opposition, mostly through politically -
293 motivated consumer subsidies for the urban working poor, for example, the writing off of water debts by ZANU - PF soon after 2013 general harmoni sed elections.
7.15 INCAPACITY IN HARARE CITY COUNCIL
The study noted that the Tender Verification Committee (TVC) was too rigid when considering tenders. The TVC seemed to think that it was not under obligation to add value or fine tune tender specifica tions. The result was that tender conditions and terms were fully applied regardless of whether they were unreasonable or irrelevant. A case in point pertained to the bid for Cleansing and Environmental Services (Pvt) Ltd.
According to the minutes of the TVC, the Cleansing and Environmental Services (Pvt) Ltd was declared irregular because it had not enclosed proof of ownership and certificate of roadworthiness of the vehicles yet it had been collecting refuse for the past four years. The company had got t he infrastructure and human resources already in place. The condition defied logic to an existing and performing contractor and the act of declaring it irregular was illogical.
7.15.1 The charges per bin were said to be not commercial
Refuse remov al charg es in City of Harare were done in terms of Waste M anagement By - laws as read wit h section 218 (a) of the Urban C ouncils Act [Chapter 29:15]. The HCC on several occasions queried the way contracted companies were calculating the charges for a bin. One of the contracted companies wrote a letter to Council outlining the escalation formula. The factors considered were (a) fuel, (b) wages, (c) lubricants, that is, hydraulic oil, engine oil and brake fluid, (d) cost of tyres and (e) maintenance costs especially re pair of clutch and pressure plate. The HCC caused unnecessary tensions between itself and
294 contracted companies because it was failing to take full cognizance of the macro - economic environment in calculating the price per bin.
7.15.2 Slow Decision - Making
Slow decision - making process es caused non - collection of refuse during the transitional period. The delay in the finalis ation of awarding of tenders resulted in old contractors being uncertain of their future. This affected their performance.
7.15.3 Lack o f Clarity on Information Contained in Tender and Contract D o cuments
The tender document for MNF Environmental Services (Pvt) Ltd cites duration as five (5) years whereas the contract document cites the duration as four (4 ) years. The company preferred fiv e years as it allowed for depreciation over a longer period. This would culminate in cost reduction per bin per year. The study further noted that Broadway Waste Recovery
(Pvt) Ltd wrote to HCC complaining about the discrepancies in letter of award and con tract documents regarding the number of suburbs allocated to it. The letter of award was different from an earlier contract document. “According to the 24 th December 2002 contract, the following suburbs were included among others: Highlands, North of Ent erprises Road,
Milton Park, Belvedere North and South, Ridgeview. We subsequently accepted the offer in writing and were prepared to commence collecting in January 2003 had the Council not deferred the signing ceremony. To our surprise, the above suburbs h ave been dropped from the final award letter of the 17 th February 2003”, queried the letter.
This was really unfair on the part of the contracted company. On the basis of the 24 th
December 2002 contract, Broadway Waste Recovery (Pvt) Ltd went ahead to mak e financial commitments and ordered additional equipment in order to cope with the areas allocated.
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The HCC responded by saying Encore Consolidated (Pvt) Ltd and Broadway Waste
Recovery (Pvt) Ltd companies , had more areas than the rest of the contractors. As expected, the other contractors queried that. The HCC then reconsidered the matter and resolved that all the five contractors be given almost the same number of bins to collect. Implied here is , that a new offer letter was drafted. The study noted that HCC asked Broadway Waste
Recovery (Pvt) Ltd to make a decision based on Council’s February offer. The major
problem observed here was that communication was very poor on the part of Harare Ci ty
Council. Whenever changes were made to contracts , they were n ot communicated to avoid
apprehensions and suspicions. Even the contract specification was silent on how changes to agreed positions could be amended. This was a serious omission and flaw.
7.15.4 Inclusion of Services in Co ntracts: Mbare Skip Bin Service
Mbare residential area was not included in the initial contract awarded to Encore
Consolidated (Pvt) Ltd. The contract document seen by this study excluded Mbare residential skip service. Another contentious issue was the three months duration. Encore Con solidated
(Pvt) Ltd argued that the duration was too short to cover operating expenses. Also Encore
Consolidated (Pvt) Ltd indicated in its letter to HCC that the Z$9 000 it had been paid by
Council per skip bin collected was not a fair price. In response , the HCC acknowledged the error and promised to amend the contract to include the skip bin collections. The study noted that the contracts were poorly designed. The three months was indeed a short period of time for a company to comfortably invest in the purchase of more skip bins.
Surprisingly, the HCC threatened to sue Encore Consolidated (Pvt) Ltd for breaching the contract. Some key provisions of the agreement were:
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In terms of the preamble as read together with clauses 1.4 and 1.5 , the contractor shall collect refuse and at the request of Council, provide skip - bin services in areas specified in Annexure “A” to the agreement.
Further in terms of clause 1.9:
I n addition to the areas specified in the annexure or in place thereof, the contractor may be required to work anywhere in the Harare municipal area and should the contractor be so requested, he shall be bound to do so as directed unless in the event of additional work, it is beyond the contractor’s resour ces capacity to take more work.
The study noted that Encore Consolidated (Pvt) Ltd did not breach the provision of clause 1.9
because it had no capacity as indicated in its letter to the HCC. The foregoing provisions
were arbitrary and silent on Council availing more resources to execute extra responsibilities.
The s tudy also observed that there was need to develop a culture of belonging and trust
amongst employees and councillors when undertaking certain tasks. The finger - pointing and buck - passing did not impress at all. In most cases, unnecessary bureaucratic tendencies developed. A ca se in point was of the 70 Watt street light f ittings where all councillors were
invited during the tender opening, verification and adjudication meetings.
7.15.5 Lack of Feasibility S tudies
The Ci ty Treasurer was asked in 2002 to come up with a cost - benefit analysis (CBA) on
refuse collection an d transportation. The factors consider ed were: the average distance to and
from the dumpsite, the size of the crews and the numbers of vehicles, the recover y period,
capital expenditure and running costs, number of bins, salaries and wages for the
administration staff, and the maintenance of the dump site, among others. The City Treasurer
considered three options for refuse removal, namely, Council, Council c ombining contractors
and contractors alone.
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Where Council or the contractors would collect refuse in all areas each on their own, the average bin price would be Z$96, 60 and Z$95, 57 respectively. Whilst for collections done by the Council together with t he contractors, the average bin price would be Z$84, 70. If the latter option was chosen as the best method, Council would concentrate on refuse removal in areas such as the Central Business District (CBD), suburban shopping centres, Mbare Musika and the i ndustrial areas whilst the contractors would be allocated mostly residential areas.
The table 7.8 below , shows comparative expenditure and income figures on refuse collection and transportation by HCC, HCC and Contractors, and Contractors alone.
Table 7.8 : Comparative Expenditure and Income Figures on Refuse Collection by HCC, HCC and Contractors, and Contractors Alone (Full Cost Recovery) Expenditure 2003 Council 2003 Council & 2003 Collecting Contractors Contractors Z$ Z $ Z$ Salaries & 333 089 000 153 626 200 Allowances Administration 97 800 500 97 800 500 Charges General Expenses 385 057 300 287 426 400 Repairs and 137 343 300 69 132 300 Maintenance Capital Charges 784 927 500 168 160 800 Hire Charges 764 346 200 1 632 115 400 Supervision 20 985 700 (inspectors) Receptacles 80 000 000 GROSS 1 738 217 600 1 540 492 400 1 733 101 100 EXPENDITURE Less: Amounts 4 500 000 4 500 000 Charged Out Net Expenditure 1 733 717 600 1 535 992 400 1 733 101 100 INCOME 1 733 717 600 1 535 992 400 1 733 101 100 Owners Charges (L.D.A &H.D.A) TOTAL INCOME 1 733 717 600 1 535 992 400 1 733 101 100 NET SURPLUS/( - 0 0 0 DEFICIT) Price per bin 95,60 84.70 95.57 Source: Harare City Council Documents, 2003
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The cost per bin collected was calculated using the following formula e : Total Expenditure
divided by annual collections (refuse collection vote only).
The major weakness of this cost - benefit analysis (CBA) was that it focused only on economic
and financial di mensions and completely ignored the political, technical, social and
environmental dimensions. The study found no evidence of systematic change in refuse
collection prices as a result of contracting out. The major explanation seemed more likely to
do with affordabilit y. Affordability is a real concern for much of the residents. The result s point ed to the economic and political difficulties of aligning rates with the costs of service provision. The affordability implications for revenue streams to contracted companies call into question the sustainability of private involvement unless there are explicit subsidy payments.
The study noted that the CBA was an in - house exercise. The HCC was supposed to engage a n external consultant to carry out a scientific cost benefit analysis for refuse collection and transportation. The HCC needs in - depth studies supported by detailed financial sta tistical data to prove that contracting - out ventures are viable and profitable to undertake.
7.16 CHEATING BY CONTRACTED COMPANIES
The documents seen indicated that some companies were making claims for work not done.
For instance, a letter from HCC addressed to Cleansing and Environmental Services (Pvt) Ltd stated that :
I t was observed that your claims for the month of March 2003 do not tally with the actual work don e as reflected on the job cards. It is a fact that Mufakose has a once a week collection and yet you claimed for twice a week i.e. Tuesday and Thursdays. It is also a fact that in the same suburb there was no refuse collection for three weeks during the month of March 2003 and yet you did claim for the whole month.
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Other documents seen by this study , cited a number of breaches of the agreement by
Cleansing and Enviro nmental Services (Pvt) Ltd such as delay ed refuse collection, non -
collection, failure to notify Council of any breakdown s , failure to provide sufficient vehicles
and unsatisfactory performance.
It is striking to note here that HCC had no monitors of contr acted companies on the ground. It
relied much on the complaints lodged by residents. The quotation above illustrates the fact
that contracted companies were not collecting refuse at the frequency indicated in their
contracts. As a result, fraudulent and co unterfeit claims were rampant.
Other key informants attributed these problems to HCC. One academic observed that “when a
government administration is inept and ethically challenged, it is highly unlikely that they
will be able to build an effective partne rship with a private vendor. Was the HCC refuse
collection d ebacle a failure of contracting - out or a failure of government?”, the academic
questioned. As to the proposition that contracting - out increases the danger of corruption, the academic was strong a nd firm in his disagreement. “Honest people behave honestly, whether they are direct employees or contractors . ” Corruption comes from the individual and from the work environment, whether it is t he public or the private sector ” the academic further reporte d.
The study, however, observed that in the case of HCC , refuse collection and transportation, the failure of the project was as stronger of a council failing to properly execute its contract management and regulatory responsibilities as it was the failur e of the contracted companies to provide the refuse collection services they had promised the residents of Harare.
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7.17 LEADERSHIP CHALLENGES
The study observed that Harare City Council between 1999 and 2008 , had been run by appointed ruling political party (ZANU - PF) mayor and commissions. City contracts were dished out to cronies. Because of frequent leadership changes, there were discontinuities in terms of policy stance and commitment. When the Sekesayi Mak wavarara led commission was appointed in late 2000, it issued a statement in September that it was “ cheaper for council to undertake the refuse collection function itself than contracting - out the service to outsiders” (Zimbabwe Independent, 20 September 2002). Shockingly, barely a month after terminating existing contracts and buying thirteen new refuse collection vehicles, the commission decided to contract - out the refuse collection citing lack of in - house capacity and to improve service quality.
From 1999 to 2008, the then Minister of Loca l Government, Public Works and N ational
Hou sing has been dismissing the Movement for Democratic Change (MDC) urban councillors and replacing them with hand - picked commissioners and special interest councillors. The de velopments took place at a time service delivery was very poor - be it clean water supply shortages, garbage collection, sewerage bursts and maintenance, water drainage blockages, congestion of the urban centres by people and vehicles, poor housing provis ion, mushrooming of squatter camps, potholes among others.
The majority of Harare residents believe that these problems emanate d from leadership crisis instigated by the Minister of LGPWNH. The MDC political party once fired corrupt council l ors but the Mi nister of Local Government refused to dismiss them.
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The intervention by the Ministry through appointment of HCC personnel reduce d the independence of urban councils. In 2008, the government abolished the post of the executive mayor and replaced it with th e old system of the ceremonial mayor. This was designed to reduce the powers of mayors as provided in the Urban Councils Act.
7.18 GENERAL OBSERVATION
The results suggest ed that when Harare City Council management were forced to contract out refuse services in both 1998 and 2003, it did not put a strong emphasis on developing, enhancing and ensuring contractor performance. It merely shipped responsibility outside council not improving public service delivery. Plummer and Nhemachena observed that the municipal privatisation of refuse collection in Harare was “widely considered to be a disaster” (2001).
7.19 CHAPTER SUMMARY
In this chap ter, the results of contrcating - out the r efuse collection and transportation services within Harare City Council , were presented and analysed. The following themes were presented: contract documents, contract awarding process, contract terms and definition, financial incentives to contracted comp anies, contract duration, relationship between contract design and quality of refuse service, contract management problems, conflict of interest, cost savings, staff reductions and challenges faced by contracted companies and Harare City
Council, leadershi p challenges. The next chapter presents the contracting - out innovations in sampled cases such as housing, water reticulation and water treatment chemicals, city parking, city clinics and roads.
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CHAPTER EIGHT CONTRACTING - O UT INNOVATIONS IN SAMPLED CASES
8.0 INTRODUCTION
This chapter presents the findings obtained from sampled cases, namely, housing, city parking, water reticulation and water treatment chemicals, Wilkins Clinic services (catering, security, cleaning) and airport road construction.
8.1 CO N TRACTING - OUT PROCESS
The contracting - out process is not different from the contracting - out dynamics and refuse collection and transportation services discussed in the two preceding chapters: Six and Seven.
The Harare City Council’s Tender Board approves t he process of advertising the bids including postings on the council notice boards statin g the services to be contracted - out and the conditions for bidding. Selection criteria of service providers included experience in the business, financial capacity, kn owledge and skills, and availability of equipment. The HCC usually respond promptly to follow - up questions i n detail of contracting - out process from prospective bidders. An evaluation committee of five usually is formed to check bidders’ ability to perform the tasks and assess rival bids on competitive merits.
8.2 HOUSING EXPERIENCES
This section presents and analyses the contracting - out of housing services to both for - profit private firms and non - profit organisations. An overview of the housing policy is outlined.
The Bill and Melinda Gates Foundation (BMGF) and Central African Building Society/Old
Mutual (CABS/OM) contracts are discussed below.
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8.2 .1 Housing Policy Overview
The preamble of the City of Harare’s housing policy states that it is the responsibility of the
Director of Housing and Community Services to allocate residential stands in an efficient,
equitable and transparent manner to the housing applicants registered on the City’s housing
waiting list. Housing delivery is driven by four ma jor strategic channels which are
coordinated by the housing department. These channels are: housing co - operatives, employer assisted housing schemes, private developers in partnership with council and pay schemes.
The HCC adopts a contracting - out policy w here it enters into smart partnerships with private land developers for purposes of housing delivery. In such partnerships, council provides the land or skills whereas the partners prov ide funding for infrastructure , both offsite and onsite
development.
8.2.2 BILL AND MELINDA GATES FOUNDATION (BMGF)
8.2 .2.1 Background
Bill and Melinda Gates , are very concerned about the relentless migration of people from
rural to urban areas. That concern stems simply from how the cities will cope with the influx
(80 pe r cent of the world population will be living in urban areas by the year 2030 (UN -
HABITAT , 2013 ) of people. Therefore, BMGF is channe l ling funds to make sure that cities
are able to put the necessary infrastructure in place in terms of housing, water and s anitation.
The former mayor of Harare info rmed the study that HCC benefit because HCC systems were
part of all the hardships that the city has endured since November 1997.
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8.2 .2. 2 BMGF Motivation
The foundation has a clearly defined public interest in housing and community development.
The docum ents seen by this study revealed that the BMGF seeks to “advance public welfare”.
There are two dimensions to advancing public welfare, namely, housing activities and community activities.
The housing activities that are undertaken include: low - income housing, low and moderate income housing, housing for the aged, student housing, orphanage, instruction guidance in housing and other housing activities.
The community activities include: area development, redevelo pment and renewal, homeownership association, job training, counsel l ing and assistance, and sanitation as well as water infrastructural development.
The study also observed that the Government of Zimbabwe , gives tax - exemption s to non - profit organisations that engage in projects that promote community development and welfare of an adversely impacted community.
8.2 .2. 3 Work Done By BMGF for Harare City Council
Melinda, a world famous philanthropist, provided a US$5 million fund through the Bill and
Melinda Gates Foundation f or developmental projects to City of Harare in 2011. The chief purpose of US$5 million was to reduce a housing backlog estimated at two (2) million. The amount was meant for regenerating high - density areas li ke Mbare, particularly, the fifty - eight
(58) blocks of Matapi hostels. The Harare City Council used the money to carry out a survey of who is who in the hostels and established the number of people who needed
305 accommodation. The pilot study was done at Pats iga area in Mbare high density suburb. Part of the same amount was utilised to build 486 housing units in Dzivarasekwa (Ambuya
Nehanda Housing Project) using the bulk of the US$5 million. Furthermore, the foundation also gave US$ 140 000 worth of vehicles (a truck and minibus) and waste bins to Kuwadzana high density area.
8.2 .2.4 Discussion
The Harare City Council, rather than undertaking building itself, enters into a contract with a non - profit Bill and Melinda Gates Foundation to work on behalf of the public as an agent of change, that is, to carry out a public policy to construct the houses in Mbare, Dzivarasekwa and Budiriro. The deal was structured as a partnership. It was a network for channe l ling money. The contract was incomplete not only to cont ent but also to procedure. How to get it done was not specified and what the units should look like outside of the basic model was not specified. But the number of units was given. This gave flexibility but it was also a potential source of dispute.
The H CC avoided the daily managerial problems , but took the political credit for project success. The Minister of Local Government, Public Works and National Housing officially launched the project in 2011. Monitoring problems were almost nonexistent.
8.2 . 3 CA BS/OLD MUTUAL: BUDIRIRO HOUSING PROJECT
8.2 . 3.1 Background
Pressure on housing infrastructure and land in urban areas , has over the years been fanned by population growth and rural - urban migration. The increase in demand for land has consequently pushed p rices up, leaving low - income earners struggling to acquire decent
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housing. On average, prices for serviced land in Harare’s high, medium and low density
areas, at the ti me of writing this thesis, stood at US$15, US$18 and US$25 respectively per square mete r. CABS/OM came in to address this problem.
The Old Mutual and CABS project was part of the Old Mutual’s (OM) five year plan to
produce 15 000 low income housing units across the country. Under the scheme, Old Mutual
Zimbabwe (OMZ) provided mortgage for h ousing projects through its subsidiary CABS, with
Old Mutual Property Company and RM Insurance Company provided cover for the home
owners.
Old Mutual (OM) Zimbabwe, through its subsidiary, Central African Building Society
(CABS) signed a Memorandum of Understanding (MoU) for Budiriro Housing project in
January 2012. The Mo U set out the framework for the establishment of US$15 million
housing fund , for construction of over 3 000 housing units in the Budiriro high density
suburb. The contract between HCC and CABS/OM , required the two companies to service
the land, putting in roads, water and sewer before allocating the developed stands. The
CAB S/OM’s housing development represents one of the major private sector funded projects.
The houses comprised one - bedroomed and two - bedroomed structures. There were three types
of houses under phase 1: Type A which was 27 square meters (m 2 ) built up two roo med core
house. Type A + which was 64 square meters being 27 m 2 built up two roomed house plus
37m 2 pliant for three rooms. The A + type provides the home owner an opportunity to
immediately extend the house using a given plan at a cost of around US$5 000. Ty pe B is
being 47 m 2 being four rooms built up. The stands have a provision for extension of the
houses to a maximum of 168 m 2 for the 240 m 2 stands and a maximum of 210 m 2 for the 300
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m 2 stands. The cost of the houses ranges between US$20 000 and US$30 00 0 payable over
10 years.
Phase two of the project has 1 509 stands with on - site roads and storm water drainage, on site
sewer and water reticulation.
For one to be eligible for these houses was supposed to have a monthly income of US$900,
00. This basic minimum requirement for accessing the 10 - year mortgage was out of range of
most civil servants who constitute the bulk of the local workforce in Zimbabwe. At the time
of writing this thesis, the lowest paid public worker earned a salary of US$275, 00 per month.
This was the most commonly used benchmark for low - income earners.
The repayment framework was 25 per cent cash deposit plus monthly installment of between
US$246 and US$276 per month depending on the option one chooses. The beneficiaries were expe cted to be on the City of Harare’s hous ing waiting list and earn a mini mum of
US$2 000 per month. The HCC had the responsibility to actually allocate the property.
According to documents seen by this study, the properties were divided into 2 695 stands bei ng 300 square meters and 407 stands measuring 240 square meters.
8.2 . 3.2 Rationale of CABS/OM Budiriro Housing Project
The Old Mutual official interviewed informed this study that the Budiriro project endorsed the organisation’s commitment to support the development and growth of the Zimbabwe economy mainly the reconstruction and recovery of the economy. The CABS official expressed the organisation’s commitment through genuine participation in land and housing development. “It is a great honour to be entr usted to undertake a project of this size that will
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yield over 3 000 housing units to benefit Harare residents on the waiting list.” Implied here is
that Budiriro Housing Project was designed to alleviate the immense pressure on housing in
Harare.
8.2 .3.3 Co sts and Benefits of Contracting - Out the Provision of Housing
The housing field alone provides cogent illustrations of incoherence of cont racting out. The
HCC through CABS /OM constructed residential houses granted mortgage loans. However,
problems were abound. The HCC refused to quote a financial price for a unit before the
customer signed a purchase contract. CABS bank, however, refused to commit itself to a loan
until it received a firm price from the HCC. The s tudy noted that each party had a valid point.
On the one hand, the HCC did not want to quote a price in an escalating market when the mortgage bank might delay its approval and this would have resulted in the HCC’s receipting its money by several months. O n the other hand, the mortgage bank did not want to start its procedures without a firm price being set for the unit (house). These developments affirm that the contract was defective and flawed from th e onset. It further demonstrated that generally the HC C had no capacity to design complete and workable contracts.
The whole process took several months of intense debates. Numerous purchases floundered with the collapse of delicately stacked finance plans. It is little wonder that the HCC recorded more th an 100 complaints against CABS and saw many of the complaints as justified . The HCC has its share of the world’s scoundrels. Small and large scandals have taken place in the HCC. One of the large scandals that occurred within HCC was the US$144 ,
4 million Exim Bank (China) loan. The HCC officials did not create project bank accounts for the US$144, 4 million loan facility obtained from China’s Eximbank for the rehabilitation of waterworks making alleged corruption that surrounded the funds difficult to trac e. The
309 councillors of HCC appointed a committee of councillors in early 2014 to investigate into the implementation of the Harare water and rehabilitation project. The investigation revealed that the HCC officials failed to furnish the committee with proje ct accounting and internal audit reports. The study observed that without these reports it was impossible to track budgeted costs and actual costs, conduct variance analysis reports, project cashflow, fixed assets tracking, errors of commission and omis sions, project deliverables, negligent and willful misstatements, among other things.
8.2 . 3.4 CABS /OM and HCC Challenges
8.2 . 3.4.1 Conflict of Interest
The former Harare Mayor, Muchadeyi Masunda, awarded 3 000 residential stands to CABS and OM companies. Apart from being the Mayor of HCC, Muchadeyi Masunda dabbled as the board chairperson of both companies. However, the former Mayor informed this study that when he took office of Harare Mayor in July 2008, “I made a full disclosure of all my interests to t he city council. In addition, my conduct at all material times being beyond reproach. I always recused myself from any meeting s where there could be any conflict of interest, however remote that possibility may be.” The Minister of MLGPWNH once ordered the reversal of the 3 000 stands deal, arguing that the Mayor was “double dipping” since the
Mayor was the board chairperson for both CABS and Old Mutual. “Council must take back the 3 000 stands allocated to CABS and Old Mutual to benefit local people instea d of benefiting two companies where Muchadeyi Masunda is the chairman. That is the kind of double dipping which ZANU - PF and the people do not accept” (the Minister informed the study during an interview held in 2013).
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The former Mayor was also investigate d after he had allocated residential stands to OM and
CABS both of which he chaired at the time. The probe was necessitated by the fact that there
had been a conflict of interest. Minister of LGPWNH was said to have ordered the reversal of
the deal. Masund a, however, was obstinate that there was nothing wrong with the deal as all
procedures had been followed despite the fact that he even had a 60 per cent stake in the John
Sisk and Son Company that was contracted to service the stands (The Herald, 30 Septem ber
2013).
Responding to the question: “is there a danger of conflicts of interest between your business
roles and that of being Mayor in the capital?” T he mayor said, “No, because I have managed the situation. Recently, there has been a lot of fuss about my involvement as mayor and my
being chairman of Old Mutual and also being a chairman and shareholder of John Sisk and
Son, but in all those instances, I am squeaky clean and the reason it gets raised now is
because of the build - up to our elections.”
Th e former Mayor further remarked that:
The US$15 million is in fact going to be channeled towards the construction of 3 106 housing units. The deal was done between Old Mutual through the Central Af rican Building Society and the C ity of Harare. But going towards an election, the Minister of Local Government seems to have woken up and said ‘Ah there is a conflict of interest’ as he has been told that the Mayor is going to benefit as I am chairman of Old Mutual and chairman of CABS, which is not true. They even trot out that I am still involved on the High Court and Supreme Court Rules Committee but that happened 30 years ago when I was a Partner at Gill , Godlonte and Gerr associates.
8.2 . 3.4.2 Low Uptake of Budiriro Houses
When CABS completed the construction of the 3 000 housing units in Budiriro, the HCC found it difficult to find suitable candidates to fill up the 985 houses. One HCC official informed the study that , out of 3 000 applications that were received from aspiring home
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seekers, only 4 40 had been successful. Another key informant at Town House disclosed that
many home seekers failed to meet the required deposit. “It is true that council is struggling to
fill up the finished houses because of the high deposit being charged. The US$6 000 that is
required as deposit , is too high for many people considering the current economic
hardships.”, said the key informant. Zimbabwe Statistical Agency (Zimstat) report of 2015
noted that more than 30 100 employees lost jobs in 2014 especially in sector s such as mining and manufacturing alone. “There has been a decline in the number of people employed in the manufacturing sector from 118 600 employees to 93 100 in 2014 and the mining sector from
43 000 employees to 38 400”, the Zimstat report.
The study observed that the Budiriro Housing project was designed to provide affordable
housing to low income earners. The full cost per unit was US$27 000 but interested home
seekers were expec ted to pay a down payment of 25 per cent. This was an insurmountable
to ll order because many people were struggling to make ends meet at the time of writing this
thesis. The HCC councillors interviewed voiced their concerns over the high deposit fee.
They argued that the noble scheme was no longer for the poor who were the ta rgeted
beneficiaries. Old Mutual and CABS w ere awarded the land on subsidis ed rates by HCC in
order to meet the needs of low income earners.
In the minutes of the 1 834 th full council meeting held at Town House in May 2014,
councillors resolved that the T own Clerk and Mayor had to renegotiate the deal with CABS
so that it benefited low income members of society. At the time of finishing writing this
study, a report back to council was not yet made.
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When contacted for comment on the progress of renegotiati ng for a downward review of the
deposit, the Harare Mayor said there was nothing happening. “There are no negotiations yet as the current demand for houses is high. Councillors still want to discuss a genuinely pro - poor deal with the next phase. I have met with CABS and we will be discussing again”, the
Mayor informed the study. The Mayor made reference to high demand for houses. Th e question is who was demanding the houses? The low income earners or high income earners?
The intended or unintended beneficia ries?
The study noted that HCC was in a difficult position. Usually, it is difficult for CABS and
Old Mutual to review downwards the deposit because projections were already made. On the other hand, government and residents were clamouring for affordable housing. Therefore,
HCC found itself in a tricky situation.
Harare’s housing backlog at the time of writing this thesis was estimated at one million.
Residents associations representatives interviewed informed the study that the deposit was beyond the rea ch of poor majority. “It is beyond the reach of many. The houses were built for the poor and CABS got that land for free from the council as part of housing delivery”, HRT official said. This observat ion by residents associations was quite correct gi ven th at the
Zimbabwe economy was plagued by high formal unemployment and meager incomes in the informal sector. Hence, the average cost per unit of bet ween US$22 000 and US$27 000 was undoubtedly too expensive for most low - income earners. Responding to the ques tion of marginalising the informal sector, both officials from both CABS and OM argued that th ey knew that a lot of people were in the informal sector. They accepted copies of receipts, bank statements or share certificates to show that they were capable o f raising the money to cover the mortgage.
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The monthly mortgage payments were pegged between US$240 and US$306. Those in the informal sector who fail ed to produce proof of payment were ineligible for the mortgage loan. A Zimbabwe National Statistics Agen cy report titled, “ The 2011 - 2012 Poverty Income
Consumption and Expenditure Survey” indicated that paid permanent employees stood at
15,2 per cent of the population. This was seconded by the Confederation of Zimbabwe
Industry (CZI) manufacturing sector rep ort for 2013 , that revealed that capacity utilisation in the manufact uring sector dropped to 39, 6 per cent from 44 per cent in 2012.
The Old Mutual official, however, defended the need for US$6 000 deposit. “Although the underlying idea was to help low - i ncome earners acquire descent accommodation, soaring costs had bloated prices.” Furthermore, the OM official blamed the HCC for failing to meet its end of the bargain, which resulted in OM taking up those costs, contrary to initial agreements. “We would ha ve wanted this to benefit more people in the low - income bracket, but there are issues beyond our control. We were not only building the houses, we also had to do infrastructure development and this means we incurred costs.” According to the agreement, the HCC was supposed to service the land. However, HCC failed to service the land and CABS intervened to make sure that beneficiaries bought houses in the area with proper facilities such as good road network, sewer lines and water pumps.
The study observed t hat HCC failed to provide affordable housing to residents. Housing co - operatives and private land developers have played a major role in providing homes, but the prices attached were exorbitant for poor people, leading to the mushrooming of illegal settlem ents in the city. In orde r for HCC’s vision of becoming ‘World Class C ity by 2025 ’ , the housing shortage should be addressed.
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8.2 . 3.4.3 Corruption
The Minister of LGPWNH bemoaned the magnitude of corruption in HCC as attested by inexplicably changed lifes tyles by Harare councillors since the y came into office. “When the forty - six MDC counci llors were voted into office, forty - four had no cars and only two (2) had cars. Right now, two still do not have cars and the rest have more than two cars each and several residential properties in suburbs such as Borrowdale.”
8.2 . 3.4.4 Quality of Budiriro Houses
CABS/OM bank houses sold on mort gage in Budiriro succumbed to bad weather with s ome already started cracking at the time of writing this thesis. The writer of this thesis visited the
Budiriro houses and observed that the cracks we re due to poor workmanship. The researcher saw thirteen (1 3) housing units which were severely affected and were being demolished to pave way for reconstr uction after full assessment had been completed. The CABS mortgage home owners were interviewed , by the researcher and they indicated to this study that they fe lt “shortchanged and suspect ed sub - standard material ” to have been used to construct the houses.” Another beneficiary complained that, “This is painful, we paid US$8 000 to get these houses and every month we are paying US$200”. The figure 8.1 below , demo nstrates some of the cracks.
Figure 8.1: CABS/Old Mutual Budiriro Houses Crack
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When the study contacted for comment, an official at the CABS headquarters in Harare referred all questions to Old Mutual. The Old Mutual Property official admitted to this researcher that there were some structural defects.
8.3 GKW: WATER RETICULATION CONTRACTING - OUT
8.3 .1 Background
The construction of sewerage works is provided for under Part X11 of the Urban Councils
Act [Sewerage and Drainage] . S ection 168 of t he Urban Councils Act , gives the council the option to “take such measures and construct such works as it considers necessary for the collection, conveyance, treatment and disposal of sewerage . ” The listed works include: c ollection, c onveyance, t reatment an d d isposal .
In the City of Harare ’s Strategic Plan ( 2012 – 2025 ), one of its main strategic thrusts (page 11 and 12) is sewerage pipe leaks. Under the Waste Management department , strategies for the period 2012 – 2 015 in the Strategic Plan Document , sewerage was not considered . T herefore , there is no strategy set pertaining to sewerage for the strategic planning document.
In its 2014 budget, presented for council approval, the finance commit tee indicated that it operated five sewerage treatment work s with a total installed capacity of 219 mega litres a day , but treating seventy - two mega litres due to frequent breakdowns. From the above, if one looks at the Strategic Plan documen t, only leaks of sewage pipes are addressed as the City
Councils’ strateg ic thrust. The question is what were the efforts since 1998 to address these problems?
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In 1998, the HCC awarded a contract: Solid Waste Project DW 8/97 to GKW Company. The
contract was for solid waste management, engineering consultancy, selection of new disposal
sites, design of landfill method, preparation of documents on management of waste disposal
sites, closure and rehabilitation of existing refuse disposal sites.
The study observed that , water contracting - out was attempted in 1996. The water contr acting out innovation was adopted upon recommendation by German company of water engineering consultants GKW, funded by African Development Bank (AfDB). The GKW developed a plan for HCC’s water and sanitation services.
Water multinational company, BiWater International, jumped in and grabbed the opportunity and proposed a far - reaching build - own - operate and transfer (BOOT) scheme, but the proposal and debates around it were kept largely secret . The debates only collapsed when the
HCC plunged into deeper pol itical crisis in 1998. Efforts since that time by the European
Investment Bank (EIB) to r esuscitate the GKW proposals , had been unsuccessful as the HCC
stumbled from one crisis to another.
8.3 .2 Water Contracting - Out Discourse in Zimbabwe
Contracting - out entered public debate in Zimbabwe in the 1990s as part of neoliberal
economic refor m packages. For example, ESAP ( 1990 - 1995 ) and its sequel, ZIMPREST
( 1996 - 2000 ). Although the government claims to have abandoned neoliberalism, privatisation
oriented reform s still linger.
Donor countries and their agencies, multilateral donors like the WB, business people and
some individuals , saw privatisation as a panacea for the mounting economic challenges that
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the Zimbabwean government faced and the related decline in the quality of services in many
sectors (Bond and Manyanya, 2002). The WB advised the Government of Zimbabwe to
privatise more parastatals in all sectors (Agriculture, Water, E lectricity, Telecommunication,
T ransport , etc. ). However, the government proceeded slowly. For example, the Privatisation
Agency of Zimbabwe (PAZ) was only formed belatedly in 1999 as an advisory body to the
Cabinet and a facilitator for privatisation. Its mandate does not include the privatisation of
municipal services, howeve r. It focuses solely on state - owned enterprises.
The study observed that PAZ, in 1999, produced a privatisation manual that read like a WB
brochure: to reduce government subsidies to poorly performing enterprises, ensure efficiency
and competition in the economy by doing away with monopolies, empower indigenous
Zimbabweans to participate in the economy and to raise revenue for Treasury. Concurrently,
PAZ does not only privatise state - owned enterprises but seeks to restructure them by
changing management st yles and shareholding through strategic partnerships with corporate
bodies or individuals that have either money or technical expertise (PAZ, 2000).
Asked about the implication of the international isolation of Zimbabwe and its impact on
finding potential business partners, the PAZ official argues that:
Business is business. It is not politics. People look for business opportunities everywhere in the world regardless of the politics of the day as long as they are sure they can make their money. The politic al climate is not a deterrent; the challenge is to put in place viable management systems and to adhere to international business practices (Interview with PAZ official, 2014).
For local government services, the WB recommended that subsidies be removed to cut
government expenses. The argument was that local authorities had to be able to earn or attract
their own resources through cost recovery and by running themselves as for - profit entities
(Bond and Manyanya, 2002). This along with a generic administrati ve malaise in local
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government, led to legislative changes in the Urban Councils Act of 1996 (Hansard, 1995).
Many local authorities in Zimbabwe began to look at commercialisation and privatisation of
municipal services as a way of raising income by playin g the role of facilitator/regulator of
services rather than providing the services directly. In Harare, a number of municipal services
were subsequently privatised including refuse collection and liquor sales such as Rufaro
Marketing.
The Zimbabwe Auditor General rep ort of 2013 , confirms that HCC was in a mess
administratively, financially and technologically. It also confirmed that there was gross
mismanagement of funds with monies , being diverted from budgeted projects to unbudgeted
projects with no cons ultation. Water and reticulation plants were in disrepair. In 2013, the
HCC secured a US$144 , 4 million loan from Exim Bank (China) for rehabilitation of water
and reticulation plants. The HCC officials used US$2 million from the facility to buy luxury
veh icles including Range Rover Vogue, Land Rover Discovery 4 and Toyota V8 cars instead
of refurbishing water facilities with the US$144 , 4 million. The Harare Residents Trust
official reported that “the money will be paid back using taxpayers’ money and peop le want
to know what justification City of Harare management can make on buying the vehicles with
reports that they are abusing the loan money.” Another representative of , Combined Harare
Residents Association (CHRA) informed the study that “We need the re port and agreement
from the Exim Bank and how the HCC is using the money and whether they have followed
the tender procedures in buying the vehicles. This is a major concern to us as they a re using
the ratepayers’ money.”
Giving oral evidence on progress made regarding upgrading of water treatment plants at
Morton Jaffray Water Works before the Environment, Water, Tourism and Hospitality
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Industry Parliamentary P ortfolio Committee, the acting Town C lerk, defended the purchase
of the vehicles arguing that:
W e agreed with Exim Bank that we are going to buy the vehicles and we only used US$1, 3 million for the vehicles as part of US$8 million that is meant to buy equipment for the Harare water works project, the acting Town Clerk said.
She further said “there was no abuse of the funds as we can acco unt for every cent of the loan.”
8.3 .3 Leadership Crisis
The mayor and forty - two (42) elected councillors were dismissed by the MLGPWNH in
February 1999, to the relief of most Harare residents. The Minister was empow ered by the
Urban Councils Act of 1996 , to dismiss a wayward council and create d a commission to run a municipality in the absence of elected officials, pending elections.
Subsequent to the dismissal of councillors and the mayor, some heads of departments were dismissed as well, including the Director of Works, Christopher Zvobgo and Elias Mudzuri, then a senior member of staff in the Department of Works. Mudzuri later emerged, however, as the first opposition party executive mayor, giving credence to the saying, “Forsaken by the ruling party, embraced by the opposition.”The Minister of Local Government duly seconded a commission headed by Elijah Chanakira to run Harare for six (6) months. However, the
Chanakira commission’s term , was extended for two years , fomenting opinions of a governance crisis.
8.3 .4 Enter BiW ater International Company
A signed agreement allow ed BiW ater International Company to proceed with the water project. If Kunzvi dam was built according to BiW ater International Company ’s plans ,
320 propos als and sourced financiers, the HCC had to refund BiW ater International Company for all expenses incurred on completion of the project.
In a letter written on 6 August 1999, the BiWater International Company , Corporate director for Africa, made ref erence to the undated letter of intent and included a formal BOOT proposal indicating that there were “a lot of decisions” still to be made. It appeared to this study that BiWater International Company was using foot - in - the - door sales tactics , whereby , one interests a client by revealing product information incrementally with the tricky bits coming last. The late Solomon Tavengwa, then Executive Mayor of Harare, signed the original letter of intent on 31 August 1998, ostensibly with the BOOT proposal in min d. In his letter to MLGPWNH dated 1 September 1998, the mayor summarised BiWater
International Company ’s plans noting that the company would do a feasibility study for free and no strings were attached. A month later Harare was plunged into the political c risis, leading to Tavengwa’s dismissal and endangering the BiWater International Company agreement.
Entries in the Kunzvi dam f iles made during the Chanakira C ommission revealed that the mayor signed the letter “against professio nal advice.” For instance, it was alleged that the
Finance and Environment committee had not reviewed BiWater International Company ’s proposal. Some key - informants claimed that this demonstrated that bribery was taking place within HCC. But it could also be argued that BiWater Inte rnational Company was going to do a free feasibility study, providing an alternative source of information and a basis for weighing options and that the M ayor was well within his right to do something about the
BiWater International Company proposal lest t he Mayor was accused of inaction. The
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Chanakira Commission later summarised BiWater International Company ’s proposal in confidential office correspondence as follows:
a Special Purpose Company (SPC) will be set up and registered in Zimbabwe with
shares bel onging to BiWater International Company and its subsidiaries;
t he SPC would “award a f ixed price contract to BiWater I nternational Company” for
the design, procurement, construction and commissioning of Kunzvi dam construction
project without going to tend er. The SPC would award a long - term contract to
BiWater International Company to operate and maintain the scheme for t he twenty -
year operating period;
t he HCC would have no control over bulk water tariffs. According to proposal made
in January 1999, bulk w ater from Kunzvi dam would be charged at Z$24,65 per m 3
with a 25 per cent mark - up for the HCC, meaning it would cost Z$30,81 per m 3 at the
time; and
BiWater International Company wanted “institutional strengthening” for which the
BiWater International Company was expected to plug all leaks in the w ater
infrastructure.
The summary further noted that BiW ater International Company ’s letter of intent , was proposing that the City of Harare refund BiWater International Company for all expenses incurred after project completion. The Chanakira Commission noted that there was nothing in the documents about currency or exchange rates to be used. BiWater International had indicated neither the caliber of its personnel nor their qualification s.
Although the Chanakira Commission had been bound by the letter of intent signed by the previous administration to continue talking to BiWater International Company , it summarily
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revoked the letter in August 1999 saying it was signed for the wrong reaso ns and BiWater
International Company “did not” have money. BiWater International Company was a “water
supply company”, not a dam builder. Furthermore, the BOOT proposal preempted the tender
procedures and transparency. The study noted that Tavengwa’s admi nistration had bad
publicity, hence, all its decisions were suspect. The parent Ministry suspected a grave
“misconduct” (MLGPWNH official informed the study during the interview). The only
contender left after BiWater International Company was European Inv estment Bank (EIB)
led consortium.
8.3 .5 European Investment Bank (EIB)
The recommendations made by GKW’s 1996 feasibility study were adopted and turned into
strict conditionalities. GKW (1996) lamented the technological and expertise weaknesses that
bese t the City of Harare’s Department of Works. It noted that its personnel did not have the
expertise to supervise the construction of Kunzvi dam or to manage the water works that
would be constructed afterwards. It also pointed out that the water account was in shambles
and recommended that it be ringfenced into a stand - alone “publicly owned company” which would be called the Harare Water and Sewerage Authority (HWSA), run on a commercial basis and staffed by professionals. In addition, it recommended that th e water reticulation system needed a serious overhaul but top priority was to rehabilitate the Morton Jaffray
Waterworks and Firle Sewerage W orks, plug underground water leaks and redesign the pipe networks. Plugging leaks was deemed particularly important before Kunzvi dam water was introduced in to a network because the 30 - 40 per cent loss of treated water through leakages was considered too high to be economically worthwhile.
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The EIB was prepared to fund the project and the money had to be sourced from E IB ( E 25 million), AfDB ( E 21 million), AFD ( E 10 million) and the Government of Zimbabwe ( E 70 million).
8.3 .6 Discussion of GKW, BiWater and EIB Contracts
The GKW contract was never implemented and died in its infancy and formative stages. The contract was poorly designed with numerous loopholes. The contract had a provision that compelled HCC to pay for mobilis ation fees amounting to DM150 000.00 on signing the contract agreement. This payment was, however, not made because of among other things,
HCC then was in financial constraints and that a member of the Commission had felt that it was not justified to pay such a huge amount of money before the amount of work done had been quantified. Surprisingly, the HCC had signed the contract committing itself to paying mobilis ation fees before any work wa s done. The study observed that the contract was entered into by Solomon Tavengwa led council. When the Chanakira Commission took over the administration of HCC, it had a lot of reservations.
Because of these challenges, a meeting betw een City of Harare and the GKW c onsultants was held on 16 February 1999. It was agreed that due to financial constraints on the part o f City of Harare, it was, therefore, necessary to scale down the scope of works of the original contract to a level which would be affordable. That meeting came up with an addendum that reduced the project phases from four to two phases as follows:
Phase 1 was the feasibility study and was to encompass the original phases 1 and 2.The document was to be bankable in order to mobilise donor funds for the implementation of phase 2. Phase I was funded by City of Harare at a cost of DM150 000.
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Phase 2 was the implementation phase and comprised phases III and IV of the original contract that included the design, tender documents preparation, tendering, evaluation of tenders and construction supervision of the work.
The agreement comprising the amendments in the addendum was signed on 18 October 1999 and the agreement entailed the contentious issue of payment of the mobilisation fee amounting to DM150 000, 00. Subsequently, an initial payment certificate amounting to
DM249 875.00 was submitted in November 199 9 and t his was inclusive of the mobilis ation fee and work that had been done to that date. The certificate was not processed by HCC since there were no supporting documents on the breakdown of the amount of work done.
The study noted that several correspo ndences between HCC and GKW had been prospered with the intention to resolve the payment of the outstanding payments. The GKW resolved that work would not resume until invoice dated 28 November 1999 amounting to
DM249 875.00 inclusive of the mobilis ation fee of DM150 000.00 had been honoured.
The study noted that correspondence dated 27 August 2001 from GKW wherein the company was requesting for payment for work done to date and the response from HCC dated 18
September 2001 wherein the company had been re quested to give details of:
i tems covered by mobilis ation fees, details and costs of work done to date;
n ew extrapolated cost table to meet DM350 000.00 including a revised manpower
activity plan and a revised project programme of works for implementation;
c larification on the accuracy of the pre - design; and
r esubmission of revised project personnel profile and remuneration to reflect the
revised nature of the project.
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The HCC argued that the clarification of the above issues would necessitate payment of th e outstanding monies.
Subsequent to these correspondences, a meeting between HCC and GKW was held on 24
January 2002 where at some of the issues contained in the letter dated 18 September 2001 by
HCC were clarified. However, HCC advised GKW that the incep tion report submitted was unsatisfactory in terms of council’s standards. The HCC explained that in view of the substandard inception report submitted, there was no guarantee that GKW would carry out a better job after payment of the requisite funds.
The contract was never implemented and GKW due to events and circumstances surrounding the contract decided to opt out. It instituted legal proceedings forcing HCC to honour the provision in the contract signed by HCC and GKW that compelled Council to pay the mobilisation on the signing of the agreement. The study observed that the contract dragged for seven years of quarre l ling . The HCC had a culture of rushing and speeding without understanding the mechanics of the project. How could the HCC , for instance, re quest for feasibility study in the addendum. Yet, before signing the contract, a financial feasibility was needed to avoid the financial problems that emerged soon after signing the contract.
Other problems emanated from the donors. The donors were not in terested in the local autonomy. They wanted assurances that the HCC would keep its end of the deal.
Because so much time had lapsed and there had been so many staff changes in the
MLGPWNH and Harare City Council, it was not possible to say what central g overnment’s reaction to these conditionalities was. For the HCC, after the dismissal of the Tavengwa
326 administration, the Chanakira Commission’s motto seemed to have been “proceed with extreme caution.” The commission raised more questions than answers abou t the feasibility of a lot of the proposals and demands, mainly the setting up of Harare Water and Sanitation
Authority (HWSA) and its implication to other HCC activities. The water account was one of the city’s cash cows. Ring - fencing would have put its f unds out of reach of the city for possible redistributive purposes. The Chanakira Commission needed a feasibility study to assess the recommendations made by EIB.
The Chanakira Commission had very limited capacity to conduct feasibility studies due to lim ited funds. Despite this, its core mandate was to put things in order before making major decisions. In view of this fact, there were no audited income and financial statements. This became one of the major administrative priorities of the commission.
The re were no minutes of meetings held with the EIB led group during the Chanakira
Commission so it was impossible for this study to know how the EIB group reacted to the commission’s misgivings. It was not clear what the parent M inistry’s position was at tha t time. Perhaps everyone was too preoccupied with dealing with the mess of Town House. In any event, the Chanakira Commission’s unanswered questions could be said to have translated into a stalemate, which in turn translated to no action.
By 2000, the EIB offer was still on the table with conditionalities. There were indications that the contract between EIB, Government and HCC was still ongoing. By October 2000, the steering committee on Kunzvi dam indicated that there were no funders for the project and that the EIB proposal had been shelved. In July 2001, the HCC wanted to go it alone, proposing that US$75 million be budgeted for in 2002 as capital development to build
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Kunzvi dam . In July 2002, the steering committee on Kunzvi dam, noted with regret that the
HCC could not manage the building of Kunzvi dam alone. Nevertheless, Government of
Zimbabwe called for local financiers to bid for funding Kunzvi dam in local newspapers in early 2003. Details of who the bidders were and to whom (if anyone) a tender h as been awarded remained confidential. The study did not see the correspondences or any documentary evidence.
Even if local financing could be found, high local interest rates could more than double the cost of bulk water. A memorandum dated 3 September 2002, from the City Treasurer to the
Director of Works at the HCC, noted that a Z$21 billion loan would cost the city Z$48, 4 billion a year at inflated l ocal interest rates of about 40 per cent , plus capital repayments of
Z$840 million a year for 25 years , during the cost of water production from Z$34, 00 to
Z$87, 00 per kiloliter immediately. It also noted that “managing a debt and cashflow of this magnitude is a mammoth task, which required a lot of professionalism and good debt collection systems neithe r of which the HCC had in abundance. ”
In - depth interviews with various key - informants converged on the claim that the crisis in
HCC was as a result of deep - seated institutional problems such as gross mismanagement, poor coordination of activities and cor ruption, fraud, embezzlement, lack of capital and investment from insufficient central government transfers, poor revenue generation and bloated bureaucracy and weak technical capacity. For instance, the documents surveyed by this study discovered that th e Chanakira Commission was tasked to improve the city’s financial position. It had incurred an overdraft of Z$100 million and debts amounting to
Z$299 million. The commission was also challenged to upgrade the water distribution network.
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8.4 CHEMPLEX CORPO RATION: WATER TREATMENT CHEMICALS
8.4 .1 Background
The study visited Chemplex Corporation which owns Zimphos. Zimphos manufactures aluminum sulpahate (alum) at its factory situated in Msasa. The study learnt that there was a crisis from January 2008 to Fe bruary 2009. During that period, the Morton Jaffray Water
Works would be closed for several hours due to power cuts. The liquid aluminum sulpahate deliveries were not reliable and of poor quality. The HCC officials said during that period
HCC had no option except to use the available product then. The study discovered that when the situation got serious owing to pressure from high level officials, the HCC ended pumping sludge, whose suitability was questioned.
8.4 .2 Results from Harare City Council
The HC C officials informed the study that the council has two plants: Morton Jaffray and
Prince Edward that produce about 600 mega liters (ML) and 100 ML per day respectively.
The study was informed that the HCC’s water treatment chemical bill was US$ 3 million per month. Out o f that bill, HCC was footing 60 per cent and 40 per cent was being paid for by
United Children and Emergency Fund (UNICEF). However, by end of 2013, HCC had been meeting the full bill of US$3 million. Th e study found that HCC procures 155 metric tonnes
(MT) of bulk sulphuric acid from Chemplex Corporation on a monthly basis. UNICEF in
2012 placed an order of 3 000 MT of granular aluminum sulpahate from Chemplex for HCC.
During the interviews with HCC officials from the Water Department, th e study discovered that there was a period whereby the responsibility to supply water was on Zimbabwe National
Water Authority (ZINWA) before being handed over to the HCC in March 2009. During
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ZINWA’s water administration, the volume of portable water wen t down to about 333ML per
day. When HCC took over, the volume rose to the current level of 700ML from the two
sources, Morton Jaffray and Prince Edward. The HCC officials, however, informed the study
that the demand for water is almost 1000ML per day. Impl ied here is that there is 300ML
shortfall.
8.4.3 Results from Chemplex Corporation
Chemplex Corporation officials informed the study that the company was operati ng at 20 per
cent capacity utilisation mainly due to the decision by the HCC to stop procuring liquid aluminum sulpahate. It was further reported that HCC has been Chemplex Corporation’s bigg est client through procuring 80 per cent of its aluminum sulpahate. Zimphos factory was
designed to specifically meet the requirements of HCC for the past five decades.
The Chemplex Corporation’s operations were affected by the power cuts, the economic
meltdown, lack of foreign currency and nonpayment by ZINWA. It was ex plained to the
study that the production of aluminum sulpahate requires water but it was unavailable. In
order to procure materials for water treatment, ZINWA moved to the solid aluminum
sulpahate.
Responding to the question whether HCC , indeed , had stopp ed procuring liquid aluminum
sulpahate, the response was that it was indeed true that the HCC had stopped procuring liquid
sulpahate from Zimphos. The HCC officials stated that the city’s job was to reliably supply
clean water , hence , it was requisite that the supply of chemicals had to be viable.
The HCC offici als informed the study that it was policy that procurement of goods and
services, includ ing water treatment chemicals went through a tender process. The awarding of
330 tender took into consideration co mpetitive pricing. This implies that Zimphos had to go through the tender process like any other bidders. It was further explained that the tenders fo r water treatment chemicals had specification requirem ents and those companies that did not meet the speci fication requirements were terminated. In addition, the study discovered that
HCC had floated the tender for an annual supply and delivery of water treatment chemicals for 2013.
The HCC officials stressed to the study that the council put more emphasises on the issues of quality and price, without any compromise. Implied here is that whichever company was to supply chemicals to the HCC should have the ability to supply the agreed quantities on time.
The study was further in formed that plant shut down was n ot tolerated at all. These requirements were designed to ensure that HCC supplied clean portable water to Harare,
Chitungwiza, Norton, Ruwa and Epworth. The HCC always outlined its conditions which guided the supply of chemicals. These are reliability, qua lity and price competitiveness. The process also involves a technical and financial evaluation.
Regarding the quality of products, HCC analyses the samples. It was brought to the study’s attention that there have been instances when Zimphos chemicals fail ed the tests. Other than
Zimphos, there were some products that HCC procured from South Africa to ensure adequate stock cover , thereby guaranteeing regular water supply.
Responding to the issues raised by HCC, Chemplex Corporation informed the study that its plant was prepared to meet 80 per cent of Harar e’s requirements and another 20 per cent went to other local authorities. Chemplex Corporation chronicled how the company, like any other, was seriously affected by the economic meltdown between 2007 and 2 009, namely, lack of
331 foreign currency, unavailability of spares and nonpayment of goods and services by ZINWA.
Chemplex informed the study that it was prepared to do business with HCC. “Our sincere request is that HCC should engage us, we are committed and we can supply HCC’s requirements.”, one Chemplex Corporation official remarked. It was further explained that there was no need to doubt Chemplex Corporation’s ability to do the job. In terms of transporting liquid aluminum sulpahate, the company had in p lace its own company called D
& G haulage. The co mpany’s standards had made it become ISO certified.
8.4 .4 Observations and Analysis
The study observed from documents a nd in - depth interviews with key - informants that the quality and shortage of water worsened during ZINWA management. The HCC managed to restore regular supplies of p ortable water to areas that had been affected for five years such as
Mabvuku, Tafara and Epworth. UNICEF and other donors came in handy. The HCC should be commended for the i nsistence on quality and price competitiveness before procuring water treatment chemicals. However, there is an anomaly for HCC for using the price factor as the only credential. It should consider technical issues and capacity. Sometimes, c ompanies that w ere awarded tenders had no capacity to supply or deliver the services or goods.
The study noted that the disbandment of the municipal procurement committees in March
2013 affected the speed at which HCC handled tenders. In March 2013, the Minister of
Fina nce, through Statutory Instrument 179 of 2013 , issued a directive instructing all councils to stop handling any tenders with the mandates being transferred to the State Procurement
Board (SPB) after an increase in tender scams within local authorities. How ever, councils felt that the centralis ation of procurement was a huge setback. All tenders above the figure
US$50 000 for ordinary tenders and US$1 million are now referred to SPB. The SPB took
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over the tendering process for water treatment chemicals for a ll councils in Zimbabwe. The
minutes of the executive meeting seen by this study revealed that councillors were concerned
that city’s water supply would be compromised by delays in the SPB processes. “Do we have
enough chemicals to cover Harare until we ha ve another supplier because all know that the
SPB takes its time”. However, the study discovered that SPB had given green light to HCC to continue receiving supplies from Chemplex Corporation until the process was finalised.
It is instructive to note that from the Ministry of Local Government, Public Works and
National Housing’s perspective, it was necessary to centralise procurement because the municipal procurement committees were not effective. The councillors lacked public procurement deep knowledge r equired of them. The decisions were based on personal benefits and rent - seeking. One Ministry official remarked that “Service delivery is not the driving force behind the business at Town House. It is more of personal benefits. There is no
powerful manage ment system and this is leading to gross mishandling of the financial
register.” Furthermore, councillors were not taking advice from experts in council as they
made decisions against the advice of the Chamber Secretary. The councillors interviewed
accused the Town Clerk for failing to implement council resolutions. “The Town Clerk, as
head of administration, is a bit lethargic in carrying out what is agreed in council meetings for
example, removal of illegal car sales”, one councillor said.
The state of the water and sanitation system in Harare is generally in a deplorable state. At
least half the public toilets within the HCC are dysfunctional, despite evident increase in the
outbreaks of typhoid and cholera at the time of writing this thesis. The HCC a rgued that the
water crisis gripping the council has been politicised to derail the operations of the council.
Contrary to this, the study noted that the water crisis was due to administrative blunders and
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ineptitude of the HCC management. The HCC has pro ven that it lacks the capacity to deliver
clean and safe water to the citizens. Surprisingly, the HCC has failed to learn from its
mistakes and shortcomings of the 2008 cholera outbreak that killed nearly 4 000 people
showing a serious dearth and absence o f short, medium and long term plans in place to address the water crisis engrossing the once “Sunshine City” and the administrative capital of Zimbabwe.
Regarding the tendering process of the water treatment chemicals, the study observed that companies s uch as Curechem and the other companies were supplying the water treatment chemicals to HCC charging more than the Kemira Company that supplied water treatment chemicals through the UNICEF supported programme. Curechem Company was charging 69 cents per kil ogramme whilst Kemira was charging only 59 cents per kilogramme. The sudden change by HCC from a reliable supplier Kemira that offered a lower cost to a company that almost caused fatalities by providing a poisonous substance under the guise of the deliver y of
water treatment chemicals was confusing. The study noted that companies such as Chemplex
Corporation which was a leading producer of water chemicals in the country has been
snubbed by the HCC when procuring water treatment chemicals in preference of s helf
companies which some of them were owned by former council employees. This
compromised the quality of the water being provided to the residents.
The tendering process of HCC was rot ten . There was no due diligence and objective
administration of public resources. In this regard, the Standard Association of Zimbabwe
(SAZ) should play an active role in ensuring the provision of quality products especially
when the products concern public health and welfare. The SAZ should deploy at least an
officer at th e Morton Jaffray Waterworks to ensure the safety of residents who have become
334 skeptical of the city water. However, the HCC argued that the shortage of water in the capital was as a result of burst water pipes.
The epicenter of all these challenges lie in gross maladministration of public resources and the failure by shelf companies contracted by HCC to provide the rig ht quantities and quality water treatment chemicals in a timeous manner. What disturbs the mind is that what criterion the HCC used in the procurement of the water treatment chemicals against a backdrop of the continuous decline of the water quality in the greater Harare. It is a sad development that the institutional arrangement within the HCC portrays a lack of commitment and willingness on the party of the HCC management to genuinely address the plight of residents. The study observed that the scenarios in HCC defy the whole ethos of achieving a world class city status by the year 2025 when looting of the resources was the order of the day .
It is also instruct ive to observe that contracting - out reforms no matter how well designed, resourced and implemented would have almost no chance of sustained success if they do not, first and foremost, allow for the real political motives of the local authority they seek to improve. Equating poor governance with incompetence or negligence would be a grave mistake. The result of any public sector reform is not a matter of skill or effort or chance. It is the deliberate choice of the regime in power.
The so - called predatory state is perceived to be the main obstacle to achieving development in Africa. The nature of contemporary politics in Africa is best understood as the exercise of the neo - patrimonial power (Chabal, 2002). This is a situation where stat e control and political legitimacy are attained through informal political ties with an elaborate network of patrons and clients whose loyalty is rewarded through the appropriations of public resources
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(Medard, 2002). Underlined here is that the view that the dismal performance of public sector reforms is attributable prematurely to poor designs or lack of national ownership (Kjaer,
2004; Wohlgemuth, 2008) or inadequate institutional capacity is incorrect or, at least, incomplete where it does not recognis e the overriding impact of political factors (Crook and
Manor, 1998). This assertion is corroborated by Van de Walle (2001) who argues that some reforms will not be resisted as long as they do not hurt interest of important clienteles.
8. 5 EASIPARK (Pvt) Ltd: CITY PARKING
8.5 .1 Background
The HCC formed a joint venture with Easipark Holdings for city parking management business. The company started operations in 2009. The contract was a four - year with the provision for renewal.
Easihold, the parent comp any of Easipark and Harare City Council entered into a joint venture in 2009, with Easipark generating sizeable profit from the US$1 per hour charge on inner city parking. According to the agreed partnership between the two entities, HCC would receive 60 p er cent of profits while the remainder would go to Easipark. E asipark marshals were paid a 10 per cent commission and were expected to cash in no less than US$520 per month.
8.5 .2 Easipark Challenges
Easihold (Pvt) Ltd accused HCC for clandestinely opening bank accounts to divert funds from the joint venture. The Easihold placed an advert in the press on February 2014 in w hich it claimed the HCC unlawfully opened an alternative bank account and diverted funds from
Easipark Harar e. However, in respons e the HCC denied that it had never acted unlawfully in
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its association with Easihold. One HCC official informed the study that Easihold assigned its
rights in the joint venture to a company called Servest (Pvt) Ltd without disclosure to and
consent of City of Harare in breach of the joint venture agreement. Harare City Council argued that Easihold transferred money from Easipark Harare to fund its new parking business venture in Nigeria. However, Easihold Holdings (Pvt) Ltd counter argued that it was
HCC th at opened a bank account into which it deposited proceeds from Easipark. One
Easihold official succinctly stated that “this was done without notice and consultation with
Easihold and this meant that the City of Harare and Easipark Holdings (Pvt) Ltd could
administer all operations and funds within Easipark Harare unilaterally and without the
approval or knowledge of Easipark.”
According to their contract, Easihold Holdings (Pvt) Ltd was supposed to procure, install and
maintain at its own cost parking mete rs. The HCC charged that “in brea ch of the agreement,
Easihold was hiring the equipment from a South African Company and the hire charges were bei ng paid by Easipark Harare. That show ed that Easihold did not invest in the joint venture
business.”
The Town Clerk chairs the Easipark Management Committee but refuted the allegations that
the Easipark dividend was paid directly into the City Treasurer’s Department. “Let me set
this straight, there is no parallel account and we can prove that Easipark an d Citipark are
paying dividends to their parent which is the council.”, he said. The study made efforts to get
a comment from the HCC’s financial director but declined commenting referring all
questions to City Treasurer. However, the chairperson of the HC C Finance Committee said
that the finance committee had no access to books but simply appraised of developments.
This confirmed that Easipark (Pvt) Ltd did not pay any dividends in 2013 but in early 2014 it
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promised to pay US$800 000, a pro mise they fulfil led. What raised the stink in the Easipark
deal was that the company pledged to pay money at the beginning of the year without
factoring in the increase in the number of vehicles or the expansion of parking space. The
study discovered that the Easipark dea l did not state the HCC’s share in the deal.
Also the HCC accused the Easipark (Pvt) Ltd for deploying staff to work at Joina City and
Meikles Parkades that were not part of the joint venture agreement. According to full council minutes seen by this study , Easipark Harare premises were used by Easihold Holdings (Pvt)
Ltd to operate its other company Easihold trading as JN Parking.
The HCC also accused Easihold Holdings (Pvt) Ltd of persistently refusing to cooperate with auditors. This resulted in the aud itors failing to conclude their assignments for 2010, 2011 and 2012. Because of these challenges, the HCC decided to terminate the deal s with Easihold alleging that it was not getting mileage out of it. The case went for arbitration and the council was ord ered to reinstate the agreement. Some of the specific challenges of Easipark contract are discussed below.
8.5 .2 .1 Conflict of Interest
The HCC and Easihold Holdings (Pvt) Ltd formed a joint venture company known as
Easipark (Pvt) Ltd to manage parking i n the capital. When Easihold Holdings (Pvt) Ltd claimed breach of contract, the matter was referred to the Commercial Arbitration Centre, which was chaired by then Harare Mayor, Muchadeyi Masunda. Some councillors even wanted the Mayor to recuse himself. B ut, the Mayor refused. “The Easipark - Harare matter had been referred to arbitration in accordance with the agreement between the HCC and
Easihold (Pvt) Ltd. In the meantime, it is business as usual pending the outcome of the
338 arbitration process” ( www.herald.co.zw/city - of - harare - easihold - verbal - war - escalates ). The
Mayor attempted to dissuade a council meeting from deliberating on the Easipark wrangle, arguing that it w as sub judice . The study discovered that the Mayor wanted Easihold to continue managing the parking in the capital. The councillors wanted the contract to be discontinued arguing that the contract had not been bringing any money to council. “The business i s not viable at all. No profits have come our way since the deal was sealed”, one councillor complained.
The HCC lost its bid to terminate the joint parking street venture with Easihold of South
Africa, with an arbitrator in the case ruling that ending th e deal would be illegal. The arbitrator ordered HCC to pay 75 per cent of the costs incurred by Easihold and the arbitration costs. The former Harare Mayor , Muchadeyi Masunda, who was against the cancellation of the deal, told the outgoing councillors on 2 9 July 2013 to always listen to expert advice from officials to avoid future embarrassment.
The study observed and gleaned that these financial challenges indicate d , lack ed of transparency in Harare City Council contrcating - out processes. The proceeds fro m HCC’s strategic business units, mainly Easipark, were not finding their way into council coffers.
Financial transparency challenges were haunting HCC management at Town House. The study observed that strategic business units , such as Easipark and Citipar k were supposed to be cash cows but the HCC was not yielding the expected profits due to opaque processes and corrupt activities by senior management. The institutional arrangement was not clear. The
Town Clerk was overseeing a parallel account that the fi nancial director was not in charge.
3 39
The Town Clerk was appointed Easipark Harare (Pvt) Ltd board member in August 2014.
The decision was recorded in the business committee minutes after the council noted that
there was no longer a functional management co mmittee at Easipark. “That in view of the
concerns raised by the committee, an interim b oard comprising deputy M ayor, Town C lerk
and the head of the business development unit be appointed with immediate effect”, read the
minutes. Among some of the terms of reference for the interim board were to represent the city in all Easipark matters and ensure d that di vidends were paid to HCC. P reparations for the
amalgamations of Easipark and City Parking (Pvt) Ltd to undertake vehicle parking in Harare
were made . “Mo nitor the arbitration process reporting on the anticipated period to resolve
and conclude the process and the cost involved”, read their terms of reference.
8.5 .2 .2 Opposition to Easipark
Harare residents were concerned with HCC’s penchant for awarding t enders for menial jobs
like street parking and lighting to foreign firms, saying such decisions raise d a stink.
Representatives of residents’ organisations suspected that HCC officials were awarding the
jobs to foreigners in return for kickbacks. The resid ents resisted the move mooted by HCC to
seal a parking management deal with an Israel company known as Park Rite Africa to replace
another foreign, Easihold Holdings from South Africa. At the time of writing this thesis ,
HCC was close to awarding a Zambian company, Lamise Investments, the tender to
rehabilitate street lighting in the central business district. Combined Harare Residents
Association official said, “We are worried with such deals like the Easipark one. For
example, why engage a foreign company to tell us how to park cars in the city? Aren’t
Zimbabweans clever enough to invest in such business? What it simply means is there are
corrupt activities going on.” A youth pressure group, ( Upfumi Kuvadiki ) , also protested over
the HCC decision to engage Park Rite Africa to manage its motor vehicle parking business
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instead of contracting local companies. In 2014, the Parliamentary Portfolio Committee on
Local Government quizzed Town Clerk on why the city had hired Chinese engineers for the
Morton Jaffray Water Works refurbishment when the country had several internationally -
trained engineers.
Opposition to contracting out city parking also emanated from retrenchment consequences.
Easipark sacked 40 workers in March 2013. To protest the terminations, remai ning Easipark
workers gathered at the company’s offices, leaving only a few employees manning the
parking bays in the central business district. The workers committee officials argued that the
company had mostly S outh African management team required to re sign over
mismanagement and unfair labour practices. The HCC ordered Easipark to reinstate the 40
workers it had dismissed.
8.6 AIRPORT ROAD
Augur Investments was contracted to dualise, extend and develop the Airport Road into a
highway with complex high rise motorways, road and rail subways. The road stretches for 15
kilometers from the Harare International Airport to Dieppe Road in Braeside where it starts.
It would be dualised and extended up to the intersection of Robert Mugabe Road and
Enterprise Roa d in the city.
The HCC committee that evaluated Auger Investments’ bid discovered that the bid lacked the
technical expertise to implement the project because the company had no proven track record
on road works. The study noted that Augur Investment was awarded the US$ 80 million
contract without a formal tender in 2007. However, HCC officials interviewed admitted that
there was no open tender process for the project because it was approved by the Cabinet.
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Implied here is that the project was given a nati onal status , hence , no scandal. Therefore, if
the Government of Zimbab we approves a project, does it mean that formal tendering
procedures should not be followed? The Minister of LGPWNH informed the study that the
project was supposed to be handed over to Zimbabwe National Road Administration
(ZINARA) for completion after Augur failed.
The Harare City Council rejected unsolicited bids from local construction companies:
Constain (Pvt) Ltd, Murry and Roberts (now called Masimba Construction Company) and a
c onsortium of local contractors. Instead , HCC contracted Augur Investments, a Ukrainian
Company incorporated in Estonia.
The local contractors wro te to HCC to express interest on the Airport road construction and
the Construction Road Industry (CRI) wrote to HCC demanding the reversal of the whole
contract as it disregarded the principle of transparency in public procurement as stipulated by
international best practices. “According to council policy, projects of that nature should be
put to tender for the c ouncil to get the best possible deal by comparison. A tender gives a
project owner the opportunity to assess the bidders in terms of pricing and capacity. The way
this one has been handled flouts council policy on outsourcing especially for large scale
cap ital projects like the Airport Road.”, the Construction Industry Council official explained.
The study discovered that the deal was shrouded in controversy, was signed in 2008 and the
project was to be completed in 2010. The Power Roads Zimbabwe (Pvt) Ltd was only
incorporated on the 6 th of July 2009, a year after the signing of the Memorandum of
Agreement (MoA). The Augur’s partner in the Joint Venture Company (JVC) was a South
African - based company called Power Construc tion. Implied here is that Augur Investments
342 was hiring Power Construction South Africa to build the Airport under the guise of a JVC.
Furthermore, the study noted that the then Town Clerk of Harare City Council signed the
MoA in his capacity as the chair man of the caretaker council, unilaterally approved the appointment of himself as the project manager, a move which guaranteed him of at least
US$1 972 002.52. One key - informant informed the study that :
In the letter to the City Council written by Mr. Mic hael Van Blerk of Augur, Augur sets the cost of utilisation of the project manager, Mr. Tendai Mahachi (HCC), at 2.5 percent of the total cost of the project. This translated to US$ 1 972 002.52.
The Lands Committee of HCC then recommended that: “Tendai Mahachi’s conduct pertaining to the signing of the Memorandum of Agreement (MoA) with Augur and his being appointed as Augur project manager for the same Airport project should be referred to the police for investigations with the view to having charged in terms of Section 172 of the
Criminal Law (Reform and Codification) Act.”
The documents and internal correspondences between HCC and Augur Investments revealed that HCC paid Augur with 93 hectares of prime land which translated to 41 000 high - density stan ds measuring 200 square metres each. Furthermore, according to the MoA, the City of
Harare was to deliver to Messrs Coghlan Welsh and Guest, a law firm, title deeds for no less than 100 hectares of land in Gunhill Township, Harare, as security for due perf ormance.
These title deeds were to be held in trust by the law firm. The MoA provided for the transfer of the land to Augur upon production by Augur of monthly consulting engineer’s certificate showing expenditure.
The shareholding in the JVC was 70 perce nt - 30 per cent for Augur and Harare C ity Council respectively . However, the study could not discern a justification in the agreement of how this shareholding ratio was arrived at. Clause 5 of the agreement states that Au gur’s
343 contribution to the JVC was a n injection of between US$ 20 million and US$ 30 million. But there was no fixed amount that was prescribed in the agreement that pertains to Augur’s contribution. Therefore, it was not possible to deduce from the agreement how Augur was allocated 70 per c ent of the shares.
Another observation made by the study was that while augur’s contribution was quoted in
United States dollars, the value of the land that the City of Harare brought to the deal was quoted in Zimbabwe dollars. There was no explanation in the agreement as to how the land contribution amount ed to 30 percent of the shares nor was it explained why the value of the land was quoted in Zimbabwe dollars. The rationale for the shareholding structure was therefore not apparent in the agreement.
Th e decision to allocate Augur 70 percent of the shares was further called into question by the provisions of Clause 13.1 of the agreement. According to Clause 13.1, working capital for the project was to be provided by Augur on loan account. If the JVC at i ts inception had an initial share capital of US$ 20 million to US$30 million and 1.7 million square metres of land, there would have been no need for working capital loan. The study discovered that JVC was according to the agreement, limited to a loan whic h was to attract interest at the rate of libor plus 6 percent. In effect, Augur was therefore absolved from making a capital injection into the JVC as justification of its equity.
The study noted that back door deals usually inflate the price of the proje ct and prejudice the
HCC of huge sums of money as they ga ve individual officials too much discretionary power and room to stitch up underhand dealings. This airport road contract has demonstrated that contract design was very poor and corruption was rampant in HCC.
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8.7 WILKINS CLINIC SERVICES CONTRACTED OUT
This section presents the contracted out services in HCC clinics. In this regard, Wilkins
Clinic was sampled for close examination. The following services were sampled: cleaning,
catering and secu rity. The core activity of Wilkins Clinic is health services to patients. The
Wilkins Management Committee identified non - core services as catering, laundry, general
cleaning, security and reception services and started contracting - out of cleaning, securit y and
catering from 2003. These were chosen as the areas most in need of improvements.
A range of factors ca used Wilkins Clinic to contract - out non - medical activities. These factors
included:
t he mediocre quality of catering and cleaning services in the c linic, which were a
source of dissatisfaction for patients and a waste of resources;
a shortage of qualified staff owing to budgetary restrictions; and
t he important ripple effect of the stereotype that private organisations deliver better
quality than pub lic organisation.
Th erefore, the aim of contracting - out was to achieve through competition the highest possible effectiveness in the management of public services. The contracts were very detailed. The standards for the frequency of cleaning the floors, wa lls, the equipment and serving meals were clear. However, the provision in the contracts for sanctions for non - performance was weak. Bidders were selected during a prequalification process. The external bidders were all fairly large companies. The Wilkins Clinic management committee , examined the companies’ accounts for the last three years. To ensure the technical capacities of the companies, the Wilkins Clinic asked for references.
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The contents of the contracts are summarised as follows : t he catering, cleaning and security services , were contracted - out through a sealed bid regime. On average six companies participated in all service categories and the highest bidder was awarded the contract. The sealed bid regime was conducted with respect to the procu rement legislation. The contract s cover the following terms:
d ining rooms, kitchen, utensils and other facilities that could be used free of charge by
the companies contracted;
t he contracts covered a period of one year and the delivery prices of the compa nies
contracted were reviewed biannually. The contracts could be extended with the same
conditions if both parties agree. However, extending the contracts without reviewing
the terms could eliminate the incentives for competi tion and efficiency. If there w as
no new bidding for a long period, the terms of the existing contract could not be tested
with regard to new market structures;
t he quality and quantity of services were inspected by respective committees at the
Wilkins Clinic. Both quality and quantity standards were listed and attached to the
contracts. If either was not followed, the contracted company was warned and fined in
the first two instances. If this problem was repeated and the guaranteed fee of the
contracted company was not re turned;
p eriodi c hygienic check - ups of cooks and waiters were provided by both the
contracted companies a nd Wilkins Management Committee; and
c ourts were the authority for dispute resolution. However, there were no arrangements
if the contract was interrupted in order to change the contractor.
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8.7.1 Catering Services
As the meals provided by the hospital were not appetising, patients purchased from vendors or had meals brought in by thei r families. As Harare’s Western region referral centre and recipient of numerous HIV/AIDS victims, it was essential for the hospital to provide a healthy and palatable diet.
After identifying non - core services, the Wilkins Management Committee tabled recommendations with justifications for contracting - out to the City Health Director. The City
Health Director and the Wilkins Management Committee conducted a feasibility study using the experience of Parirenyatwa Group of Hospitals in Harare which had already contracted - out most of its no n - core services such as cleaning, reception, security and catering. The feasibility study conducted by a nursing officer, an assistant nursing officer from Wilkins
Management Committee, the representative of the City Health Director and assistant procureme nt manager, identified the type of services to be contracted out, the reasons for contracting out, how the services should be provided, the companies that should provide the services, the methods of monitoring and evaluation, the costs and benefits, set re wards and penalties for performance. The study team submitted the report to the City Health Director who presented it to the Tender Formulation Committee (TFC). The processes as discussed in the preceding chapters: Six and Seven were followed. Bidders were invited for catering and laundry services. The selection process was completed but no immediate contracts were awarded because funding was not available.
The 2004’s funding allocation was sufficient to engage only the catering service. The tender board d eveloped the contract terms, including delivery times, variety of food, cleanliness of food premises and provision of special diet to some patients.
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The catering contract was awarded to a company working with Parirenyatwa Group of
Hospitals. Services inclu ded breakfast, lunch and super served to patients in the wards. Staff were offered breakfast and lunch on a purchase basis. The Wilkins Clinic officials interviewed reported that the improvement in catering services was instantaneous, dramatic and spectacu lar. Renovated kitchens produced hygienic, healthy and tasty food to the delight and direct medical benefit of patients and their relatives. Also, better - fed patients showed higher tolerance to drugs and made more rapid recoveries. Fewer visitors deliverin g meals reduced congestion and the valuable caring time of nurses was liberated from waitress duties.
In - house catering had previously used five nursing officers, ten medical attendants and two technicians. All of whom returned to their core professional d uti es when catering was contracted - out.
Monitoring of service delivery at Wilkins Clinic included regular interviews of patients, sampling of food supplied and responding to complaints from patients. The service provider produced daily reports on the food produced and the number of patients served. The Wilkins
Clinic matron belied that the system assured a level of quality control. Performance indicators included quality (both taste and nutritional value), food quantity (in terms of price and unit measurem ent) and delivery time, measured by the head nurses on a daily basis but marked on only two grade options, ‘acceptable’ or ‘not acceptable’. The overall rating of the catering service has been good.
However, this emphatic success was imperiled and engende red by the clinic’s failure to pay the service providers on time, with corresponding shortfalls in service performance. This study conducted physical checks over ten consecutive days and found meals that lacked
348 variety and relatives again were bringing foo d in for patients with attendant congestion in the wards.
8.7.2 Cleaning Services
These were provided by three indigenous companies. The activities included public toilets and staff offices (toilets and bathrooms), grass - cutting, tree - planting, pruning a nd flower gardens. The Waste Management Department was responsible for managing the services providers (HCC Cleanliness Evaluation Committee Report, 2007). Cleanliness services were monitored by a committee comprising a field officer, two Waste Management Department attendants, who submit a monthly report to the Waste Management manager. The report findings triggered a sliding scale which could reduce monthly payments to the sup plier. If the rating score fell to 60 per cent, payment was reduced to 85 per ce nt and a warning was issued.
After contracting - out, there has been visible improvement in the quality of the outdoor areas
(increase bin trees and attractive flower gardens) but indoor cleaning has not been consistently performed to the specified standard s. Interviews with officials revealed that in a certain instance, the contractors were not in a position to buy the required materials for cleaning owing to delays of payments from the HCC and lack of skilled and experienced supervisors. In the end, the se rvice providers scored below the minimum levels and were terminated. At the time of writing this thesis, cleaning was done in - house by the Waste
Management Department. The grass - cutting was done using causal labour since it was seasonal.
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8.7.3 Security Services
The 24 - hour security services cover HCC’s hospitals (Wilkins Clinic, Beatrice Infectious
Diseases, and Polyclinics in High Density Areas). The services also cover movable HCC property such as vehicles, office equipment and records.
The methods u sed include patrols of large outdoor areas, reception guards at gates and doors, and inve stigation services when theft was reported. These services were provided by a private security company with bases in Harare, Bulawayo and Masvingo.
While adequate sys tems were in place, ensuring close supervision was a challenge and a rise in theft of council’s property was attributed to this shortfall. For security services, the HCC’s
Municipal Police Chief Office r checked contract compliance and submit ted a monthly e valuation report to the head of Municipal Police Department.
The criteria measured included equipment, attendance and incidence for example, thefts, in which examples ranged from records, computers and drugs. A significant defect or dete rioration in any a rea leaded to overall down - rating which in turn could lead to termination of contract.
8.7.4 O bservations From Wilkins clinic’s Contracted Out Services
The Wilkins Clinic considered contracting - out to be a good tool for making services as effective as possible. Quality standards of the contracted out services improved. The major lesson f rom Wilkins Clinic experience was that the better the preparation of the contract documenta tion, the better the contract was . The catering, security and clean ing cases h ad revealed some factors that determine d the successful application of contracting - out. These
350 were inter alia staff capacity (knowledge and skills in feasibility assessment, implementation and evaluation), prior contracting - out experience and financial cap acity. This study endorse d and underline d that the financial capacity was a critical element. The most striking lesson from Wilkins Clinic contracting - out experienced was that contracting - out required that local authorities needed to have several generic s kills and resources including planning, economic analysis, contract design and negotiation as well as suitable information system. There is evidence a lso that contracting capacity was very weak when a local authority ha d inadequate financial resources.
Th e process of contracting - out in HCC’s departments is similar in services, feasibility study, tendering, selection, monitoring and evaluation. Despite for Wilkins Clinic’ s inexperience with contracting - out the provision of public services, there was thought ful and thoroughness in designing and implementing arrangements and process. However, it had problems with funding flows, leading to delayed payments that resulted in compromised service performance. This does not appear to have been caused by miscalculati on in feasibility or accounts management issues. It was a direct result of delayed payment of funds from both the
Treasury and the City Treasurer, on which Wilkins Clinic was dependent. The bureaucratic nature of the public sector, slow ed speed of decision - making and implementation especially in financial issues were a major obstacle to effective contracting - out. Currently, public organisations in Zimbabwe are operating in severely resource - constrained environment which hinder their abilities to improve ser vice delivery. Local authorities in Zimbabwe are mainly reliant on central government funds that are often unpredictable or unsustainable. The study observed that well - articulated reforms at the planning and form ulation phases do not guarantee a successf ul implementation phase. It is evident at the planning cycles for Wilkins
Clinic’s security, cleaning and catering cases were well thought out (for Wilkins Clinic there
351 was heavy reliance on the bottom - up approach to planning) and guided by good intentions .
Financial constraints caused implementation bottlenecks.
8.8 CHAPTER SUMMARY
The chapte r has presented the contracting - out results and findings as well as analyses from housing, water reticulation and water treatment chemicals, parking, roads and clinic s. The stark conclusion of this chapter is that effective contracting out by HCC depends, above all, on the contractor’s financial capacity. Clearly, defaults on funding by City Treasurer cascade s to declining in quality. The results also indicated that co ntract management in some cases s uch as water and city parking was very poor in HCC. There were also leadership crisis.
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CHAPTER NINE DISCUSSION AND SYNTHESIS OF FINDINGS
9.0 INTRODUCTION
In the preceding chapters (Five, Six, Seven, Eight), the presentation and analysis of data have been reported. This chapter presents a discussion of the findings and implications for theory and practice. The purpose of this chapter is to expand upon the co ncepts that were studied in an effort to provide a further understanding of their po ssible influence on contracting - out processes. Finally, a theoretical framework is offered to capture the substance and scope of what has been studied in this research.
9. 1 CONSTITUTIONAL AND LEGAL FRAMEWORK
The laws of Zimbabwe entail that local governments play their part to ensure that they are accountable to government and to the residents.
9.1.1 The Constitution of Zimbabwe
T he obligations imposed by the Constitution are mandatory. Values and principles which are imposed on local governments by the Constitution under Section 3 among many are, ( i)
fundamental human rights and freedoms and ( ii) transparency, justice, accountability and
responsiveness. It follows , therefore , that local governments in all their plans and duties
ought to endeavor to serve the above principles and values. Section 11 of the Constitution of
Zimbabwe specifically provides that the State must take all practical measures to protect the
fundamental rights and freedoms and to promote their full realis ation and fulfillment. This
section must be read together with Section 44 which further imposes a duty on the State and
agencies of government to r espect, protect and promote rights and freedoms of the people.
Sections 5(c) provide that all local authorities are government and should represent and
353 manage the affairs of people in the urban areas. This was the legal framework that guided contracting o ut in local authorities.
9.1. 2 State Procurement Act [Chapter 22:14]
Public procurement in Zimbabwe is governed by the State Procurement Act [Chapter 22:14].
This Act provides that purchase transactions that exceed the US$50 000 threshold pass through the State Procurement Board (SPB). The SPB Act creates opportunities for companies owned by formerly marginalised races, for example, black indigenous people to participate in the contracting out process. The general guideline is that 10 per cent of all tende rs should be given to locally owned companies.
The Procurement Act [Chapter 22:14], Part IV provides for procurement proceedings.
Section 30 (1) states that the procurement of goods or construction work by a procuring entity shall be done by means of tend ering proceedings. Section 31 of the Procurement Act deals with tendering proceed ings.
The Parliament of Zimbabwe in 2010 amended a number of laws in order to centralise all procurement and tender allocation authorities to fall under one SPB . Before these amendments, only government ministries in need of goods to undertake their various mandates had to go through the State Procurement Board (SPB) empowered by the
Procurement Act [Chapter 22:14]. Local Authorities used to procure their goods through
Munici pal Procurement Boards as stipulated by the Urban Councils Act [Chapter 29:15] and
Rural District Councils Act [Chapter 29:13]. The Urban Councils Act of 1995 was the governing instrument when calling for tenders by municipalities.
Every municipal council shall appoint a municipal procurement board consisting of not less than five and not more than seven members, which shall be responsible for
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carrying tenders in terms of section two hundred and eleven and for making recommendations to the council in regard to the acceptance of tenders and the procurement of goods, materials and services (Urban Councils Act 29:15, Section 210).
The key clauses in the 2010 amendment laws that centralised procurement are discussed as follows. Clause 12 amends the Procurement Act so that all local authorities are deemed to be procuring entities in terms of the Act. The clause a mends Section 2 (2) of the Procureme nt
Act by repealing the proviso : “Provided that the Minister shall not make any such declaration in relation to a per son other than a body corporate wholly owned or controlled by the state without that person’s consent”. Clause 18 repeals Section 79 of the Rural District Councils
Act [Chapter 29:13] which provides for contracts and tenders of councils. The tendering proc ess is now done in terms of the Procurement Act Chapter 22: 14.Clause 19 repeals section s 210 and 211 of the Urban Councils Act [Chapter 29:15] that provide for the procurement board and the tender process respectively which fall under the ambit of the
Pro curement Act. Consequently, t hese three clauses 12, 18 and 19 have centralised all procurement of local authorities, both urban and rural.
These developments have far - reaching effects. The centralisation contradicts the Constitution which provides for de volution. The se development s annulled global trends that dictate that systems of governance, administration and power should be devolved from the centre to the grassroots. This centralisation of procurement by the central government has perpetuated the mar ginalisation of smaller towns. Some of the regressive effects of centralisation are discussed below.
Corruption would be entrenched. The tender process in Zimbabwe has become a breeding ground for corruption where government officials responsible for the allocation of tenders
355 and together with powerful politicians in the different line Ministries have benefited from kickbacks and bribery.
Accountability challenges. Members of the SPB are appointed by the President; hence, they are political appointees who are only accountable to the President. Centralising the tender processes would mean that the SPB would be inaccessible to the general public for accountability purposes and cannot be questioned on negligence, delays, corruption or incompetence. The old ar rangement where tender processes were undertaken by the Local
Authorities ensured accountability and participation of residents both as tender seekers and monitors. It is easy for residents to bring councillors to account rather than appointed members of the procurement board who are answerable only to the appointed.
Unlike the Municipality Procurement Board, the state entity is chosen by the Head of State, leaving room for patronage and abuse of office to further political ends. Besides, the process by w hich the President appoints the Board is not elaborate in the Act , hence , making the SPB accountable to a limited few. Such a scenario is an affront to the principles of accountability and transparency since the members of the Board are political appointees rather than professional technocrats.
The study noted that no efforts have been taken to explain or demystify problematic terms such as ‘locally based’ or ‘previously economically disadvantaged’ in the regulations. Such terms can easily be misinterpreted, misrepresented or misconstrued to fit the political landscape of the day or to favour business initiatives of the ruling party or its members. For example, a local company with political connections but little expertise can be favoured against a well - equipped and experienced foreign firm. This was prevalent in the refuse
356 co llection and transportation contracts in Chapter Seven. The study observed that in the awarding of tenders, there was breach of corporate governance practices. For instance, board members of some companies that were awarded tenders were employees, spouses of Mayors and some Mayors were chairpersons of the companies contracted. Underscored here is that at times the contracted companies were agency people and contracts were awarded to the ranks of HCC alumni. This compromised service delivery while enriching the politically connected and their cronies. Furthermore, the Procuremen t Regulation of 2002 grant a 10 per cent preference to locally - based contractors over external ones and ‘previously economically disadvantaged contractors’. This facility though noble was subject to open abuse just as the affirmative action agenda had been abused by politicians for mileage.
The centralisation of municipal procurement has complicated the issue further as ‘local’ in local governance terminology means a resident of the locality while ‘previously economically disadvantaged contractors’ can also refer to marginalised ethnic groups. However, an indige nous Zimbabwean contractor who submits an equally advantageous bid, with competitively matching price and technical specifica tions as those of a foreign bidder, shall be given preference.
9.1. 3 Indigenisation and Economic Empowerment
The study observed that HCC was dominated by councillors from the opposition political party , Movement for Democratic Change - Tsvangirai (MDC - T). Z ANU - PF sought to contain, weaken and possibly exclude the councillors from economic activities. This was followed by deliberate policy of empowering the weaker groups especially the youth.
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After independence in 1980, the majority black rule under Preside nt Robert Mugabe had no problem with the less than 100 000 wh ite farmers owning more than 80 per cent of the fertile land and the bulk of the industrial structure. In so far as they posed no threat to the political power base, policies were not “discrimina tory”. But once the whites were perceived to be using their financial - economic muscle to volte face the political landscape by supporting the opposition, the hammer fell on them. The Mugabe government began to appeal to the sentiments of the population reg arding the injustice of white domination of their land. Even if the policy of land acquisition and distribution would have disastrous economic consequences, the prime objective function to be maximised was the stay in office of the political elite. In this instance, what constitute sound economics was obviously bad politics and what was seen as good politics was bad economics.
9.1. 4 Contracting - Out Policy
One HCC official expressed a view of contracting - out policy that represents the feeling of key - inform ants: “It must be explicitly permitted in the policy, or clearly derivable from the language of the p olicy. If it is not in the law, we don’t do it.” One local government expert noted that, “the contracting out policy is a wilderness of single instances.” One senior HCC official conceded that “there are no rules or principles…it is purely a matter of what appeared at the time to be the most suitable administrative arrangement.” The study observed that the national economic blueprint, Zimbabwe Agenda for Su stainable Socio - Economic
Transformation (ZIM - ASSET) , encourages government institutions to embrace private sector participation through public - private partnership and contracting out the delivery of non - core services. It explains within this framework, why HCC partnered the Central African Building
Society (CABS) in housing delivery programmes. ZIM - ASSET directs the Social Services
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and Poverty Eradication cluster to collectively deliver 250 000 housing units or serviced
stands by 2018.
T he study noted that contracting - out policy formulation had many Achilles heel. In - depth
interviews with key - informants revealed the following weaknesses in Zimbabwe’s process of
policy formulation. The process has been choked by inadequate consultation even with some
of the key stakeholders. The World Bank, MLGPWNH and HCC representatives dominated
the initiation of contrac ting - out policy, with the private sector and residents associations
playing no or only a minimal role. The HCC’s blueprint to transform the city into a “ World
Class City” by the year 2025 , was formulated without any input from the residents and
business community. Key stakeholders only participated at the launch of the Strategic Plan
(2012 - 2025).
Poor implementation of policies has been degenerated by cor ruption and mismanagement of
HCC’s resources, inadequate supervision of the public sector workers, inadequate checks and
balances. The study noted that the major causes of poor policy implementation were :
l ack of shared vision and an implementable strategi c plan together with lack of
prioritisation creating serious pressure on limited financial resources;
f inancial crisis resulted in lack of focus on financial management; and
d epleted skills base, lack of clarity about roles, blurred accountability, and lac k of
performance monitoring systems; and poor corporate governance.
9.1. 5 Policy Discord
Chapter 4 of ZIM - ASSET proposes that the O ffice of the President and Cabinet has an oversight, coordinative and policy guidance role in the implementation of the economic blue
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print . Y et , the Public Finance Management Act gives the same role to the Treasury. If indeed
ZIM - ASSET is to take precedent , then clearly there is a clash between who is in control. This
is in view of the fact that the National Budget of 2015 recognised and adopted ZIM - ASSET.
Local Government Circular No.3 of 2011 provides under clause 4 , that budget estimates must
be a process to be achieved through consultation of stakeholders and that consultations have
to be through proper costing of service by council. There is nothing in the HCC’s Strategic
Plan (2012 - 2025) or the b udg et s peech es (both 2014 and 2015) suggestive of consultation or
costing of services. Clause 8 of the Local Government Circular entails that there should be
consideration of inflation, gender budgeting and Millennium Development Goals in the
b udgeting process together with regional and i nternational protocols and conventions to
which the government is signatory. All docume nts and policies by council do not address
these r equirements. It is only in the 2013 budget speech under paragraph 1.2 that it is said,
‘ The 2013 budget is anchored by the City’s vision of a Results Based Management
philosophy, the Gender Mainstreaming In itiatives and the Millennium Development Goals. ’
There is no substantiation of this claim in any of their policies, strategies and budgeting.
Neither is there mention of the exact Millennium Development Goals that have been
addressed and to what capacity a ny of these have been achieved or at least the targets of
achievements expected.
It then follows that in as much as the policies of council address housing, road development
and water su pply among many thrusts they were not people oriented and stakeholder based.
One is bound to think that the strategies and budgets are firefighting strategies just like ZIM -
ASSET has proposed quick fix strategies. The study observed that such a policy discord
disable effective implementation of contracting out reforms.
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9.2 INSTITUTIONAL FRAMEWORK
The procedures for arranging contracts are council’s first line of defense in the process of
control. The pr ocedural details of contracting - out have the following traits:
General Guidelines, Proclaimed by the Parent Ministry
The guidelines specify a ge neral policy toward contracting - out or in - house activities, specify
a central unit (a unit of the Ministry of Finance and Economic Development or a separate
procurement agency) , that has general charge of contracting, indicate the st eps to be followed
in clearing a contract with this central agency and specify a monetary value of small contracts
that agencies may arrange on their own without central clearance.
Standards Formats Promulgated by the Central unit giving General Responsib ility for Contract Supervision
These may include a questionnaire , that asks an operating agency to justify contracting out,
in terms of elaborate costing calculations and specify procedures for selecting a specific
contractor. These procedures begin with public advertisements and formal bidding by prospective contractors, but are likely to allow negotiated contracts (agreements made between government agencies and firms chosen on some other basis than formal bids). For such negotiations to pr oceed, the go vernment agency requires written approval from a key official, the Town Clerk. The standard formats may require a contractor’s acceptance of the government’s policies toward affirmative action hiring of minorities, indigenisation and economic empowerment, potential contractors located in the local authority’s jurisdiction will be given preference over outsiders and may outline procedures for auditing the performance of contractors.
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The study noted that the procedures and formal rules for controlling contra ctors were
different from the actual practice. Exceptions seemed to be freely allowed, especially for
negotiating contracts outside the advertising - bidding procedure. Moreover, the categories of
small contracts - a dollar figure below which there is little or no central clearance were
widely used. The current limit of US$50 000, many contracts came in between US$49 000
and US$50 000. At times, projects were divided into several components with each
component fitting under the limit that allows HCC to make a rrangements on its own.
9. 2.1 Oversight Institutions
The principal influence on local authorities that comes from the economy of Zimbabwe is the
constant strain of insufficient resources. There are personal as well as institutional signs of
shortage and f amine of resources. Salaries are lower on an international standard than is the
cost of living and workers often take second jobs. The result is reduced efficiency and
increased tension in all HCC departments. The HCC offices were parsimonious, crowded and
noisy. There was none of the plush carpet and rich paneling.
The HCC controls over contracted companies were also thin. While there was an abundance
of control systems and regulations, weaknesses appeared at the working level. For instance,
the State Pro curement Board had a role in approving contracts but it did not concern itself
with defining costs or savings accruing from contracting out. It waited on the HCC’s requests
or until a complaint was filed by resid ents alleging improper behaviour or corrupti on.
The Ministry of Finance and Economic Development (MoFED) has one unit within it - the
Department of Government Procurement Policy - that handles a range of issues involved in contracting out. A report it issued in 2014 dealt with numerous activities. Some appeared
362 simple, such as the purchase by the HCC computers and laptops as well as twine (i.e., string) from non - Zimbabwean suppliers in violation of “Buy Zimbabwean” requirements. Other activities seemed weightier, such as improving procedures for acq uiring new systems, based on a more explicit simplification of mission needs than had been the case previously.
The MoFED also has the responsibility for checking comparative cost figures on contracting out versus doing a service in - house. But this extend s only to new activities. Asked at a
Parliamentary Portfolio on Public Accounts Committee hearing about a general programme to analyse costs for established programmes that were contracted - out, an official from the
MoFED said, “There is no requirement and no desire that any of these actions be reviewed by the Ministry of Finance and Economic Development.”
The Auditor General (AG), an audit body accountable to Parliament, ha s a general mandate to review contracting out but has no power to halt actions that go contrary to its preferences.
The AG can make recommendations to Parliament of Zimbabwe to halt spending only for those activities that run counter to explicit legislation. Furthermore, the AG has shown little interest in contracti ng out as a general pro blem. This was shown by its typical treatment deals with contracting out along with other issues in the administration of particular programmes.
Late in 2014, the AG released a study on the administration of contracts and grants by HCC.
The grants involv ed dealings between the central government and local authorities. The AG found that grant and contract administration were laxed on several grounds. Unfortunately, the mixture of grants and contracting in the same study blurred any possibility of learning about the distinctive problems of each. At the time of writing this study, about US$89 million in outstanding cases were being contested, with about 80 per cent of that figure potentially
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recoverable by the Treasury. Some c ases had been dragging on for te n years. As an
indication of its lack of sanction and enforcement power s , the AG noted that HCC
administrators had the final word on issues of questionable expenditures. Yet administrators
consider the resolution of these issues to be onerous, and therefore give them low priority.
The number of control units with a role in contract supervision is one reason why contractors
have autonomy. The Government of Zimbabwe assigns overall responsibility for contract
matters to the operating agency. The Min istry of Indigenisation and Economic
Empowerment checks compliance of contractors with general policies like indigenisation.
There are also Affirmation Action Group, State Procurement Board, Ministry of Finance and
Economic Development, Ministry of Local G overnment, Public Works and National
Housing, Parliament of Zimbabwe, Auditor General and Judiciary.
Chief executive officers and legislative committees have general responsibilities to deal with
issues of contracting - out. With different actors in the play, each has some concern to avoid
offending the others. This is particularly true when issues of central - local government
relations combine with issues of contracting out. For instance, the Ministry of Local
Government , Public Works and National Housing gave low priority to reviewing contracts
when Harare City Council purchased bussing services from Zimbabwe Passengers Company
(ZUPCO).The central government units would rather not look too closely at activities
implement ed by local authorities.
The study discovered that the most impo rtant actors in the contracting - out game were the contractors and the HCC management who arrange contracts. In a setting where the bulk of contracts are secretly negotiated, rather than bid competitively, a key item was the knowledge
364 contractors and agencies had of one another. This gives rise to principal - agent problems as discussed in Chapter Two of this thesis. It is important to know the techniques, concepts and buzzwords that are current ly in favour. Potential contractors cultivate contacts with HCC officials to gain information about what HCC wants and how much it can spend. Often a contractor helps shape the HCC’s definition of what it wants and not surprisingly the shape is in the dire ction of what that contractor can provide.
The study observed that some contractors took steps to enhance their access to HCC. The crudest of their techniques resulted in public disgrace and incarceration for council officials on the take. Also of intere st were subtle payoffs, where the beneficiaries seemed to be receiving nothing more than an honour. Some of the prominent private sector organisations recruit members of their boards of directors from HCC that make decisions about contracts.
This could be looked on as nothing more than an honorary appointment, innocent at least at first glance. Such directors may actually participate in policy making for the private organisation or may simply lend their name and prestige in exchange for the prestige of bein g a director of the private company. Contracts of the HCC with Old Mutual Zimbabwe, through its subsidiary, CABS, where the former Harare Mayor was the chairperson of both Old
Mutual Zimbabwe and CABS as discussed in the Chapter Eight attest to the foregoi ng argument. To the extent that council officials with a role in contracting out also have a role in the direction of contractors there was a conflict of interest.
In 2005, the Ministry of Local Government, Public Works and National Housing appointed cit izens’ committee to oversee a survey of HCC’s refuse collection that was contracted out.
Either through innocence or guile, the foxes were set to count the chickens. Most of the
365 members of citizens’ committee were officials of contracted organisations that serve as contractors.
Harare Municipal Workers Union (HMWU) is the prominent critic of contracting out. Its activity is vocal and occasionally productive. The HMWU claimed to have altered a decision by the HCC to contract out the cleansing and public con venience services. It did this by convincing the Parliamentary Portfolio Committee on Local Government that the Harare City
Council’s cost analysis was faulty. The HCC’s argument on cost efficiency of contracting - out rested on contractors that paid lower w ag es than the council. The HCC ’s argument did not take sufficient acco unt of the costs in retrenchment compensation to be received by council employees laid off as a result of contrcating out. Responding to the proposed privatisation of water through the p re - paid meter system (at the time of writing this thesis), one HMWU official noted that HMWU was “gravely concerned over the growing practice in th e council services, to contract - out to private interests, certain council services and functions that have hi storically been performed by city employees.” The Inter - M inisterial Committee on
Restructuring and Privatisation raised some basic issues about the control of contractors. In a report to the Office of the President and Cabinet, the committee expressed conc ern about the capacity of council officials to oversee contractors adequately and maintain control over basic policies. In response to this report, an official of one of the contracted companies raised the issue of excessive control by local authorities ov er contractors. Thus, the central issues about contractor control versus autonomy were not clearly defined.
9.3 CONTRACTING - OUT RATIONALE
The key question was : Why shou ld Harare City Council contract - out what it may otherwise do in - house? Answers included : to abide by requirements to freeze the size of the workforce,
366 to purchase services cheaper than they can be had using council employees, to weaken the power of council employees’ unions by giving work to contractors, to evade civil service regulations of various sorts (maximum salary rules, affirmative action procedures) by contracting - out a project (the contractor is responsible for staffing), to reward certain persons for favours rendered in the past by giving them a contract and to provide certain pers ons on a one - time or one - project basis, or experimentally, without risking continuation beyond a certain date that can be fixed in a contract.
There were also pragmatic reasons, among them the growing awareness of the intolerable fiscal burdens that the o perating deficits of poorly performing HCC imposed on public finances at a time of severe economic crisis. Financial austerity in the form of contrcating out was an important means of reducing public deficits. This was consistent with international best pr actices. In UK, there was an explicit macro - economic objective of contracting out that is, limiting the growth of public expenditure. This shows that contracting out leads to cost efficiency, cost reductions and efficiency gains (Brown et al. , 2015; Lavery , 1999; Savas,
2000). The results from HCC do not, however, support these claims. This is explained by the fact that HCC adopted contractin g - out in 1996 that coincided with the beginning of socio - economic quagmire in Zimbabwe. However, UK had also a covert political objective of contracting out - balancing the influence of trade unions in the public sector.
As evidenced in the previous chapters , there are stories of beautiful successes and horrible failures, each mingled with simple ideology, myth and pers onal stakes. The supporters of contracting out pride the creativity, hard work and efficiency of the private sector. As a representative of Confederation Zimbabwe Industries wrote in a pro - contracting out statement to a Parliamentary Portfolio Committee on Local Government:
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I do not believe Harare City Council has any business being in business. I see no reason why it should compete with private sector in providing goods and services. A dollar spent in - house by City of Harare simply does not buy the same le vel of productivity as one spent in the private sector….Competition is lost . Harare City Council is forcing itself into obtaining more and more of its goods and services without the benefit of competition .
It has been government policy since 1991 to rely upon the private enterprise system to supp ly its needs, except where it was in the national interest for the Government to provi de directly the services it used . When ESAP was adopted, large numbers of people, often in positions of political influence, fel t that private business was inherently more efficient than government.
Circular Number 76/96 of the Ministry of Local Government, Urban and Rural Development was an important indication of this. It directed all local authorities to contract out functions t o the private sector whenever possible. The ESAP prescription was deemed to be a solution to the poor performance of most public organisations (GoZ, 1991). Moreover, MERP (200 0), advocated for the rationalis ation and reduction of government expenditure and acceleration of municipal service reform.
There were respondents who argued that HCC attempted to contract virtually the provision of all public services to private companies. An exception was the actual approval of public policy. This was reserved, cons titutionally, to ward councillors, to members of the executive, legislative and judicial branches.
The contracting out discourse in Zimbabwe coincided with the ascendancy of technocrats over ideologues in Cabinet. In fact, according to Bond and Manyanya, ESAP and ZIMPREST were introduced by the late former Finance Minister, Bernard Chidzero, and a very small group of technocrats. It also saw the entry of the World Bank (WB) as a key player in the country’s economic policy making, invariably on the side of the economic interest groups.
The technocrats in Cabinet and the state bureaucracy, the powerful economic lobby groups
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and the WB together constituted a powerful pro - adjustment coalition. Within the political leadership and government, certain coalitions were calling for the opening up of the economy
to liberalisation. Herbst (1990:210) refers this to the emerging of the “technocratic
considerations replacing political considerations” within both the ruling party and
government structures.
But what fruit s did contracting - out bear? Contracting out of public services by HCC resulted
in poor quality of services as well as the skyrocketing of prices beyond the reach of the
ordinary people. The contracting out of refuse collection in Harare resulted in the non -
collection of refuse for days, although contractors continued to receive fees. In September
2006, the HCC was forced to officially terminate refuse collection and transportation
contracts with three private contractors offered the jobs in 2003. The contra cts were due to
expire in March 2007, but the companies had not been doing work for council because of a
dispute on bin prices and other related reasons. It was reported that the three companies had
breached their contracts and had failed to collect and tr ansport garbage since July 2005 (The
Herald, 4 October 2006).
Critics charge that contracting - out did not offer all the flexibility claimed by its boosters. One
privatisation specialist argued , that private companies are innovative in raising money but
conservative in spending it. The argument was that contractors lacked responsiveness to
norms defined by the democratic process. For instance, contracted companies slighted values
such as affirma tive action and a well - paid civil service. Contractors often paid less than the
Harare City Council for unskilled work, while they paid more than the council for
professional and managerial tasks. The people who lost city jobs when HCC services went to
con tractors were disproportionately the poor and members of the minority groups. The title
369 and some chapter headings in a book published by the Weaver Press (2006) signal the organisation’s feelings toward contracting out. The book is called “Harare City Coun cil for
Sale: Contracting - Out the New Patronage.” Its chapters include “Harare City Council:
Contracting - Out is Political Patronage”, “Getting Rich Off the Poor”, “Blue Collar Workers:
The First to Go” and “Managers Who Can’t Manage.” This book succinctly summaries the ways key stakeholders construed the problems of contracting out within HCC.
Also critics charge that , start - up costs could be heavy. Capital intensive contracts require the purchase of equipment. In order to justify start - up costs, potential contractors may demand a long - term arrangement. Once a deal is underway, it may not be possible to shift contractors even though a formal agreement is about to expire. New firms may not want to bid for a contract, fearing heavy start - up costs with only li mited prospects for payoffs. Implied here is that a private company that collects garbage may have an assured monopoly over the life of a contract, with no competition waiting in the wings. It takes a lot of money to buy the equipment needed for such a tas k. Once a community decides to contract refuse collection and transportation services , it may find itself stuck with one contractor and little control over its services.
Contracted companies may use the old gimmick of the ‘introductory offer’ or ‘loss lea der’ to win a contract. They then boost prices when a community has committed itself and closed the door to other options. Urban Councils Association of Zimbabwe and Combined Harare
Residents Association monitored the implementation of refuse collection be tween 1998 and
2006 and found out t hat charges for contracted refuse collection increased by 93 per cent between 1999 and 2001, from Z$6.78 toZ$13.09 per month.
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Furthermore, the qualit y and efficiency of contracting - out are not attributes that come
automa tically. The study noted that claims of reduced costs were simply the product of
reduced services. The study observed that contracted companies collected and transported
refuse once per week. The implication of this was that it was less expensive than thre e times
per week by Harare City Council. A memorandum seen by this study from the Waste
Management Department to the Town Clerk’s office complained that “Their work on the
whole is almost totally unacceptable. Garbage is piling up. I’m sure most residents and stakeholders would not tolerate for one minute what is happening.”
Because of these challenges, the HCC engaged “reverse contracting or contracting back - in”
(Hefetz and Warner, 2004). But, why contracting back - in? The principal agent problems are inh erent in contracting - out, for instance, goal incongruence between HCC and the contractors. To gain a better u nderstanding of the contracting - out process requires analysis of both contracting out and contracting back - in, which gives attention to economic, m anagerial and political considerations. However, the contracting back - in was beyond the scope of this study.
By and large, professional management is a crucial determinant of local government performance. Osborne and Gaebler (1992) observe that entreprene urial managers would both experiment with contracting - out and employ internal process improvements, which could result in higher levels of contracting back - in. The majority of HCC officials (79 percent) reported attempts to cut costs in either 1998 or 2003 or both. Implied here is that if contracted companies failed to make significant cost savings, HCC management would contract bac k - in.
In HCC, professionalism was lacking. Some Council officials thought and behaved like
371 politicians, though they serve in ap pointed positions at the pleasure of their appointing political masters.
9.3.1 Efficiency Gains and Cost Savings
Efficiency gains and cost savings , appeal to local authorities experiencing fiscal stress. The premise of gains in efficiency and economy of ten are driving forces behind the decision to contract - out (Kettl, 1993; Sclar, 2000; Savas, 2000). This promise appears to depend at least in part on the level of competition among service providers. Competition encourages providers to deliver best qualit y of services possible. The results from Harare City Council do not support these efficiency gains and cost savings. Also the HCC had insufficient supplies of competent private providers , especially in the area of refuse collection and transportation. In o thers areas like Wilkins Clinic and housing, the supply of competent contractors was better.
9.4 CONTRACTING - OUT DYNAMICS
The study noted that some contracts were arranged verbally by Harare City Council. A memorandum in the files was the only record of the agreement. The State Procurement Act permits wide discretion to administrative personnel for contracts under US$50 000. Records of these agreements remain with the agency that initi ates them. When executive or legislative attention turns to such contracts, it becomes difficult, if not impossible, to assemble the information for central review.
The procedures for arranging some contracts permitted great abuse. The Ministry of Finance and Economic Development estimates that 85 per cent of contracts in sampled years were not advertised and bid competitively. The HCC officials identify a contractor they consider appropriate and proceed to negotiate an agreement. The study also noted tha t council
372 statements that equipment or services were chosen by price alone were not true. There were opportunities for key administrators or elected office holders to steer contracts to friends, family members, party supporters that threaten retribution if contracts do not come their way.
As shown in the three previous chapters, quality and efficiency are not guaranteed by contracting out. Both individuals and government agencies suffer from contractors who lessen the quality of their services below the lev els specified in their contracts. Most vulnerable were people who were not sufficiently streetwise or aggressive to apply pressure successfully in the maze of contractors and council officials who respect contractors’ autonomy. A file of correspondence de aling with the contracted road surfacing and maintenance revealed lax control with respect to supplying gravel to fill potholes and theft of diesel by employees of the contractor. The HCC officials seemed to have accepted low - quality service rather than de al continually with the minimum - wage transients the contractor hired to the work.
A memorandum from Wilkins Clinic to the City Health Department complained about a contractor’s laundry service in the most homely of terms:
Their work on the whol e is almost totally u nacceptable. I’m sure most of us as private citizens wouldn’t tolerate for one minute sending our laundry out and getting it back like this without complaining and demanding immediate remedial action…… Many of the items sent to the laundry are ne ver returned…..Laundry received on the cottage is often not for that cottage and must be resorted. It isn’t at all unusual to find laundry from such places as Harare Central Hospital, Holiday Inn, Rainbow Towers, etc. Laundry comes back wet and mildew - smel l y.
9.5 MARKET STRUCTURE AND COMPETITION
The market theory and the injection of competition into government procurement is fundamental to contracting out success (Osborne and Gaebler, 1992; Savas, 2000), yet many public service markets are not robust (Wa rner and Hefetz, 2009; Sclar, 2000). Warner and
Hefetz (2009) report survey results that 31 per cent of respondents in city governments where
373 competition should be strongest, report low levels of vendor supply. For local governments’ contrcating out of s ocial services, similar problems exist (Van Slyke, 2003, 2015). As a result, contractors can seize upon their preferred position, knowing the contracting organisation is vulnerable because it cannot be replaced with another company. In the event of perform ance failure, HCC was held hostage and was unable to sanction thereby undermining contract accountability.
Implied here is that the competition in the market is critical to ensure gains from contracting out, but competitive markets for public services may not exist for all services. The study asked if HCC officials faced an, “insufficient supply of alternative private companies”, and almost three quarters of the respondents reported that they do. Because HCC had insufficient supply of private suppliers to carry out the refuse collection, it had to resort to contracting back - in. The interviews revealed that a lack of competition and a dearth of bids were not uncommon for HCC. Other HCC officials reiterated this concern, expressing an unwillingness to term inate contractors despite performance problems because there were only two qualified companies in the market from which to choose. This was worsened by the need for specialised assets in areas such as refuse collection and roads construction.
The study ob served that specialised investments increase the likelihood of “Lock - in”. Lock - in is a double - sided problem. For the seller, it is the risk that the buyer will back out, making investments into specialised equipment a sunk cost. For buyers, the seller’s sp ecialised investments means it is difficult to switch sellers. The seller can then ‘gold - plate’ the proverbial toilet seat or cut corners even if the buyer catches on. Brown et al. (2015) convincingly, argue that the key to manage complex contracts is to i nduce “consummate” behaviour (cooperation) and to avoid “perfunctory” behaviour (defection). They further argue
374 that when service requires specialised investments, the buyer and seller can find themselves locked into a mutually dependent relationships in which both win - win and lose - lose outcomes are possible.
9.6 POLITICAL DYNAMICS
In electoral systems, numbers count. Political incentives spur efforts by politicians to secure majorities and politicians usually champion laws that favour the numerous, small , even sometimes at the expense of the big interests.
Politics involves coercion, the state, in Weberian phrasing, is the human institution that possesses a monopoly of violence, for example, the May 2005 Operation Murambatsvina in
Zimbabwe. The structure of political institutions affects which economic institutions are chosen to deliver public goods and services.
Contracting - out in the public sector is more complex than in the private sector even if services appear to be the same. This is due to politica l exigencies. Political demands may mandate greater attention to a broader range of values, such as transparency in the transaction or that the service be delivered partly by small businesses or other politically relevant groups.
Public contracting becomes more complex because it must address not only cost and performance parameters, but also whether the process was open and fair in ways that do not apply to private sector (Brown et al. , 2015). Even the authorisation to contract out is generally the result of highly charged and combative political debates. For instance, routine policy dialogue between political overseers and implementing agencies .
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Since the superiority of the private sector is axiomatic to the neo - classical, resistance to
privatisation, whi ch has been widespread in Africa, is deemed to be the product of entrenched interests where local authorities and government officials do not want to forgo opportunities for patro nage and pilferage. Contracting - out was seen to run counter to the narrow pol itical and economic interests of the deleterious coalition of political - bureaucratic elites and their urban working class allies. Thus, the narrow and short - term interest of this coalition was deemed to guarantee the persistence of status quo economic poli cies and to preclude the likelihood of meaningful contracting out reforms. With the adoption of the contractin g - out reforms in 1997, the HCC appeared to be executing a retreat from the anti - market and statist economic policies said to be economically ruino us but politically prudent in favour of pro -
market and neo - liberal policies said to be politically dangerous but economically correct.
Research suggest that a variety of political factors can influence the decision to contract out
at the local level, incl uding citizens’ preference for the size and role of government, the
political ideology, partisanship of citizens and elected officials, public employee and union
strength. Cooper (2003) observes correctly through the vertical approach to contracts as
discu ssed in Chapter Two of this study. “It is the political process that produces the decision
to contract out an d techniques of accountability” (Cooper, 2003 :119 ).
In HCC, most of the important economic policy decisions had been made by politicians and
gover nment officials. And the way government leaders made economic decisions had been
strongly politicised. The study discovered that the way contracts have been awarded, to a
marked extent, was on political calculations. Political interventions and manipulatio ns in the
economic realm have posed major problems for contracting out reforms.
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The contracting - out decision was a purely political one because it was started without any
feasibility study u ndertaken. In 1997, contracting - out reform emerged a s a priority issue.
Contracting - out was meant to expose HCC’s operations to competition by external
organisations concerned about the financial and efficiency shortcomings of HCC. Indeed,
World Bank thinking in the 1990s, was that contracting - out and commercialisation of
municipal services was more feasible than privatisation.
Evidently, these economic problems pose serious obstacles to contracting - out. It is important to draw on political as well as economic factors to achieve a fuller understanding of the slow pace of contracting out of publ ic services by HCC. Contrcating - out has been a highly controversial and politically contentious issue. The political impediments to contrcating out began within the HCC itself. Some HCC officials were concerned about their positio ns and perquisites and consequently contracting out faced bureaucratic resistance from concerned directors and managers.
Harare Municipal Workers Union (HMWU) , also organi sed against council contracting - out particularly on the grounds that it would result in large job losses. A notice seen by this study at one of the Harare Municipal Workers Union’s (HMWU) doors reads: “Public service - it is yours; Private service - it is theirs. Join the fight to put public needs before private greed.” But it was the fear o f large - scale lay - offs of workers that constituted the main imp ediment to the
1998 contracting - out attempt. A member of the HMWU informed the study that, “it is well known that HCC is the largest employer of the labour force these days after Public Service
Commission. The right of the people to work will be curtailed if the HCC adopts contracting - out.” The MLGPWNH shared these fears and directed the HCC management to make sure that not even a single worker would be rendered jobless. Under pressure from the HMWU
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and in situations where alternative employment prospects were dim, HCC was reluctant to
proceed with contra cting - out for fear of the political consequences arising from the mass
shedding of labour. Furthermore, political leaders were sensitive to cont racting out certain
services which had served as important vehicles of state patronage. One key informant
claimed that “over the years politicians have used local authorities as centres of patronage to
reward or appease relatives, friends, and political su pporters or as sources of profit in one
way or another.”
Ideological factors have presented further obstacles t o contracting - out. The contracting out
reform was ideologically unacceptable to socialistically inclined leaders. In 2000, at the
national heroe s acre, President Robert Mugabe of Zimbabwe said, “This solitary should be
guarded against”, he warned, arguing for a continuation of ‘socialism’ in key economic
sectors including local government.
Pressure groups such as Upfumi Kuvadiki, Affirmative Acti on Group (AAG) and the
Ministry of Indigenisation, Youth Development and Economic Development aroused vocal
nationalist sentiments and called the government to take full cognisance of the historical
economic disparities in awarding tenders. The President of the AAG declared that it “would
not allow any structure of privatisation…which is made outside the framework of a
calculated programme for economic indigenisation”
The business community, however, hailed the contracting - out initiative. Representatives from organisations such as Confederation of Zimbabwe Industries (CZI) and Zimbabwe National
Chamber of Commerce (ZNCC) argued that HCC’s performance has been rarely in the public interest. The HCC’s economic record had been universally poor and its socio - p olitical
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purposes had also been far from achieved. As such, contracting - out was viewed as a measure
to plug , a notorious loop hole for the plunder of public funds and relieve residents and
businesses from shoring up money - guzzling HCC.
What can be concluded from these discussions is that politics is part of public management and good managers do not just make technical decisions. They interact in the political process
(Nalbandian, 1999). The political climate affects managerial decisions.
9.7 CONTR ACT MONITORING
Contracting out requires a good monitoring system. The study asked about several monitoring aspects including costs, citizen satisfaction and compliance with delivery standards and techniques such as surveys, field observations, data analysi s and residents’ complaints. The HCC results showed that HCC contracted back - in because of monitoring failure. Most respondents complained about waste, mismanagement and fraud that surrounded the contracting - out process. Groups that oppose contracting out include residents associations, youth pressure groups and municipal employees. They documented contracts awarded for reasons of political party patronage or nepotism, contracts that pre sent a cost - saving image but were really more costly than activities provided by Harare City Council and the entry of organi sed crime into city contracting - out process.
The Auditor General (AG) , is now expected to audit local authorities in Zimbabwe. Aside from conventional checks on financial recordkeeping and the legalit y of revenues and expenditures, the Aud itor General may determine, “whether the inspected bodies have operated economically, efficiently and in a morally irreproachable manner.” However, the san ctions available to the Auditor General are more limited. The AG can report findings
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publicly, to responsible authorities in the organisations audited, to the Ministry of Finance
and Economic Development, to the Parliament of Zimbabwe and in the case of suspected
criminal violations, to the Justice Ministry. In this , the AG resembles most counterparts
elsewhere, it does not have operative sanctions. The office does not have the power of the
United States Comptroller General , to stop payments for activities carried on contrary to the
law.
It is not easy to characteri se the audit findings of the AG about HCC operations. The study survey findings and reports of the AG were taken for c lose analysis. The study discovered
that the AG’s office concentrates on matters of procedure: whether HCC executives follow
established rules for consulting with ministerial superiors, whether the HCC insists on its full
rights in transactions with private partners and whether the appropriate reports are filed on
time. From this perspective, the AG follows a safe course, avoiding details o f contract
designs.
There may be a point of balance between these views. On the one side, there are cases when
the AG takes on difficult issues requiring technical expertise and close judgment. On the
other side, a great deal of what the AG does with resp ect to local authorities is to cite faults in
routine procedures of management. The study noted that analyses and reports prepared by
Zimbabwe’s AG rate high by international standards. Nevertheless, there is a good chance
that the managers of public organ isations will escape effective supervision and sanction
because of shortage of systematic follow - ups to the AG’s detailed reports. During the
interviews, the AG informed the study that “As a matter of policy, reports on government
companies receive no form al follow - up.” In discussing these arrangements, AG’ office
asserted that the follow - ups were informal and continuous.
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The ultimate limit of the AG’s effectiveness is its dependence on persuasion. The office lacks
definite powers to stop the activities of government departments or local authorities that it
considers improper or unwise. One sign of this dependence on persuasion was the
introspective character of senior officials. Officials discuss honest differences of opinion
between the AG and audited bodi es as well as not - so - honest differences of opinion . An
honest difference of opinion occurs when the AG makes a point of criticism while conceding
within its organisation that the case has some weaknesses. When the target of the criticism
makes a sharp defe nse against the criticism, there is a sense of fair dispute, which the AG can
lose gracefully. A dishonest difference of opinion occurs when the targets of criticism invent
spurious reasons to excuse culpability. In these instances, the AG is less inclined to make a moderate defense of its position and pursues the matter by orchestrating information for the media and the parliament.
9.8 CONTRACT ACCOUNTABILITY
Accountability is the key to orderly government. It links the various organs of administration t o the officials charged with defining public policy. If a government claims to be democratic, accountability ties the administration to key elected officials and thereby gives to the electorate some control over their governments. For accountability to work in practice, top officials must be able to supervise and control what goes on in all organs of the government.
This was emphatically stated by Dowd (2011). Dowd (2011) observes that:
The governmental agency must be charged with and retain ultimate responsibility for the quality, appropriateness and effectiveness of the service. This will involve a change of emphasis to an administrative, regulatory and policy role. The government agency must, however, in all circumstances , retain the role of princip al.
The study noted that contracting out deters political accountability. The elected members of
the legislature cannot supervise important features of the HCC’s business because they
381 cannot learn who is responsible for what or how to bring about desired changes in programmes. The problems of accountability arose because legislators simply encouraged the transfer of activities to private companies and gave assurance of autonomy as protection against political interference. Yet some degree of political inte rference is essential to political accountability. How can legislators represent the people if they cannot probe the public’s business?
There were also issues raised by HCC management about responsibility without power. The form of government in HCC combi ned with high levels of oversight dilutes managerial responsibility. This was exacerbated by the frequent use of centralist crisis - management measures, such as freezing contract awards by the State Procurement Board and late payments during the economic an d financial crisis era. This arrangement discouraged managers from feeling responsible for their portfolios. This also made for bad management because decisions were often taken by elected and appointed officials who were far away from the action on the gr ound and knew little of the issues. Implied here is that contracting - out was a tool of politics rather than a tool for administrative efficiency. The HCC managers were operating within weak organisational arrangements and contentious political environments and yet they were expected to undertake the legal requirements and transaction costs obtaining under different market conditions.
The literature consulted and re viewed revealed that trust in the management of government contracts is a critical dimension of contract accountability (Bel et al., 2014; Foged, 2015).
Trust can reduce transaction costs between parties and serve as a substitute for monitoring
(Williamson, 1975; Van Slyke, 2009; Goldsmith and Eggers, 2004). However, government contracting entail s some level of tension between the contractor and the contracting
382 organisation. The absence of tension may reduce the public manager’s oversight duties, allowing the contractor to take advantage. Trust, reputation and past experience with contractors are highly influential in contract arrangements, particularly contract selection and maintenance (Van Slyke, 2007).
Trust is also a key element in contract monitoring and performance management (Van Slyke,
2007). There is evidence to suggest that trust can le ad to improved contract performance
(Fernandez, 2009; Scalar, 2000; Williamson, 1985). Trust also has a positive effect on future cooperation (Brown et al. , 2015). Interview data support these assertions. As one key - informant argued that “the contractors were bad performers. Only those who were good performers will be considered in future.”
9.9 CORRUPTION AND CONFLICT OF INTEREST
The study noted that sometimes central government directs local authorities to contract out the provision of public services be cause politicians see opportunities for themselves. They can assign a risky venture to call it independent. If it fails, the politicians consider themselves free of blame. If it succeeds, they can claim credit. In politics as in war, victory knows many pa rents, defeat is an orphan.
The liveliest political scandal for newspaper readers in HCC concerned the delivery of poisonous synade water treatment chemicals to HCC by contracted companies. There were stories about the Minister of Local Government, Public Works and National Housing that circulate among area journalists, politicians, academics and civil servants that include:
a llegations of land deal s that bring great profit to the Minister of Local Government ,
members of his family and close associates;
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s h arp and deceptive dealing s in coalitions to support controversial projects; and
m eddling in technical details that should be left to HCC management .
However, behind some of these allegations are, of course, hurt feelings of politicians. Behind other allega tions , could be simple disagreements over policy.
Conflict of interest is a frequent companion of contracting out. At times the conflict is blatant and criminal. The late former Harare Mayor, Solomon Tavengwa, was the only most prominent of many HCC offic ials who lost his position in 2000 for receiving bribes, kickbacks or other improper favours from contractors. The HCC officials have been accused of accepting grossly inflated contractors’ claims for payment of delivered goods or services.
Certain HCC em ployees used council purchase orders either to buy things for their personal use or for illegal resale. One stairwell in a council office building appeared on the network news several nights running. According to invoices, it had been painted many times o ver a short period. Yet visual inspection showed nothing like the good treatment the council had paid for.
Even contracting out that was not outrightly crooked was made suspect by cozy dealing s .
Contractors work both for a government agency and for busine ss firms subsidised or regulated by the agency. The study also noted the dangers of bidding low. Some contractors were submitting low bids in order to win the contracts. The problem with this approach was that contracted companies were left with little fin ancial headroom to absorb unexpected and hidden costs. Coupled with the effects of external factors like inflation, this meant companies had to take loans from banks to keep the project running. As the Broadway Waste Recovery
(Pvt) Ltd director put it: “Bi dding low comes back to haunt us.”
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If the Noble laureate Chinua Achebe had been writi ng about Zimbabwe in the past thirty years, he would say what he said of Nigeria, that corruption in Zimbabwe “has passed the alarming” and has entered the “fatal stage ” that the country “will die if we keep pretending that she is only slightly indisposed.” Achebe blames this state of affairs not just on poor leadership but also on those who are close to power: “the sharks and crooks that surround these leaders” (Achebe, 1984). Political support is bought with fiscal favours on an all - pervasive and colossal scale. Corruption is rampant in Zimbabwe (Zinyama, 2014b). This symptomises institutional ineffectiveness or even decay.
Corruption is the logical outcome of the poli tics practiced in Africa in the post - colonial period: politics of patronage, politics of extraction, politics of rent - seeking and personality rule (Kivuvu, 2013). The study observed that the absence of an institutional framework to check over - centralisatio n and over - concentration of power are factors at the centre of corruption in Zimbabwe. This observation was made 150 years ago by Lord Acton when he said “Power tends to corrupt, and absolute power corrupts absolutely.”
In short, corruption thrives where there is lack of accountability and transparency. This is a vital area a n d essential for the credibility of contracting - out. This speaks to the necessity of appropriate mechanisms through which accountability and transparency can be fostered to build confi dence in residents.
9.10 PROBLEMS OF PRIVATE SECTOR BUSINESS PRINCIPLESIN PUBLIC SECTOR
The results showed that goal incongruence and orientations differ between the private and public sectors. There is no common denominator like profit, return on investment or market share that can serve as common comparator for building trust and legitimac y of citizens in the
385 political institution. Moreover, values like equity, protection of rights, fairness, and transparency play an important role in delivering the legitimacy of political institution, process and outcomes (Hefetz and Warner, 2004; Rosenbl oom, 2015). The study results , endorsed these claims in the literature. For instance, Section 77 of the Constitution of
Zimba bwe Amendment (No.20) provides for water as a basic human right and requires the
Government of Zimbabwe to provide clean, portable and affordable water to citizens. In
Eastern single - party countries like China and Vietnam, the value of state legitimacy and attendant policy or party control play a dominant role in shaping performance - based approaches to public management and governanc e.
The study observed that some of the contracting out problems emanated from the literature.
The NPM, for instance, tries to use administrative approaches to solve problems that are essentially political in nature (Larsen, 2008). But in the public secto r, methods of providing values, services or goods are contested and decided politically. At least, the New Public
Governance (NPG) can resolve some of these challenges because it is value centered. It argues that the goal of government is to promote the la rger common good not just efficiency, effectiveness and responsiveness (Medard, 2002; Megginson and Netter, 2001). This is really confirmed by the results especially the Budiriro Housing Project discussed in Chapter Eight of this study.
9.11 THE PROBLEM O F SHIRKING
The study observed that HCC is a late payer. Indeed, such is the level of delay in payments that many contractors had to take into account when submitting their contract prices.
Moreover, it is well known that late payments cause severe and some times terminal cash - flow problems for small firms. The HCC had agreed to pay interest for late payments in
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excess of 60 days. These observations were consistent with OECD (2007) and European
Commission (2003) that credit standing of the public sector count erpart affects contractual
relationships.
Contracting - out is usually adopted with public interest in mind not profit motive and the spirit
of entrepreneurship. As such, private companies are driven by profit motive hence cutting
corners on services unles s city closely monitors the contracted companies’ performances. The
monitoring that took place tended to be based on word of mouth and anecdotal. Council
members were rarely involved in monitoring issues unless such issues became public
problems with media coverage. Monitoring, though formalised on paper, was highly
informalised. District officers were supposed to carry out spot checks and following up
complaints but never carried out the spot checks. The monitoring was mainly through
complaints by resident s. Such an approach is very “mainly unreceptive monitoring system”
(Gordon and Kelley, 2010:189).
The principal - agent theory argues that shirking can be resolved through proper contract
design and management. According to Huque (2005), it is virtually impossible to eliminate
shirking by the agent. Kettl (1993) suggests that shirking can be eliminated through defining
the job, choosing the contractor, selecting incentives and sanctions as well as monitoring
performance. A good contract document should h ave the following clauses specified:
contract specification, performance targets, monitoring indicators, conditions of renewal,
sanctions and enforcement mechanisms and conflict reduction mechanism (Domberger and
Hall, 1996). As shown in previous chapters, HCC contracts had no the bulk of these clauses.
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9.12 MINISTERIAL INTERVENTION
All local authorities in Zimbabwe are responsible to the Minister of LGPWNH. The minister
has legal responsibility for approving major contracts, appointments of key personnel or
changes in certain policies. When respondents were asked about the role of the minister, they
responded in euphemisms like, “He stays on top of our major problems.”, “We keep him
informed of each step in major decisions”, “He shows close interest.” Gen erally, these
comments mean a passive role for the Minister. The Minister deals episodically with items of
his/her own personal interest or he/she may be called on by the Town Clerk to support HCC’s
needs in public, in the Cabinet or in the Parliamentary P ortfolio Committee. Contrary to these
views, the study noted that the Minister likes to cultivate an image of being involved. He
appears at ceremonial openings of new facilities and at the retirement of key personnel. He
announces major appointments and ne w contracts. He takes a posture in major negotiations while leaving the details of bargaining to the professional staff and Town Clerk. One senior
HCC o fficial regarded the minister as “a good fellow.”
Responding to the question: You are alleged to be int ervening in technical details of HCC?, the Minister’s response was “They will call something technical when it’s really a matter of general policy.” One former Town Clerk informed the study that the Minister interferes unnecessarily in local government man agement. The key - informant further added that if a project fails to pass the efficiency criterion and passes the political criterion, the Minister would force the adoption of such a project. Responding to the question what would happen if you refuse to ado pt the project, the former Town Clerk said, “If I were to refuse one of the directives from the Minister, he would send an army to Town House.” He meant an army of analysts capable of justifying the project at a level of detail the Town Clerk would not
388 cha llenge. The study noted that the HCC has a peculiar structure that brought politics right into the boardroom and made management of the city awkward.
Through the abuse of such laws as the Urban Councils Act [Chapter 29:15], the Constitution of Zimbabwe, t he Electoral Act [Chapter2:01], the Provincial Councils and Administrative
Act [Chapter29:11], the Minister of Local Government either removed or intimidated MDC councils and Mayors and used the vast powers to interfere in local affairs in order to modify, cripple or destroy local councils. Civic organisations such as CHRA fought long legal and civic struggles with the Minister to enforce the democratic rights of urban residents who were described by the Minister as ‘totemless strangers” and were a persiste nt threat to ZANU - PF rule. The study observed that the HCC has been marked by ubiquitous political intrusion resulting in abuse of authority, serious state corruption, arbitrariness and political favouritism.
With the above discussion in mind, it is import ant to remember that political controls substitute for market discipline in regulating public administrative behaviour. The decisions whether to regulate and provide services, at what levels, where and how, are largely driven by politics rather than margin al costs and technical capacity alone. This reality necessarily infuses “public administration with political consideration and with policymaking comes political interest, pressure, competition and conflict” (Rosenbloom, 2015).
9.13 POLITICKING ABOUT CONT RACTING - OUT
Contracting - out is a live issue in Zimbabwe. Circular Number 67/96 of the Treasury has defined the pro - contracting policy of the national government since 1996. The circular was modified in the years 2002 to 2004, but not in a manner to alter p olicy in a substantial way.
The Circular states that the Treasury “will continue to support the policy that the Government should rely on the private sector for goods and services…” Yet the procedures for costing the
389 advantages of contracting - out versus in - house activities were not made more precise, and greater concern was to be shown for government employees who would be affected by the contracting out.
In the details of the 2002 to 2004 review of contracting procedures, it was possible to see one small point in policy that has crucial impact. The issue is the cost of government retirement programmes to be used in assess ing in - house versus contracting - out. The true cost of government retirement plans was elusive. It depends on unknown future events, such as, inflation and the generosity of government to pensioners. The higher the cost figure assigned to government retirement costs, the more likely that a comparison would favour contracting out the provision of services.
Between August 2002 and April 2004 the figure to be used for government retirement costs moved back and forth with all the marks of a pressure contest between contractors on one side and government employees’ unions on the other. In August 2002 the Treasury announced that “new guidance… for calculating overhead costs of commercial and industrial activities of the government could result in substantially greater use of the private sector and lower costs.” What followed was an increase from 7 to 24.7 percent in the overhead factor for retireme nt benefits. This was designed to put an additional 17.7 cents on each central government payroll dollar when comparing prices with private contractors.
The Treasury legitimised all this arguing that “This factor was produced by the Public
Service Commiss ion’s actuarial model, as modified and validated by the Ministry of Finance, using current economic assumptions supplied by the Ministry of Economic Planning.” All these dynamics led to HCC terminating all contracted companies for refuse collection in earl y
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2006. The Minister of LGPWNH in 2005 gave a directive to HCC to determine if the capability to perform the contract service existed in the council and they were to tighten procedures for monitoring contractors’ performance. Within the directive was lang uage suggesting bias in favour of in - house service provision.
9.14 STRATEGIC CONTRACTING - OUT
One of the most impressive aspects of the City of Indianapolis approach to contracting, as discussed in Chapter Four, has been the emphasis on putting sound management processes in place before embarking on a major contracting out programme. For instance, introduction of activity based costing (ABC) and perfo rmance measurement. Contracting - out in the City of
Indianapolis was part of a much wider vision for loc al government. The study discovered that the two Harare City Council strategic plans had no reference to contracting out. Observed here is that ad - hoc approach to contracting out was institutionalised in HCC. This explains why there were no feasibility stu dies undertaken. Hsieh (2012) argues that feasibility assessment capacity is needed to ensure that a programme meets practical procedures, political viability and cost - effectiveness. This shows that Zimbabwe’s policy making is characterised by policy maker s who often decide on matters without first having obtained full and detailed knowledge of the possible consequences of their decisions. They start running and take the consequences as they occur. In this respect, they come close to the approach that
Hirsc h has called the “motivation - outruns - understanding” (1965b:29) style of policy making.
Full understanding of what can or cannot be achieved with the existing resources is not regarded as a precondition for making a policy by HCC. Instead, the political dec ision is made first, often under dramatised circumstances, in order to produce a sense of rapid advance.
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9.15 ECONOMIC VERSUS POLITICAL RATIONALITY
Bratton (1987:87) defines economic rationality as “… the approach of the economic planner who applies stand ardized tests to determine maximum output for least cost.” This he contrasts with political rationality which “… derives from the worldview of politicians who assess particular policy measures in light of the impact on their own political support and survi val”
(ibid.).
The Government of Zimbabwe basically espoused economic rationality for as long as its survival was not at stake. But, as noted, the decline of the ruling party’s base in urban areas, coupled with increasing corruption among top leaders, inc reasing economic hardships and increasing demands for political liberalisation, forced political rationality to come to the fore.
Bratton (1987) rightly observes that the notion “… that policies be formed only by considerations of economic rationality fall s on inhospitable terrain in Africa.” He further notes that African leaders are inclined to make policy choices on the basis of distribution of resources in order to mobilize political support, neutralise opposition and, thus, maintain their leadership po sitions (ibid.). The following policies: fast track land reform programme of
2000, In digenisation and Economic Empowerment Act of 2007 and Operation
Murambatsvina of 2005 attest to this.
Skalnes (1995:104), citing Bates, asserts that the state is an aren a, “..where conflicts between societal groups are played out…” It is quite tempting here to identify the groups as the urban masses (electorate), the business/industry, international financial institutions, the media and the central government. The reality of the Zimbabwean situation, however, goes beyond this simple analysis. In view of this study, the groups also include international capital which owns large companies, international donor agencies, and governments, the emergent black
392 business elite, the ruling elite which finds utmost prestige in winning HCC tenders and contracts, the youths supported by Affirmative Action Group (AAG) and Ministry of Youth,
Indigenisation and Economic Empowerment and HCC bureaucrats. This is not necessarily a complete pic ture either.
Political and personal considerations had been important influence in a variety of local authorities policy matters. For example, many decisions have been made to build patron - client linkages of support for those in state power. This has accounted for the politically inspired distribution of contracts and tenders. Tenders have often been awarded to dubious companies that never delivered the services. Political loyalty had benefited from such awards.
Those awarding contracts had also extrac ted handsome kickbacks which rendered many HCC projects uneconomical.
9.16 SICK INSTITUTIONS
One radical respondent described the HCC as a ‘sick institution’. The respondent defined a sick institution as one where a substantial number of employees go for months without pay, do other work while at the workplace, where corruption and favouritism are not isolated instances but the corrosive norm, workers cannot feed and house their families and service delivery is very diabolic.
A major contributor to the e mergence of sick Harare City Council is the whole notion of the indigenisation of the national economy. Many politicians and senior HCC and government officials have engaged in fast track wealth accumulation in the name of indigenisation of the economy. Th e HCC tendering procedures have been violated willy - nilly and economic indigenisation has been utilised as a convenient excuse for such violations. Representatives
393 of contracted companies indicated to this study that they would rather lose their money tha n drag a senior politician to court over the matter and end up being victimised by the political system. Besides, this could result in the kind of publicity that contracted companies would not like to attract. The study observed that HCC awarded tenders to private companies of questionable credentials and capabilities. To this end, corruption necessarily undermines a government’s legitimacy. Hamir (1999:5) puts it succinctly thus: “corruption is enemy number one to legitimacy. When corruption is allowed to become a way of life, people lose faith in their institutions, from the presidency down to the lowest levels, and this loss of faith by the people necessarily takes away legitimacy from any government.”
Practically all sectors of the Zimbabwean economy a re suffering from some form of fraud/or corruption. Indeed, Zimbabwe is now facing the real danger of becoming a culturally corrupt and fraudulent nation. For instance, following the award in 1997 of a highly lucrative mobile telephone licence to a consort ium in which President Robert Mugabe’s nephew was a partner and whose other directors included a former army commander and a batch of ruling party officials, many accusations were directed at top state officials and politicians for abusing government tende rs to enrich themselves and their cronies.
9.17 OVERT POLITICAL MANAGEMENT
Traditional public administration assumes a clear divide between politics and administration.
Politicians decide policy and administration executes the decisions. The distinction i s blurred in practice - administrators often have an important influence on policy because of their specialist knowledge and politicians often get involved in implementation because they recognise the potential to effect change in line with their priorities. Contracting out is one of
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those issues that straddles the policy/administration divide. It, certainly, is a political issue,
especially as it impacts on the municipal workforce, residents and local businesses.
Politicisation of contracting - out carries hi gh risks. It explains why many municipal services
t hat are amenable to contracting - out are kept in - house and little attention is devoted to the details of contract strategy - terms, conditions and leng th of the contract. Contracting - out is
usually done at great speed without the proper groundwork.
9.18 POLICY REVERSALS/VACILLATIONS/UNCERTAINTY
In some services, there is a high risk of politically motivated changes in policy direction or
service specification which could result in service being discontinue d, scaled back or
dramatically reconfigured. Policy uncertainty raises the costs of contracting out in the long
term. Changing and adapting contracts so that they reflect new policy priorities can be time -
consuming and expensive, increasing ex - post transac tion costs. To minimise the risks of
policy uncertainty, it may be helpful to build political consensus around policy goals and use
of contractual mechanisms prior to their use.
The study observed that some politicians use contracting out in a Machiavelli an fashion: as a
strategy to retain power by purchasing the electoral support of certain constituencies
(electoral gains) and in some cases Adam Smithian approach was embraced where market
competition was promoted.
From the year 2000, there was ‘policy va cillation’ (Masunungure and Chimanikire, 2007). At
the burial of former C abinet Minister at the National Heroes Acre, President Robert Mugabe
sentenced ESAP to death by pronouncing:
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…enough is enough. ESAP is no more. We can’t bury it here (at National Heroes Acre). It is destined for some hidden bush somewhere… the socialism we wanted can start working (The Herald, 16/10/2001).
The study noted that policies were being crafted, abandoned, redesigned and discarded with haste to the extent that the econom y had become an experimental guinea pig. Policy zig - zagging back and forth was more pronounced in Zimbabwe especially between 1995 and
2008. For instance, the re - introduction of the Agricultural Marketing Authority that had been disbanded in the early 1990 s. Implied in this move is mistrust of the private sector. In fact, it means moving away from the liberalisation philosophy of the 1990s. This thinking also manifested in the decision in 2006 by the Government to reconstitute the focus of the
Privatisation Agency of Zimbabwe (PAZ) from ‘privatisation’ to ‘restructuring’.
The study observed that from 2000 policies were either implemented piece - meal or abandoned halfway or still remain ed paper reforms. From the end of ESAP to 2009, but more pronounced since the new millennium, the policy style has been marked by incoherence bordering on anarchy. For example, ZIMPREST was introduced by the Government with pomp and fanfare but was half - heartedly implemented and never enjoyed even half of the plan n ed life span. This was the same with Vision 2020, ZIMPREST, Millennium Economic
Recovery Programme (MERP), National Economic Recovery Programme (NERP), the 10 -
Point Plan, Macro - Economic Policy Framework (2005 - 2006), National Economic
Development Priority Programme (NEDP P) and many others. Some of these policies were implemented within a very crowded institutional framework such as NEDPP. Firstly, there was the Zimbabwe National Security Council (ZNSC) set up by the President of Zimbabwe to formulate the programme. There was the National Economic Recovery Council (NERC) chaired by Vice President which was responsible for the programme. The NERC worked with another committee chaired by the Chief Secretary in the Office of the President and Cabinet.
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Local authorities were no t spared with policy reversals. The Operation Murambatsvina of
May 2005 is a case in point. Implied in the name of the operation was that the Government viewed the poor people as filth (tsvina). The Police Commissioner - General actually called poor people “ maggots”, (makonye or honye in Shona – a native language). Normally, honye are found only on something that is rotten. It, therefore, means that the whole of Zimbabwe was rotten.
9.19 CONTRACTING - OUT WITH NON - PROFIT AGENTS OF PUBLIC POLICY
What were once accepted as government functions have been privatised to firms and non - profits. The study observed that there was no convergence of commitment and purpose between the HCC and the contracted for profit companies to an identified problem. Ther e was convergence of interests and objectives between HCC and non - profit organisations. For instance, both organisations converged on the need to improve public welfare. Thus, when
HCC chose the Bill and Melinda Gates Foundation for Mbare Hostels and const ruction of
Dzivarasekwa housing projects in 2011, the decision was motivated by the fact that the two shared the same commitment in search of the same general results for the same reasons - better housing for advancing the welfare of the same community. Th is resonates well with
Granovetter’s (1985) observation that the quality of relationship (trust and understanding) allows contracts to be incomplete or unspecified and still be valid. “We understand each other. We are a family. We want the same thing” (Gra novetter, 1985: 210). One senior HCC official proclaimed: “Oh, we can get along; we think alike, we dig each other.”
9.20 STAKEHOLDER INVOLVEMENT
The study observed that contracting - out remains a top - down process controlled by incumbent leaders. Despite t he public criticisms and controversies it has engendered, HCC had not
397 encouraged public debate and participation. Representatives of residents associations remarked that “debates and discussions which should have taken place before the exercise, took place at the end when deals have been sealed.” Contracting - out decisions have remained largely outside the domain of public scru tiny. Criticisms of contracting - out have been confined to occasional remarks by opposition politicians, trade unionists, academics a nd journalists. The respondents from the residents association s conceded that they were involved
“peripherally, sometimes unwillingly” in the formulation of the contracting out policy. For instance, the US$144 , 4 million water loan agreement between the Ha rare City Council and the Exim Bank of China that was guaranteed by the Government of Zimbabwe. The contents of the loan deal, the terms and conditions, were unknown to the residents of Harare, despite the fact that the residents were responsible for the r epayment of the entire loan. The HCC management bought about 20 project vehicles using the Chinese loan without the procedural authority of cou ncillors and the Mayor of Harare (Full Council, Thursday 15 May 2014). This was despite the fact that HCC used co uncil’s immovable properties, Trafalgar Court and
Cleveland Building as collateral. One HRT official argued that the residents were unable to influence HCC’s decisions and pressed for greater presence in policy discussions.
We would like to see the City of Harare sitting with the residents and charting strategies for development. We would like to be fully involved in City departments that deal with various policies. This is not happening, said HRT official .
The CHRA official echoed the same sentiments:
A truly compromise can only be arrived at when all interest groups and stakeholders participate in policy formulation, decision making and implementation. Participation and decision making by all has to be guaranteed through a broad, participatory approach.
Most policies are initiated without consultation with the concerned parties. Sometimes residents are deceived into participating in dubious ventures. However, one HCC official said the HCC was alert to the weight of public opinion and sought to shape and schedule major
398 actions with various groups in mind. Consistent with the Local Government Circular No.3 of
2011 and the need to foster a sense of ownership of the council decisions, ratepayers, the media, residents’ representatives, the business community and politicians should be consulted before decisions are made. Furthermore, the Zimbabwe Government, for its part, has affirmed that policies should be embedded in the aspirations of the whole community
(Growth with Equity, 1981; The Prime Minister’s Dire ctive, 1984; ZIMPREST, 1998).
Despite these calls, there is still a lot of apathy because participation is usually invited on trivial issues but rarely invited on vital issues such as choosing priorities.
It is important to note that residents association s have become active in promoting their interest and challenging councils to become accountable to them. However, some of them are influenced by party politics. The Harare Combined Residents Association is one of the strongest associations in Harare.
Ano ther stakeholder involvement issue is the role of international institutions. WB and IMF have increasingly become influential players in economic governance in Zimbabwe. In the design and implementation of policies, for instance ESAP, Zimbabwe sought coope ration and assistance of both WB and IMF. The specific role of these institutions is discussed extensively elsewhere (Gibbon, 1995; ZCTU, 1996; Sachikonye, 1999). The WB in 1996 organised and sponsored a Seminar on Privatisation of Municipal Services where it urged the local authorities in Zimbabwe to consider contracting out the provision of non - core services.
In the following year (1997), the Secretary for the Ministry of Local Government directed all local authorities to contract out services to private agents. The study observed that the directive lacked a more nuanced approach hence the refuse collection and transportation of
1998 was less successful and proved deeply unpopular domestically. While governments may
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not be absolved from mistakes which enge nder socio - economic crisis, also lending institutions which insist on flawed cocktails of reform measures cannot be absolved.
9.21 CONTRACT MANAGEMENT CAPACITY
There are many laws and regulations to ensure open competition, fairness, honesty, accountabili ty and cost - effectiveness. A common factor in failure to implement policies is lack of institutional capacity. Finding the right contractor is the first in effective contracting out. There is massive literature which shows that contract definition is crit ical for effective contract management (Gordon and Kelley, 2010; DeHoog and Salamon, 2009; Johnston and
Seidenstat, 2007). The HCC and contractors must develop the capacity to manage the contracting out process (Brown and Potoski, 2006). Contract c apacity includes the ability to find the right contributor, to negotiate contract terms, to monitor the work in progress, reward performance and to evaluate outputs and outcomes (Cohen and Eimicke, 2008; Brown and
Potoski, 2003).
While Sclar (2000) is pessimistic about the prospects of public contract management capacity catching up with pressures to incr ease contracting - out, the research of Brown and Potoski
(2006) suggests that governments can and do adjust their contract capacity when confronted with problems s uch as poor outcomes, high transactions or stakeholder opposition. Whether optimistic or pessimistic, scholars generally agree that government contract management capacity is critical to positive contract outcomes and that contract capacity need to be str engthened (Brown et al ., 2015).
The capacity to manage contracts has many components. First, local authorities’ staff must have skill s and capacity to make the make or buy decision (Cohen and Eimicke, 2008).
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Secondly, capacity includes resources, expertis e and experience to manage the contracting out process. This includes choosing the best bid process - lowest price, sealed bid, sole - source or request for proposals, a transparent and defendable mechanism for selecting the winning bidder and a legal team to draft and reach agreement on the actual contract. Lastly, the ability to evaluate contractor performance. Evaluation addresses the question: “Did we really achieve the results and get the benefits we thought we would gain from contracting out?”
(Cohen and Eimicke, 2008:109).
Research by Brown and Potoski (2003:162) suggests that governments that invest in contracting out capacity are not immune from problems, but they are “better positioned to avoid these threats and to prevent full - scale contracting disa sters.” The study noted that the capacity to contract is a critical skill for twenty - first century public managers. Skills such as strategic planning, human resources management, information and performance management, financial management, political and m edia relations and leadership, quality management, benchmarking and team management. These skills enable contract managers to deal with five categories of contracting out problems identified by Cohen and Eimicke: problems related to letting contracts; comm unications issues; contractor internal management issues; government contract management issues and environmental or external issues (2008:127 - 128).
Brudney et al. (2005) comment that political and ideological considerations had little if any effect on co ntracting out by local governments. The study results contradict these observations. Political variables find their way into the contracting out process through measures such as legal and political institutions that act as environmental constraints on pub lic managers. The political climate in an economy influences policy making at the local
401 level. However, the study results acknowledged the need for contract management capacity which is massively lacking within HCC.
9.22 OPPOSITION TO CONTRACTING - OUT
There were numerous arguments raised by HMWU, residents associations and MLGPW NH in opposition to contracting - out. Poor quality services for residents, increased corruption cases, services were interrupted mid - stream in the event that contracted providers went bankrupt, displacement of council employees, difficulties in drawing up adequate contracts, increased cost of monitoring and political interference.
However, not all these problems are valid in certain circumstances. The HCC should not construe contr acting out as an unwise decision, only that it is always a difficult one. A single misstep in the contract management process as discussed by Brown and Potoski (2003) and
Savas (2005) may affect the entire process.
9.22.1 Expectations from the Residents
R esidents appeared to be relatively indifferent as to the source of utility services, as long as the quality remains high, costs low and corruption absent. They expect services to be technically proficient (timely and clean) and ethically fair (costs relate d to services provided and no monopolisation). Though comfortable with different service provision models, the public does generally expect that the HCC exercises due diligence in finding the best and most cost - efficient provider and in maintaining regulat ing the service over time. The study noted that certain competencies are needed. These include technical, ethical and leadership.
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9.22.2 Technical skills
These are important to determine which sector can provide the best technical skills to deliver utility services. The choice involves the quality of the product (clean water, tidy trash collection) as well as efficient and reliable delivery (no accumulation of trash). Viable contingency plans should be in place. Competitive bidding should be promoted .
9.22.3 Ethical
The use of public funds to enhance commercial profits when utilities and services are privatised is often met with apprehension. For example, a lowering of accountability standards, a reduction in wages and benefits due to commercial cost - saving measure and laying off of council employees.
9.22.4 Leadership skills
Leadership skills are crucial in identifying new models of service provision to generate support for what may be untested but promising methods. The challenge is to enhance acc ountability and transparency when private firms participate in public policy. This is especially in polarised political environments - it has strong views about the role of council and justifiable fears about commercial monopolisation. Hence leaders must f oster confidence and support in their ability to provide for people’s basic needs. For contracting - out to succeed, there is need for effective leadership. The noted Nigerian writer Chinua Achebe reduces all African problems into one: leadership. In his 198 4 book The Trouble with
Nigeria, he argues:
The trouble with Nigeria is simply and squarely a failure of leaders. There is nothing basically wrong with the Nigerian character. There is nothing wrong with the Nigerian land or water or air or anything else. The Nigerian problem is the unwillingness or inability of its leaders to rise to the responsibility, to the challenge of personal example which are the hallmarks of true leadership (Achebe , 1984) .
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Achebe (1984) concludes one of the chapters by saying, “W e have lost the twentieth century, are we bent on seeing that our children also lose the twenty - first? God forbid?” What Achebe says of Nigeria is equally true of Zimbabwean local authorities. Since 1980, Harare City
Council has had bosses and not leaders.
Like all management options, contracting out has a potential for misuse, used for wrong reasons. One such misuse , is to contract out a managem ent failure, to use contracting - out to avoid facing and solving a management problem. Management problems are ra rely disposed of in such a way. They just change their form and reappear to haunt the HCC in a different guise. The study observed that problems must be solved not repackaged.
9.23 THEORETICAL FRAMEWORK
The principal - agent theory is concerned with questio ns of governance and control while transaction cost theory is more concerned with efficiency and the proper institutional form of governance, given the transaction costs involved. The transaction cost theory to contracting out has focused on the government ’s contracting - out decision and the structure of the contracting out process (Besley and Ghatak, 2001). It, furthermore, provides a powerful analytical tool for understandi ng a broad range of contracting - out processes, decisions and procedures. Market con testability theory also tied nicely with the study. In contestable markets, competition for contracts helps overcome principal - agent problems (Lai et al. , 2007;
Muller and Turner, 2005). Even when only few firms are initially available to contract with, ma ny firms would quickly become available if the price paid by local authorities exceeds the average cost incurred by vendors. When there is low contestability, a potential vendor would tend to offer services at a much higher price for two reasons. Firstly, the vendor cannot be
404 quickly replaced and secondly, there is a high risk of contract breach externalities. The study noted that conditions needed to study the contestability model are rarely met in practice.
While the economic theories provided a rich theoretical base for the adoption of contracting - out, they ignore the political dynamics. The political economy filled this gap for this study.
Contracting out is a political process whose success or failure unavoidably hinges on the prevailing economic, s ocio - political dynamics within the polity. Harries et al. (1995) argues that societies that adopt the formal rules of another society, for example, the adoption by
Latin American countries of constitutions similar to United States of America had very different performance characteristics than the original country because both the informal norms and the enforcement characteristics had been different. The implication is that , transferring the formal political and economic rules of successful Western market economics to third world is not a sufficient condition for good economic performance.
It is politics that shape economic performance because it defines and enforce the economic rules of the game. The reasons for the different outcomes have to do with the political context or what Khan (1989) refers to a “political settlement” meaning the balances of power between the classes and groups affected by the institution. Im plied here is that contracting out can highly be politicised. Political and technical risks may affect the feasibility of contracting out. The OECD (2010:18) observes that the challenge for the government is “to assess key stakeholders’ incentives before d eciding whether or not to contract - out.” The assessment can be done by asking the following questions: who stands to benefit from the decision to contract out? Who are the potential losers? Will losers become a significant obstacle to the success of the pr ocess? What is their capacity to undermine the process?
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Regulati on is critical when contracting - out for public service provision (Romzek and
Johnston, 2005). The European Union experiences discussed in Chapter Four of this study
revealed that the success o r posi tive performance of contracting - out was built upon strict
administrative regulation. The Asian Development Bank Institute (2011:11) concludes that if
“these are absent, there is a disti nct likelihood that contracting - out will be unsuccessful.”
The institutional context of contracting out has appeared in the study as very important.
Contracts are not enacted in a vacuum. There are constitutional laws, contract law, competition, Parliament, the structure of ministries, the structure of markets and ot her formalised rules that guide the process. An important factor in the development of successful contracting out in the reviewed global experiences in Chapter Four of this study is the existence of a specialised unit promoting contracting out. For instanc e, Partnership UK,
Contracting and Public - Private Partnerships in Czech Republic and the creation of a commission by City of Indianapolis. In UK, there was a National Co - coordinating Committee
that promoted a comprehensive and strategic approach to contrac ting out under the title of
“Don’t Panic.” Neither Zimbabwe nor HCC does have such institutions. The only structure in
place is Privatisation Agency of Zimbabwe. It, however, deals mainly with privatisation
matters not contracting out.
All these conceptua l issues were distilled into a contract management framework consisting
of contracting out policy, stakeholder analysis, the contract itself, provision of public
services, citizens, regulation, institutional context, strategic contracting and communication .
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Figure 9.1: A Contract Management Framework
General policy on contracting - out and level of political sensitivity
Institutional rules Strategic contracting and communication
Contract - Mix of formal and informal rules - Short - term or long - term Regulation of Formal contracted public service institutions - Provision of public services delivery - profit or non - profit provider - local, national or global provider Legal, political, managerial, Informal Consumption among users/customers professional, Institutions and ability to choose provider market, accountability
Source: Greve 2005
9.24 POLICY AND MANAGEMENT IMPLICATIONS OF STUDY FINDINGS
The theoretical significance and policy relevance of this study emerge mainly from its detailed empirical results on contracting out processes with Harare City Council. This section provides a summary of the key implications for contracting out theory and policy. It has contributed to advancing theory on this topic by teasing out the factors that impede effective contract management and providing insights on the implementation of contrcating out. The study showed that successful contracting out is largely d ependent on managerial, institutional, environmental factors, contract management capacity, political and legal factors.
The results underscore the need for proper contract management process. The literature is unclear on the impact of socio - economic envir onment, but the survey and interview results
407 from this study are consistent on this - both indicated that the socio - economic environment has an impact on successful contracting out and contract management.
9.24.1 Contract Management
Given the rise of cont racting - out as an alternative to direct service provision, scholars have identified management competencies required to effectively manage contracts (Gansler,
2002; Kelman, 2002a; Kettl, 1993; Romzek and Johnston, 2002). These tasks include assessing the a ppropriateness of a service for contracting (Donahue, 1989); planning, structuring and executing competitive bidding processes (Lavery, 1999); managing fiscal resources (O’Looney, 1998); negotiating and bargaining with private companies and employees (Girt h et al., 2012); measuring contractor performance and evaluation (Ballard and Warner, 2000); managing external relations to ensure market competitiveness (Scalar,
2000). One view is that these tasks are unique to managing contracts and local authorities need special man agement capacities when they contract out.
It is important to understand that contracting - out is no panacea for all municipal financial or service delivery ills. At best, contracting out helps control costs and increase efficiency and at worst, a badly planned or poorly designed contract reduces service levels and produce a net loss to the council and its residents. Even a well - designed contract may face some difficulties such as negative union reaction, the risk of a low ball bid or inade quate competition in the private sector.
The scope of work or the contract in general must specify the milestones and deliverables that should be met. Also the contract should specify the procedures and mechanisms to be used to obtain payments for the ser vices. The HCC should fulfill contractual obligations. A key role
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for HCC is to pay the contractor in accordance with the payment mechanism outlined in the
contract. A payment system should be secure and timely. If payments are not made on time,
the contra ctor may have grounds to halt the provision of services until payment is made.
Contracts should have a clause stating that failure by the council or contractors to fulfill
obligations under the contract will not be considered a default if failure is the r esult of a force
majeure such as war, strike, crime or an Act of God such as flooding and epidemic.
Furthermore, modification clauses should be included in contracts.
Performance bonds are also necessary to protect HCC from non - performance in the event th at the contractor defaults on the contract. If the contracted company fails to change its performance, the HCC can exercise its rights under a liquidated damages clause in the contract or invoke the performance bond.
It was evident from the study results that HCC exposed itself to heightened risks of fraud, abuse and poor contract performance because it did not have sufficient contract management capacity.
9.24.2 Strategic Contracting - out
T he HCC does not see contracting - out in a strategic persp ective. “S trategic Contracting”
Kelman’s (2002a) is now a global trend. Contracting - out can no longer be put aside in the organisation. Instead, it must gain a place in the overall organisational strategy. The key message from both theory and study results is that , c ontracting - out needs to be an integral part of every local authority’s activity and that sufficient resources and political attention should support this. There should be a focus on “adequate resources” (Romzek and Johnston,
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2005), the need for training of contract managers (Cooper, 2003; Kettl, 1993; Van Slyke,
2003), the need for building robust contract management capacity at various levels of local
government sector (Brown and Potoski, 2003a), thinking through in addition to the strategic
recognition and the integration of performance - based management sought by Kelman
(2002b).
9.24.3 Communication about Contracting - Out
The HCC does not have a communica tion strategy about contracting - out. The study found
few references to the communication aspect in th e literature cited in Chapter Two. Savas
(2000: 175) lists “initiate a public relations campaign” as one of the elements on his list of
steps in the contracting out process. It would help HCC if it thinks about a communication
strategy before it goes ahead with certain contracting out processes. Media storms need to be
avoided. Contract managers and the leaders to whom they are accountable frequently find
themselves in the midst of cont roversies when some contracting - out schemes do not turn out as planned.
The communica tion strategy for a contracting - out process would ideally be directed at the key stakeholders in the contracting out process. It would have specific types of information for each group of stakeholders. Citizens worrying about change in servic e standards need assurance and potential providers need to receive information about the market conditions and future competition prospects. When the tender process is announced, there are likely to be many questions from media and stakeholders. When a pr oblem with service delivery occurs in the middle of the contract period it calls for another kind of communication. Local government executives would be well advised to inform both the citizens and the Minister of
Local Government if a council has succeede d in the delivery of the promised results through
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contracting out. The missing focus on communication might be due to the more technical
and ration alistic approach to contracting - out that is often taken by contract managers and
academics.
Both public adm inistrators and policy makers must properly package the contracting out policy. The policy package needs to be disseminated clearly and rapidly as soon as it has been decided on so that politician s, bureaucrats and the media can grasp it quickly and
recoun t it in turn to their constituents and to the public at large. The policy package must
persuade, coerce, safeguard, compensate or co - opt the various groups to be affected.
9.24.4 Contract Accountability
The local authorities in Zimbabwe continue their reliance on private, international
companies, other public organisations and non - private agents to deliver services to residents.
Yet there is a dearth of scholarly research on the critical decisions made b y council
management throughout the contract implementation process - decisions that have profound
impact on the quality of services delivered to residents and on the accountability of
contractors to the public interest. For scholars of public management, it is imperative to better
understand contract designing and implementation as well as accountability dynamics in third
party governance.
There are many l essons for p olicy m akers with regard to political accountability here. In the
face of contracting - out reality is an ancient query of government: Can agents of the State be
subject to control or held accountable for their actions? Without an affirmative answer to this
question, the government invites disorder and its legitimacy in the eyes of the populatio n
comes into question. Why pay taxes to a State that does not hold its officers accountable?
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Why accept regulations imposed by of ficers who claim to be acting on behalf of the state, but
who may be acting in their own behalf?
To be sure, there is no evide nce that problems are worse once services are contracted out than
in - house production. Mechanisms exist to oversee the contracted companies and rein in
managers who go beyond the bounds of government policy. Yet controls are weak. Many
controls are cursory in operation. Local authorities are routinely exempt ed from formal
requirements to let contracts according to advertisements and competitive bidding.
Can HCC put its house in order? The question requires consideration of the basic reasons for
contracting out. Some of these reasons reveal a basic incapacity. The HCC cannot handle all the activities demanded by residents and promulgated by politicians. Other reasons reveal some measures of indifference or guile. Politicians respond to some demands out of po litical
necessity, with little care about how the contracts are designed. Contracts can be available to
patronage demands from politicians who create them: to hire a supporter outside the formal
controls.
Political accountability may come not only through the conventional linkages between voters,
elected officials and the heads of administrative hierarchies but through the direct
involvement of citizens in local service agencies. Residents can also demand that local
authorities reform their own procedures in certain ways in order to make service agencies
more responsive to clients, even without including residents in the policy process.
Citizen demands seem to increase the number of actors in policy making and service delivery
process. Residents associatio ns can advise, or even exercise controls over local authorities.
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The contracted companies may allow community input that has local impact. Seen from the
perspective of general policy, however, such a resident group becomes an additional choke -
point that ca n hinder systemwide coordination or policy change. However, reforms designed
with residents in mind make local authorities more effective and more responsive. To deal
with proble ms of irresponsible contracting - out, offices with responsibility for purchasing
services might refine tech niques of comparing contracting - out costs with the costs of in -
house activities. The MLGPWNH has to examine its policy on contracting out and add more
explicit comparative cost criteria to that policy. Such techniques c ould be enhanced to deal
with issues of service quality as well as cost differential. Contracting costs are often cheaper
than those of councils simply because lower - quality services are offered or initial wage bill are sharply lower or low profits are es timated in a period of “introductory free offer.” Local authorities need to consider contracts for longer terms, with stronger assurances of service quality and price stability.
9.24.5 Legal Framework
The legal framework does not suppo rt contracting - out in local authorities. Contracting out debates have series of criteria that are intended to promote efficiency as practiced in industry.
The debates lack two qualitative factors. One is that it is conceptually biased in one direction
- in favour of contrac ting out and against direct administration by council. It is focused on legal and economic abstractions rather than the nature of the political order. The second qualitative factor is the political order in Zimbabwe . It seems almost axiomatic that the fund amental values of this order should also shape such a key matter as who does the council’s work. Normative principles are needed for the contracting out debate.
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The Preamble to the Constitution of Zimbabwe Amendment (No.20) Act gives purp oses of the natio nal government as:
We the people of Zimbabwe, ……resolve by the tenets of this Constitution to commit ourselves to build a united, just and prosperous nation, founded on values of transparency, equality, freedom, fairness, honesty and the dignity of hard wo rk… (Constitution of Zimbabwe Amendment (No.20) 2013:15).
Yet this stirring long sentence, with its cadence and alliteration, will one day become immortal as a Zimbabwean credo. The public values enunciated in the Constitution take both the substantive an d procedural dimensions. Some are about public authorities deciding the processes through which they must act such as due process and giving reasons for decisions made. Others refer to the content of their decision, for instance, respect of human rights as stipulated in Section 3 (Founding Values and Principles) of the Constitution of Zimbabwe.
Section 77 of the Constitution of Zimbabwe provides for right to food and water.
Those who praise the private sector should not forget that the goal of public admin istration is not to minimise expenditure but to implement public policy in general and to make the
Zimbabwean democracy work in particular. With respect to contracting out, this study fears that both academics and policy makers might be completely correct about the numbers and completely miss the point about the role of public administration.
9.24.6 Theoretical Implications for Public Administration
Public administrators and political scientists have much to learn from contracting out processes. Some publ ic administrators and public policy practitioners may not want to recognise what is happening. Crisis is a cheap slogan in a world of many aspirations.
Nevertheless, ignorance about contracting out qualifies as a crisis among the people charged with under standing the State. The responsibility for such a crisis can spread widely, among government officials, journalists and attentive citizens as well as public administrators. As
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schola rs and specialists in affairs of the State, however, public administrators carry more than
the average burden of repairing this ignorance about contracting - out.
Academic departments of public administration and political science can add course in public
procurement alongside traditional offerings in administration and policy ma king. Materials
about public procurement in all its forms - tendering process, contract design, and contract
management among others should find a place within existing courses dealing with public
policy and administration. Unless stude nts know about cont racting - out and public procurement dynamics, they will recognise only part of what is politics. Cooper (2003) has called for contract management to be taken up more systematically in training programmes for public managers, such as Master of Public Adminis tration or Master of Public
Management courses.
9.24.7 Political and Ins titutional Risks to Contracting - Out
It was evident from the results that key stakeholders such as the government, non - state service providers, donor agencies and service recipients should have a say in the contracting out debate. There was limited government buy - in. Contracting - out was initiated by World
Bank and there was limited HCC ownersh ip. It explains why contracting - out was not a priority. As a result, contr acting - out was deci ded by central government without consulting and agreeing with HCC management. Implied here is that resistance from lower levels of
Council was inevitable.
There was rapid turnover of key decision makers in Harare City Council. This means that policy maki ng was very unstable. A decision to contract today could be reversed tomorrow.
This was the case with GKW, EIB and BiWater International companies. Another political
415 risk occurs when unrealistic expectations for service delivery are not met. When the expec tations (cost reductions, cost savings, improved quality) were not met, resentment was generated among service users. The Government of Zimbabwe (GoZ) has tried and continued to try to address contradictory social and economic policies and objectives/prior ities that pull local authorities in opposite directions. On the one hand, the GoZ wants to implement reforms and arrests the budgetary deficits through adoption of market - oriented approaches to public management. On the other hand, it still wants to satis fy socio - political goals such as suppressing the price (below - cost pricing) of social services like water and refuse collection.
This cannot be easily reconciled with the market orientation that the NPM emphasises.
Political risk is a significant challeng e to the success of contracting out. Prevention is easier than cure. Political risk is best avoided by thoroughly assessing the incentives of all key actors before deciding to contract out through information sharing and policy dialogue.
Policy makers in Zimbabwe should focus on the system level of institutional rules to ensure the success of contracting out policy. It is very important to influence the right regulatory framework if contracted public service delivery is to be a success. The legislature can do many things to help improve contract management. For one thing, Parliament could add and should address the disconnection between the law of government procurement and administrative law. These laws are separated: contracting law’s primary focus is on prevention of corruption and administrative law’s emphasis is on administrative procedure.
9.24.8 Technical Factors
These arise when capacity or information, legal, procurement or regulatory systems are inadequate or where markets operate imperfectly. The lack of council capacity to identify
416 contractual needs and manage the tendering process: inability to define contractual needs and hold contractors to account for performance, limited capacity for contract monitoring during contract implementation.
There could be also inadequacies in the enabling environment. Inadequate legal framework and regulation with which to enforce contracts, limited enforcement or dispute resolution capacity, absence of government policy framework to guide service delivery, inadeq uate tendering and fiduciary system to support the tendering process and ensure timely payment of contractual obligations.
Information gaps create technical problems. Insufficient information available on market conditions to support the contract design p rocess in terms of supplier capacity or availability.
This is also compounded by lack of local suppliers capable of meeting contractual requirements. These technical issues can be minimised by developing council capacities and systems for contract manageme nt and ensuring appropriate contract selection and design.
9.24.9 Managerial Factors
Cont racting - out creates potential for principal - agent problems such as adverse selection and moral hazard that result from asymmetrical information and opportunism. To curb these problems and help ensure success, local authorities need to develop contract manageme nt capacity to plan contrcating - out initiati ves, manage the bidding process and monitor contract performance. Contract capacity helps local authorities to contain transaction costs and reduce opportunistic behaviour when contracting for services.
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As noted previously, a wide literature indicates tha t contract management capacity is crucial
for successful contracting out, by allowing governments to plan effectively for and administer
the contracting process and by helping public managers monitor and regulate the behaviour
of contractors. Like Brown an d Potoski (2003b), the findings indicate that HCC does not
consider contract management factors seriously when making decisions about contracting.
Ex ante analysis (feasibility studies) and planning for contracting (ex ante management) were
not undertake.
Regarding contract management capacity, the study’s ability to explain local government
contr a c ting would be improved by developing measures of the number of procurement
specialists employed by local authorities, their level of training in contract admin istration and
their professional experience. Contract management capacity involves activities other than
planning for and monitoring contracts, such as clearly specifying contractual requirements,
developing effective incentives and sanctions to encourage good provision, resolving contract
disputes and modifying contractual agreements. Although such measures are currently not
covered by this study, future researchers are encouraged to include them in future analysis.
9.24.10 Fiscal S tress
When HCC contrac ted - out, it was facing serious financial constraints. Whether local
authorities experience fiscal stress, lack resources to develop contract management capacity
that allow them to contract out effectively were not supported by the study. More studies are
n eeded on this area. The study noted that fiscal pressure has an effect on local government
decision making. This study demonstrated that when local governments are unable to respond
to fiscal stress by increasing revenues, they reluctantly gravitate toward expenditure reduction
418 through contracting - out or outright privatisation. As fiscal stress increases, the chance of contracting out to reduce expenditures increases.
9.24.11 Stakeholder Participation
Almost all cases show how important it is to involve st akeholders at all levels and at all stages of the reforms. This means that it is essential not only to plan for change, but also to change the way plans are made by ensuring the participation in the plan formulation of people who are directly affected by t he plan and those who implement it (Dodge and Bennett,
2011). Participation, involvement and engagement of key stakeholders reduces suspicion, galvanises support for reform, infuses new ideas, produces more practical designs and ensures team spirit in impl ementation. It is clear that top - down approaches were responsible for the failure of many intended contracting out reforms while effective bottom - up by
Wilkins Clinic led to successful implementation.
Failure to clearly and adequately commun icate objectives of contracting - out initiative create d room for multiple interpretation s and management by rumours. This was evident in refuse collection and transportation case discussed in Chapter seven of this study. This exacerbates perception problems and g ives detractors opportunity to oppose and misinform.
9.24.12 Feasibility S tudies
Both policy makers and policy implementers should undertake feasibility studies to assess the benefits of contrac ting - out and identify potential barriers, specify comprehensi ve and detailed bidding process and contract documents and conduct more rigorous evaluation of bids before awarding contracts.
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9.24.13 Distinction between public and private for - profit organisations
Whereas the performance of private companies can be jud ged chiefly in terms of efficiency
and profitability, public sector organisation are expected to pursue the competing goals of
competition and political responsiveness. Public sector organisations are expected to make
and implement policy that is responsiv e to the preferences and concerns of residents, elected officials, the courts, inter est groups and the media. Contr a c ting - out has an impact on the rates residents pay, on the quality or level of services residents receive and on the council jobs.
9.24.14 Reverse Contracting
Public opposition to existing contracts can arise to the point where elected officials terminate those contracts and bring the services back - in. Although the transaction costs of contracting
‘back - in’ have not been studied, they could b e considerable and include hiring and training new employees, buying equipment, developing rules and procedures for delivery of the services. These costs can be avoided and disruptions in service prevented by gauging the level of political support for cont racting when studying the feasibility of external service delivery. Implied here is that successful implementation of policies requires strong and lasting political support. Implementation of contracting - out initiatives is both an
administrative and polit ical process which itself continuously raise policy issues afresh. This may culminate in reverse contracting.
9.24.15 Employee Opposition Management
The HCC management should be knowledgeable of the various tactics for managing
employee opposition to cont racting out. Some of these include public employee involvement
in the planning stages of the process, establishing a “no layoff” policy when contracting out,
requiring that the contractor offer the right - of - first - refusal to affected public employees and
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pr oviding retraining, job placement and counsel l ing services and reimbursement for lost
pension and other benefits to ease their transition. Allowing council employees to bid on
contracts and creating employee stock ownership plan (ESOPs) as articulated in t he
Indigenisation and Economic Empowerment Act of 2007. The ESOPs provide public
employees an ownership interest in new private enterprise and encourage them to buy - out in -
house operation and run then as employee - owned business.
9.24.16 Non - Profit Private Agents
As mentioned previously, in public management scholarship and practice, non - profit
contractors are preferred because of public - value alignment of non - profit organisations.
Although the data used in this study did not allow comparing non - and for - pr ofit contractors because it was beyond the scope of this study. Future studies should identify services that are suitable for non - profit contractors.
9.25 CHAPTER SUMMARY
The chapter has presented the discussion of the results and the findings. Like all m anagement options, contracting out has a potential for misuse and for being used for the wrong reasons.
The discussions showed that HCC was not contracting out the provision of services but management problem s . One such misuse is to contract - out a managem ent failure, to use contracting out to avoid facing and solving a management problem. Management problems are rarely disposed of in such a way. They just change their form and reappear to haunt the council in a different guise. Problems should be solved no t repackaged. Also the theoretical framework of the study was discussed as well as the implications of the study for theory and practice of public management. The results confirmed the literature that accountability, cost
421 reduction, institutional, politica l, legal considerations and fiscal pressures promote or restrain contracting - out.
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CHAPTER TEN SUMMA RY, CONCLUSIONS AND RECOMMENDATIONS
“Doctors say of tuberculosis that in the early stages it is easy to cure but difficult to diagnose, whereas in the late stages it is easy to diagnose but difficult to cure. It is the same of the affairs of states” Niccolo Machiavelli.
10.0 INTRODUCTION
This chapter begins with a summary of the purpose and structure of the study and is followed by the major findings related to contracting - out. Conclusions from the findings of this study are summarised. The recommendation s are presented and discussed. Finally, the areas for
further research are outlined.
10.1 SUMMARY OF THE STUDY
This section pre sents the overview of the prob lem statement, objectives and research
questions, theoretical framework, overview of the methodology and major findings.
10.1.1 Synopsis of the Problem Statement
The contracting - out reform within Harare City Council has yielded less than wholly
impressive results. Unless HCC managers can know the factors that promote or inhibit
contracting out, there is little chance of success for future contracting - out init iatives. Hirsh
(1995a) suggests that fiscal pressure, political , institutional, legal, cost and efficiency, accountability determ ine the success or lack of contracting - out. The stud y sought to explore
contracting - out experiences of Harare City Council in order to provide a source of valuable
information for local gove rnment manager s to ameliorate the contracting - out process.
10.1.2 Objectives and Research Questions
The principal objective of the study was to investigate and describe Harare City Council ’s experiences with contracting - out the provision of public services in order to better appreciate
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the factors tha t make or break the contracting - out process. In the same vein, the study sought
to interrogate how contracting - out reform process can be made more effective. The study’s
spec ific objectives were to:
e xplore the fundamental features of the Harare City Council contracting - out process
encompassing the various contra cting - out policies enacted, strategies employed and
the rationale behind those actions;
e xamine political, socio - eco nomic, institutional and legal frameworks that were put
tog ether to facilitate contracting - out;
a ttempt a detailed and critical review of the theoretical and global empirical lite rature
dealing with contracting - out both in general and in local government contexts so as to
provide background information , context and methodological foundation; and
d iscuss the theoretical lessons learned vis a vis existing literatu re in order to make
contracting - out better in Zimbabwean local authorities.
To achieve the for e going objectives, the study use d the following guiding questions:
1. What i s the rationale for contracting - out?
2. What influences the make or buy decision in local authorities?
3. How does HCC manage the contract?
4. How enabling are the framework s (statu tory, institutional, legal, political,
constitutiona l or regulatory) of contracting - out ?
5. What kinds of capacities are needed to ensure effective contract management?
6. What mechanisms are in place to ensure the accountability of contracted
companies?
7 . Which factors determine the success of the contractual governance process?
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10.1.3 Synopsis of the Theoretical Framework
To properly frame this study it was necessary to review new institutional economics, institutional theory, political science, public administration and public management literature that deal s with the challenges facing public administrators. Theorists studied contract management in the public sector for over 35 years and developed theories that have been tested and validated.
Formal m odels of government contracting decisions and processes suggest that the dec ision about whether to contract - out services provision should not be made without consideration of how the contracting process works given the nature of the service and other relev ant factors
(political and economic). Both theory and empirical research also suggest that contracting for complex public services presents greater risks, management challenges and costs to implementation. In their study of public sector contracting, Brown and Potoski (2003a) consider two service - specific characteristics, asse t specificity and service measurability, drawn from Williamson’s (1981) transactions costs framework for analysing alternative contracting structures. They note that services with a gr eater degree of asset specificity require more specialised investments to produce them, thus barriers to entry and the risks of monopolistic in service delivery are likely to be greater. In these circumstances, contractual negotiations become critical, as the contracting parties determine the terms or mechanisms, for example, performance incentives or conceptualise the contracting decision: organisational outcomes, environmental factors (political, market structure, economic conditions, external authorities , organisational structure(administrative rules, contractual arrangements) and management (leadership, monitoring, control and accountability mechanism).
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The various contracting - out variables were distilled into a contract management framework.
The framew ork consists of: contracting - out policy and political sensitivity, stakeholder
analysis, the contract itself, provision of public services, consumption/citizens as consumers,
regulation, legal, managerial professionalism, accountability, market structure a nd the
institutional context. This contract management framework is illustrated in figure 10.1 below.
Figure 10 . 1 : A Contract Management Framework
General policy on contracting - out and level of political sensitivity
Institutional rules Strategic contracting and communication
Contract - Mix of formal and informal rules Formal - Short - term or long - term Regulation of institutions contracted public service - Provision of public services delivery - profit or non - profit provider
- local, national or global provider Legal, political, managerial, Informal professional, Institutions Consumption among users/customers market, and ability to choose provider accountability
Source: Adapted from Greve 2005
This contract management framework implies that local authorities in Zimbabwe should
build a well - informed, evidence - based and theoretically underpinned cont racting - out policy.
The Government of Zimba bwe and Harare City Council did not do that. One of the basic ingredients in such a policy is to be specific about what the theoretical and practical rationale of the policy is. The rationale would be the guiding light for both local authorities and private organisations.
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10.1.4 S ynopsis of the Methodology
The target population for this study was the local government policy community. Purposive and snowball samplings were used to identify key - informants within the population that met specific criteria. The study included a qualitative sample of 52 participants ( 7 Harare City
Council, 2 Ministry of Local Government, 4 Parliamentary Portfolio on Local; Government and Urban Development, 4 Harare City Council councillors, 3 District Administrators, 1
Provincial Administrator, 1 Harare Metropolita n M inister of Provincial Affairs, 10 contracted companies, 1 Auditor General’s office, 5 residents associations, 3 research institutes, 2 State
Procurement Board, 2 former HCC commissioners, 2 Harare Municipal Workers Union, 4 academics, 2 Inter - ministeria l Committee on Commercialisation and Privatisation (IMCCP), I
Ministry of Indigenisation and Economic Empowerment) purposively selected.
I n addition to these respondents , the researcher attended four local government conferences and workshops where nine l ocal experts were interviewed.
The study also used a questionnaire of 45 questions (consisting both exploratory and closed questions) to a survey sample of fifty (50) respondents from Harare City Council. A total of thirty - two (32) completed sur veys were returned. However, three were discarded leaving on ly
29 and a response rate of 58 per cent . The survey questionnaire included sections that asked about service production arrangement s , contract m anagement capacity, contracting - out functi ons, procedures for contracting - out, contractors to contract with, how contracted companies were managed, benefits of contracting out, policy environment (political, institutional, legal and regulatory), expectation s and challenges of contracting - out. The detail in the surve y made it possible to check key information for consistency and completeness.
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The study also used document search to gather data. The study involved literature search at the policy formulation and implementation levels.
Data analytical framework: qualitative analysis of data comprised analysis for similarities and differences, coding and categorising and constant comparison. The study used constant comparison method to group answers to common questions and analysed differ ent perspectives on central issues. This approach was employed for document and interview analysis. Categories were formed, coded and triangulated for both the open and closed ended responses. Themes were determined for each research question. The themes f rom the data were compared to exi sting literature on contracting - out theories, global experiences and theoretical framework.
Where necessary, the qualitative analytical frameworks were supplemented by statistical data outputs from Statistical Package for Social Scientists (SPSS). The frequency and percentage of responses were displayed using descriptive statistics, tables and figures. The data were interpreted within the context of findings from semi - structured interviews with key - informants, from periodi cals, press articles and seminar papers.
Validation of findings was also critical. For qualitative findings, the study employed data triangulation by reviewing case data from archival records such as council resolutions, memoranda, strategic plans, newsle tters, minutes, by - laws, reports, annual financial and budget statements, audit reports and other such documents.
To further validate the findings, drafts of each case (refuse collection and transportation, housing, water treatment chemical, airport road, city parking) reports were submitted to the
428 head s of departments or coordinators. Based on the comments from departmental heads or coordinators, minor corrections were made regarding the contracting - out processes, the responsibilities of the HCC and contr actors.
10.1.5 Major Findings
This section presents major findings under the following themes: contract design, cost savings, legal framework, institutional framework, contract awarding process, contract accountability, market structure and competition, service quality, fiscal p ressure, strategic contracting - out, leadership, contract monitoring, contract management capacity, staff reductions, corruption, abuse of indigenisation, policy formulation and stakeholder involvement, and feasibility studies.
1 0.1.5.1 Contract D esign
Contracts were poorly designed. They had many problems such as:
t he wording and practical application of clauses ; and
a rbitration and litigation clauses, payment of inv oices, duration of the contract and
performance bond.
Contract design was the major cause of contract failure. However, the results did not confirm that while poor contracts may increase the chance of failure, good contracts do guarantee success. In fact, the relationship between contract design and performance is not well understood and has attracted little research. The study noted that contract design is a necessary condition but insufficient for successful contracting out. The are many reasons that account for this contrary relationship, inter alia, contract manage ment problems, conflict of interest, corruption and lack of contract management capacity.
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10.1.5.2 Cost Savings
The question of efficiency gains is at the heart of contracting - out (Savas, 2000; Brown and
Potoski, 2006; Greve, 2008; Brown et al. , 2015; Domberger et al. , 1986). The study findings did not confirm this claim. The results were contrary to the study’s expectations, but they lend support to case study and other empirical evidence that local government managers are pragmatic and recognis e that contractin g - out does not always result in cost savings (Sclar,
2000; Greenwood, 2014). Furthermore , the results lend support to other studies that show limited cost savings from privatisation of municipal services (Boyne, 1998; Hirsch, 1995a).
10.1 .5.3 Legal Framework
The co ntracting - out legal framework was heavily fragmented. There was no specific policy on con tracting - out. Contracting - out was done within an exogenous system of procurement laws and regula tions. Contracting - out policy was a wilderne s s of single instances. There were no rules or principles guiding the contracting - out process. It was purely a matter of what appeared at the time to be the most suitable administrative arrangement.
10.1.5.4 Institutional F ramework
Oversight institutions were constrained by insufficient resources. Cont rols over contracted companies were thin. While there wa s an abundance of control organisations and regulations, weaknesses appear ed at the working level. The Auditor General had no sanction powers.
Contract ing - out in the public sector is more complex than in the private sector even if services appear to be the same. This is due to political exigencies . Public contracting - out i s more complex because it must address not only cost and performance parameters but also whether the process was open and fair in ways that do not apply to private sector. Even the
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authorisation to contract - out is generally the result of highly charged and combative political
debates. Cooper (2003) observes correctly that “it is the political process that produces the
decision to contract out and techniques of accountability.” Politics is part of public
management and good managers do not just make technical decisions. They interact in the
political processes.
10.1.5.5 Contract Awarding Process
The results indicated that competitive bidding was scarcely implemented. Other processes of
awarding contracts were:
c ontracted companies’ connections with politicians or bureaucrats in higher authority
usurping the C onstitution of Zimbabw e , State Procurement Act, Urban Councils Act,
Public Finance Management Act, and HCC’s control over terms, specifications and
requirements;
r enewa l of c ontracts with fresh bidding ;
g entlemanly agreements based on mutual planning and negotiation in the form of
Memorandum of Understanding; and
c ontracting back - in (reverse contracting) that did not pass through any competitive
process.
Contracts should be awarded to a private party after a great deal of competition. This study
found that there were no many bid ders. Only few apply and normally the same contractors
have been awarded the contracts thereby defeating the very purpose of contracting. It was just
like substituting the council monopoly by monopoly of the private service . This had very
serious implicati ons.
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10.1.5.6 Contract Accountability
The centralist crisis - management measures such freezing contract awards by the SPB deterred contract accountability. The study results discovered that there was responsibility w ithout power in HCC. This made bad management.
10.1.5.7 Market Structure and Competition
The results disclosed that HCC had insufficient supplies of competent private providers in the area of refuse collection and transportation. The injection of competition into council procurement i s fundamen tal to contracting - out success (Osborne and Gaebler, 1992;
Rosenbloom, 2015), yet many public service markets are not robust (Van Slyke, 2007). This was abun dantly confirmed by HCC results especially refuse collection and transportation and water reticulation cases. This was compounded by the need of specialised investments.
10.1.5.8 Service Quality
The contracts produced poor quality services to residents (76% of respondents). The results of almost all cases sampled were lamentable. Even those c ontracts that commenced well, could not sustain good quality.
10.1.5.9 Fiscal Stress
The results revealed that rapid urbanisation as a result of high rural - urban migration resulted in high population densities in both formal and informal residential was t he pr imary rationale for contracting - out. This rapid urbanisation compounded by fiscal pressure encouraged HCC to explore alternative service delivery arrangements. Other motivations were competency gap, to improve service quality and cost reductions. Sim ilarly , the study expected fiscal
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pressure to motivate local authorities to contract out services. However, these fiscal
constraints showed no significant effect on contracting level.
10.1.5.10 Strategic Contracting Out
The results showed that HCC lacks a strategic approach to contr acting out. Contracting out
did not feature in HCC’s strategic plans. There was no a well - documented strategy for
contracting - out, hence, it was ad - hoc approach. When HCC was given a directive to contract -
out in both 1998 and 20 03, it did not put a strong emphasis on developing contract
management framework. It simply shipped responsibility outside council not improving
service delivery.
10.1.5.11 Leadership
The HCC had no a consistent political and managerial leadership through out the period which allowed for unstable progression in the strategy. The study observed that HCC between 1999 and 2008 had been run by appointed ruling political party (ZANU - PF) Mayors
and Commissioners. Because of frequent leadership changes, there were discontinuities in
terms of policy stance and commitment.
Political expediency undermin ed regulatory autonomy of HCC. While legislation may in
theory empower HCC to decide the awarding of contracts, th e central government often
found other ways of influencing the process. A numb er of international surveys pointed to
high turnover of commissioners with many not completing their full term due to pressure
from government ministers to resign. This was the case in Harare City Council. Ther e was a
large gap between law and practice. As a result , institu t ional development and memory were
hampered.
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10.1.5.12 Contract Monitoring and Oversight
The results confirm the importance of public management and monitoring in the contracting process. It w as striking to note that HCC adopted a minimalist approach to contract monitoring. It is no exaggeration to say that HCC devoted great energy to selecting the right contractor and then appeared to assume that everything would run smoothly thereafter. For instance, no HCC official was responsible for financial monitoring. No dedicated officials were responsible for assessing the quality of the contractor’s performance. Hence, HCC relied heavily on self - reporting by contractors. The approach to monitoring a ppeared very informal. The study found little evidence of formal observation reports, scheduled random monitoring or regular formal review meetings with the contractors. Even regular contract status reports provided by the contractors to HCC were not found .
Prop er monitoring and supervision are the most critical component of contracting - out process. It was observed that there was very poor supervision and monitoring of contractual arrangements in HCC due to non - availability of qualified staff. No wonder, the provisions contained in the contracts were flouted by the contractors with impunity. Further, provisions regarding penalty did exist in contracts, but the study revealed that contracts were rarely fined for non - conformity with the provision s of the con tract. This poor supervision resulted in high degree of corruption and was prevailing in the form of submitting false claims for payment, collusion between contractors and council officials.
One of the gre atest challenges of contracting - out was the diffi culty of holding contracted companies accountable for their performance. Contracting - out requires a good monitoring system. Performance monitoring was mainly done through “monitoring by exception.” It was highly passive. Performance inputs and processes w ere partially spelled but outputs were not
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clearly stated. The capacity to evaluate and find out what has been bought was sometimes
hampered by unclear performance targets.
10.1.5.13 Contract Management Capacity
The overwhelming impression was of the abse nce of formal contract management. Moreover, few people engage d in contract management had any formal training in public procurement.
The HCC has no capacity to manage contractual transitions (handover - takeover). The results indicated that HCC needs compet encies in institutional design, communication (political communication included), awarding contracts, implementing (through networks and partnerships), quality checking and dialogue, controlling, evaluation and regulation. In terms of human resources, the HCC has youthful and inexperienced degreed staff.
Harare City Council needs to train and prioritise managers working with contracts and contract ual issues. Kettl (1993) points to the need for more focussed training in the 1990s.
Kelman (2002a) renewed the call and asked for more strategic competence of the public managers including managers at the top who work with contractual issues. Brown et al.
(2015) call for contract management to be taken up more systematically in training programmes for public managers such as Master of Public Administration or Master of
Public Management courses.
As revealed by the study, managerial factors are critical for successfu l contracting - out.
Contract ing - out creates potential principal - agent problems such as adverse selection and moral hazard that result from information asymmetry and opportunism. To curb these problems and help ensure success, HCC need to develop contract ma nagement capacity to
435 plan contracting - out processes, manage the tendering process and monitor contractor performance (Fernandez et al . , 2008, brown and Potoski, 2003a, 2003b; Savas, 2000).
10.1.5.14 Private Sector Realities
The private sector is not an im mediate panacea of performance virtues. While commercial competitive ness can drive greater efficiency, private sector organisations can also be ill - informed, ill - equipped, ill - funded or downright exploitative. The contracting - out efforts of refuse collecti on and tr ansportation services (Chapter S even), Wilkins Clinic’s catering services and security services highlighted the need for financial and staff capacity ( in term of knowledge and skills). If a pu blic organisation contracts private sector suppliers t hat have financial and capacity constraints, service delivery hurdles get worse and not better. This was very evident in contracted companies for refuse collection and transportation services. And, as Wilkins Clinic’s catering, security, and refuse collec tion and transportation cases illustrate, if HCC contracts out services, it must be ready and able to pay fully and promptly or else corrupt sets in, thus amplifying the very problems the contracting out reform is aimed at eradicating.
10.1.5.15 Policy Re versals
There was a certain amount of ambiguity in national economic and social policies. On the one hand, the government pronounced a desire to introduce socialism and on the other sought to preserve and consolidate the inherited capitalist system. Mixed policy signals were sent to local authoriti es. In the end, the contracting - out policy was more concerned with matters of elucidating the desired pleasant ends than setting out the means for getting to them. The study results showed that politicians use co ntracting out in a Machiavellian fashion: as a strategy to
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retain power by buying support of certain constituencies (electoral gains) and in some cases
Adam Smithian approach was embraced where market competition was promoted.
10.1.5.16 Staff reductions
The results confirmed that introducing the private sector in the public sector provokes fierce
political resistance and political hostility.
10.1.5.17 Contracting - out with Non - profit Agents
The results showed that there is mutual trust and goal congruence between HCC and non -
profit organisations. Bill and Melinda Gates Foundation and HCC shared the same vision:
“Advancing the Welfare of the Community.”
10.1.5.18 Corruption and Influence of the Political Process
The results showed that when a council administration is inept and ethically challenged, it is
highly unlikely that it will be able to build an effective partnership with a private
organisati on. Some of the HCC contracting - out could not be construed as failure of
contracting - out but failure of HCC. As to t he proposition that contracting - out increases the
danger of corruption, the study believes that corruption comes from the individual and from
the work environment, whether it is the public or the private sector. The results showed that
corrupti on wa s entrenched in HCC. The tender process in Zimbabwe has become a breeding
ground for corruption where government officials responsible for the allocation of tenders
have benefited from kickbacks and bribery.
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In the main, the politicians were far more interested in contract award and contract
management was rarely highly on the agenda. However, politicians and pressure groups did
get involved in monitoring contracts that were viewed as controversial.
10.1.5.19 Abuse of Indigenisation and Economic Empo werment Policy
Empowerment laws require tenders to be given to ‘locally based’ or ‘previously economically
disadvantaged’ individua ls or companies. These phrases we re on several occasions
misinterpreted, misrepresented or misconstrued to fit the political landscape of the day or to
favour business initiatives of the ruling political part y or its members. However, contracting -
out promotes the development of small businesses. It provides opportunities for small
businesses to compete for government projects a llowing them to diversify. This will increase private sector employment and tax revenue. From this perspective, contracting - out can be
viewed as an industrial policy.
10.1.5.20 Policy Formulation and Stakeholder Involvement
The contracting - out plan and po licy design were largely a technocratic exercise in the
bureaucratic realm. It ap peared as if the council tended to manage on a reactive management -
by - crisis basis. Despite the existence of strategic plans, no comprehensive contracting out
strategy was pursued. This trend continued when the council strategic plans for 2004 - 2015
and 2012 - 2025 were designed. The results showed that contracting - out remained an
essential ly top - down process controlled by incumbent leaders. The formulation of the
contracting - out policy has not been adequately consultative with some key stakeholders. The
process was shrouded in secrecy. The Ministry of Local Government, Public Works and
Nati onal Housing dominated the initiation of contracting - out policy, with the private sector
and residents associations playing no or only a minimum role. The failure to involve
438 stakeholders in the poli cy formulation processes appeared to be attributable to mu tual suspicion between or among key stakeholders. The absence of a vigorous dialogue between the HCC and the major stakeholders on the policy, limited the opportunities for more constructive inputs.
10.1.5.21 Opposition to Contracting - out
G roups that res isted contracting - out were citing poor quality services, corruption, displacement of council employees and political interference. Competitive contracting - out process was intertwined with the complexities of collective bargaini ng and labour relations.
Thes e present serious impediments to HCC seeking marketplace efficiencies.
10.1.5.22 Policy Implementation
Policy implementation by the HCC lacked coordination and co mmitment. The issue, however, was not merely one of policy implementation. A profound issue r elate d to the very design of policies. Po or implementation of policies was due to:
l ack of shared vision and an implementable strategic plan together with lack of
prioritisation creating serious pressure on limited financial resources ;
f inancial crisis resulted in lack of focus on financial management ; and
d epleted skills base, lack of clarity about roles, blurred accountability and lack of
performance monitoring systems and poor corporate governance.
10.1.5.23 Problems of Private S ector Business Princi ples in Public S ector
The results showed that goal incongruence and orientations differ ed between the private and public sectors. There is no common denominator like profit, return on investment or market share that can serve as common comparator for build ing trust and legitimacy of citizens in the
439 political institution . Also values like equity, prote ction of human rights, fairness and transparency , play an important role in delivering the legitimacy of political institutions, processes and outcomes (Hefetz and Warner, 2004; Rosenbloom, 2015). The study results endorsed these claims in the literature.
10.2 CONCLUSIONS
The principal objective of the study was to investigate and describe Harare City Council ’s experiences with contracting - out the provision of public services in order to better appreciate the factors tha t make or break the contracting - out process. The study concluded thatl ocal government service delivery is a complex process. The HCC engaged r everse contracting or contracting back - in , demonstra ting the complexity of service provision in a world where market alternatives are used along with public delivery. The public choice theory offers markets as a mechanism to improve public service delivery , but the study has shown that even under contractin g, market solutions are not a substitute for government planning and management. The complexity of public service delivery, the limits of market approaches and the need to engage citizens in the provision of public services , require governments t o manage m arkets by contracting - out or contracting back - in.
Contracting - out the provision of public services presen ts challenge s to local authorities’ public service delivery. The first challenge is for local authorities to get the contract right.
Another challenge is for contracted companies to get the service delivery right. Even though contracting with the private sector can be an effective technique for service delivery in a cost - effective manner, it is important to understand that it is no panacea for municipal financial or service deli very ills. At best, contracting - out can help control costs and increase efficiency; at worst, a badly planned or poorly executed contract can reduce service levels and produce a
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net loss to the local authority and its citizens. It was clear from the study that contracting - out
process has to be very carefully planned. Contract design and management in HCC appeared
to be very weak. Contract design should be clear, thorough, accurate and contain
unambiguous specifications. A poorly d esigned contract results in unnecessary
misunderstandings at the implementation stage. HCC contracts were poorly designed with
ambiguous speci fications, in effective e nforcement by the HCC officials and the quality of
service was t he biggest causality. To s ustainably implement contracting - out initiatives , there
is a need to build, accumulate and retain capacity in terms of skills, financial resources,
materials and equipment, to ensure there are strong leadership and management teams that can provide directi on. All these elements need to be enshrined in and supported by legislative and regulatory frameworks.
The nature and extent of HCC contr acting was invisible and inaccessible to the public despite
procurement laws and policies and other rules that are ostensibly designed to ensure their
disclosure. Some of the contracts were off the books; others were awarded under suspicious
circumstances, hurriedly and without competition. Although contracts themselves can be a
source of accountability in theory, many contracts were so underspecified as to afford
contractors almost unlimited discretion. And even when contractual terms were clear, there
were stunnin g failure of HCC in performing the oversight function. At times, it seem ed as if
no one in the HCC had the knowledge and capacity, and political will to enforce contractual
terms. Despite elaborate rules and procedures, sometimes, legal regulations and sa nctions
were not applied .
Several institutional factors affect the prospects for accountability of contracting - out in local
authorities. These are market conditions and the clarity of contract design. The following
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factors can promote or inhibit contracti ng - out : accountability; efficiency and cost; institutional, political, legal considerations; and fiscal pressures. HCC is over - politicised;
policy and contract management capaciti es were inadequate. Contracting - out the provision of public services is a legal, economic and human resources intensive process. Conditions for successful cont racting - out initiative are: appropriate legal environment, resident’s
participation in a transparent public decision - making process and measuring performance in
the public sector . Contracting - out should not be viewed as a sign of council failure but should
be presented as an innovation and a response to the needs of the population.
The HCC is construed by industry and pro - contracting - out as plodding and change - resistant.
T he question that begs an answer is: What is the goal of public administration? The goal of public administration is n ot to minimise expenditures but to implement public policy and make democracy work (Preamble to the Constitution of Zimbabwe, Principles of Public
Administration). This study obse rved that with respect to contr a c ting - out, researchers may be completely correct about the numbers and completely miss the point about the role of public administration. This s tudy concluded that contracting - out has both institutional and even constitutional questions related to the state, but also more focused questions on how to achieve best value for the public.
While one may criticise the affordability and equity aspects of patrimonial systems, needs to recognise their durability. They are attractive to politicians and the clients who receive the services and thus resistance to contracting - out, despite evidence of effectiveness could be substantial. Thus, by distancing the politicians or civil servants from the de livery of a valued service, contracting - out decisions may reduce opportunities for rent seeking or elite favouritism. On the other hand, if contracting - out arrangements are not structured, contracted,
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implemented or monitored properly opportunities for cor ruption may increase. In contracting -
out, one must also recognise the associated transaction costs and regulatory complexity. This
view has implications for capacity development to ensure effective contract management.
Contract monitoring focused on proce dural and compliance issues rather than substantive performance outcomes. T he study concluded that HCC did not have contract management capacity. While HCC has been persistent in its efforts to design and implement contracts that specify contractor perform ance and improve ac countability, these efforts had fallen short, especially in the areas of measurement of performance, transparency of operations and consequences for contra ctor performance shortfalls. The HCC eng age third party monitors to provide exter nal assessments of contractors’ performance. This will allow HCC to acquire documentation regarding the quality of contractor performance, delivery of services to clients and viability of performance measures. To avoid shirking, contractors should be cloth ed with public interest and purpose.
Asset specific investments pose d challenge s when HCC contract ed - out refuse collection and transportation services. They create d “classic lock - in” problem s . A party becomes locked into a contract because it cannot deplo y its asset - specific investments to other profitable endeavours. The contractor may seek to opportunistically exploit contract ambiguities, perhaps by gold plating the service with costly features that increase profits.
The successful contracting - out requ ires an in - depth study in the beginning to know whether it is beneficial to contrac t - out a service to a private party or should it be provided by the department itself. This stu dy revealed that HCC contracted - out refuse collection and
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transportation due to lack of capacity. No efforts were made to work out the costing details
and no comparisons were made.
10.2.1 Contract Management
The overwhelming impression was of the absence of formal contract management. Moreover,
few people engaged in contract managem ent had any formal training in public procurement.
Key features of a good contract management: the nature of the specification/contract, the
vol ume of monitoring and oversight and the influence of political process. With respect to the
respective roles of elected and appointed o fficials, the main conclusion was that contracting -
out decisions were much more politicised. The decisions on which services to contract, how
and with whom were subject to strong political influence. This relates in part to the system of
partisan politics, the form of government and the strong tradition of political management.
10.2.2 Policy Environment
The political conditions surrounding the contracting - ou t were not stable. Political
environments either disable or enable contracting - out policy. The political turmoil in
Zimbabwe post 2000 diminished organisational capacity for policy design and contract management. It induced a culture of ad - hoc responses to urgent problems leaving little room for more fundamental and long - term policy analysis, consultation, design of effective implementation strategies, monitoring and evaluation. Short - term crises tend to receive top priority, leading to grossly inadequate a nalytical effort being given to the development of workable policies.
Because of blurred boundaries between government and party structures, brilliant academics once recruited as government advisors end up serving in party structures and spewing
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partisan analysis and propaganda. This usually leads to policy decisions that are well
intentioned but ill - conceived.
Another key conclusion is that stakeholder involvement was not prioritised by HCC. There
has been little consultation and consensus amongst the st akeholders on what the contracting -
out policy should contain and aim towards. The design process was top - down. Broad
own ership is imperative for successful con tracting - out . It is an issue which lies at the heart of
governance. The evidence was clear - cut a s exemplified by poor contract specifications and minimalist contract monitoring and supervision. It appeared to the study that this was attributable to underdeveloped contract management function within HCC. It is vital that staff be assigned to the contr act management function before any contracting work begins. These staff members should have status in HCC and receive appreciate training.
10.3 RECOMMENDATIONS
10.3.1 Policy and Institutional Framework
Political commitment is one of the key elem ents for success of contracting - out. One measure of political commitment is the policy and institutional framework for contracting - out. This includes institutions governing the manner in which contracting - out could be conducted, as well as the legislative framework governing the manner in which contracting would operate.
Legislation acts as both insurance and assurance to investors that the government will honour the contract.
It is important that a policy framework on contracting - out be developed, wh ich would guide the contracting - out process. In addition, a public institution to oversee the whole process also needs to be developed. The institution would also play an active role in developing the
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legisl ative framework for contracting - out. The existence of three issues (policy framework,
legislation and contracting out institution) plays the most critical role in making contracting
out suc cessful. The Nepal Contracting - out approach can be used to indicate the importance
of policy and legisla tive frameworks for c ontracting - out.
T he contracting - out concept was incorporated into Nepal’s Development Plan (Eighth
Development Plan 1992 - 1997). The Tenth Development Plan (2002 - 2007) laid the groundwork, mentioning the co ntracting - out approaches and led to the development of neces sary policy and legal reforms that promote d private sector participation in public service delivery like construction of road network. However, it was noted that in the Three - Year
Interim Plan (2007/08 - 2009/10) that the private sector i nvestment could not rise as expected.
This called for a simpler and practical legislation to govern the process.
( http://www.unescap.org/TTDW/CT2007/mm_nepal.pdf ).
10.3.2 Legisl ation Governing Contracting - Out
There are two possible approaches towards the establishment of enabl ing legislation for
contracting - out. The first is to ensure that the existing pieces of legislation, which in one way
or another , have a bearing on contracting - out, are al l reviewed and amended to make them
contracting out compliant. This is necessary because the pieces of legislation were enacted
before contracting - out was envisag ed and would thus either promote or in hibit contracting -
out. Thus a legislative review would e liminate legi slative barriers to contracting - out.
Alternatively, a s tand - alone specific contracting - out legislation would be enacted. The
advantage of a specific legislation is that it would give policy makers an opportunity to
harmonise and legalise all i ssues to do with contracting, ranging from the institutional
framework to the specific conducts.
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According to the United Nations Legislative Gu idelines on Privately Financed I nfrastructu re projects, a good contracting - out law should incorporate the followi ng:
t he law should provide the scope of authority to award contracts;
t he law should describe an institutional framework that enables sound administrative
coordination;
n o unnecessary limitations should be placed on the allocation of risks;
t he law should clearly state the provisions for providing financial or economic support
to the project;
t he law should provide transparent, competitive procedures for selection of bidders,
requesting proposals up to negotiation and contract award;
t he law should describe exceptional circumstances for exemption of competitive
procedures; and
t he law should address how to deal with unsolicited proposals.
It is quite easier for these issues to be adequately dealt with under one piece of legislation rather than several pieces . This approach has been taken by many countries, namely: Poland
(the Contracting Act, 2005), Mauritius (Contracting out Act, 2004) and the Czech Republic
(Act on Concession Contract and Procedure No.139/2006, 2006) which have comprehensive contracting legisla tions in place. It is better for Zimbabwe to follow a similar approach.
Examples can be found where contracting - out failed due to absence or weak legislative frameworks, for example in Poland, the need for specific laws or regulations was not considered until at a highly advanced stage. Due to the absence o f the legislative framework, it took almost seven years between the selection of the private company and the signature of the agreement in the case of the A1 Toll Motorway Project in Poland. This was after it was later identified that the procurement legis lation was not good enough and a decision was
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made during procurement to amend a piece of legislation (Toll Motorway Act) to define the
legal framework for contracting - out in the road sector (Cuttaree et al. , 2009).
10.3.3 Structural Framework
The succes s of the contracting - out process also hinges on the presence of an institu tion to oversee the contracting - out process. Such an institution across many countries is referred to as a Contracting - out Unit. It is important that such a Unit be establi shed in Zi mbabwe. A
Contracting - out Unit helps in contract preparation, helps in the selection and management of
contractors, ensures that the contract fits into the overall contacting out policy and also plays
a role in contract approval and quality assurance.
A r eview of case studies on Contracting - out Units by Sanghi et al. (2007) showed a prima
facie positive correlation between the use of Contracting - out Units and successful
contracting - out programmes. Some of the important lessons that could be drawn from the
case studies include the following:
e ven with well - designed contracts, governments characterised by lack of political
commitment to advance contracting out with lack of transparency and coordination
within government agencies reduce the chances o f a succes sful Contracting - out Unit.
r e latively successful Contracting - out Units directly target government failures, thus
focusing clearly on responding to specific government failures is essential in ensuring
the success of the institutional solution chosen.
the C ontracting - out Unit should have enough authority to match its expectations from
stakeholders, particularly in providing quality control.
t he location of the Contracting out Unit in the government is also central for its
success, especially for coordination and political support. In a parliamentary syst em
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of government, a Contracting - out Unit is most likely to be effective if located in the
Ministry of Finance or Treasury. In addition, a country with a strong planning and
policy coordination arm ca n also hav e the Contracting - out Unit housed under that arm
of government. In Zimbabwe, a Contracting - out Unit could serve its purpose well if
housed under the Ministry of Local Government, Public Work and National Housing.
It is important also to note that politica l commitment for any government is not measured by only the policy and institutional framework, although these are key in demonstrating it.
Having those institutions will not be a sufficient condition for the take - off of contracting - out initiatives, given that policies and laws can exist on paper without any implementation or with implementation being characterised by some hurdles.
10.3.4 Managerial Factors
Management is not a neutral, technical activity. Management techniques and styles are themselves political and people with different political views will have different ideas about management. Contract ing - out creates potential principal - agent problems such as adverse selection and moral hazard that result from information asymmetry and opportunism. To curb these problems and help ensure success local governments need to develop contract management capacity to plan contracting out initiatives, manage the tendering process and monitoring contractor performance.
Th e HCC should treat contracting - out decis ions as strategic ones, influencing th e running of the whole city rather than as resorting to quick fix measures to control costs and get around the difficult problems. As a result, HCC management need to ensure top management support for these strategies to review the trade - offs between in - house provision and contracting - out
449 the provision of services to private agents. The HCC should seek to foster competition in the providers’ market, introduce mechanisms for ensuring transparency in the selection process to avoid corruption and establish systems for strong performance monitoring.
To be effective, HCC should be competent (measured by access to technical expertise in a wide variety areas) independent (from government interference and capture by service pro viders and interest groups) and legitimate (abiding by existing legal principles and practices and being transparent and accountable). These resources are not fully present in
HCC and hence , this resource gap can be filled by contracting - out.
10.3.5 Ensu re Top Management S upport
The support of top management i s important because contracting - out is not an operational decision to save costs but a strategic decision to develop and leverage HCC’s core skills of the over - arching governance of contracting - out. T he exercise of contracting - out should be led from the top. The top management needs to debate the trade - offs involved and how these trade - offs will impact on the organisation’s effectiveness. Once a clear vision exists around this question, a set of opera tional guidelines for the managers and staff needs to be published.
Top management support is al so required because contracting - out decision impinges on the sensitive issue s of staff recruitment and performance evaluation. These issues have to be incorpora ted in the trade - offs analysis and feature in the strategy paper.
Active top management involvement is essential in preventing or resolving inte rnal impediments to contracting - out. Barnard (1938) talks about the primary role of the chief executive as the shaper and manager of shared values in an organisation:
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The essential functions of the executive are, first, to provide the system of communications; second, to promote the securing of essential efforts; and third, to formulate and define purpose (Barnar d 19 3 8:16).
Barnard’s advice might be very us eful for successful contracting - out initiatives.
10.3.6 Transparency
The HCC requires a set of measures that assist all stakeholders to understand and have confidence in HCC processes and decisions. Such measures include the following: clarifying the objectives and functions of HCC, stakeholder consultation in the proces s of developing new contracting - out methodologies and standards, public hearings where stakeholders can make submissions and i nput into im portant contracting - out decisions, written pub lic explanations of contracting - out decisions and open access to information. The veil of secrecy that characterised contracting - out processes stifled wider ownership of policies.
Transparency measures provide a common understanding of “the rules of the game” and how they are applied. Fostering transparency goes hand in - hand with building institutions and capacity. Ultimately, transparency is critical for developing legitimacy.
10.3.7 Encourage Competition
Co mpetition in the supply market, resulting in more innovative, better quality and lower cost services, is the single most powerful argument in favour of con tracting - out. The HCC influenced the nature of the supply marke t through the decisions it made on the key contractual questions: is selection process competitive, are the pre - qualifications too rigid, are there sufficient internal checks and balances to minimise the incidence of conflict of interest, are the weights on price variables too high, is the co ntract too detailed and puts too much
451 emphasis on procedures than outcomes and are contracts attractively packaged so that they are profitable for companies to bid.
Contracting - out is part of the procurement function. It should be recognised that particip ation in the bidding process involves substantial time and resources on the part of the bidders. To the extent that the process can be simplified and shortened, a greater number of valid bidders are likely to participate.
10.3.8 Strong Performance Monito ring
Coordination between HCC and contracted companies was not written in the contracts. No control accountability systems were put in place from the beginning of the contract period .
Once the decision to contract - out has been taken and the contractors have been selected, it is important to set up reliable systems for monitoring the performance of those contractors. The
HCC ranks quality improvement more than cutting costs as key innovations for contracting - out. But it suffers from the problem of non - con tractibility of quality and so the challenge is to identify the types of monitoring systems that should be introduced to improve the contract performance. The HCC should use output based contract specification not the process monitoring.
Political turmoil , represented by leadership turnover, affects the costs of negotiating, enacting and enforcing the provisions of a contract. When such “transactions costs” rise too high, the study found out that the HCC would not seek to contract - out or it would be unable to find an external supplier that will accept responsibility for a government service without demanding an unacceptability high risk premium.
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10.3.9 Contract Design, Implementation and Management
The limited contract capacity places challenges on contract management processes.
Weaknesses reported in the research include lack of expertise in administration, management, monitoring and evaluation as well as with knowledge of the requisite government structures, such as contract management teams or units. Service specification in terms of outcomes or outputs should be clear. The HCC should specify what the activity is, not how the activity is to be performed.
Several components of contract design, implementation and management present particular ch allenges that HCC need to consider:
t he contract award process sometimes was long , complex and unpredictable ;
g overnm ent administrative processes slow ed down key aspects of a contract, for
example, government approval ;
c ontracts resulting from bids pitched too low by the service provider, hidden and
unexpected costs and imposed changes to contract terms r esult ed in adequate cost
recovery;
i nadequate monitoring and supervision limit ed the ability of HCC to verify the
s ervices provided or to demonstrate the impact of services ; and
h igh staff turnover among HCC personnel undermine d the HCC’s commitment to
contracting out arrangements .
Contract modifications clauses should be explicit in the contracts. Implementing a government contract sometimes reveals flaws in the contract that need to be remedied to ensure the continued delivery of high quality services. In anticipation of this, a cl ear system should be determined for negotiating and managing contractual modifications. The protocol should establish an acceptable procedure for making mutually agreed amendments to the
453 contract, in writing, with both parties attempting in good faith to r esolve matters.Also arbitration clauses are essential in a contract. Even with the most thorough preparation and despite every attempt to analyse the context of a contract and build in protection against financial and operational difficulties, things will occasionally go wrong.
10.3.10 A Transplant That Might Be Helpful
The HCC should embark on genuine examination of all the options f or delivering services.
The HCC can learn from the case study of Indianapolis. The experiences of City of
Indianapolis case discussed in Chapter Four of this study can be imported by Harare City
Council. However, it should be designed in such a way that it will fit well in the socio - economic environment obtaining in Zimbabwe. Another very important lesson from the
Indianapolis case was the need for a commission.
There is need to create a commission focused on maintaining HCC’s commitment to contracting out. Such a commission exits i n every state where contracting - out has been successful and sustained. The commission should be t asked with facilitating, promo ting and overseeing contracting - out activities. It must be representative of the labour, central government, residents associations and private sector communities. It should be a clearinghouse of information and procedures tha t would help intereste d agencies to effectively contract - out. The commission should have an established timeline for meeting clearly articulated savings goals.
10.3.11 Stakeholder Involvement
The challenge for HCC is to forge an institutional framework an d process through which consens us and ownership of contracting - out process may be achieved. One possible
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institution through which council ownership of policies may be forged is through creation of
Harare Municipal Consultative Forum. The HCC cannot expect to serve its clients effectively
without their involvement in policy initiation, analysis and formulation. In the 21 st century,
residents and other stakeholders (private sector, professional associations (ZNCC, CZI ),
NGOs, regulatory bodies) are demanding to be heard with greater frequency. The
development of these partnerships with these stakeholders is, therefore, paramount to
effective formulation an d implementation of contracting - out reforms and strategies for
service delivery. If the f inal goal of con tracting - out is to satisfy the needs of the residents ,
then any credible contracting - out project should ensure that it represents the interests of the
people. There is an old adage that says “People like their own children a lot, and typically are
no t that interested in other people’s babies.” Underscored here is that no amount of analytical
brilliance can get otherwise uncommitte d people to buy the contracting - out idea. Key
stakeholders have to get into the problem and understand it, and then own it for t hemselves.
Constant communication both with media and with the key stakeholders and consultation is necessary to avoid accusations of sidelining. It is the responsibility of the media as watchdog organisation to be informed and to report on the HCC in a c onstructive manner. To this effect, journalists should be trained in professional reporting skills and mechanisms to monitor their professionalism and objectiveness.
In summation, the contracting - out reform process should balance the multiple stakeholder interests. The government seeks to build capacity, increase revenue and investment in the provision of public services. Private contractors are generally concerned with clear incentives, earn sufficient profits and build a reputation for futur e work. Donor s want contracting - out reform to serve wider reform agenda – bringing commercialisation and
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private sector involvement to the sector. Residents are concerned with services improvement
and being affordable. Support from all these stakeholders is essential. Otherwise, the
contracting out reform process run the risk of being seen as unreasona bly profitable or
technical ly successful by some and a social or political failure by others.
10.3.12 Adoption of St rategic Approach to Contracting - out
At the time of writing this thesis, HCC had no strategy for contracting - out. Decisions
appeared to be highly opportunistic and there were significant variations between
departments in their aggressiveness to wards contracting out. No study had been undertaken to
identify the best candidates for contracting - out and there was no formal plan for the future.
The HCC in 1997 responded to a growing crisis in the City’s refuse collection system with
the contra cting - out exercise. It clearly wanted to be seen to be doing something highly
visible. However, no feasibility study of the options had been undertaken, there was no
contract specification to speak of, there was no competition for the contract s and the whole
contract was rushed through in just three months, with a letter of intent in July of 1997, a
contract in August and the start of the contract in September. The HCC should embark on
genuine examination of all the options for delivering services. The City of Indianapolis
proffers some practicable lessons for Harare City Cou ncil. Mayor , Goldsmith , of City of
Indianapolis set up the Service, Efficiency and Lower Taxes Indianapolis Commission
(SELTIC) in February 1992.
The clearest example of a strategic approach was Indianapolis. The City of Indianapolis began by establishing business systems such as activity - based costing. It also surveyed all
services to identify promi sing candidates for contracting - out and privatisation. Then it reviewed strategic options for specific areas such as trash collection, waste water, data
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proces sing and the airport using outside cons ultants. Therefore, contracting - out should be
integrated with the overall corporate strategy of the organisation.
10.3.13 Capacity Building
In each case used in this study, it was clear that capacity was a major fac tor either as a constraint or as a supportive element in the achievements recorded. Capacity building is more than training. There is need to strengthen HCC and councillors’ abilities to understand a situation and take action to improve it. This requires l ong - term building of confidence, development of knowledge, skills and creativity, the formation of positive attitudes and the strengthening of relationships.
Successful contract management requires people with contract management experience, policy exper tise, negotiation, bargaining, mediation skills, oversight and programme audit capabilities, and the necessary communication and political skills to manage programmes with third parties in a complex arrangement. The HCC is yet to recover from the brain dra in that was induced by the post 2000 socio - economic meltdown in which it lost specialised and experienced staff across all departments. Effective contract management requires a new set of skills. The HCC needs to maintain its knowledge of the market and it s technical knowledge of the activities. This is imperative i n order to be able to communicate with the contrac tor on equal terms. Contracting - out is a learning process, with knowledge garnered through the contract management phase s enabling subsequent ten dering of the activity to be carried out
more effectively.
Ca pacity building for contracting - out should be at individual, organisation and environment.
457
Individual capacity covers HCC’s needs of the skill s , knowledge and experience of individuals including political leaders and senior staff who can mobilis e new approaches to service delivery and of professional staff su ch as lawyers who can manage the procurement.
There is also a need for capacity building programme designed to correct weaknesses of councillors. The programme should be based on learning by doing approach giving councillors resources, facilitation and specific training such as management skills, negotiating contracts with private business ent repreneurs.
Organisational capacity deals with structures, processes and resources for contract design
(writing contracts, specifying services, estimating costs), management, (setting up administrative and financial systems) and monitoring and evaluation (information, systems and resources to perform oversight).
The enabling environment covers enforceab ility of rules and legal, regulatory and policy frameworks. Structures of power and influence among stakeholders are important. Without these, it is diffic ult for HCC to set standards, ensure contractual rights, therefore, gain the confidence of contractors (Batley and Mcloughlin, 2010).
10.3.14 Progressive Progress
For any reform programme to succeed, it has to gather momentum as it goes. From the case stu dies: on refuse collection and transportation services, water reticulation, security services, it was cle ar that the pace of contracting - out decelerated as implementation progressed and ultimately they were either abandoned, as in refuse collection and tra nsportation services or lost direction as in Wilkins Clinic’s catering case.
458
10.3.15 Role of Regulation
Contracting - out requires a very carefully designed regulatory system. Contracting out has no
governing legislation except the Privatisation Agency of Z imbabwe. This created loopholes
that led to the predominance of administrative discretion, selecti ve implementation and
personalis ation of decisions about what should be contracted - out by when an d at what cost.
Contracting - out in HCC was introduced without a clear regulatory framework defining
contracting practices, rights and arbitration mechanisms. The absence of a regulatory
frame work led to chaotic contracting - out, ambiguous objectives as well as glaring absence of
systems through which HCC and private companies could be held accountable to the
residents.
10.3.16 Policy Adaptability
Policies cast in stone cannot respond to frequent and unforeseen changes that always change
any reform process. It has been counse ll ed that policy actors should start thinki ng of p olicies
that “ anticipate and respond to an array of conditions that lie ahead and can navigate towards
successful outcomes w hen surprised by the unforeseen” (Venema and Drexhage , 2009:1).
Swanson and Bhadwal (2009:21 - 22) have suggest ed the principle s that should be taken into
account in the development of flexible policies. These include: “integrated forward - looking analysis, multi - stakeholder deliberations, automatic policy adjusting enabling self - organisation and social networking, ensuring that po licies do not undermine existing social capita l, decentralisation of decision - making, promoting variation; formal policy review and continuous learning.” It was clear from the case studies that most of these elements w ere lacking in many contracting - out ef forts. Very few policies seem ed to have been based on a careful identification of possible scenarios and possible future surprises.
459
10.4 AREAS FOR FURTHER RESEARCH
In addition to further exploration of the findings related to political, legal and institutional
interpretations, several areas for future research emerge from this study.
The focus of the study was limited to understanding HCC ’s experiences with contracting - out,
but deeper analysis of the use of contract rewards, contract accountability, monitoring and
sanctions are also merited. For instance, although the inclusion of sanc tion terms in contracts
was commonplace, the conditions under which HCC management exercised them has not
been well understood.
Future s tudies should fo cus on how transaction cost considerations influence local
authorities’ decisions about whether to contract, how they manage contracts and whether the
contracts were successful.
The case of refuse collection illuminated the potential benefits of contracti ng - out while
pointing to factors that public managers should address when structuring and managing
contracted service provision. Although the research on whether contracting - out refuse
collection delivers on its promises is mixed, on balance it appears tha t contracting - out results
are more efficien t than internal production (Hodge, 2000). Moreover, little of this research
discusses the managerial challenges associated wit h refuse collection contracting - out which may not be surprising because of its relative asset specificity. On the contrary, the success of contracting out may still vary across certain conditions. For example, Hodge’s (2000) extensive review of refuse contracting studies suggests that competition among vendors does not always occur, although it is a critical component of driving down prices.
460
The challenge for future research is to ask: Wh at is the nature of contracting - out and who is regulating its application? How are definitions of contracting - out in terms of value for money derived and o perationalised? What c an be learned about contracting - out from international experiences?
Another area for future research revolves around democratic problems. Do contracts, contract management models and various versions of a contract state pose problems seen from a democratic perspective? Contractualism is sometimes charged with being undemocratic.
Some of the usual concerns involve lack of accountability, the exclusiveness of the deals, lack of wider public participati on, secrets involved in dealing wi th private sector organisations.
Almost all services that were contracted to private agents by HCC were contracted back - in.
Reverse contracting or contracting back - in demonstrates the complexity of service provision in a world where market alternatives ar e used along with public delivery. It may involve market failure, council failure or both. To gain understanding of the contracting process, future research requires an analysis of both contracting - out and contra cting back - in, which give attention to econo mic, managerial and political perspectives.
461
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Conferences Attended
Understanding Poverty, Promoting Wellbeing and Sustainable Development: A Sample Survey of 16 Districts of Zimbabwe, 2nd October 2012, TREP Seminar Room, University of Zimbabwe, Organised by The Institute of Environmental Studies, University of Zimbabwe.
Urbanisation and Risk in Zimbabwe: Reducing Poverty and Enhancing Resilience on Policy Dialogue, 19th No vember 2014, The Crown Plaza, Harare, organised by UNICEF and IES of UZ.
Policy Analysis and Knowledge Sharing Dialogue Seminar Workshop on Constitutional Provisions on Provincial and Local Government, Organised by Local Governance Community Capacity Buil ding and Development Trust (LGCCDT), 20 March 2014, Pandhari Lodge, Harare.
Implementing the 2013 Constitution of Zimbabwe: Provincial and Local Governments Workshop: Organised by Community Law Centre in collaboration with the Portfolio Committee on Loca l Government, Public Works and National Housing, 06 August 2014, Meikles International Hotel, Harare.
Newspapers
Debra Matabvu 2015. Major Cities Switch to prepaid Water, The Sunday Mail, 15 March 2015, Harare, Zimbabwe.
Hardlife Mudzingwa 2015. Interrog ating Pre - paid water metering as a policy option. The Sunday Mail, 22 March 2015, Harare, Zimbabwe.
Knives out for Masunda, The Standard, 17 February 2013, Harare, Zimbabwe.
The Herald, 30 September 2014: Harare Mayor face probe.
The Herald , 8 September 2002.
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Appendix A Initial Letter Soliciting Participation
DEPARTMENT OF P. O. Box MP167 POLITICAL AND ADMINISTRATIVE STUDIES Mount Pleasant Harare, Zimbabwe Telephone: 303211 Ext.14014 Telex: 26580 UNIVZ ZW A/CHAIRPERSON: Dr. C. MANYERUKE Telegrams: UNIVERSITY PhD, Msc (Int’IRel), BSC (Pol & Admin) (UZ)
UNIVERSITY OF ZIMBABWE
28 March 2013
TO WHOM IT MAY CONCERN
RE: APPLICATION FOR PERMISSION TO UNDERTAKE A STUDY IN YOUR ORGANISATION
This letter serves to introduce Tawanda Zinyama: 27 - 141038 C 27, a PhD student at the University of Zimbabwe, Department of Political and Administrative Studies. The title of the thesis is: CONTRACTING OUT PUBLIC SERVICES IN LOCAL AUTHORITIES IN ZIMBABWE : THE CASE OF HARARE CITY COUNCIL.
Enclosed is a question naire - type instrument, employed to secure:
1. Your opinions concerning certain aspects of Harare City Council’s experiences with contracting out; and 2. Your opinions on a number of important socio - economic and political factors that affect contracting out.
The questionnaires do not take long to complete - the time required by the most individuals range from fifteen to twenty minutes. All that is necessary is that you give your frank experiences. Kindly assist the student by filling in the attached questionnaire and have some interviews with him. Your responses will be strictly confidential, all replies are anonymous and no individual will be named in any part of the report of the research.
Please read the directions carefully and then proceed to answer all the questions. Some of the questions may be difficult to answer with the information given, but please respond to each statement you are able, following the directions.
Your prompt attention and cooperation will be greatly appreciated, as it is a prerequisite to the success of this research. Thank you.
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Shoul d you have any queries, please contact the Acting Chairperson, Professor Charity Manyeruke on the above address . Yours faithfully
Tawanda Zinyama Professor Paul Mavima, PhD Doctoral Student Supervisor
Alfred Nhema, PhD Supervisor
PS: Y ou will receive a report of the research probably mid - 2016, but perhaps sooner.
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Appendix B First Follow - Up Letter
DEPARTMENT OF P. O. Box MP167 POLITICAL AND ADMINISTRATIVE STUDIES Mount Pleasant Harare, Zimbabwe Telephone: 303211 Ext.14014 Telex: 26580 UNIVZ ZW A/CHAIRPERSON: Dr. C. MANYERUKE Telegrams: UNIVERSITY PhD, Msc (Int’IRel), BSC (Pol & Admin) (UZ)
UNIVERSITY OF ZIMBABWE
17 August 2013
TO WHOM IT MAY CONCERN
RE: APPLICATION FOR PERMISSION TO UNDERTAKE A STUDY IN YOUR ORGANISATION
About three weeks ago, you were one of the 50 Harare City Council officials who received a questionnaire - type instrument in connection with a basic project in contracting out the provis ion of public services in local authorities in Zimbabwe conducted at the University of Zimbabwe. These questionnaires do not take long to complete. The time required by most individuals varies from fifteen to twenty minutes.
Your prompt attention and coope ration will be greatly appreciated, as it is a prerequisite to the success of this research. Thank you.
Should you have any queries, please contact the Acting Chairperson, Professor Charity Manyeruke on the above address.
Sincerely,
Tawanda Zinyama Professor Paul Mavima, PhD Doctoral Student Supervisor
Alfred Nhema, PhD Supervisor
PS: If you have misplaced the questionnaire, please receive another copy of the instrument.
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Appendix C Second Follow - Up Letter
DEPARTMENT OF P. O. Box MP167 POLITICAL AND ADMINISTRATIVE STUDIES Mount Pleasant Harare, Zimbabwe Telephone: 303211 Ext.14014 Telex: 26580 UNIVZ ZW A/CHAIRPERSON: Dr. C. MANYERUKE Telegrams: UNIVERSITY PhD, Msc (Int’IRel), BSC (Pol & Admin) (UZ)
UNIVERSITY OF ZIMBABWE
17 August 2013
TO WHOM IT MAY CONCERN
RE: APPLICATION FOR PERMISSION TO UNDERTAKE A STUDY IN YOUR ORGANISATION
About three weeks ago, you were one of the 50 Harare City Council officials who received a questionnaire - type instrument in connection with a basic project in contracting out the provision of public services in loca l authorities in Zimbabwe conducted at the University of Zimbabwe. These questionnaires do not take long to complete. The time required by most individuals varies from fifteen to twenty minutes.
Enclosed is another copy of the questionnaire, in case you have misplaced the original. Your responses will be strictly confidential, all replies are anonymous and no individual will be named in any part of the report of the research.
Your prompt attention and cooperation will be greatly appreciated, as it is a prerequisite to the success of this research. Thank you.
Should you have any queries, please contact the Acting Chairp erson, Professor Charity Manyeruke on the above address.
Sincerely,
Tawanda Zinyama Professor Paul Mavima, PhD Doctoral Student Supervisor
Alfred Nhema, PhD Supervisor
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PS: If the official to whom this letter is addressed is no longer i n the position, the new official should respond to the questionnaire. You will receive a report of the research, probably mid - 2016, but perhaps sooner.
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Appendix D Questionnaire
Questionnaire for Harare City Council Officials Questionnaire No______Date Submitted______Date Collected______
Preamble : This research is being undertaken by Tawanda Zinyama, a PhD student at the University of Zimbabwe. The title of the thesis is: CONTRACTING OUT PUBLIC SERVICES IN LOCAL AUTHORITIES IN ZIMBABWE: CASE OF HARARE CITY COUNCIL.
The principal objective of the study is to investigate and describe Harare City Council’s experiences with contracting out the provision of public services in order to better appreciate the factors that make or break the contracting out process. In the sam e vein, to interrogate how it can be made more effective. The study’s specific objectives are to:
e xplore the fundamental features of the Harare City Council contracting out process encompassing the various contracting out policies enacted, strategies employed and the rationale behind those actions; e xamine political, socio - economic, institutional and legal frameworks that were put together to facilitate contracting out; a ttempt a detailed and critical review of the theoretical and global empirical lite rature dealing with contracting out both in general and in local government contexts so as to provide background, context and methodological foundation; and d iscuss the theoretical lessons learned vis - a - vis existing literature in order to make contracting out better in Zimbabwean local authorities.
Your cooperation towards the completion of this research is sincerely appreciated. You are assured that your responses will be treated with utmost confidentiality and your anonymity will be ensured. Your respons es will contribute to this timely research about contracting out municipal services to private companies. A summary of the research will be mailed to you upon completion. I appreciate your participation in this research.
Survey Instructions Most question s are followed by a list of choices. Please choose one or more to describe your best response. If none of the available choices accurately describes your response, it would be helpful if you would describe your response.
If you have any questions, please don’t hesitate to get in touch with me. [email protected]
Section A: Respondent Profile
Kindly provide information about yourself.
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Agency name Designation Contact number Email Age 18 - 30 [ ] 31 - 45 [ ] 46 - 60 [ ] 60+ [ ]
Section B: Contracting out Functions 1. Does your organisation or department contract work to external institutions? Yes [ ] No [ ] If your answer to the above question is ‘No’, please answer questions 2 to 5 and then skip directly to section C. If your answer to the above question is ‘Yes’, skip directly to question 6 of this section.
IF YOUR ORGANISATION/DEPARTMENT DOES NOT CURRENTLY CONTRACT OUT
2. Reason(s) for not contracting out. Give a weight to the proposed factors below (H: High M: Medium L: Low) Reason(s) Weight In - house capacity existence Legal barriers Too expensive, budget does not permit Hard to define contract terms High transaction/contracting cost High cost of monitoring Loss of control Compromises credibility Not acceptable to consumers Past experience with contracting out has not been good Union resistance Accountability problems Asset specificity problems
3. Is the lack of contracting out affecting the effectiveness of your agency? Yes [ ] No [ ] Can’t say [ ] 4. In future, do you see any role for contracting out in your organisation or department? Yes [ ] No [ ] Can’t say [ ] 5. Assuming it were possible to contracting out, kindly state and rank in the order of importance functions you might contract out. Functions that may be contracted out Ranking 1 2 3 4 5 6 7 8
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9 10 11
IF YOU CURRENTLY CONTRACT OUT
6. What kind of functions do you contract out? Kindly state and rank in the order of importance Function presently contracted out Ranking 1 2 3 4 5 6 7 8 9 10
7. What is the share of contracting out in your total budget? Less than 10 % [ ] Less than 20% [ ] More than 20% [ ] Can’t comment [ ]
SECTION C: WHY DO YOU CONTRACT OUT?
8. What are the reasons for contracting out? Give a weight to the proposed factor below (H: High M: Medium L: Low) Reasons Weight General lack of in - house capacity Law requires it To cut cost/cost saving Quality improvement Improves service delivery Past experience with contracting out has been good Improves accountability
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SECTION D: PROCEDURES FOR CONTRACTING OUT 9. Is the contracting out decision based on: a). well documented strategy? [ ] b). Ad - hoc basis? [ ] 10. Has any comprehensive risk and legal assessment been done to ascertain what functions can or cannot be contracted out within legislative requirements and interest of th e stakeholders? Yes [ ] No [ ] Not taken but plan to undertake [ ] Not taken and don’t plan to undertake [ ] Can’t say [ ] 11. Is contracting out done under the Existing Public Procurement Guidelines? Yes [ ] No [ ] 12. How does your organisation or department determine potential valid bidders? (Tick the appropriate). Criteria for selecting pre - qualified contractors Yes No Experience and past performance Capability of personnel and equipment Financial Status Current commitments Affirmative/indigenisation policies Political connections
13. Which of the bidding documents do you use during the competitive bidding process? (Tick the appropriate). Bidding document Yes No Instructions to bidders General conditions of contracts Technical specifications Special conditions of tender Bid form
14. What are the tendering procedures used by Harare city Council? (Tick the appropriate) Tendering procedure Yes No Period of publicity Opening of bids Clarification and modification of bids Confidentiality of bids Examination of bids
SECTION E: WHO DO YOU CONTRACT OUT TO?
15. Indicate the kind of parties that you contract out to and rank them from 1 (most important) down to the least important. Tick the appropriate party. Parties Ranking Private companies Government owned companies Non profit organisations (NGOs) Individuals International organisations , e.g IMF, WB, ADB, EU
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SECTION F: HOW DO YOU CONTRACT OUT?
16. How are the agencies selected for contracting out? Competitive sealed tendering [ ] Negotiation [ ] Combination of the above two [ ] Unsolicited offers [ ] 17. How much weight, in percentage, is appropriated between price and non - price selection variables in contracting out? Price variables: [ ] Non - price variables: [ ] 18. What kind of contract arrangements were/are used? Long - term [ ] Discreet [ ] Short - term [ ] 19. Are your contracts based on: fixed price [ ] Fixed price plus incentives [ ] Schedule of rates [ ] Combination of above [ ] 20. Level of political in terference in contracting out decisions? None [ ] Moderate [ ] High [ ] Can’t say [ ]
SECTION G: HOW ARE CONTRACTED OUT FIRMS MANAGED?
21. How are the firms that are contracted out monitored? Direct monitoring (while work is underway) [ ] Follow up monitoring (work is completed) [ ] Monitoring by exception (following any complaints) [ ] Can’t say [ ] 22. In the event of non - performance by contracted agencies, are there any back up plans? Yes [ ] No [ ] Can’ t say [ ] 23. Has any contract ever been cancelled for sub - standard or incomplete work? Yes [ ] No [ ] Can’t say [ ] 24. Are the costs of hiring external contractors: High [ ] Reasonable [ ] Can’t say [ ] 25. Are the monitoring costs: High [ ] Reasonable [ ] Can’t say [ ]
SECTION H: WHAT ARE THE BENEFITS OF CONTRACTING OUT?
26. How has been your experience with contracting out? Good [ ] Average [ ] Poor [ ] Can’t say [ ] 27. Is the private supply market for contracting out functions: Very small (hard to find good contractors)? [ ] Adequate? [ ] Abundant? [ ] 28. Does contracting out when compared with ‘in house’ provision gives you better control over the outcome? Yes [ ] No [ ] Can’t say [ ] 29. Has contracting out resulted in: Lower cost and better quality of services? [ ] Lower cost and inferior quality? [ ] Lower cost and no change in quality? [ ] Can’t say? [ ] 30. Does contracting out affect the quality of a service? Yes [ ] No [ ]. 31. How effective has contracting out been at improving your agency’s performance? Extremely [ ] Moderate [ ] Low [ ] No impact [ ] Can’t sa y [ ] 32. How effective has contracting out been in improving your agency’s trust with key stakeholders. Extremely [ ] Moderate [ ] Low [ ] No impact [ ] Can’t say [ ] 33. Have the advantages/disadvantages of contracting out functions “in hous e” ever been studied? Yes [ ] No [ ] Can’t say [ ]
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34. Does your accounting system permit you to calculate the internal cost of regulating activities to enable meaningful cost com parison with contracted out functions? Yes [ ] No [ ] Can’t say [ ]
SECTION I: EXPECTATIONS AND CHALLENGES
35. Do you expect the future sphere of contracting out in your agency? To stay the same [ ] To increase [ ] To decrease in future [ ] Don’t know [ ] 36. If both public and private sectors could provide the same service, who do you think would do a better job a) Private sector [ ] b) Public sector [ ] c) Don’t know [ ]
37. Identify t he ‘Top 10’ challenges in contracting out? Challenges Please Tick Political interference Budgeting constraints Hard to specify performance variables High transaction/contracting cost High monitoring cost Supply market is small Cost savings are minimal Quality improvements are minimal Asset specificity Ease of measurement of tasks/ activities Leadership capacity Technical capacity Ethical capacity
SECTION J: POLICY ENVIRONMENT
38. What are the enabling legal instruments (policies) for the establishment of contracting out...... 39. What are the major factors impinging positively or negatively upon the overall performance of contracting out? (Tick the appropriate) Positive Negative i. Level of politica l will on the part of leadership [ ] [ ] ii. Willingness of residents to report cases of non - delivery [ ] [ ] iii. Legal environment [ ] [ ] iv. Legislative amount [ ] [ ] v. Shirking [ ] [ ] vi. Assets specificity [ ] [ ] vii. Institu tional weaknesses [ ] [ ] 40a. How would you describe the real autonomy of HCC in the tendering process? i. Very High [ ] ii. High [ ]
501 iii. Fair [ ] iv. Low [ ] v. Very low [ ] 40 b. If low or less, what are the major causes of lack of very high level of autonomy? i. Intervention by executive arm of government [ ] ii. Intervention by legislative arm of the government [ ] iii. Poor funding or lack of financial independence [ ] 41. Which institutions play an oversight role over the activities of contract ing out organisation? i. Ministry of Local Government, Rural and Urban Development [ ] ii. Parliament [ ] iii. Cabinet [ ] iv. Audit Office [ ] v. Media/civil society [ ] 42. Please describe briefly the major capacity constraints of Harare City Council and your suggestions on how to overcome them: Capacity constraints:…………………………………………………………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… …………………………………………………………… Measures to overcome:……………………………………………… ……………………………………… ………………………………………………………………………………………………… ………………………………………………………………………………………………… ……………….. 43. Please provide any additional evidence and/ or information that will enable accurate objective appraisal of the strengths, weaknesses and needs of Harare City Council’s contracting out performance. These may include i. Priority capacity building requirements…………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………………………………… ……………………………………………………………… ………………………… ………………………………………………………………………………………….. ii. Challenges ahead…………………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………… ……………………… 44. Political, institutional, legal and regulatory contexts of contracting out in Zimbabwe The implementation of contracting out policy in any country is significantly influenced by the nature and operations of the political, institutional, legal and regulatory frameworks in the policy environment.
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On a continuum of low level (1) to a high (10), please circle the number on the scale below which best evaluates the institutional, legal and regulatory frameworks in Zimbabwe. Please circle ONE number only. LOW 1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9 - 10 HIGH Adequacy of the institutional scope(well - defined 1 2 3 4 5 6 7 8 9 10 responsibilities, monitoring mechanisms, clauses for penalties) 1 2 3 4 5 6 7 8 9 10 Legal frameworks (formulation of the contracting out acts, amended pieces of legislation, procurement acts, competition acts Regulatory frameworks(structures in place to 1 2 3 4 5 6 7 8 9 10 monitor the operations of the contracted agency) Socio - economic frameworks (extent to which the 1 2 3 4 5 6 7 8 9 10 political and economic environment is conducive to policy implementation) Stakeholder consultation/involvement 1 2 3 4 5 6 7 8 9 10 (incorporation of views of residents associations, business community and affirmative groups into decision making) Comprehensiveness of the contracting out 1 2 3 4 5 6 7 8 9 10 policy(planning, objectives, strategies and organisation) Policy feasibility(implementability and 1 2 3 4 5 6 7 8 9 10 achievability of goals) Transparency in tendering process 1 2 3 4 5 6 7 8 9 10 Political interference 1 2 3 4 5 6 7 8 9 10 Capacity of local government lobbyists 1 2 3 4 5 6 7 8 9 10
NB Where appropriate, kindly provide documentary evidence in support of the responses such as the copy of the Act establishing the contracting out and so on, as deemed appropriate.
Thank you very much for your time in responding to this questionnaire.
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