Incentivising public service contracts: a methodology and recommendations

Abstract

In October 1995 HM Treasury set up a number of working groups to examine the feasibility of applying the aspects for change listed in the White Paper ‘Setting New Standards’. The aspect of incentivisation was examined by a highly defined Research Group. The major findings of the group are contained within this case study. The Research Group was chaired by the author and the organisations represented on the group were: The Department of Transport, The Department of the Environment, HM Treasury, National Rivers Authority, The NHS Supplies Authority, Inland Revenue, The Defence Research Agency and the National Audit Office. The work the author previously published in the EJPSM (Jones, 1997) made reference to traditional Government and Public Sector contracting models that have been applied. The fixed price/cost plus type of contracts were seen to have limitations. Incentivisation within public sector contracts was suggested as a way forward for developing Government purchasing. This suggestion poses the question of how we perceive, judge and assess the use of incentives in contracts; what concepts are at the root of the term? The author chaired a UK Government Research Group which considered the concept, suggested a methodology for application and recommended action. In following this process the concept of incentives in contracts proved the most difficult to pin down. The task was completed and accepted by the UK Government. This article explains the general detail of the work, commencing with concepts of incentivisation.