There are several phenomenon in the world whose universe of possibilities involve either multiple equilibriums or take U or inverse U-shapes. All such phenomenon manifest in multiple forms depending on time and/or location and/or other contextual factors. Let's call these multi-form phenomenon. In fact, most phenomena in the world manifest this way.
The multi-form phenomena teaches us a few things:
1. There is no unique model to explain the phenomena. There are several models. We need to select the model which is appropriate for the specific context and time.
2. It's not possible to ex-ante claim with any degree of conviction that we'll be successful, even if the implementation is done well.
3. When all's said and done, there is an inordinately huge element of fortune associated with many phenomena we see around us. We need to do all the things that's required to make it happen, and then hope that things will fall into place and the desired outcomes will manifest. That's all can be done.
I'll henceforth occasionally document such phenomenon I come across in the public policy space. This post will focus on the idea of outsourcing activities in engineering departments.
A conventional wisdom in economics and management thinking is that of core-competence and transaction costs. It follows that we should identify activities which can/should be done in-house and those which can be outsourced. The New Public Management school of public policy advocate the importance of attributes and factors like core-competence, transaction costs, efficiency, value for money, delegation, and so on.
Accordingly, like elsewhere, outsourcing of tasks or activities has become common in governments too. Three questions follow. One, can this task be outsourced? Two, whom can it be outsourced to? Three, how should the contract be managed?
In this context, take the example of an engineering work. The chain of activities involve the following - administrative sanction, estimates or detailed project report (DPR) preparation, technical sanction, tender process, work award, contract management, work recording and check measurements, quality audit, work monitoring, renegotiations or time extensions or cost-escalations, bill payments, and work closure. In case of large works, most of these activities are outsourced to project management consultants and third party quality control agencies.
In theory, it's unexceptionable that at least certain activities like estimates or DPR preparation, work recording and check measurements, quality audit be outsourced, just as certain others like administrative and technical sanctions, work award, monitoring, renegotiations, and bill payments be done in-house. But, as I blogged earlier, reality eats theory and logic for breakfast.
Take the case of work recording and check measurements. Consider the context of a bitumen road being laid in an Indian village by a capacity constrained and often corrupt Local Government Engineering Department. It's a reality that most often (in many states) the work recording is done by the agent of the contractor or a contractually employed work inspector, and a complicit and/or over-burdened Assistant Engineer (the lowest functionary) is merely affixing the signature. The sample check measurements by superiors to the AE is either small or absent.
In the circumstances, there is a logical attraction to argue for dispensing with recording and check measurements by officials and outsource it. After all, recording and check measurements in case of large projects and by better managed public organisations like the National Highways Authority of India (NHAI) are outsourced. Why not simply formalise what's anyways the reality?
I'll hesitate for at least five reasons. One, the large numbers and small size of these works, coupled with weak institutional oversight mechanisms, mean that the likelihood of fraud and corruption is much higher than with large and fewer works managed by the likes of NHAI. Two, the context and political economy of these works is more complex and more vulnerable to capture by rent-seeking interests. Three, outsourced recording and check measurements are effective when coupled with strong complementary safeguards like strong quality audits, which are likely to be even less rigorous in these works. Four, even in a system where deviation is the norm, the mere existence of a form of recording and check measurement acts as a moral suasion and deterrent to ensure that the entire process is not captured. Five, the presence of a formal requirement also strengthens those committed among engineering officials at various levels in forcing their sub-ordinates to necessarily record and check measure their works.
So, we are faced with the real possibility that, in case of scattered works and where weaknesses in state capacity really show up, the logically appealing idea of outsourcing could end up worsening things. The legal formality of an AE mandated to do recording and check-recording by superior others may be the basic minimum requirement to ensure that atleast some good engineers insist on the same and thereby ensure that the whole thing does not fall apart.
But, it's possible that in some cases (say, a Department or a city or even a State) the outsourcing approach could work. For example, a Department which initiates outsourcing of an activity and is lucky to have a succession of good leaders with commitment to making the reform work. Even here, it would require dollops of plain good luck for things to miraculously fall into place and the reform to stick.
Who knows? But a teachable example of how there is no one right thing in public management and how judgement plays an important part in decision-making, and judgement, by its very nature, can be flawed, and therefore the need for constant revisions of priors.
Do we outsource and hope that all those things will hopefully fall into place, or retain in-house since the contextual constraints are too many to make it unlikely that the reform will work? This is a tough judgement call, and it's purely an exercise in judgement and hardly an outcome of theoretical and logical contemplation.
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