Creating effective bidding and monitoring systems are the two central tasks in developing a contracting out program that minimizes the opportunity for poor service quality, collusion, corruption, waste, and fraud. Experience has demonstrated that most of the cases of inferior service quality and/or corruption in contracting out could have been avoided if the government had better designed the bidding and monitoring systems (see Figure 4).
Elements of a Good Monitoring System:
1. Require the contractor to present periodic reports.
2. Review those reports carefully for adherence to the written contract.
3. Compare wage rates and equipment charges for materials or rentals with the contract.
4. Verify that all services, material, labor and equipment were actually received, used or consumed.
5. Initiate all change orders that affect the contract.
6. Whenever possible, make on-site inspections. Report the results of those inspections, comparing accomplishment to the prescribed specifications.
7. Of site inspections are not feasible (as for a personal service contract as an attorney) keep a record of user department satisfaction.
8. Follow up on every complaint.
9. Survey citizen or user satisfaction whenever possible.
Bidding for services should be open and competitive whenever possible and bid awards should be widely publicized. Collusion can be safeguarded against by, for example, prohibiting employees from having any financial or other interest in the contract. In addition, ex-employees can be forbidden from representing others, such as a contractor, before the agency for a specified period. Furthermore, if the bid is to be negotiated, a formal explanation should be prepared of why the agency's interests are best served by the manner proposed.
Governments must not abdicate their responsibility to ensure that citizens receive quality, cost-effective services. The government is accountable to the taxpayers for the services contracted out. Public officials, therefore, must develop strong, comprehensive monitoring systems. These typically include: contractor reports, inspections, formal citizen complaint mechanisms, and customer surveys. The performance of the contractor should be based on clear and specific performance standards. Efficiency and effectiveness measures are often the best standards to utilize. By following the guidelines outlined here and in the other how-to manuals on contracting out, government officials can largely prevent abuses. This, in turn, sustains public support for contracting, helps to ensure that taxpayer money is not wasted, and takes away the most effective argument for opponents of privatization.