The Father of Managed Competition

Blog, Local Government, Peter Holle, Uncategorized, Workplace

Over the years Frontier has distinguished itself by associating and collaborating with world renowned public policy figures as can be seen by looking at the Centre’s Expert Advisory Panel.  Practical and on-the-ground, some have literally pulled their countries from the edge of financial catastrophe (Sir Roger Douglas and the Hon. Ruth Richardson in New Zealand) while others have been more quiet revolutionaries, path breaking all the same when it comes to achieving better public policy or, as we like to say, raising the bar to achieve high performance government.

Frontier’s positioning in the ideas marketplace has been to engage both the so-called right and left around the broad topic of creating better public services.   Take, for example, healthcare and local government.   We have led the discussion on practical, go forward health reform by profiling best practices in European healthcare.  Reforming hospital payment systems (by replacing global budgeting with payment by results models) and moving to a purchaser-provider split model (to remove the conflict of interest that occurs when the payer and provider where the same hat) are policies that resonate on both the left and the right.

Frontier has led the discussion on how to make the government work better when the topic comes to organizing local government. We have focussed on improving public service delivery in cities by profiling what we call “high performance cities”.  What are the best practices around the world for providing high service levels at reasonable delivery cost?   What can we learn from cities that lead the discussion on service delivery innovation?

Both the sophisticated left and the right agree that the discussion around public versus private service delivery is a red herring.   Rather, what matters is competitive delivery and, critically, introducing systems that align the incentives of the internal workforce towards efficiency, performance excellence and customer service.  In other words, systems that operate as “win- win” for both the taxpayer and public service provider.  This, of course, stands in stark contrast to the traditional model where government managers and employees are rewarded for maximizing internal budgets and staff counts  because, for example, salaries are linked to how many people are being managed.

One such “win- win” model, that appeals across the political spectrum, is referred to as “managed competition”.  It sets up the in-house workforce as a business unit which competes with outside suppliers.  The beauty of this system is that it puts cost cutting pressure on the vast layers of middle managers and supervisors that are a fixture of the traditionally rule bound, bureaucratic and process-oriented government systems we still see  mostly everywhere in the public sector, cities no exception.

The go-to place in the Canadian think tank community for this discussion is the Frontier Centre.   We have led this discussion in Canada by, for example, profiling how these models operated in the cities of Indianapolis and Phoenix, Arizona.  They clearly improved services, created efficiencies, while empowering city workforces and have obvious implications for Canadian cities and governments who are struggling to get out of the narrow box of funding services by simply raising taxes to throw more money at rusty, low performance delivery models.  The Frontier website is a practical treasure trove of links on these higher performing, worker empowering models.

One of the benefits of running an independent public policy think tank is meeting and

Father of Managed Competition

working with cutting edge thinkers and doers.  Ron Jensen, the former Public Works Director of the City of Phoenix, Arizona was one such person.  Back in the post California proposition 13 tax revolt days, the Phoenix city council decided that the best course forward to make its operations more efficient was to simply begin privatizing and contracting out various aspects of its operations.   Ron Jensen offered a compromise – why not let his department compete with private vendors?   With that the so-called Phoenix model of managed competition was born, where city garbage collection crews competed with giant companies like Laidlaw and BFI.  The city was divided into several service areas and then the services were put out to tender.  Over time the city workers became so efficient that they won back all the work, a story which eventually made Ron Jensen a bit of a public sector rock star.   I remember watching a video tape of Ron and some of his team discussing this delicious situation with Jane Pauley on one the national morning TV shows back in 1980s.

I had the honour in 1998 of working with Ron on a consulting project in the US Pacific Northwest. The contract involved a local government that was contemplating bringing in its own managed competition system.   It was quite the eye-opener where we, the consultants, found ourselves in a nasty civil war between the managers and the unions.   The unions eventually figured out that the competitive model was a smart way to reform antiquated operating methods – if they could become more efficient – by removing bureaucratic red tape and cutting the number of supervisors and overheads – they would directly benefit.   In the end, there was a surprising conclusion to this story which I omit as watch the word count in this blog post get too long (though I am happy to share if you call me).

It is with great sadness that I report the very recent passing of Ron Jensen, a member of the Frontier’s Expert Advisory Panel.  Ron was a great inspiration and friend to me and one of the quiet public sector revolutionaries who pioneered a high performance way forward for governments interested in innovative methods that benefit everybody.

He has rightly been described as the father of managed competition.

The Frontier Centre for Public Policy and the world will sorely miss you.  We will continue to carry your innovative flame forward.