Since bureaucracy functions through a clearly defined hierarchical

Since the 1990s, private sector risk management processes
and techniques have become increasingly utilized by public sector agencies
(Fone and Young, 2000). These private sector techniques are considered to be an
important tool in improving the delivery of public services and an essential aspect
of good governance (Audit Commission, 2001). However, there a number of
scholars who have criticised the use of private sector risk management
practices in the public sector with many who believe that the rising
expectations of public accountability has resulted in risk management being
used for defensive management and blame avoidance, which has led to a focus on
documentation rather than service delivery (Power, 2007; Hood and Miller, 2009).
Additionally, some scholars have argued that standard risk management
frameworks pose a number of challenges when applied to public services (Hood
and Miller, 2009; Lapsley, 2009). Furthermore, corporate failures such as Enron
and Lehmann Brothers has saw the superiority of private sector management being
called into question (Lapsley, 2009).

Public sector management has had a long history, and whilst
some form of administration existed earlier, the traditional model of public
sector management is often regarded as starting in the 19th century
and is largely underpinned by Max Weber’s theory of bureaucracy (Ostrom, 1974). Mih?ilescu (1993) defines
bureaucracy as “a way of organization, meant for widespread administration of
resources through a specialized body of persons, usually placed in a
hierarchical structure and having the powers, responsibilities and procedures
strictly defined”. According to Weber, bureaucracy has five key elements.
Firstly, bureaucracy is based on capability and is regulated by a number of
rules and predefined procedures. Ridley (1996) adds that for bureaucracy to
function properly activities should be organised as official duties and must be
guided by a list of rules and procedures. Second, bureaucracy functions through
a clearly defined hierarchical structure in which higher-level officials
control and monitor the activities of lower-level officials. Third, the
bureaucratic is based on written documents that are preserved as originals for
increased transparency (Weber, 1968). Documents must be gathered in permanent
files and archived in order to enhance accountability, traceability and
possibilities for retrospective evaluation (Jain, 2004). Fourth, dedicated staff
who deal with the public must be fully trained to do so. Lastly, and arguably
the most notable characteristic of bureaucracy is that it follows explicit and
formal rules and regulations. In the view of Merton (1940), “the chief merit of
bureaucracy is its technical efficiency, with a premium placed on precision,
speed, expert control, continuity, discretion, and optimal returns on input.”
Furthermore, Weber (1968) claimed that bureaucracy was technically superior to
all other forms of organisation and hence indispensable to large, complex
organisations. Whilst many people were in favour of bureaucracy, it also had
its critics, with many who believed that the system placed too much emphasis on
rules and regulations making public officials very robotic, thus stifling innovation
(Newman, 2005; Thompson and Alvesson, 2005). Walsh (1995) also claimed that the
system is ill-suited to cope with the tasks, purposes, and circumstances of
contemporary democracies.

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During the public sector reforms of the 1980s and 1990s, a
new paradigm known as New Public Management emerged in response to the
inadequacies of bureaucracy (Hughes, 2003). Osbourne (1993) explains that one
of the core dysfunctions of bureaucratic government is that it is resistant to the
changing needs of society. The standardized delivery of a one-size-fits-all
service to mass markets was the core of bureaucratic activity and when society
changed, government bureaucracies did not. The main goal of NPM was to strengthen
management capacity in government and introduce the performance incentives and
disciplines of a market environment (Flynn, 2000). One of the most influential
factors leading to the emergence of NPM was the economic and fiscal crisis which
triggered the quest for efficiency and ways to cut the cost of delivering
public services. Another important driver of NPM was the rise in popularity of
neo-liberalism throughout capitalist countries. Neo-liberalism was a political
framework which rejected the idea of the welfare state, opposed a large public
sector, believed in private sector superiority and emphasized market
competition in service delivery (Haque, 2003). Hodge (2006) argues that the
foundations of NPM rest in both institutional economics and managerialism.
Institutional economics proposes disaggregating public bureaucracies and the
use of competition; whilst managerialism includes an emphasis on private sector
management techniques and performance measurement. The essential
characteristics of NPM have been specified by a number of scholars in public
management. Key elements include increasing the use of markets and competition the
public sector, decentralization of management and increasing emphasis on
performance, outputs and customer orientation (Carroll, 1998). Advocates of NPM
argue that it provides efficient alternatives for service delivery; better
incentives to public managers and improved accountability. Moreover, it was
responsible for promoting an entrepreneurial culture throughout public sector management.
Conversely, many have criticised NPM for its ambiguity regarding efficiency,
blurred accountability, and for causing conflict in public organisations as a
result of competition (Minogue, 2001). The heaviest criticisms of NPM concern
its fragmented nature, intra-organizational focus and its use of out-dated
private-sector techniques for public policy implementation and service delivery
(Rhodes 1997). Whilst NPM is said to have influenced a number of public sector
reforms, it was said to have passed its peak by the early 2000s (Hughes, 2003;
Dunleavy et al 2006).

NPM is said to have had an influence on the introduction of
Compulsory Competitive Tendering (CCT). CCT was one of the privatisation
measured introduced by the Conservative government which was aimed at managing
the inflationary pressures of the public sector and the political power of public
sector unions (Walsh, 1995). The use of competitive tendering by British local
authorities for the provision of goods and services has a long history, but
compulsory competitive tendering for the provision of local government services
was first introduced in the 1980 then extended through the 1990s. Central to
the implementation of CCT in the management of public services was the
introduction of a client-contractor division whereby the client held
responsibility for the development of the service specification, inviting tenders
from both the in-house contractor and private contractors and awarding the
contract to the tender offering the most value for money. The winning
contractor was responsible for delivering the service to the contract
specification at the agreed price. Initially, CCT helped local authorities reduce
the costs of public service provision and maximise operating efficiency,
however, it came under criticism for achieving the goals of efficiency and
economy at the expense of service quality (DETR, 1998). Furthermore, the
compulsion element in competitive tendering created a hostile environment
between the public and private sectors which is often reflected in the delivery
of public services and deprives them of quality and innovation (Bovis, 1999). Whilst
there were initially high hopes for CCT, it ultimately fell short of expectations
and attracted widespread dissatisfaction from both the private and public
sectors. CCT became an excuse for poor service quality and was deemed
responsible for alienating local government from the public.

In 1997, New Labour came into power, ending the conservatives
18-year reign in government. By 1999 they had opted to replace CCT with the
Best Value regime. Best Value was introduced as a manifesto commitment of the
Labour government and was intended to improve the quality and
delivery of public services by
preventing local and national government clients simply
opting for the lowest cost options,
as this did not always provide the optimum long-term solution (Boyne, 2000). The
regime was managed by the Audit Commission which carried out regular best value
inspections on local government services, from waste disposal to corporate
strategy (DETR, 1999). Unlike CCT, Best Value did not necessarily require
privatisation or competitive tendering of services, however, competition was always
considered as an option. The Best Value regime maintained that the choice of
deliverer should be wholly dependent on which sector provides the service with
most quality and efficiency, as opposed to the cheapest. Services should be
provided through the sector best placed to provide those services most
effectively, whether this be public, private or a partnership between the two. Whilst
Best Value always considered competition as an option, New Labour believed that
it was not appropriate for all areas of the public sector. A prime example is
the NHS, where the New Labour government abolished the internal market
introduced by the Conservatives in 1990. New Labour criticised the internal
market, arguing that it had fragmented health services, creating thousands of
organisations which were often in competition with one another when their efforts
should have been combined to best serve the health of the population (HMSO,
1997). The internal market forced organisations to compete even when
cooperation was more appropriate; many organisations were unwilling to share
principles of best practice for fear of losing their competitive advantage
(HMSO, 1997)

In 1997, the New Labour government introduced two pieces of
legislation: the National Health Service (Private Finance) Act 1997 and the
Local Government Act 1997, which allowed public sector organisations to
introduce the private sector as a partner, rather than as a contractor, in the
process of delivering public services. Public Finance Initiatives (PFI) gave
local authorities access to new sources of funding and management skills for
new and improved facilities and created new opportunities for the private
sector to combine construction, facilities management, maintenance and
operating skills (Ball, 2011). 

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