Public sector performance and contracts: an emergent analysis

Academics and practitioners working on performance measurement of public service organisations have long acknowledged the difficulties of measurement when the output of public service organisations is difficult to identify and define. Many new management practices have been introduced in recent years to improve the efficiency and effectiveness of public expenditure programs. These include the contracting out of public services. Measurement without theory is blind. Often the wrong things are measured. This paper makes an initial attempt to look at the problems of modelling public sector contracts within the context of discussing the performance of the public sector. It makes use of principal/agent theory and considers some criticisms of that approach. The problems of X-efficiency are reviewed within the same framework. The paper concludes with a consideration of the effectiveness of the public sector.