Reputation-based governance

Public works are an important instance of public procurement; their reputation–based management, moreover, is the object of a software demonstrator (named “Rebag–Ware”) that the reader is encouraged to access, by picking one of the user identifications and passwords that are provided for the purpose of experimentation.

Public procurement is subject to a set of constraints that private enterprises do not face when they buy goods or services. In particular, private negotiations prevail within the private sector, while the public sector is typically obliged to use public bids for its procurement needs (Bajari, et al., 2003).

Public bids and auctions may have optimal characteristics when the goods or services required can be specified in all their details.

This however only happens rarely. In most cases it would be beneficial to consider the past reputation of potential contractors, so as to constrain their actions by the thought that if they under–perform, they will find it difficult to secure future contracts.

Reputation–based governance of public works is based on a taxonomy of possible projects. For example, new public works can be “roads”, “bridges”, “buildings”, etc.

Within each type of good, there are further sub–classes: Buildings may be schools, police headquarters, and so forth. All projects are documented in a database accessible by all.

Upon approval, the public administration inserts each project into the database. Preliminary information about a project include its general description according to the codified taxonomy (type of good, location, expected cost, etc.), technical drawings, and any documentation that may accompany the early stages of the project, such as an environmental impact and a cost–benefit analysis.

As the project evolves, more information is provided, eventually to include details on costs and information on the final outcome, comprising, for instance, pictures of the completed works.

Each project is associated with the administration and with the contracting firms that are responsible for its execution. In particular, the information system keeps track of, and makes visible, all the projects carried out by each administration and firm.

Once completed, a project is assessed by accessing the information system. The public administrators involved express their opinion on the quality of the work carried out by the contracting firms.

Firms in turn assess the performance of the public administrations with which they interacted. Most importantly, the public judges public works that affect them.

For example, a school is assessed by the local community where it is built, by the personnel working there and, possibly, by its students. A local road is judged by the people who live in its proximity, while a freeway is of interest to residents of a vaster area.

Such assessments are highly structured and refer to a small set of well–defined characteristics. For example, the public could judge “aesthetic qualities”, “usefulness” and “accessibility” of a public building.

These digitalized information allows for the provision of a series of automatically generated summary statistics. When all the relevant information on public works are contained in a digital repository, computing summary statistics of interest does not require any ad hoc data gathering and processing, but only the production of a “view” of the available digitalized data.

Such method of producing statistics in itself represents a novelty with respect to current practices, a topic on which I will return.

The statistics produced inform on the general characteristics of the projects, the unit costs of works of comparable types (for example, of a mile of road of a given category) and their completion time.

They moreover express the overall assessment by the public. Also, the availability of information on many projects allows for the computation of rankings of individual projects on several dimensions.

Summary statistics could be available also for various subsets of the data, providing views by geographic unit, by type of administration, and by contracting firm.

The assessments of the quality of the completed public works then reverberates to administrations, administrators and firms: The reputation of all these actors is a function of their past performances, as perceived by others.

Political appointees and parties also could come into play. The assessments of projects could also reverberate to the political appointees who are at the head of public administrations executing them, and to their political parties, providing electors with useful policy–derived “hard data”.

Reputation–based governance of public works would establish a number of incentives and of disincentives.

The visibility of various rankings of completed public works, of the administrations who carried them out, of the administrators involved, and of the contracting firms, by itself puts a premium on honest and efficient behaviour, inasmuch as such information influences electoral choices.

Also, public administrators would be pressured not to be looked down by their peers. The visibility of their reputation rankings would encourage meritocratic career decision by their superiors.

As for firms, to the extent that reputation matters in determining the outcome of public procurement, they would want to receive good ratings. Moreover, if a firm is active in both the public and in the private sector, a good reputation in the former would be expendable in the latter.

Most importantly, reputation considerations could be employed within source selection procedures, that is, contractors could be chosen not only according to the price and technical evaluation of their bids, but also depending on their reputation.

!!! New methods of production of statistical information and new venues for quantitative analyses

Reputation–based governance would bring about important changes in the availability of governance–related statistics.