Matching Responsibilities with Tactics: Administrative Controls and Modern Government

Abstract

This essay shows how to align governance mechanisms to achieve public purposes more effectively. First, it explains the alternative governance arrangements employed by public agencies, which boil down to four elementary mechanism designs. Two of the mechanisms (outlay budgets and fixed-price contracts) impose "before-the-fact" or ex ante control, while the other two (responsibility budgets and flexible-price contracts) rely on "after-the-fact" or ex post control. Then, it demonstrates that mismatching control mechanisms and task requirements can be very costly. Finally, it shows how decisions about alternative designs can reflect the objective of minimizing the sum of delivery and transaction costs and shows how creating and sustaining trust in control relationships is essential to achieving win-win outcomes.

Keywords: Administrative controls, budget process, acquisition, contracts, responsibility budgets

JEL Classification: D73, D80, D23, H56, H61, L22, L33, L13