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Chapter 1
The Challenges of Public-Sector Project Management and the Coming Storm
THE DISTINGUISHING CHARACTERISTICS OF THE PUBLIC SECTOR
Before embarking on a study of public-sector project management, including its unique characteristics, we should first identify how the public sector differs from the private sector. More differences exist between private-sector organizations and public-sector organizations than just their approach to earning and distributing revenue.
Of course, there are differences among public-sector agencies as well. Some public-sector organizations can be defined as public enterprises that are charged with the provision of services on a self-supporting basis. These include municipal utilities that provide water, wastewater, sewer, and other services. Other public-sector organizations can arguably be described as only quasi-public. Examples of these organizations are state-supported universities, which receive an increasingly lower percentage of their operating funds from the states they are in.
Some public-sector organizations provide direct services to the public, although those services are increasingly being outsourced as well. A good example is the provision of mental health services by state institutions. Until the 1970s, state institutions were one of the primary modes of service provision to people with mental illnesses or mental retardation. Since then, those institutions have largely been closed, and service provision has moved to private hospitals.
Other public-sector agencies set standards for the industries or perform economic regulation. Public service commissions at the federal and state levels set rates for gas, electricity, and telecommunications providers. In the past decade, some of those services have been deregulated, and market mechanisms are allowed to set rates. Nonetheless, public service commissions still retain general oversight of the quality of services and the maintenance of effective markets.
Some public-sector organizations are also responsible for ensuring that other agencies comply with the myriad of laws, rules, and process requirements that have been levied on public-sector agencies. Those organizations exercise formal and informal supervision of other agencies and may set requirements for agency operations. Budget agencies not only prepare the budget for the jurisdiction (e.g., the city, the state, the nation) but also are responsible for ensuring that the agencies comply with budget requirements and conform to appropriated limits. These agencies create or enforce many of the constraints that impact public-sector projects.
Despite this array of types of public-sector organizations, they have some shared characteristics, particularly with regard to the management of their projects. Descriptions of those shared characteristics follow.
The Public-Service Purpose
Although they sometimes provide services to distinct populations (like issuing hunting and fishing licenses), all public-sector organizations operate to serve the larger public. That service to the public complicates the management of public agencies and public-sector projects, because it makes identifying objectives much more complex. Not only do a variety of opinions attend the best way to serve that public, but the public itself is difficult to define. For example, what is the goal of a public-sector program designed to revitalize neighborhoods? And who is the public to be served by that program? Is the goal of the program to encourage new investment and development in the neighborhood, which might draw new residents to the neighborhood and consequently drive out current low-income residents? Or is the goal to make housing affordable to current residents? The answers to those tough questions are not without controversy and can substantially impact the direction of the program and the projects within it.
In general, public-sector agencies lack the simple measures of performance, like return on investment (ROI), that private-sector organizations enjoy. Although simple project outcomes, like on-budget performance and timeliness, can be measured, larger outcomes, like the impact on public welfare, are more difficult to measure.
Overlapping Oversight Mechanisms
Public agencies are constrained by overlapping oversight structures. A public agency may operate under (1) the oversight of an elected executive (e.g., a governor or the President), (2) oversight agencies like the Government Accountability Office (GAO) or an office of the budget at the state level, (3) legislative bodies and their own oversight agencies (e.g., a legislative budget office), and (4) elected oversight officials, such as state auditors and treasurers. The constraints of these overlapping oversight agencies are embedded in statutes, rules, executive orders, and required processes. This overlapping oversight represents, at the operational level, the system of checks and balances that limits the power of government agencies to operate outside the bounds of public authorization.
As a result of this overlapping oversight, public-sector projects may be required to dedicate substantial resources to ensuring that constraints are not violated and that oversight agencies are placated. These constraints are, in fact, designed to limit agency discretion and operations so that public-sector employees remain accountable. In addition, the penalties on public-sector agencies for violating these constraints are so severe that public-sector agencies may be very risk averse, even to the extent of choosing compliance over the attainment of business objectives. These overlapping oversight mechanisms also increase the number of project stakeholders with an interest in a project.
For reference throughout this book, it may be useful to identify the hierarchy of official and formal constraints that impact public-sector projects. They are as described in hierarchical order in Table 1.1.
Table 1.1 Official Constraints of Public-Sector Projects
In national governments, the executive is typically called the president; in states, it is called the governor, and in cities, the mayor. In city governments, the legislative body is usually called the city council. For other levels of government, other terms may be applied. For example, in U.S. county governments, the executive and legislative functions are both performed by the county commission made up of elected commissioners.
A Short Planning Horizon
Private-sector organizations like to presume that they operate at higher speed than public-sector agencies. Sometimes they do, but there is one area in which the public sector is required to move more quickly. Public-sector agencies have a shorter planning horizon than private-sector organizations because of electoral cycles. Although some public-sector agencies are not subject to election cycles (e.g., publicly supported universities and other board-governed agencies), those that are subject to them are required to articulate an agenda, create plans for implementation of that agenda, and create outcomes in four years, with a four-year grace period if the administration is reelected.
Private-sector, for-profit organizations can establish substantially longer time horizons for product planning and other strategic movements. Public-sector organizations cannot count on the commitment to strategic goals beyond the term of current political officeholders and their appointees.
A Contentious Environment
Every project is subject to conflict and differences of opinion, and private-sector projects may not be supported by all of the organization’s stakeholders. But public-sector organizations are subjected to an organized political opposition. That opposition, usually embedded in the opposition party, may be on the alert for opportunities for criticism of the current administration. In addition, the media, though not explicitly attempting to find fault with the current administration, finds “good copy” in the failures of public-sector projects. Unfortunately, failed projects make better stories than successful projects. Both of these factors in combination cause public-sector project managers to feel that they operate in a hostile environment and that they need to avoid visible failure at all costs.
Overlapping Service Delivery Mechanisms
It is rare that any public-sector agency has a monopoly on providing a public service or attaining a public goal. In the United States, for example, services provided to those with mental illnesses may be funded by federal programs and grants, managed by state agencies, and provided by private providers, the state agencies themselves, and county governments. Similarly, education at any level is subject to a variety of funding mechanisms at various levels of government and is provided to the public by an equally extensive array of organizations.
As a result, public-sector agencies have to coordinate their projects with other agencies and consider the impact of their projects on that array of programs and providers. These overlapping service delivery mechanisms also increase the number of stakeholders involved in a project.
Some observers might argue that another difference between public-sector and private-sector projects is that public-sector employees are not adequately motivated. That is not the case. First, though it is true that public-sector employees may not be motivated by short-term financial rewards such as bonuses, they are motivated by the same drives for professionalism and career growth that inspire private-sector employees. Second, they have learned that their motivation for performance must be tempered with an understanding of the constraints under which they work. Blind ambition or revolutionaries cannot be accommodated in public-sector agencies, and public-sector employees have learned that accomplishing objectives requires sharing responsibility and working within existing systems or shaping those systems incrementally.
Third, because of the long-term nature of most public-sector employment and the group cohesion that characterizes many public-sector agencies, public-sector employees have strong group norms and are motivated by a desire to support their colleagues. Although military operations are perhaps an extreme example of public-sector projects, the behavior of soldiers in combat has been shown to be motivated by allegiance to their comrades in small units. Public-sector project managers may want to keep in mind that, in many cases, the allegiance to the small group exceeds the allegiance to the larger agency or organization.
Last, public-sector employees are also motivated by a concern for the public interest. Operationalizing that concern requires complex behaviors given the challenges inherent in identifying the public interest and the actions that must be taken to serve that interest. Inspiring project team members based on their public-interest motivation is, of course, more challenging than awarding them bonuses, which is probably also impossible in public-sector agencies. It is a factor, however, that astute project managers can apply to induce team performance.
THE CHALLENGES OF PUBLIC-SECTOR PROJECT MANAGEMENT
Private-sector project managers like to assume that their work is more demanding than projects in the public sector. They assume that their projects are more complex, subject to tougher management oversight, and mandated to move at faster speeds. Although private-sector projects can be tough, in many cases, it is easier to accomplish results in the private sector than in the public sector.
Public-sector projects can be more difficult than many private-sector projects because they:
- Operate in an environment of often-conflicting goals and outcomes
- Involve many layers of stakeholders with varied interests
- Must placate political interests and operate under media scrutiny
- Are allowed little tolerance for failure
- Operate in organizations that often have a difficult tim...