1

The principal-agent model and the network theory as framework for administrative

procedures

Social Security in Belgium

Paper presented at the EGPA conference “Public Manager under pressure: between politics,

professionalism and civil society”, Milan, September 6-9, 2006 (Study group VI : Governance of

Public Sector Organizations).

Authors: Amaury Legrain & Tom Auwers

(Federal public Service Social Security, Belgium)

The theoretical framework

Coordinating a cluster of independent agencies is not easy to do, given the many factors that must

be taken into account. Nevertheless, certain theories can offer a sufficient basis to structure inter-

organizational relations within the public sector. When speaking about "guidance of agencies",

most scientists and even public managers immediately think of the agency theory and its

corollary, the principal-agent model. This is, in fact, the theoretical model that was used as the

groundwork for all administrative reforms in the last two decades. Nevertheless, another theory

may be taking over this dominant position: the network theory.

The dominant model: the agency theory

Independence and specialization

Since the mid-80s, many OECD countries have undergone fairly important transformations of

their public sector. One of the best known phenomena is no doubt what the Anglo-Saxons call

agentification of the public sector. This refers to breaking down the public sector into small

specialized bodies ("agencies"). The creation of these organizations generally goes hand-in-hand

with the award of a certain amount of management’s autonomy. In other words, this means a

reduction in interference of the political level and/or certain cross-sector administrative bodies

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(such as the ministries of the Budget or of Public Service) and central departments in the way

administrative affairs are executed by the agencies (Lupia, 2001; ter Bogt, 1999). These new

organizations can generally be identified by the degree of independence they are given. Some

can freely determine the use of resources made available to them and the organization of their

internal management (internal autonomy); others, conversely, have the possibility to determine

(some of) their assignments and strategic objectives themselves, alongside operational

independence (external autonomy) (Van Thiel, 2004). Agencies have also been created to deal

with a particular territory (territorial autonomy) or to manage a specific field of expertise

(functional autonomy) (Albertini, 1998).

These reforms are part of a broader institutional framework that saw OECD countries reform the

organization of their public administrations under the combined pressure of budgetary constraints

and social-economic evolution, to better respond to observed or suggested malfunctioning of the

administrative machine (Pollit & Bouckaert, 2004). The main objective of these changes was to

abandon the system of ministries with general competence in favor of organizations specialized

in a limited field of competence in order to create expertise and sufficient critical mass to

increase efficiency of public organizations. The smaller organizations were considered to be

easier to manage and consequently they could establish much more productive ties with the

policy environment (Van Thiel & others, 1999 & Verhoest & Legrain, 2004). Some economic

theories support this movement by affirming that greater responsibility for results and better

appropriation of products and services by the civil servants should improve the quality of their

results and actions (ter Bogt, 1999). Finally, a responsible, specialized civil service would enable

the political authorities to focus more on strategic decisions and less on operational details. The

quality of decision-making within the public sector would be improved and the influence of the

political world on public policy cycles would be reinforced (Van Twist, 1998).

Guidance of autonomous agencies

The agency theory underlines the management’s autonomy and the functional specialization of

agencies as a guarantee of the efficiency of the public sector. This newly won autonomy can

hardly fail to affect relations between these new agencies and their supervisory authority, whether

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it is political (ministers and their cabinets) or administrative (central departments). According to

this theory, a new, individualized system of inter-organizational relations is therefore set up and

can be defined using the principal-agent model (Shapiro, 2005). The supervisory authority thus

becomes the principal, which, for reasons of efficiency, delegates part of its mission to

specialized implementing parties (the agents). Their relation is mainly governed by means of a

contract (formal or no), which determines the rights and obligations of each party, including the

results that the principal would like to see, as well as the resources made available by the

principal to enable the agencies to carry out the assignment given to them (Stassart & de

Visscher, 2005).

The principal must therefore trust the expertise and professional know-how of the agent.

Nevertheless, the principal-agent model starts with the idea that the players in this new relation

act in a rational way and in keeping with diverging interests. Therefore, the principal would like

to get maximum results while devoting as little resources as possible, whereas the agent's

objective is to maximize its resources while minimizing its obligations with regard to the

principal. This divergence is stronger when accentuated by the fact that the agent has an

advantage. By its specialization and many contacts with the policy environment, the agent

masters the field of expertise and the assignments stipulated in the contract much better than the

principal. In a rather Machiavellian way, the agent will therefore tend to limit or even

deliberately manipulate the flows of information given to the principal (Pratt & Zeckhauser

(1985) In: Stassart & de Visscher, 2005, 1985; Benschop, 1997).

To try to counter this information gap and achieve good implementation of the contract, the

principal endeavors to establish monitoring systems to ensure sufficient, quality information

flows. But these control systems must meet two conditions. First, they cannot be organized in

such a way as to neutralize the advantages associated with the autonomy and specialization of the

agent. Consequently, the control can only be exercised by means of the establishment of an ex

ante contract and by systems to monitor the agents’ results ex post. In addition, the control

systems must take account of the costs they entail. Establishing inter-relational rules and

ensuring that they are applied well cannot be done without injecting human, financial and

logistical resources. So the control must not entail costs higher than the improvements in

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efficiency produced by specialization and autonomy of the agent (Strausz, 2004; Verhoest, 2000;

Kalhil & Lawarée, 2001).

It should be noted that other schools of thought began with a much more optimistic vision,

considering that the ex post monitoring has the advantage of motivating the agents and making

them responsible for their results. This motivation is all the greater when the principal’s attitude

varies with the quality of the results by means of financial or structural mechanisms of sanctions

and rewards (Chajewski, 2004).

The alternative model: the network coordination theory

Definition of coordination

Coordination theories have also looked into changes in relations within the public sector by

means of an analysis of inter-organizational coordination systems. Various players have tried to

accurately describe inter-organizational coordination. Analyzing the definitions they have used

can identify the main aspects of coordination: central guidelines or voluntary harmonization of

activities and actions of several organizational bodies in the same public cluster that try to

achieve common objectives in a voluntary, planned way using a method of intervention agreed in

advance (Verhoest & Legrain, 2003).

A change in the coordination model

At the beginning of the 80s, the public sector in OECD countries was organized as a hierarchy:

coordination of public policies was done at government level. Once the coordination had been

done and decisions taken, the government communicated them as instructions to the executive

level (the ministers). Systems of controls and a clear definition of competence ensured correct

implementation of political instructions. (Verhoest & Legrain, 2004). The system suffered from a

serious functional deficit that strongly decreased the capacities of public organizations to reach

satisfactory results. This malfunctioning of the administrative machine, in turn, had major

consequences on the impacts of policies carried out and their credibility. As a result, the very

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credibility and legitimacy of the State was brought into question.

The response of the various governments throughout the 80s and the first half of the 90s was to

create autonomous agencies (deconcentration), decentralize and privatize other public bodies. As

explained above, the objective was to create more effective organizations and to improve the

quality of their results. Moreover, their results would automatically mean improvement of the

quality of public policies and their impact on society (the policy outcomes).

The main consequence of agentification was the disconnection of the policy cycle: like large

multinational companies with their production processes, public service divided the policy cycle

into different phases (agenda setting, policy formation, decision-making, policy implementation

and policy evaluation.) and allocated them to various organizations, each one being responsible

for all or part of a stage of the policy cycle (Bouckaert, 1997 & 2003; Laegrid & others, 2003).

Where a central Ministry was previously active, several organizations (ministries, agencies,

private organizations or commercial enterprises) divvied up the work.

This organizational proliferation also meant erosion of responsibility of the political-

administrative players with regard to the final objectives of public policies, which are their

outcomes for society. In fact, hyper-specialization of administrative organizations increases

appropriation by those same organizations of the products and the services that they produce

(policy output). Greater focus on results indubitably improved the quality of those results, but

also clouded the fact that these results are only one link in a much larger chain of production (the

policy cycle) whose aim is to reach much more general objectives (outcomes).

The chain of hierarchical command corresponding to Weber’s bureaucracies no longer applying

for public administrations, the implementation of the policy cycle was confronted with

coordination problems: the quality of various policy outputs was not enough to guarantee the

quality of policy outcomes. A different system of production within these organizations had to be

coordinated to maintain coherence and unity of action within the public sector (Van Twist &

others, 1996; Brans and others, 2003).

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Figure 1 : Disconnection and re-connection of the policy cycle

A new model: the network

The new reforms targeting more effective integration and coordination had to take account of the

management’s autonomy and the functional specialization of public organizations. There could

be no question of going back to a pure hierarchy (reinforced guidance and control, detailed

definition of competence) and new coordination estimates had to be introduced. In Anglo-Saxon

countries, certain initiatives were launched to introduce a market system and competition

between various public bodies (National Service and Community Care Act of 1990 and the

Competing for Quality initiative in 1991 in Great Britain, plus the Pricing Policy Advice initiative

in New Zealand 1993). But these experiments were limited to those countries and were a limited

phenomenon over time (Bouckaert, 2003). Most of the counties chose another system for a new

coordination model: the network system, based on collaboration and integrity of public

organizations.

This new relational model is based on the desire of the public bodies to do a good job and

Policy cycle merged

Policy cycle disconnected

Monolithic structure

Organizational proliferation

2

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therefore the almost automatic willingness to collaborate in a joint strategy and to adapt their

actions and results to the needs of other organizations and to those of the global policy cycle.

Intra-organizational relationships are governed by rules such as voluntary participation, increased

responsibility of the various organizations, mutual tolerance, a feeling of equality and partnership

between organizations. Coordination is done by means of self-regulation of the organizations

involved on a voluntary basis. (Hegner, 1986; Thompson and others, 1991).

This voluntary basis can be explained …

1 By functional interdependence at the level of the achievement of public policies: in an

integrated production cycle of public policies, the bodies involved are generally dependent on

other organizations for the decisions which must be taken, information to be provided to them

or services to be delivered to them

2 By increased pressure from the outside world demanding that State bodies act as a single

player;

3 By an increasingly uncertain political and social environment that encourages the

organizations to establish common systems of defense.

Interactions between the organizations will be even easier if the future network shows a certain

amount of stability. Stability refers to the absence of competition, the absence of deep-seated

divergence of views concerning the existence of the network, its objectives and its operating

rules, the existence of a cognitive and cultural base common to the organizations and the absence

of major structural differences between the organizations. The nature of the environment to be

coordinated and the desire of the participants to collaborate are important, and not only this, the

organizations capacity to move within the network will influence the level of integration of the

network. Consequently, the organizations must have a certain freedom of movement and

decision making (autonomy) and good internal organization in order to be able to respond

effectively to demands and evolution of the network (Verhoest & Legrain, 2003).

According to Verhoest & Legrain, the integration of the collaborating organizations can only be

achieved gradually. Setting up a structured system for exchanges of information and consultation

between the organizations are the first two steps in establishing a network. Only after this can

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more complex systems be put in place such as joint decision--making processes or the integration

of various systems of production. (Verhoest & Legrain, 2003).

Belgian Social Security

Introduction

The Belgian Social Security system as we know it today began just after the Second World War

when systems set up by the trade unions and employers were generalized to cover the entire

population, under the joint responsibility of the State and the social partners. Belgian Social

Security is meant to cover the consequences of nine major risks by means of a financial

intervention. These are referred to as the branches of Social Security.

Risks Intervention of social security Illness Intervention in the cost of illness Loss of income in case of illness Incapacitation allowance Loss of income in case of maternity Incapacitation allowance Loss of income in case of incapacitation

Incapacitation allowance

Old age or premature death Retirement and survival pensions Industrial accidents Compensation for industrial accidents Occupational illnesses Compensation for occupational illness Family charges Family allowance Unemployment Unemployment allowance

These financial interventions are financed by means of contributions from the income of workers

in the system, employers’ contributions and State subsidies. The determinate weight of the social

partners in financing Social Security and their good organization enabled them to be considered

like shareholders in the system (alongside the State) and therefore to be involved in the

development of public policies and in the management of public institutions active in the sector.

Cover of risks and the means of financing vary with the category of workers. In Belgium there

are three major regimes: the regime for employees, the regime for self-employed workers and the

one for civil servants (DGSOC, 2000).

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Under the supervision of the central departments of the State, management of Belgian Social

Security lies essentially with decentralized institutions that enjoy a more or less autonomy. These

institutions are broken down into two levels: the primary network and the secondary networks.

More than 2000 institutions (most of them private) are involved in all three schemes. However,

management of Social Security has been entrusted to a certain number of public or semipublic

institutions.

These organizations form what is referred to as the primary Social Security network and their

assignments are to collect social contributions, to distribute the financial resources allocated to

Social Security and to manage one of the branches of Social Security (preparing regulations,

forecasts and analysis, control of payment organizations, etc.)

Across from these organizations are the payment bodies, grouped by branch and by network: the

secondary networks. In fact, for certain branches of Social Security, the task of paying

allowances is given to partner institutions, established by private initiative but controlled by one

or several public organizations. These payment bodies are in charge of managing individual

dossiers which means investigating the files (awarding or refusing the rights to allowances) and

payment of social benefits.

Contractualization policy

Fifteen organizations, most of them coming from the primary network, received a performance

agreement in 2002 for 10 of them and 2003 for the five remaining institutions. By means of these

contracts, each organization establishes a strategic medium-term plan (three years) in which it

undertakes to reach a certain number of operational results concerning service to the public and

managerial improvement. The contract also determines the resources allocated to these

objectives, those being the operating budget for the organization for the first year, and for the two

following years, a growth margin (gross amounts or increase in amounts as compared to the first

year).

Belgium bound the introduction of a contractual relation to granting greater autonomy with

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regard to internal management. In fact, publication of the first performance agreement, called the

administration contract, was a formal condition for these institutions to be recognized in their

category as Social Security Public Institutions (SSPI) and to take advantage of their new

management’s autonomy.

As concerns financial management, greater responsibility involved dividing the annual

expenditures’ budget into a policy budget and an operating budget, the possibility of long-term

planning based on the methods of calculations contained in the performance agreement, and

greater flexibility and possibilities for budgetary transfers (re-allocation between various

assignments in the same budget year and between the various years for investment credits). The

management of human resources was modernized by the introduction of job profiles, a personnel

plan replacing the imposed organizational framework,, the authorization to choose the most

suitable personnel plan and status. In addition, these SSPI were given full ownership of the

buildings they occupied (Auwers & Robben, 2005).

The new autonomy was real, but compared to that of public companies or foreign agencies, it was

nevertheless limited. In addition, because of the presence of two commissionars from the

government on the management committee, the Belgian State still gave itself the right to look

into the decisions of the institutions ex ante. The commissionar representing the policy minister

could block a decision of the SSPI that it considers counter to the regulations, general interest (=

ministerial policy) or the terms of the performance agreement. Financial transfers, considered by

many to be a crucial aspect of the reform, alongside the performance agreement, could only be

carried out if the SSPI had received approval of the commissionar representing the Ministry of

the Budget.

This autonomy and responsibility had to be combined with a change in the relationship between

the supervisory authority (the ministers and ministries) and the SSPI. The key to the change was

the establishment of partnerships within which each party was considered in the same way.

"Supervision" also undertook to put more emphasis on monitoring ex post that on ex ante control

(Legrain & Larmuseau, 2005).

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Negotiating the performance agreements for 2006-2008

In 2004, the ten first performance agreements for 2002-2004 were extended for one year to allow

for a coherent, efficient approach to the 15 contracts by the establishment of a common timetable

for the negotiation and conclusion of the second-generation agreements. In 2005, the contracting

parties got together to meet the challenge of organizing these negotiations. During the

discussions on the first contracts, negotiations were deliberately limited. The budgetary situation

allowed the Federal State to provide additional funds to finance modernization of the SSPI’s ICT.

Consequently, the institutions had no reason to dispute the budgets that were granted. In

addition, due to lack of interest or a desire to facilitate the discussions, the representatives of the

State had accepted the objectives contained in the contracts with almost no discussion.

The situation in 2005 was very different. The Belgian State had decided not to authorize more

expenditures than those allowed by a strict budgetary policy. In addition, under the impetus of

several assessments and audits that strongly criticized the State’s lack of interest, the State also

decided to enter on a serious discussion with the SSPI with regard to the output level proposed in

the performance agreements.

Coordination of negotiations was entrusted to a central department, the Social Security Federal

public service. This was not an easy job. Many players and organizations had to be involved in

the process.

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Figure 2 : The contracting “pandemonium” in the Belgian social security

At the level of the Federal State, the contract is signed by the Policy Minister(s), the Minister of

Public Service and the Minister of the Budget. Each of these appoints a government

commissionar in charge of administrative supervision and monitoring of the implementation of

the performance agreement. The commissionars and the political level are supported by central

departments : the Social Security Federal public service and by the Budget and Management

Control Federal public service (the Budget Administration). Other federal public services such as

Employment, Labour and Social Concertation are also involved, but generally in consultation

with the Social Security Federal public service. At the level of each institution, the agreement is

signed by the institution’s CEO (the administrator-general) and by a delegation of the

management committee. The delegation of the SSPI is assisted by the central services of the

institution.

Ministre

de Tuelle

Ministre

de Tuelle

Commissionar

of the

Policy Minister

Commissionar

of the

Policy Minister

Support to the political

level

Control,

following-up

concertation

Support

Minister of

the Budget

Minister of

the Budget

Commissionar

Minister of the

Budget

Commissionar

Minister of the

Budget

Support to the

political level

Control,

following-up

concertation

Support

FPS BudgetFPS Budget

Concertation en task

division

Intercabinet working

groups

Minister of

the Civil

Service

Minister of

the Civil

Service

Social Security

Public

Institution

Social Security

Public

Institution

Belgian government

FPS EmplFPS Empl

FPS SocFPS Soc

Ministre

de Tuelle

Ministre

de TuellePolicy

Minister

Policy

Minister

Mgt-boardMgt-board

CEOCEO

Social Security

Public

Institution

Social Security

Public

Institution

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CEOCEO

Social Security

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Social Security

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Institution

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Social Security

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SSPI’s College

Ministre

de Tuelle

Ministre

de Tuelle

Commissionar

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Commissionar

of the

Policy Minister

Support to the political

level

Control,

following-up

concertation

Support

Minister of

the Budget

Minister of

the Budget

Commissionar

Minister of the

Budget

Commissionar

Minister of the

Budget

Support to the

political level

Control,

following-up

concertation

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FPS BudgetFPS Budget

Concertation en task

division

Intercabinet working

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Minister of

the Civil

Service

Minister of

the Civil

Service

Social Security

Public

Institution

Social Security

Public

Institution

Belgian government

FPS EmplFPS Empl

FPS SocFPS Soc

Ministre

de Tuelle

Ministre

de TuellePolicy

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Social Security

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Institution

Social Security

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Social Security

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SSPI’s College

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During negotiations, a Board grouping the 15 CEO’s (the College of Social Security Public

Institutions) must also be taken into account. This coordination body appeared in the mid-90s,

enabling the institutions to speak with a single voice. This is also the epitome of a place where

the common synergies and initiatives of the 15 institutions on subjects concerning management

of Social Security public institutions, HRM policy and common projects are discussed and

common solutions are found. (Legrain & Larmuseau, 2005).

From a purely formal and legal standpoint, the Social Security Federal public service is not

directly involved in contractualization. The performance agreement is considered by the sector as

a direct link between the political authority and the institutions, without any interference from a

central department. Even the assignment to monitor the implementation of the performance

agreements was entrusted to individual civil servants, appointed directly by the ministers.

The framework for the negotiation of contracts for 2006-2008

Inspiration based on the theoretical framework

The theories explained above were used as a basis for structuring and guiding the negotiations of

performance agreements. While respecting the spirit and the background of contractualization

within Social Security, reading these theories enabled the Social Security Federal public service

to draw certain conclusions for monitoring the discussions.

Based on the agency theory, the Social Security Federal public service has defined the following

bases:

1 The relation between an SSPI and the supervisory authority is determined by the specialized

field of expertise. The field of expertise changes from one SSPI to another, and therefore the

discussions on each contract are extremely different from one case to another. 15 different,

individualized processes had thus to be set up;

2 The SSPI and the Belgian State have diverging interests. Consequently, the discussions may

be delayed due to a conflict of interest;

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3 The SSPI has an informational advantage over the representatives of the Belgian State with

regard to the objectives of the performances agreements. This gap will have to be filled

during the preparatory phase and the negotiations themselves;

4 The discussions entail transaction costs for both the SSPI and the Federal State. To reduce

these, a coordination function should be established. In addition, each organization should

determine a single contact point to avoid dispersion of communication (and costs for re-

coordinating);

5 The position and attitude of the Belgian State will be determined in part by the results already

achieved under the first performance agreement. At the very least, the quality of the dossier

presented by the SSPI during negotiations will have some influence on the result of the

negotiations.

Using the network theory, the Social Security Federal public service has defined the following

bases:

1. Negotiation between organizations results in the creation of a temporary network including

all organizations involved in the discussion;

2. The negotiations will be based on the principle of self-regulation of the players. The central

coordinating role will therefore be minimal: this network should be governed by flexible rules

approved by all and respecting the autonomy of each party;

3. The principle of confrontation contained in the negotiation principle represents an obstacle to

good collaboration. The network should be stabilized insofar as possible to enable the

discussions to take place in an optimal way. This means:

a. that the network can only function if common rules governing relations between the

contracting parties are determined before the beginning of the discussions (activation

of the network);

b. that the network can only function if all stakeholders in the process accept the

principle of contractualization and the autonomy of the SSPI (common cognitive

base);

4. The discussions will be handicapped by the remaining hierarchical power that the State has

over the SSPI. The desire to act in keeping with network principles means that the State

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should not be tempted at any time to pull rank in order to close the discussions. The

negotiation process should try to control this risk;

5. Exchange of information and structured consultation between the Belgian State and the SSPI

will guarantee optimal decision-making during discussions.

Network rules: structuring the negotiation process

Based on the theoretical framework, the Social Security Federal public service began with the

principle that the 15 different networks should be coordinated and be given operating rules. On a

proposal from the public service, rules were established and approved by the contracting parties

(by the institutions on 3 December 2004 and by the ministerial cabinets on 26 January 2005).

Setting up framework for negotiations is equivalent to structuring a decision-making process.

According to the ISO 9001:2000 standard, a process is a set of interactive or interrelated

activities transforming inputs into outputs. A process generally moves foreword in an uneven

way: the rules, setting the framework for the process, are drafted in a general way and therefore

can evolve during his implementation. Managing such a process requires improvisation skills

(De Beuk, 2006). In addition, the rules cannot counter the network principles: organizations are

independent and free. The rules are not binding and each party can withdraw at any time or

request a change in rules.

This structural instability of a process must not prevent the stakeholders from drafting a common

framework whose objective should be to determine basic operating rules, general standards and

major guidelines that the network plans to respect. So in fact, these rules are more terms of the

reference framework than hard and fast obligations.

Setting a framework for a process means asking all kinds of questions about the route it will

probably take place. These include:

1 How do these processes move forward?

2 What are the needs for inputs and expectations for outputs?

3 Who will be involved and what will be the role of each party?

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4 What quality standard should the process and/or its final result meet?

5 When and according to what timetable should coordination be organized?

Players and their role

The mapping process, using a network vision, starts with the principle of co-responsibility of the

contracting parties. For each process, the Belgian State and the SSPI concerned is responsible to

see that it goes forward smoothly and for its results, namely an agreed performance agreements

for the years 2006-2008.

As we have seen, the contract should be negotiated and concluded between the Belgian State and

the SSPI. Each contracting party is represented by persons or bodies that have decision-making

power, meaning the power to approve or refuse the (temporary or final) results of the

negotiations. These are decision takers. For the Belgian State, they are the federal government

and the ministers involved, and for the institution, the management committee. These decision

takers do not have the time to negotiate a contract themselves. For this reason, they appoint

representatives – negotiators – who take part in the discussions and make progress reports on the

results already achieved. The minister’s political advisers will thuss represent him, while the

CEO will speak in the name of the institution.

These persons will be backed up by persons or organizations (advisors), whose experience and

expertise will be used during the discussions. They are government commissionars, central

departments and the SSPI administrations. These advisors will be asked to give an opinion on the

proposals of the other party to the contract. Because of its lack of specialists, a Social Security

Federal public service decided not to advise the policy minister, fully delegating this role to the

commissionars representing the policy minister The Federal public service proposed to play the

role of the coordinator of the process, in other words to monitor the 15 negotiation processes,

organize the Secretariat and provide administrative support to the negotiators and their advisors.

The College of Social Security Public Institutions would coordinate the activities of the

institutions whenever common decisions were to be taken.

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Structuring the decisions

To structure the 15 negotiations, the Social Security Federal public service used chain

management. This type of management is based on the principle that any production process can

be considered as a sequential chain of sub-processes that are functionally dependent on each

other. Consequently, to be correctly implemented, each phase of the process depends on the

results of the previous phase; its own results then serve as an input for the subsequent phase

(Vanduivenboden & others, 2000).

Temporary OutputStep 1

Original input Step 2

Final Output

Figure 3 : The chain management process

The final output of the negotiation process is clearly a performance agreement for the years 2006-

2008 agreed by all stakeholders in the process. More particularly, the parties must agree on the

nature of the operational objectives to be introduced in the contract, the proposed output level, the

operating budget covering the first year and the procedures for increasing budgets for subsequent

years. The temporary process outputs will be all the decisions and compromises that must be

reached in order to obtain a final, global compromise, phase after phase, on all these aspects.

This gradual decision-making can only be done if secondary processes deliver the information

and decisions needed for the conclusion of the performance agreements. Four secondary

processes were identified:

1. The budget process: although the SSPI are financed by the Social Security budget, rather

than the Belgian State, the establishment of annual budgets corresponds to a regulation

timetable. The operating budget for 2006 is one of the cornerstones of the contract, and

the negotiation process must take account of the various stages and outputs of this

process;

2. The decision-making process within each party to the contract: negotiators are the ones

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who establish the compromises, but they must be backed by the decision takers. The

negotiation process will therefore depend on the way decisions are taken in each party to

the contract: joint management/labour decisions for the SSPI and the political process for

the State;

Figure 4 : Secondary processes during the negotiation of the performance agreements

3. Quality checkup: evaluation reports on the implementation of the first performance

agreements identified certain weaknesses with regards to the operationalization and

clarity of objectives set down in the contracts (about 12% of the objectives observed).

The Social Security Federal public service was asked to analyze the proposals for

contracts on the basis of the technical quality of the objectives (this is not an analysis of

their suitability) and to refer to the cabinets of the supervisory ministers.

The negotiation process is therefore based on a gradual approach to decision-making, meaning

that the number of parties to the contract agreeing to the compromise, and the number of the

players who approve that compromise, increase as the contract is executed. In other words, the

NEGOTIATING THE

CONTRACT

NEGOTIATING THE

CONTRACTYe

arly

b

udge

tary

pr

oce

ss

Yea

rly

budg

etar

y p

roce

ss

Internal decision-making SSPI

Internal decision-making SSPI

Internal decision-making Belgian State

Internal decision-making Belgian State

Qua

lity checkQ

uality che

ck

NEGOTIATING THE

CONTRACT

NEGOTIATING THE

CONTRACTYe

arly

b

udge

tary

pr

oce

ss

Yea

rly

budg

etar

y p

roce

ss

Internal decision-making SSPI

Internal decision-making SSPI

Internal decision-making Belgian State

Internal decision-making Belgian State

Qua

lity checkQ

uality che

ck

19

negotiation process will consist of organizing a coalition of bodies that by the end of the contract

should progressively include all stakeholders and defend all parties to the contract:

1. Decision step (1): the SSPI proposes a series of objectives, an output level and an estimate

of its financial needs to the policy ministry. The SSPI and the ministers’ advisers approve

the output level and the budgetary proposal: together they compile a dossier and develop a

strategy for the budgetary discussions;

2. Decision step (2): the SSPI and the policy minister’s advisers defend the proposed budget

for the contract and the annual operating budget with the representatives of the Minister

of the Budget. Any additional application for funds (as compared to the indexed budget

of the previous year) is negotiated. The parties agree on a dossier to be sent to the

government for approval: during the political negotiations, the policy minister and the

minister of the Budget defend the dossier together;

3. Decision step (3): if the agreement reached between the parties is not followed at the time

of the approval of the annual operating budget for the SSPI by the Belgian government,

the contracting parties must meet again to adjust the contract (in other words the output)

to the budgetary decisions.

20

Budgetarry

discu

ssions

Stra

tegical d

iscussions

Quality

check

Preparation Negotiation Conclusion

Phase 2

Phase 3

Fase 8

Phase 7 Phas e 5

Phase 6

Phase 4

Phas e 1

Pro

posal

outp

ut

Pro

posal

output

Toets door

begroting

Toets door

begro

ting

Proposal budget 2006

Proposal budget 2006

Proposal Proposal Proposal Proposal contract contract contract contract

+ file + file + file + file budget budget budget budget 2006200620062006

Proposal P roposal P roposal P roposal contract contract contract contract + file + file + file + file

budget budget budget budget 2006200620062006

File for File for File for File for govgovgovgov

File for File for File for File for govgovgovgov

Budget

2006

Budget 2006

Bila

teral

meetin

gBila

teral

meetin

g

Appro

batio

n, sig

anture

and publica

tion

Appro

batio

n, sig

anture and publica

tion

Analyzing quality ouput

Analyzing quality ouput

Analyzing quality ouput

Analyzing quality ouput

Atte

mps

defin

ition

Atte

mps

defin

ition

Trilaterale meeting

Trilaterale meeting

Bilaterale meeting

Bilaterale meeting

Toets door

Voogdij-

ministe

rs

Toets door

Voogdij-

ministers

Gov decision

Gov decision

Pro

posa

l budget

Pro

posal

budget

Trila

teral

meetin

gTrila

teral

meetin

g

Informal

bilateral contacts

Informal

bilateral contacts

ContractContractContractContractContractContractContractContract

Pro

cess m

apping

Prefiguration budget 2006

Prefiguration budget 2006

Analyzing quality ouput

Analyzing quality ouputDS 1

DS 2 DS 3

Figure 5 : Mapping the negotiation process

21

Quality framework

Many methodologies (including ISO 9000:2001) emphasize the importance of quality standards

to be integrated into process. The quality framework for the contracts will refer to all standards

that are to apply to the drafting of future performance agreements. The implementation

evaluation of the first contracts clearly showed two general weak points: lack of clarity in the

definition of objectives and lack of integration between the output level and the allocated input.

As concerns the first problem, the contracting parties define quality standards to optimize clarity

and transparency of objectives contained in the contract. These drafting principles pertained to

the legibility of the contracts, the operationalization of objectives, the clarity of the proposed

output level, the use of performance indicators, compliance with SMART principles and the use

of risk analysis. The Social Security Federal public service was asked to analyze the proposals

for the contracts from this standpoint and to communicate the results of these analyses to the

policy ministries’ advisers.

Figure 6 : Splitting the operating budget

The second quality framework was meant to improve the correspondence of inputs and outputs in

the performance agreements. There was no question of setting up an obligation for the

institutions of implementing global output-oriented budgetting e: this kind of reform would

Investments

Operating costs & HRM costs

Main mission

Investments

Operating costs & HRM costs

Projects

22

require many adaptations such as the introduction of analytical accounting or a cost calculation

system. The idea was to divide the operating budget into two parts: a budget allocated to the

basic missions and a budget devoted to projects. The missions are generally determined on a

historical basis and it is difficult to establish an output-oriented budget without undertaking major

reforms. Consequently, this budget could continue to be calculated on an incremental way. The

projects, on the other hand, have a clear beginning and end: it is therefore much easier to budget

them using amounts calculated according to a zero-based budgeting method. A subsidiary budget

including investments for assignments and for projects was also foreseen in order to better

manage the evolution of investments.

The timetable

Establishing a timetable is far from easy, since the negotiations could be stopped at any time due

to diverging interests. In addition, the process depends on a good implementation of secondary

political processes, which has its own timetable that is far from stable. The only dates that could

be determined were those associated with the annual budgetary procedure. Each institution must

communicate an estimate of its financial needs for the following year to the Budget

Administration by 15 June (the “prefiguration”). The government decides on its budget and on

the budgets of the SSPI in a budgetary "conclave", which is generally held late September/early

October. Budgetary negotiations (first trilateral meeting) therefore cannot take place before 15

June and the dossier for the government must be ready by the end of September. The other stages

must be carried out by 31 December 2005 for contracts taking effect on 1 January 2006.

How the negotiations went forward

Coordinator and self-regulation

Establishing a central coordinator could seem contradictory to the principle of self-regulation of

the network. Under normal circumstances, coordination should be the responsibility of all

member organizations in the network, and not a central coordinator. Nevertheless, organizing

effective coordination entails additional transaction costs. For this reason, some networks

23

decided to dedicate part of the coordination assignment to a central body (Verhoest & Legrain,

2003).

Coordination of a network means structuring inter-organizational relations occurring within the

same network. The coordination mission consists of ascertaining that the negotiation goes

forward as good as possible and complying with rules established beforehand and accepted by all.

During negotiations of the performance agreements 2006-2008, this mission included the

following tasks:

1. Establishing common rules: the coordinator must ascertain that common operating rules

exist, are known to all and are accepted by all. The coordinator must also be sure that the

interpretation of these rules is consistent. As concerns negotiations, there must be a

consensus on the framework established and on its concrete interpretation (needs and

results of various stages, timing, concrete organization, identity of participants, etc.).

These rules (except for the new budgetary framework) were developed by the parties on a

proposal of the Social Security Federal public service and after adaptation based on

comments made by each party. During the negotiation process, the Social Security

Federal public service proposed an interpretation to the parties concerning the concrete

organization of the stage to be carried out (participants, objectives, needs for inputs and

expected outputs). After comments and adjustments by the negotiating parties, the stage

was effectively launched;

2. Control of the application of the rules: the coordinator must not only ascertain that rules

exist but also see that the rules are applied. This control consists first of monitoring the

process and then of developing corrective measures if the negotiation framework is not

respected.

In the negotiation framework, the Social Security Federal public service monitored the

progress of the negotiations, and at any time it could communicate the level of

compromise that had been reached for each process. When the process began to go in a

direction other than the one that had been stipulated by the framework, the Social Security

Federal public service proposed to do mapping, but the final decision lay with the parties

to the contract;

3. Supporting coordination relations: the coordinator’s function is not to carry out the jobs of

24

the stakeholder organizations in their place, but to ascertain that each actor fulfills its role.

For this reason, the coordinator must at times interfere in the inter-organizational

discussion. It can offer organizational support to bodies that must work together:

secretariat, providing material and premises. The coordinator may also be involved in the

content of the coordination itself by taking the position of a neutral person supplying the

organizations with an objective, nonpartisan opinion, drafting reports on discussions and

proposing compromises for any stumbling blocks.

The Social Security Federal public service clearly announced that it would not take

position in the discussions between the contracting parties and that it was only offering

organizational support for the negotiations. Nevertheless, its involvement in the

discussions was not nil. The Federal public service made a prospective interpretation of

the assessment reports on previous contracts and communicated the results to the

ministerial cabinets so that they could have all necessary information. In addition, in the

global negotiations between the cabinets and the SSPI, the Federal public service was

asked to draft reports on the meetings. When the negotiations pertained to the

contractualization system, the parties also used his expertise in contract management.

Finally, during the final adaptations, the Federal public service played the role of an

intermediary for some contracts between the Budget Administration and the institutions

concerned in order to reach an overall agreement on those contracts;

4. Ensuring quality coordination: as stated previously, quality control is crucial for the good

completion of a process. The coordinator must ascertain that the quality standards, like

the basic network rules, are known, understood and applied by all.

Standards proposed by the Federal public Service (quality of the output) and by the

institutions (budgetary framework) and were approved in the same way as the rest of the

negotiation framework. The Social Security Federal public service analyzed the draft

contracts on the basis of quality criteria and communicated the results of these analyses to

the ministerial cabinets. As concerns compliance with the new budgetary framework, the

Budget Federal public service offered its services and the control was done during the

trilateral budgetary discussions.

25

Figure 7 : Repartition of the coordination tasks

The coordination tasks described below can be either totally executed by the network member

organizations or totally delegated to a central organization. In reality, to reduce transaction costs,

the network delegates coordination to a central body but nevertheless maintains a share in

overseeing the inter-organizational relations. This was the case for the negotiation of the

performance agreements 2006-2008.

How the negotiations actually went

The negotiations took place according to the framework established until November 2005. A

letter summarizing the State’s expectations for each future performance agreement was sent to

the SSPI around May 2005. Between June and September, bilateral and then trilateral meetings

were organized to prepare for the governmental decision in October. Between 7 and 9 October,

the budgetary conclave met and set the operating budgets of the institutions for 2006. At this

0

0,5

1

1,5

2

2,5

3

3,5

4Process mapping

Follow up process

Organizational support

Quality framework

Mapping interpretation

Process adaptation

Substantive discussion

Quality control

Central coordination FPS Social Security Selfcoordination

26

stage, new trilateral meetings had to be organized to adjust the contracts to the governmental

decisions on the budget, to determine the method of calculation for the years 2007-2008 and

above all to reach a final consensus on the contracts. These meetings did actually take place, but,

for two reasons, they did not reach a final agreement.

First of all, the SSPI did not accept the political decisions: instead of adapting their contract,

certain SSPI rejected the operating budget decided by the government and asked to continue

negotiations, arguing that political refusal would jeopardize their financial balance or the

implementation of certain major projects. This institutional "protest" was fueled further as a

result of a misunderstanding that occurred in the first budgetary negotiations concerning ancillary

income. Some SSPI in fact do have their own additional income stemming either from payment

for services provided to third parties, or resulting from efficient internal management (rent from

buildings, purchase price of supplies below expectations, interest on investments, etc.). These

SSPI are therefore financed by the Social Security budget as well as by their own income. In the

first trilateral negotiations, the SSPI came with an amount that they considered to be equal to the

financial resources that the Social Security budget would supply to them (in addition to any

income of their own). The Budget Administration, for its part, had a totally different

interpretation because it considered that the amount allocated and approved was an authorization

of expenditure and that this amount included all expenditures of the institutions (and therefore

those covered by their own income as well). Because of this situation, a new political decision

had to be made for the 2006 budgets for seven institutions (out of 15).

After that, global negotiations concerning 15 contracts had to be organized. During the first

negotiations, each SSPI proposed in its contract the commitments that the Federal State would

make to the SSPI. Although the SSPIs College coordinated them, many aspects of these

applications differed from one contract to another. Representatives of the Federal State wanted to

make commitments in the same way for each performance agreements and therefore asked to

negotiate a text common to the 15 contracts. Shortly after the budgetary decision in October

2005, the Budget Administration considered that the chapters of the contracts in which the SSPI

budgets were included, had some information that was not necessary and was even in

contradiction with budgetary regulations. The Budget Administration therefore asked to

27

negotiate a common budgetary chapter. At the time of the "last" trilateral negotiations, global

negotiations had just begun and the individual negotiations in November 2005 could at most

conclude an agreement pertaining to the individual output level to each contract.

Global negotiations were organized between the cabinets and a delegation of the SSPIs’College.

These negotiations were far from easy and lasted until February 2006. There were many

stumbling blocks, as the institutions accused the "budget" component of the State of questioning

the principle of their autonomy (as concerns budgetary transfers), and the representatives of the

State feared that if relations between the State and the SSPI were too horizontal, this would

preclude the State’s potential to take action.

When these common chapters were integrated, a third problem arose. After analyzing the new

draft of the contract, the budget Administration made substantial criticisms of the contract, even

with regard to the individual output level that it was supposed to have approved in November at

the last trilateral meetings. In addition, the problem of the budgetary allocations for 2006 had not

be settled because the budgetary chapter did not provide for a solution on the SSPI’ own income

for the 2006 budget and all budgetary problems did not pertain to questions on this ancillary

income. At this time (March 2006), the State took over the whole process in order to find a

solution to the remaining problems. The SSPI were asked to communicate their most recent

opinions and arguments concerning the comments from the Budget Administration and

concerning their budgetary demands. These points were discussed in inter-cabinet working

groups and the results of these exclusively political negotiations had to be integrated by the SSPI

in their performance agreements. This high handed way of dealing with the discussions must be

put in context, however, because most of the requests from institutions (in any case as concerns

their budgets) were accepted (15 March 2006).

The solution consisted of re-indexing the budgets of the 15 institutions. The rise in the index in

2006 was lower than anticipated in the discussions in October 2005; consequently, by re-indexing

the 15 operating budgets downward, the political authorities could liberate a budgetary surplus

roughly equal to the budgetary demands of the SSPI

29

Figure 8 : Implementation of the negotiation process 2005-2006

Pre

pa

ratio

ns

Pre

pa

ratio

ns

Bila

tera

l co

nta

cts

Bila

tera

l co

nta

cts

Tril

ate

ral c

on

tact

sT

rila

tera

l co

nta

cts

Go

vern

me

nt d

eci

sio

nG

ove

rnm

en

t de

cisi

on

Global negotiation : State’s engagementsGlobal negotiation : State’s engagements

Global negotiation : budgetary frameworkGlobal negotiation :

budgetary framework

Trilateral contacts : integration of common

chaptersThe Budget « asked » for changes in the individual

chapters

Trilateral contacts : integration of common

chaptersThe Budget « asked » for changes in the individual

chapters

Political negotiations between ministries’ advisers

about the budgetary demands

Political negotiations between ministries’ advisers

about the budgetary demands

Political negotiations between ministries’ advisers about the

budgetary demands

Political negotiations between ministries’ advisers about the

budgetary demands

Political compromise

Political compromise

Trilateral contacts : agreement on

individual chapters but 7 SSPI rejects the allowed budget

Trilateral contacts : agreement on

individual chapters but 7 SSPI rejects the allowed budget

Political negotiations between ministries’

advisers about the new remarks of the Budget

Political negotiations between ministries’

advisers about the new remarks of the Budget

Political compromise

Political compromise

Adaptation of the contracts : fully respect

of the political compromise

Adaptation of the contracts : fully respect

of the political compromise

Gov

ern

me

nt

app

rova

lG

ove

rnm

en

t ap

pro

val

June-October 2005June-October 2005 November 2005 – Janurary 2006November 2005 – Janurary 2006 Februari – March 2006Februari – March 2006

Négotiations foresseen by planning

Global negotiations

Political negotiations

30

It should be noted that this reallocation of funds was severely criticized by certain not-involved

cabinets and ministers (including the Prime Minister), who considered that the agreement

seriously jeopardized the balanced budget and that the performance agreements included very

few commitments to the fight against social fraud and to promote administrative simplification.

It took another 15 days of political negotiations between the involved ministerial cabinets (of the

Policy Ministers and of the Minister of Budget) to convince their unwilling fellow cabinets.

After intensive discussions, the Belgian government approved the agreement and the 15

performance agreements during the Council of Ministers on 31 March 2006.

The theories put into the practice

The intention of this paper is not to put the agency or the network coordination theory into

question on the basis of the experience of the negotiations of the performance agreements 2006-

2008. Nevertheless, we feel it is important to add to the theoretical discussion on administrative

practice by "testing" the initial hypotheses on the basis of the effective implementation of this

process.

The principal-agent relation of authority is not an individualized relation

It is very clear that the individualistic vision of relations between the State and the agents cannot

encompass the complex nature of inter-organization relations in the public sector. Indeed, it

refers to a single principal, when in fact the agencies receive information and different,

sometimes contradictory, instructions from several principals. In the case of Social Security, a

very clear difference was observed between representatives of the supervisory authority

responsible for the social policy and the supervisory authority responsible for the budgetary

policy, and at times they had considerable problems reaching an agreement before meeting the

institutions. From the standpoint of the agents as well, there are many players. Several agents

can be active in the same fields of expertise, but for different territories or for different stages (or

sub-stages) of the public policy process. For these reasons, relations may become global to the

point that several principals hold simultaneous discussions with several agents on several

31

possible themes: a common project, the commitments binding the representatives of the principal,

the establishment of a contractual framework, etc.

The network theory therefore seems more adequate to provide a response to this kind of situation.

Nevertheless, the dual vision of contractualization should not be rejected out of hand, because it

has certain advantages. First of all, it forces representatives of the State to come to an agreement

and therefore be consistent in their communication with regard to the agents. In addition,

globalization of the relations reduces the involvement of the representatives of the State in the

individual assignments of their agents. The political authority has also to be involved and

informed in all the individual and administrative field of expertise : this can be only by keeping

an individual and specialized relationship between the political authority and each of his

executive agents. . Finally, as was observed at negotiations, globalization of negotiations entails

a risk of seeing principals pull rank in their relations with the agent and this should be avoided

whenever possible.

The principle of the individualized relation should be maintained, but cross-organizational

instruments should be set up to coordinate horizontal actions and discussions, as best

possible, between the various components of the various principals and agents.

There are diverging as well as converging interests

Practice of negotiations clearly showed that an agent and its principal start with diverging

interests, particularly as concerns the budgetary framework for the implementation of the agent’s

missions. The agent generally wants to be able to achieve as many objectives and products as

possible, and therefore hopes to have the budgets needed, whereas the supervisory authority, on

the other hand, has the logic of a balanced budget in which many conditions must be met before

any (limited) funds are made available. This difference in views can undermine the common

cognitive base needed for good collaboration between the various parties. In fact, fear of

exceeding the budget can encourage representatives of the State to reinforce their control over the

agents and therefore bring their independence and the entire underlying system of relations into

question.

32

Nevertheless, the SSPI and the representatives of the State were undeniably moved by a common

desire to reach an agreement, based on converging interests, although other strongly diverging

opinions and commitments considerably slowed down the discussions. Surprising was the fact

that representatives of the policy authority and the institutions which from the very start defended

the same positions against the Budget representatives while, according to the principal-agent

model, they were supposed to be opponents. It should also be noted that the interest of the

representatives of the budget also converged towards those of other players when the compromise

was attacked by other ministerial cabinets.

The principal(s)-agent(s) relations are therefore based on a principle of confrontation, but

also one of collaboration by the gradual establishment of a consensus. These relations must

therefore take into account both diverging and converging interests.

The State is not as weak as one might think, and the framework must be established for its action

The principal-agent model also begins with a vision of the principal’s possibilities that is almost a

caricature. The principal is supposed to have little information, and to be forced to invest in good

monitoring systems in order to counterbalance its "natural" weaknesses. This is forgetting that

the minister's advisers often have an administrative background in the sector in which the agent is

active and, in addition, the information gap, a cornerstone of the agent’s power, does not seem to

come into play when the principal-agent relations are globalized. In fact, because of their

position, it is much easier for the State’s representatives than for those of the agents to compare

fields of expertise and go beyond the specific context in order to have more general discussions.

In this kind of negotiation, hyper-specialization is more of a handicap than an advantage.

Finally, from a purely legal standpoint, it must be recalled that the State maintains hierarchical

rank over its agents, even when they are highly autonomous. The State is the only guardian of

the general interest, and at any time if the situation so requires, it can limit the autonomy or the

partnership relations that it has awarded. This situation will be even truer if the agent’s autonomy

is limited from the start. Agents must never be misled by the promise of a totally equalitarian

33

relation, which, sooner or later, will be questioned in practice, or by administrative law.

In an agent-principal relation, the framework that should be established does not pertain to

the information gap, but to the dominant position of the principal. This position should be

integrated and recognized by the schemes describing the relations that must define the

limits under which the State’s hierarchical power should be exercised over independent

agents under contract.

Many factors influence the degree of collaboration, but nothing is as effective as the will to work

together

During negotiations, many factors play a role either accelerating or slowing down discussions.

The good organization and internal organization of the SSPI and the coordination that already

existed between them (particularly by means of the SSPIs’ College) enable them to enter fairly

easily into either individual or global negotiations. Conversely, the misunderstandings between

the various components of the State (that can be analyzed like poor internal organization if the

State is considered to be a single player) means that diverging information was communicated to

the institutions which sometimes did not know what the official position of the State was and

how they could react to it. As we have seen, a certain amount of political competition between

ministerial cabinets at the end of negotiations, as well as discussions on the merits of budgetary

autonomy of the institution, also blocked the process. The negotiation network therefore started

with serious handicaps: poor organization of the State; difference in views on contractualization

and autonomy framework; lack of structured concertation between the "Budget" component of

the State and the SSPI, as well as an unstable political environment. On the other hand, to its

advantage, it had operating rules accepted by all and good coordination between the SSPI

together and between the institutions and the "policy" component of the State.

Guidance of agencies should therefore set up systems supporting coordination between the

agencies themselves, between the State’s components and between the State and the

agencies. This guidance should particularly focus on establishing a consensus on the

autonomy and the contractualization of the agencies. Since the political and administrative

34

personnel change, this consensus should be recalled and even defended every time, to

ensure good collaboration of the players.

The coordinator’s role cannot be denied

Although both theories begin with the principle that logically, the parties do not need an

intermediary, recent theoretical discussions have nevertheless noted that it is better to delegate

part of the coordination to « outside » organizations. The principal-agent model even accepts

delegating the monitoring to a third party for reasons of efficiency (Strausz, 1997) and theories

on coordination recognize that there is an advantage in having a central coordinator – this reduces

the cost of transactions between parties (Verhoest & Legrain, 2003). The parties must accept the

coordinator’s central role; it consists of four crucial jobs: establishing coordination rules,

ensuring their implementation, stimulating inter-organizational relations and controlling the

quality of relations. These jobs must of course be done in collaboration with the stakeholders.

This function will be even more necessary when the process becomes increasingly complex. For

example, for global negotiations that were very easy to organize, the role of the Social Security

Federal public service was only to monitor and report on the discussions. Conversely, the

procedures for the signature of the contract proved to be very difficult to organize: for each

institution, copies of the contract plus a royal decree approving the contract had to be signed by

several policy ministers, the minister of the budget and the minister of public service. That

number of ministers involved and their identity varied from one SSPI to another, and therefore

several parallel sub-processes were involved that absolutely had to be coordinated to allow for

publication of the contracts on the same date. For this reason, this stage was entirely entrusted to

the Federal public service although logically, it fell under the competence of the ministerial

cabinets.

Consequently, it is better to have the agencies and the supervisory authority accept a

central coordination function, which cannot have hierarchical superiority over the agencies

under any circumstances. This function should essentially be based on the expertise and

force of conviction of the coordinator and its nature could change with the (sub) dossiers.

35

Conclusion

A dominant theory?

Can we conclude that the principal-agent model is obsolete for organizing the guidance of

autonomous agencies? In fact, many hypotheses or affirmations in this theory can easily be

contradicted in political-administrative reality. The principal-agent model starts with a

pessimistic vision that is something of a caricature with regard to relations between a supervisory

authority and its agents. The political and administrative players are said to act in a

Machiavellian way, trying to maximize their own interest. In addition, these relations do not take

account of the political aspect, the establishment of coalitions between principals and agents, the

possible presence of other agents and the fragmentation of the principal.

The network theory is not free of criticism either. Unlike the principal-agent model, it tends to be

excessively positive and optimistic with regard to the motivations of the political and

administrative players. Driven by certain constraints and the general interest, the organizations

are said to have a natural tendency to work together and to establish common relational rules. In

practice, relations between administrative organizations are not this cordial: interdependence,

general interest and common objectives cannot prevent deep-seated differences or confrontation

of different basic commitments. The allocation of budgetary margins gives rise to serious

confrontation at both political and administrative levels. Nevertheless, it is true that neither

agencies nor the supervisory authority have an interest in a definitely blocking the dossiers under

discussion. Sooner or later, a solution must be found, which may mean that the State pulls rank

over its agencies.

Good guidance of agencies has therefore to be based on a subtle mixture of the two theoretical

frameworks. It must be able to take account of individual channels and global channels,

divergent interests, and coalition buildings. It must recognize the overriding position of the State

while establishing a context for a partnership relation and cooperation with its agencies, without

undermining political responsibility and interest in the agencies. The components of the State

36

(and the agencies in the global discussions) must be encouraged to speak with a single voice,

while providing systems of coordination and consultation that considers them to be full-fledged

partners. A central coordination function should be created, but without installing a new

hierarchy over the agencies.

Theories to help the public sector

This article and the establishment of a framework of negotiations are both demonstrations that the

theories developed in the context of administrative sciences and new public management can be

used to create a framework and even to set up administrative procedures. Nevertheless, the use

of such theories is subject to one condition: they must not be applied in a automatic way.

Circumstances in the field of application, as well as sensitivities of the persons concerned, must

be taken into account.

As we have seen, the contracting parties have not always followed this framework. The objective

was to give the parties a framework and principles for negotiations in order to maintain their

contractualization and the partnership spirit underlying them, and of course to launch

coordination on a firm, non-conflicting ground. Too dogmatic an application of the theories and a

strict methodology could cause unnecessary friction and negative reactions from the contracting

partners, delaying (and even jeopardizing) any improvement of the system. Consequently it was

preferable to be flexible at times in the application of the principles, as long as the negotiation

respected the objectives set for it. The objective of a negotiation of a contractual relationship is

not perfect scientific quality – it is the conclusion of a contract without the State having to use its

hierarchical power too often.

37

Literature cited

Albertini J.-B. (1998), Contribution à une théorie de l’Etat déconcentré, Bruylant, Bruxelles,

1998, 423p

Benschop A. (1997), Transactiekosten in de Economische Sociologie, Universiteit van

Amsterdam

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