Trends of reform in Portuguese local government: alternative mechanisms in service delivery

The influence on local government organization and management of new public management practices promoted by national administrative reforms remains an issue of contention. On one hand, some authors argue that these reforms have produced similar results at both the central and local levels of government (John 2001; Sanderson 2001; Van Gramberg & Teicher 2000). Others consider that the political nature of elected mayors and their legitimacy derived from close proximity with voters has limited its impact at the local level (McLaughlin 2002). However, it is unquestionable that local governance has changed over the years, distancing itself from traditional management involving clearly defined hierarchical relations, long-lasting career systems, bureaucratic control mechanisms, and in-house production. The influence of Public Choice theory and the New Public Management reforms have transformed local governance, albeit the degree of change remains under dispute. These changes resulted in the adoption of alternative mechanisms to deliver public services based on the externalization of service delivery, either using market approaches or employing partnerships with nongovernmental organizations (NGOs). The influence of New Public Management reforms brought about new service delivery arrangements replacing traditional bureaucratic in-house supply. Examples of these arrangements include: 1) CCT (Compulsory Competitive Tendering) replacing service delivery through in-house formal hierarchy with contracting (Fenwick, Shaw, & Foreman 1994); 2) Best Value relying on the comparison between delivery by the local government bureaucracy and alternative solutions provided by the market (Sanderson, 2001; Martin & Hartley 2000); 3) Local Government Amendment stressing the separation of municipal functions and highlighting the need for a corporate approach to commercial type functions (Wallis & Dollery 2001); and 4) New Steering Model (NSM) promoting functional decentralization and service autonomy to accomplish efficiency gains and quality in service delivery (Reichard 2003). Currently, local governments are responsible for the provision of an ever growing number of public services, including education, social services, land use planning and management, water supply, wastewater management, solid waste collection and management, and the promotion of local economic development. The mayoral system at the local level associated with the traditional administrative culture has produced resistance to the introduction and implementation of New Public Management reforms. In-house bureaucratic solutions still represent a large proportion of service delivery choices among Portuguese local governments. Nevertheless, the adoption of new governance mechanisms based on market competition and contracting out began increasing by the end of the 1990s. In recent years, we also witnessed the rise of alternatives to both market and hierarchy, through solutions relying on network partnerships and municipal cooperation. The large number of functions assumed by local governments as a result of central government delegation generated a substantial increase in the number and diversity of alternative governance mechanisms. We analyse the choice between these governance mechanisms in light of current trends of administrative reform. Our central hypothesis follows Robert Stein’s 1993 assertion that service characteristics influence the choice among governance mechanisms (hierarchy, market or network). We match three types of municipal services with these governance mechanisms and develop our hypotheses accordingly. First, we expect regulatory and monitoring activities to be provided by hierarchy type mechanisms (Lowi 1964; Peterson 1981; Barney 1999). Second, for activities involving the delivery of private goods and services (rival consumption and exclusion), local government officials will be inclined to use market-type mechanisms (Brown & Potoski 2003a; Ostrom & Ostrom 1977). Finally, social services, generally involving redistributive and social policies are most likely provided by network type mechanisms (Lamothe, Lamothe, & Feiock 2007; Brandsen & Pestoff 2006; Osbourne & McLaughlin 2004; Lowi 1964). The empirical analysis employs data collected from a sample of 102 Portuguese local governments between February and October 2008