What this chapter covers:
The focus of this chapter is on the institutional capacities and changes required in design of contractual arrangements for the utilization and management of public forests, and for the effective administration of forestry contracts. The chapter opens with a review of the administrative issues and institutional changes required to adapt to the changing role of government agencies and to increasing reliance on contracts in agency operations. Next, the chapter identifies the managerial capacities, structures, processes and procedures that are required in designing, granting and administering forest contracts. Following this, the chapter discusses the administrative changes and reforms required for the awarding and effective administration of contracts.
Evidence presented in Chapter 2 pointed to a worldwide trend in the increased use of contracts in the management and administration of public forest land. This shift in the way government forestry agencies operate requires the development of new organizational and operational capacities. Successful design and use of contracts depend on the ability of government agencies to adapt to new roles; as promoter of actions and as regulator responsible for equity and sustainability.
Historically, many countries have chosen public sector management, public institutions and government command and control as a means of providing public goods, remedying market failures, resolving environmental issues and influencing the distribution of income and wealth (Shirley and Nellis, 1991). The forest sector in particular has been heavily dependent on public sector management by public institutions (Ljungman, 1994).
Starting in the early 1980s conservative governments in the United States and the United Kingdom began what became a worldwide trend towards government down-sizing, reversing the policy of government production and privatizing many traditionally public sector functions. This included the increased use of contracts with the private sector. Primarily driven by structural adjustment programmes (SAP) of international lending institutions such as the World Bank and the International Monetary Fund (IMF), the trend spread to many developing countries in the mid-1980s, and to the agriculture and forestry sectors as well (Morell and Paveri, 1994). Forest concession contracts, which predated this trend, have been an instrument of forestry policy in many countries from the 1970s and even before. However, in very few cases have forest concessions achieved the objectives of sustainable forest management, economic efficiency or equity, primarily because of poor contract administration, monitoring and enforcement (Repetto and Gillis, 1988; Grut, Gray and Egli, 1991). To achieve success with forest contracts, governments must first strengthen their administrative capacities in the design, allocation, supervision and enforcement of forest contracts.
First, we present a hierarchy of the core of functions government organizations should carry out in the design and administration of contracts. Next, we present a framework that may be used for the design of organizational reform and/or new organizations.
To be successful in design, implementation and administration of both forest utilization contracts and procurement for forest management services or other forestry services, government agencies must have ability and capacity in the following areas:
To develop the capability to carry out these functions effectively requires the development of new capacities, the strengthening of existing capacities in certain areas, and changes in the structure and operational procedures of the government forest agencies involved.
The next section surveys the range of functions involved in the management of forests, how they are carried out, and by whom, whether by the forest agency or under contract. Subsequent sections discuss options for carrying out the institutional changes, and the reallocation of functions required in administering forest contracts.
Table 5.1: Operational functions in the management, utilization and conservation of forests on public lands
Function |
Description |
Strategic planning |
There are a variety of planning requirements associated with resource development and conservation which occur at different levels and are done for different reasons. In this case we refer to planning done at the higher levels, including, primarily, land use classification and allocation, economic forecasting, long-term planning, etc. |
Infrastructure development |
Planning, design, construction and maintenance of infrastructure works including transportation systems (roads, bridges, waterways, airstrips) communications, energy, etc. |
Resource use |
Planning and execution of operations associated with consumptive (e.g. timber harvesting) and non-consumptive (e.g. campground management) use of forest resources. |
Resource tending |
Planning and execution of operations associated with the cultivation or maintenance of forest resources. |
Manufacturing |
Planning and execution of operations associated with the processing of forest resources into saleable products (logs, lumber, oils, dyes, fruits, nuts, etc.). |
Marketing |
Development and servicing of markets for timber and non-timber forest products and services. |
Protection |
Planning and executing activities required for the protection of forest resources from both biotic and abiotic forces, principally fire and pests. |
Research |
Basic and applied research associated with any other function. |
Enforcement |
Planning and execution of operations associated with enforcing the laws and regulations applicable to resource development and conservation specified in any and all legal documents including auditing both office and field operations, filing citations and conducting legal proceedings. |
Revenue assessment and revenue collection |
Determining forest fees, assessing parties with payments due and collecting the amounts due. |
The operational functions involved in the management of public forests, their development and conservation, obviously vary among countries. However, it is possible to identify core operational functions that will be applicable in most countries. These key operational functions are described in Table 5.1. Many of these functions will also be involved in the design and administration of contracts, although their implementation may be different.
These core functions associated with the management, utilization and conservation of public forests can be assigned to one or more organizations or groups in any administrative structure (Ross, 1988). Funders finance or bear the cost of the other three core functions. Producers employ the funds for production of the good or service. Users utilize or consume and pay for the forest outputs, products or services. Finally, controllers ensure that those assigned the three other functions perform as required and meet their obligations.
Forest contracts alter these funder, producer, user and controller relationships. Forest utilization and procurement contracts alter who are the producers of forest outputs, forestry inputs or services. Forest management contracts contract out producer activities such as forest inventory, forest management planning, silviculture, reforestation, fire protection, etc. Forest monitoring and supervision contracts may contract out controller functions such as log measurement, on-the-ground logging inspections, regeneration and silvicultural inspections, environmental monitoring, forest auditing, or forest certification.
There is abundant literature on the theory and practice of institutional analysis, organizational structures and organizational design. Readers may consult the references at the end of the chapter for further discussion. Here we review three important organizational issues, organizational design, organizational reform and decentralization.
Organizations typically have three primary structural components that Mintzberg (1979) refers to as administrative, operating core and support components. The administrative component is divided further into three sub-components, or levels: strategic apex, middle line, and technostructure. When analyzing or reforming a particular organization, it is useful to group functional units of the organization into these major categories, and then review the details of their activities.
The strategic apex of the administrative component comprises the executive of the organization, the supporting staff and advisory boards or executive committees. These personnel have overall responsibility for achievement of the mission and corresponding objectives of the organization. The strategic apex establishes policy and direction for the organization, provides supervision of internal operations directly or indirectly through intermediaries in the middle line, and manages relationships with the outside environment. Their policy decisions are communicated downward and laterally in the organization through lines of authority, and are put into practice by the middle line and the operating core. The middle line in the administrative component comprises so-called middle management personnel who provide the link between the strategic apex and the operating core. These staff have line authority over staff in the operating core and engage in direct supervision of their work. The technostructure consists primarily of analysts and support services which influence the work of others in the organization principally by investigating and developing means of improving effectiveness.
The operating core component of organizations comprises all departments and sections that put policy into practice through production of outputs or through delivery of services. Public organizations involved in management and conservation of public forest lands produce forest outputs (timber and non-timber), enforce contracts, provide information and engage in planning.
Finally, the support component of organizations includes departments or sections that do not engage directly in the production of outputs or delivery of services to clients outside the organization. Instead, this component includes staff devoted to supporting the activities of both administration and line staff. They provide necessary internal services such as legal, financial, accounting, personnel, purchasing and research.
An important concept in institutional analysis and organizational design of public forestry is ”decentralization“. This popular term, often misused and poorly understood, is commonly proposed as a remedy for fundamental problems in the public sector. There are two aspects of decentralization, both relevant in the design of forestry organizations: geographic decentralization, and decentralization of decision making. Organizations may be decentralized geographically by having offices and staff located in numerous and distant areas. The management of forest lands and forest resources are, by nature, geographically dispersed activities. However, although an organization may be geographically decentralized, decision-making need not be.
Decentralization of decision-making refers to the autonomy that departments, sections and individual staff have, particularly in the line operations of the organization, in making and implementing decisions (Mintzberg, 1979). In organizations with centralized decision-making, decisions are made and/or approved at relatively high levels. Public agencies in forestry are notorious for being highly centralized, while being geographically decentralized. Forest agencies are often characterized by overly complex, extremely time-consuming, administrative procedures that require the approval of multiple levels within the bureaucracy.
Decentralization of decision-making within organizations has both advantages and disadvantages. Highly centralized designs can enhance coordination and consistency within organizations, but they compromise flexibility and the involvement of departments, sections and staff. In larger organizations engaged in regulatory activities or in the “controlling” functions described above, centralization maintains consistency. However, centralized decision- making may discourage productivity, and the flow of paperwork and approvals of decisions can become extremely slow.
The principal advantages to organizations with decentralized decision-making are the development of ownership in the decisions and products or services provided by the local staff. This can serve to motivate and foster innovation, and enable more appropriate response to local conditions (Mintzberg, 1979). Decentralized decision- making also facilitates the timely processing of paperwork and approvals which improves productivity. The major disadvantage of decentralization is the difficulty in maintaining coordination and consistency among units.
The size and breadth of individual organizations affects the possibility and the need to consider decentralization. Small organizations with limited product lines or service functions have little need to decentralize. Coordination and consistency of centralized decision-making becomes a distinct advantage. Large, complex organizations can reap substantial benefits from a decentralized model for the reasons discussed above.
Important consequences of the greater use of contracts, increased contracting out and privatization are the changes in the staff and skill requirements of the government agencies. This is particularly so in forestry. In New Zealand, following the sale of plantation forests to the private sector, and the shift of protection forests to the Department of Conservation, problems arose with the qualifications and skills of the remaining workers in the public sector (Brown and Valentine,1994). The significant needs for training and retraining had not been anticipated.
Moe (1996) and Halachmi (1995) have identified key staffing issues involved in the increasing use of contracts, contracting out and privatization. Public management shifts from direct production of public goods or services to supervision and control of the complex, and often subtle third-party relationships with contractors or private sector producers. The public agency’s workload changes, requiring different skills of government staff. Government agencies formerly in charge of delivery of the service become responsible for writing, negotiating, enforcing and renegotiating contracts or agreements. This requires quite different skills and training than those that were needed in delivery of the service. The incentive system for employees will change from an output- or delivery-based system to a process-based incentive system, with incentives now based on the sector’s performance. Finally, governments may face difficulties attracting the qualified technical staff required for management of contracts (negotiation, supervision, evaluation, control and enforcement). These new duties are primarily administrative as opposed to “hands-on” direct delivery of public goods and services. It is therefore important that governments carry out a careful planning of the organizational reforms and staffing changes prior to introducing contracting out or privatization.
Contracting out requires changes in administrative procedures and information systems, as well as changes in functions and staff. Both new and revised operational procedures and manuals are needed to describe the new protocols and decision-making responsibilities, and the detailed procedures each staff member must follow. The development of operations manuals follows logically from the development of detailed job descriptions for individual staff positions. Under contracting out, the new responsibilities of staff will involve primarily the evaluation of the contractor’s operations and performance. This requires a shift in procedures to auditing, accounting and ensuring contract compliance. New information systems will be required that focus on contract performance.
Even activities such as monitoring of compliance in forest resource utilization contracts may be contracted out. In that case, it will then be necessary to audit the performance of the monitoring organization.
Increased use of contracts in the management and administration of public forest lands will result in substantial changes in equipment and infrastructure requirements. Contracting arrangements will require different equipment for contract design and negotiation, and particularly for monitoring and supervision of contract performance and office equipment such as computers and software, as well as surveillance equipment, vehicles, boats, aircraft, remote sensing, etc.
Government agencies, formerly engaged in the production of goods or services will experience reductions in the need for heavy equipment and production equipment, such as logging equipment, road construction equipment, or sawmill equipment and associated buildings maintenance shops and other infrastructure.
Contracting arrangements within the forestry sector will also require changes in other government departments and agencies. Chapter 3 stressed the importance of considering the cross-sectoral linkages among departments in the design of new institutional structures and in institutional reforms.
Contracting out and/or privatization of forestry activities will require legal advice and guidance from the government’s central legal department, assistance in drafting and interpreting legislation and regulations, and support in contract design and writing contract terms. This may require additional legal capacity to be able to proceed without delays.
Monitoring and supervision of contracts will require coordination with other resource departments such as petroleum, mining, fisheries and environment, both to benefit from their experience in monitoring and supervision and to achieve coordination and consistency in monitoring and enforcement. Enforcement may also require coordination with the central legal department to increase capacity for legal action against contract violations and in prosecution.
The process for institutional assessment and reform of forestry organizations, or for the design of new organizations, may be divided into nine steps. The process applies equally to the analysis and reform of existing organizations or to the design of new ones. The nine steps are:
The first step in the design process is to review and redefine the organization’s mission. The mission statement is an important starting point in organizational reform or design. It identifies, in the broadest sense, the purpose and boundaries of operation of the organization, and its overall direction. Morell and Paveri (1994) observed that the absence of a clear mission statement in public sector forestry organizations was one of the principal reasons for poor performance. The mission statement itself may begin with a general statement about the purpose and objectives of the organization, followed by statements identifying the organization’s operational and core functions. Following this the organization may establish mid- and long-term goals along with a timetable for their achievement.
Once the mission has been defined, the next step is to review the organization’s role within the government’s overall institutional structure. This entails specifying the relationships with other organizations in the institutional structure. The financial aspects of these relationships should be defined, as well as the authority structure, reporting requirements, decision-making powers and any shared human and physical resources. The purpose is to identify any conflicts in mission, policy objectives, functions or programmes among other organizations.
The third step is the design of tasks within the organization and the identification of tasks and individual staff positions. This entails defining specifically all of the tasks associated with successful performance of the operational functions, and deciding how these should be grouped into positions. Issues that must be addressed at this stage are horizontal and vertical job specialization. The former refers to how broad in scope each position will be, that is, how many different tasks will be the responsibility of a single position. The latter corresponds to the degree of autonomy or control incumbents exercise in the performance of the job.
Once the full range of tasks and positions has been defined, the next step is the formalization of each job through the development of job specifications. This is accomplished by writing job descriptions. Included in each position description should be a statement of the qualifications and the training required, or the training needed to prepare incumbents for the job.
After tasks have been defined and job descriptions created for each position, the next step is to develop the structure for the organization. This is done by grouping the various positions into units (departments or sections) and deciding how large each unit should be. This process establishes the structural hierarchy of the organization and the system of formal authority within it (Mintzberg,1979). The process is aided by the development of an organizational chart, which diagrams the structure of individual units and shows their relationships to each other.
Grouping of units is done for a number of reasons (Mintzberg, 1979). Grouping units creates a system of shared supervision among units and positions and identifies lines of authority. Therefore, units included in a given group which share resources and groupings become planning units for budget, equipment and other facilities. Finally, groupings normally permit the establishment of common measures of performance.
The size of groupings is an important design parameter because it dictates the shape of the organization and the components. Organizations may be either tall, with long chains of authority and generally small groups, or flat, with relatively few levels and larger unit groupings.
Determining the size of units depends on knowledge of staffing requirements by job type. Given the scale of operations, or the planned production, capacity estimates of the number of positions in each job type must be made. This requires completing a task analysis for each job, in which the time required per day, week, month and year for each job duty is estimated. This information will permit estimating the “productivity” of each employee that may then be compared to the total planned production for the unit to determine the number of workers required. In this manner, staffing totals may be generated for each unit in all components of the organization. These data are needed both to determine budgets and to assess manpower and training needs.
Lateral linkages refer to the design of information flow mechanisms laterally within organizations as opposed to vertically in the hierarchy of authority. This means defining the relationship or communication mechanisms between various groups within the organization. Mintzberg (1979) defines two major classes of lateral linkages: planning and control systems, and liaison systems. Planning systems include activities such as strategic planning and capital budgeting by staff within the strategic apex and higher levels of the middle line, and production scheduling in the operating core. Control systems involve objectives or goals, budgets and work standards that apply at all levels of the organization. Liaison systems involve standing committees with members from units at the same level, and individuals with responsibility for ensuring communication among units within a given level.
Mintzberg (1979) defined five steps in the decision-making process:
The distribution of control over these five components of decision-making will be determined by the type and degree of decentralization. Two dimensions of decentralization: (a) geographic, and (b) structural decentralization of decision-making, were discussed above. Decision power may also be decentralized vertically and/or horizontally. Vertical decentralization refers to the distribution of power over the five components of decision-making down the chain of authority within the organization; in other words, how power is allocated among the various levels (strategic apex, middle line, operating core). Horizontal decentralization describes how decision-making powers are distributed laterally within a single level of the organization.
There are advantages and disadvantages in the different kinds of decentralization in different types of organization. Those involved in design or reform of organizations will have to find the best model for the specific organization, its situation and its tasks. Designers and managers of organizations must be prepared to evaluate different models for decentralization of decision-making in searching for the best options or combination.
Once the tasks have been determined for all units, and staffing requirements established for all positions within the organization, the next step is to assess equipment and infrastructure needs. Equipment and infrastructure needs should evolve directly from the tasks and job descriptions and from knowledge of the production processes or services to be delivered. Lists of equipment by number and type should be drawn up by units and departments based on their specific needs. These data are needed to generate capital and operating budgets, and in the development of a procurement plan.
This is a very important step. It determines overall costs for the organization’s activities, and determines the funding requirements for the organization or the revenues that will be required to finance the operations. The long-term sustainability of the organization depends on a steady source of adequate funding. If budgets are excessive compared to sources of revenue, maintaining performance or production at the planned capacity and desired quality will not be sustainable. Public institutions that are dependent on tax revenues from the national budget are vulnerable to revenue shortfalls and budget cutbacks, especially in a climate of government down-sizing.
Budgets should be developed by units, sections or departments, and based on the staffing, equipment and infrastructure needs. Standard accounting procedures should be applied for estimating both capital and annual operating costs. Realistic assumptions concerning capital replacement needs, particularly for items such as vehicles, boats and field equipment, must be applied, preferably based on historic data.
With respect to labour costs, in order to attract and retain well-qualified personnel, as well as to expect and reward performance, it is important to pay competitive salaries and wages whether in the public or private sector. Klitgaard (1995) mentioned inadequate salaries in the public sector of Ghana as a severe problem and a cause of poor performance by government agencies.
Once unit budgets are available, they may be aggregated to estimate the total budget for the organization. For new organizations or programmes, financial requirements may be expected to be higher in early years because of initial capital expenditures for equipment and infrastructure, training and other start-up costs. Care must be taken to plan for the effects of inflation in all budget items, and real increases in labour costs must be planned for, again to promote retention of qualified staff.
Total annual budgets for the organization must be compared to revenue sources to ensure that adequate funding exists. If costs exceed revenue, the organization must be redesigned to reduce costs, additional sources of revenue found, or some combination of the two.
The final step in institutional design or reform is the development of a plan for implementation. This step applies both to the design of new organizations and to the reform of existing ones. A phased implementation plan is recommended, with implementation planned in a series of sequential steps and tasks. Development of the implementation plan starts by decomposing the implementation process into separate tasks, and then scheduling these in a logical sequence with time lines for each task. Project management and project management software programmes can assist in the development of the implementation plan.
In the case of organizational reform, it is best to begin with simple changes in which support appears to be the greatest, so as to demonstrate early successes which will carry over to other units.
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