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CHAPTER 8

MANAGING THE TRANSITION AND THE CONTRACT

Dig a well before you are thirsty.

- Chinese Proverb

With the contract in place, the Title IV-D agency must settle in for the long haul of managing the public-private relationship: monitoring, interpreting, and enforcing the contract. But first, the agency and the contractor must get over the hump of converting a government-operated child support enforcement program into a private enterprise. If the transition goes smoothly, no one should notice a problem. Families should continue to receive support payments without delay or interruption; child support officials should not be inundated by calls from angry parents, confused employers, or concerned elected officials; former public employees should be content in their new jobs-either with the contractor or elsewhere; and the local news media should not even consider the change controversial enough to do a hard news story on it.

If the contract is managed properly, people should also notice positive changes sooner or later. Parents-both custodial and non-custodial-should notice increased efficiency and an attitude of respect and fairness as they deal with contractor staff. Elected officials should notice improved results: increased collections, more parents involved with and supporting their children, fewer calls from constituents complaining about that %#&* child support system. Former government employees working for the contractor should notice that they have more authority for decisions, perhaps better pay, and greater job satisfaction. Personnel in partnering agencies-district attorneys, court clerks, social service workers, and others-should remark on how well everyone is working together these days on child support enforcement. Above all, the contractor and Title IV-D agency staff should notice a mutual and growing sense of trust, respect, and team spirit in their work together.

Perhaps this is all a bit much to expect from a simple child support privatization contract, but it is the type of vision that Title IV-D directors should have before them-and should communicate often to their staff-as they prepare to relinquish direct control of program operations and assume new roles as contract managers and public sector partners. Approaching the impending partnership with an attitude of cooperation and shared mission, rather than one of suspicion and vigilance, will help them better manage the contract and transition process.

Successful transition from a government-run program to a privatized operation requires careful planning, open and regular communication, sufficient staff training, and adequate time to phase in the transfer of responsibility. Even when privatization involves integrating a new privately operated service with the current child support system or hiring a contractor to help meet the demands of an oversubscribed service such as collections, the Title IV-D agency should be prepared for a period of transition and adjustment. The goal, of course, is to ensure that service is not disrupted, any reduction in productivity is minimal and temporary, and that there are no major surprises during the transition period.

Tips for a Successful Transition

In our study of child support privatization efforts around the country, we asked Title IV-D directors and contractors to recount their experiences during the transition process. The transitions they described ranged from "quite smooth" to "disastrous." The following tips, summarized in Exhibit 8-1, are drawn from their experiences and recommendations.

TIPS FOR A SUCCESSFUL TRANSITION

Develop and follow a detailed transition plan

Allow sufficient time to make the transition

Establish clear lines of communication between the contractor and the Title IV-D agency

Require all parties to meet and work out roles and responsibilities

Plan carefully the transfer of cases and accompanying files and records

Inventory government equipment and inspect public facilities to be used by the contractor

Plan how to best inform public employees, customers, the media, and others

Training, training, and more training

Think through completely how to transfer personnel to the contractor

Develop and follow a detailed transition plan

The transition plan is usually developed jointly by the contractor and officials at the Title IV-D agency. Sometimes the agency asks bidders to submit a transition plan as part of the technical proposal, and sometimes the winning bidder is required to produce a plan shortly after the contract award. The agency then finalizes the details of the plan with the winning contractor as part of the contract negotiation process. To aid negotiation and ensure that no important steps are overlooked, the Title IV-D agency should develop in advance of the first meeting with the contractor a detailed plan for what it will do to facilitate the transition.

Transition planning was quite thorough when Virginia established two new local child support offices to be operated by a private contractor. The contract included a 90-day start-up period and required top contractor staff to be hired within 30 days of award so they could work full-time on the transition. Already in place at the time of award was a transition task force and a preliminary plan detailing the actions the state would take to help bring up the new offices. The task force included the contract administrator and senior staff from the child support enforcemrvices, and program evaluation and monitoring sections, as well as staff from the state agency that supports the Title IV-D automated system. The action plan consisted of a matrix listing each task, the functional unit and individual responsible, the start and deadline dates, and a space for the actual completion date. Some examples of the detailed tasks include:

• inform other departmental units,
• update the field telephone directory,
• notify genetic testing contractors,
• obtain new cost codes for privatized office,
• arrange for automated case transfer.
  

As part of its plan, the Title IV-D agency should ensure that during the transition period its staff continue to work any cases that will be transferred to the contractor. This will prevent delays caused by the contractor inheriting a large backlog of unworked cases. In Virginia, for example, it was made clear to staff that unanswered mail, unprocessed applications, and other lack of follow through on cases would not be tolerated.

Allow sufficient time to make the transition

For full-service contracts, a 60- to 90-day transition period is typical during which the Title IV-D agency continues to maintain service responsibility while the contractor takes the necessary steps to get the facility, equipment, materials, and personnel ready to take over the operation. In several instances, this period was squeezed to six weeks or less in order to meet a firm deadline for privatizing services. Some of the resulting problems included lots of overtime work and high levels of stress for public and private sector staff alike, contractors beginning service delivery in unfinished space, equipment failures, problems in transferring electronic and physical case records, and interruptions in service.

A particular concern for any privatization effort these days is budgeting enough time to install, link, and test computer networks and telecommunications systems used by the contractor and the Title IV-D agency to share data and information. The transition plan must specify in detail who is responsible for these activities and the date by which each task is to be completed.

The Title IV-D agency also must be prepared to compensate the contractor for the costs of starting up the program-for example, for recruiting and training staff, cleaning up case records and converting electronic data files, locating and finishing out space, and moving files and equipment. All of these tasks require a major investment of time and resources by the contractor before the first customer is even served.

Establish clear lines of communication between the contractor and the Title IV-D agency

Nearly everyone recommended that the contractor and Title IV-D agency each designate a manager to serve as the point of contact during the transition. Having a single channel through which all requests, problems, and changes are funneled prevents confusion and miscommunication. In the case of full-service privatization, the transition manager or project officer may need to spend considerable time on-site during the transition phase and early months of privatized service delivery. As one Title IV-D director stated, "You should expect lots of start-up problems and have a designated person to respond quickly and identify solutions."

In addition, it is recommended that the agency's policy, systems, contract, and legal experts be readily available during the transition period. A heavy flow of questions from the contractor should be anticipated and accommodated. Contractors complain that implementation often grinds to a halt while waiting for an agency expert to render a decision or provide technical assistance or guidance on an issue.

Require all parties to meet and work out roles and responsibilities

Successful child support enforcement is the product of many agencies and organizations working cooperatively toward a common goal. As soon as possible after the contract award, the contractor must meet with all the significant partners with whom it will interact. These can include representatives from the local social service agency, judges, state's attorneys, sheriffs, other contractors, and so forth. At these meetings, the contractor and the others should explain how they intend to operate, confirm that they understand each other's roles and responsibilities, and arrange for any needed orientation or cross-training of their respective staffs. For instance, when Georgia began using a private collection agency, the transition was fairly trouble-free in part because the contractor met with staff at each local child support office to explain its operations and establish a working relationship.

Plan carefully the transfer of cases and accompanying files and records

The transition plan should stipulate exactly how cases will be transferred to the contractor and how each type of case should be handled, including any backlogs. For example, the contractor might be instructed to work new cases immediately and gradually take on older cases over the course of a year. Physical case files given to the contractor should be consistently organized and labeled, particularly if the contractor plans to use bar codes to track files. The full-service contractor in Nebraska, who received cases from both state- and county-operated child support offices, reported having major problems during the transition because records for public assistance and non-public assistance cases were filed inconsistently and active and inactive cases were mixed together.

Inventory government equipment and inspect public facilities to be used by the contractor

The Title IV-D agency should also inventory and note the condition of all equipment to be turned over to the contractor and assess the condition of any public space the contractor will use. These actions will prevent problems later during contract closeout and enable the agency to recoup payment for damages that exceed normal wear and tear. Unless already specified in the RFP, the agency and contractor will need to negotiate responsibility for installation and maintenance of data lines and other equipment for joint use. They may also need to negotiate the extent to which the contractor can modify a public facility to meet its needs and determine who does the work and which party pays.

Plan how to best inform public employees, customers, the media, and others

As discussed in Chapter 5, one key to a successful transition is keeping public employees-both those affected by privatization and those who are not-fully informed about the program. The contractor should meet with affected child support staff as soon as possible after the contract award and regularly thereafter during the transition period. Staff who are not involved in the privatization initiative can be kept informed through the agency newsletter, e-mail updates, or other means. Frequent meetings and updates help dispel rumors, build trust, and prevent miscommunication and misunderstanding.

The plan should indicate whether the Title IV-D agency or the contractor is responsible for notifying customers of the changes brought about by privatization, as well as how they will be notified. One suggestion is to phase in the mailing of notification letters since a massive mailing on the same date to all customers will generate an overwhelming number of calls. The contractor and the child support enforcement agency should be prepared to handle a high volume of calls in any case. The initial notice to customers should describe any innovations or changes that the contractor plans to make, such as longer hours, additional voice response features, or a change of location or mailing address.

The plan should also indicate how public relations and media issues will be handled. Rational or not, the public and the press often have higher expectations of the private sector. They can become quite inquisitive and even incensed if a privatized service appears to falter, even during the start-up period. The Title IV-D agency will want to be informed of all media inquiries so it can determine how and by whom responses will be made.

Training, training, and more training

Contractors and Title IV-D directors all emphasized how important staff training is in effecting an orderly transition. Four areas stood out as most important:

• training contractor staff on child support policies and procedures;
  
• preparing public employees to work in the private sector, training them on new procedures, and offering refresher training on old procedures;
  
• training all staff on the use of automated systems-both the state's and the contractor's;
  
• orienting or cross-training contractor staff on the roles and responsibilities of partnering agencies in child support enforcement.
  

It is recommended that the Title IV-D agency and the contractor take responsibility for the areas that they know best. For instance, the state rather than the contractor should train staff on the use of the statewide automated child support enforcement system. Sometimes training sessions alone are not sufficient. Classroom training cannot cover every possible situation and staff usually have new or different questions once they are on the job. Telephone or computer helplines or other forms of follow-along support should be available to staff, particularly during the first months of implementation. Again, whoever provides the training-either the agency or contractor-should be responsible for providing later support.

If a contractor is taking over operation of a local child support office, staff should receive one to two weeks training on the new procedures and have an opportunity to perform a dry run before the doors open. Another suggestion is to have senior staff with strong child support backgrounds roam throughout the office to answer questions during the initial weeks of operation.

Despite stated intentions, training often appears to fall by the way as the demand to process cases and increase collections takes over. Therefore, the Title IV-D agency may wish to consider including minimum ongoing training requirements as part of the contract. The agency will then need to monitor whether the required training actually takes place.

Think through completely how personnel will be transferred to the contractor

Legislation mandating privatization and requiring contractors to hire (or at least consider hiring) public employees usually sets only the broadest parameters for the transfer of staff. This leaves it to the Title IV-D agency and the contractor to work out the details. The transition process is helped tremendously if child support officials carefully think through all the issues surrounding the transfer of staff and develop proposed solutions prior to entering negotiations with the winning bidder.

Some issues to consider-and which have been stumblingblocks in previous privatization efforts-include:

• the comparability of public sector and private sector wages and benefits;
• whether employees can carry over any accumulated leave;
• what happens to employees' public pension funds;
• the contractor's access to public employees prior to the contract start date;
• how quickly the contractor must interview and offer jobs to current employees;
• whether the contractor must reserve positions for employees on extended disability leave, and for how long;
• what hours and at what locations can the contractor require employees to work;
• what to do with employees who are not hired by the contractor for failure to pass a drug test;
• whether employees have the option to return to government service without loss of benefits, and for how long after they start work for the contractor;
• how much of an employee's personnel file is shared with the contractor;
• how much authority the contractor has to dismiss staff, and for what reasons.
  

It is recommended that the Title IV-D agency establish a personnel committee to make recommendations on these and other issues as privatization is being planned-and before the RFP is written.

Transition at the End of Contract

Many of these same transitional issues will need to be addressed at the end of the contract if services are transferred to another contractor or brought back to the state. Only a few of the RFPs we reviewed require the bidder to include a plan for how services will be transferred at the close of contract. More often, the RFP or contract specifies what the contractor will be expected to do at close out, with particular emphasis on the condition and disposition of case records and state-owned equipment or facilities.

Most of the privatized operations we reviewed had not yet come to the end of the first contract period. For those that had, only a couple of contracts had changed hands after the rebid. None of the privatized services had been transferred back to the child support agency. Therefore, the Title IV-D directors interviewed for this study had little or no experience in transferring services from one contractor to another or back to the state.

Nevertheless, contractors in the focus groups and child support directors identified several issues that should be considered when transferring a contract:

Timing the rebid

It is recommended that rebidding should occur early in the final year of the contract so everyone-the current contractor, the new contractor, the Title IV-D agency, and partnering agencies-has enough time to plan and effect an orderly transition. As is the case when transferring services from the public sector to a private firm, the Title IV-D agency will need to be vigilant during the final months of the contract to ensure that cases are worked properly and the outgoing contractor does not leave a backlog of cases or other problems for the incoming contractor to handle.

The right to review the current operation

Allowing potential bidders to visit the office or inspect the operations of the incumbent contractor is a sensitive issue. Private firms are extremely competitive and guard information about their methods closely. Some contractors who provide collection and payment processing services stated flatly that they would never allow a competitor to review their operations or have access to their proprietary systems. On the other hand, if a new company is to take over operation of a privatized child support enforcement office, that company needs to be able to review ongoing services when the contract is rebid and have access to the office during the transition period. The Title IV-D agency should facilitate such access, but also protect the right of the current contractor to safeguard proprietary information.

Former public employees

An issue that has not been addressed in current contracts is the effect on former public employees of a change in contractors. Although some full-service contracts specify that the contractor must hire and retain public employees when the child support office is privatized, they are silent on the fate of those workers when the contract changes hands. Experience in areas outside of child support enforcement, such as in military contracting, shows that the new contractor is usually anxious to hire existing staff since they are experienced and qualified to perform the work and already on site. This greatly reduces the contractor's recruitment and training costs and helps smooth the transition. Most times the work force remains practically the same, just the management changes.

Since it is recommended that full-service child support enforcement contracts be awarded for five years (a three-year base period and two option years), this may not become a major issue. After five years in the private sector, former public employees should be competitive, and their jobs should not have to be guaranteed. However, a change in contractors could be problematic if it occurs within a year or two of privatization. and if the new contractor plans to operate with fewer staff or offers substantially lower wages and benefits. In this instance, the Title IV-D agency may want to rebid the contract with the same employee protections provided as before.

Terminating the old contract

When the child support enforcement agency changes contractors, it should ensure that service is not disrupted and that the outgoing contractor receives full payment for services rendered. This is easier to accomplish with fixed fee and cost reimbursement contracts than for contingency-based contracts. In the first instance, say with an in-hospital paternity establishment contract, the old contractor provides services one day and the new contractor the next. Service never lapses and the original contractor is paid for all services delivered through the last day of the contract.

The situation is different for contingency-based contracts, such as those commonly used for collection and locate services. Here contractors are assigned a volume of cases to work and are paid only for those cases in which they produce results. They often must work a case for months to locate a non-custodial parent and sometimes more than a year to get an obligor to make regular payments. These contractors want assurance that they will receive full credit for cases they have successfully worked. They will have little incentive to work cases in the last months of a contract if it is unlikely that they can succeed in the time allotted or be fully compensated for their efforts.

Therefore, the Title IV-D agency cannot simply transfer a contingency-based contract overnight to a new firm as it does with other contracts. The work and/or contractor payments must be phased out to ensure continuity of service and fair treatment for the contractor. One option is to have overlapping contracts. For example, after a certain date all new locate cases could be given to a new provider while the old provider would retain and work the cases it had already received. At the end of several months, the old provider would turn over any cases it had not been able to complete successfully . For collections contracts, the solution may be to continue to compensate the original contractor for some period of time-say, up to a year-for work done during the contract period. This way the contractor is motivated to work cases right up to the end of the contract and the service effort does not flag when the new winner of the contract is announced. The implication of such arrangements for the Title IV-D agency is that for some period it must be able to track the work of multiple contractors and make sure that each is credited only for its own successes.

Transferring responsibility

Finally, the Title IV-D agency and the contractors need to develop a detailed plan for transferring program responsibility from one contractor to another or back to the child support agency. The contract with the original contractor should require the firm to hand over cases records, equipment, facilities, and other necessary program materials in a condition so that the new contractor can begin work immediately. The contractor should also be required to cooperate fully in planning and effecting the transfer. The plan may need to make provisions for compensating contractors for carry-over costs incurred after their contracts have ended. For example, a customer service contractor may continue to receive telephone inquires for many months after the contract has ended, or a collection agency may continue to receive payments or correspondence regarding collections accounts.

Monitoring is the process of overseeing and checking the contractor's performance to be sure it meets the contract's performance standards. It is also the chief means of guarding against problems once the contract has begun. The cost of monitoring a contract can vary considerably depending on the type of service provided and the degree of diligence shown by the public agency. National experts in contracting estimate that the cost of contract monitoring-exclusive of other contract administration costs-is between 4 and 10 percent of the contractor costs (Martin, 1993). Osborne and Gaebler (1992) note that cities typically budget around 20 percent of the contract amount for contract management, which includes both monitoring and administration.

Three Main Components of a Monitoring System

According to Rehfuss (1989, 1993), a comprehensive monitoring system has three main components:

Contractor Reports. These are contractor-generated statements of progress. A report details work completed or levels of service provided to date; compares work with the contract requirements-including performance standards; gives expenditures to date; presents a narrative account of problems encountered; and mentions any contract adjustments believed necessary.

Reviews and Audits. These involve thorough inspections of the contractor's facilities and records and can vary greatly depending on the type of service. Some services such as care facilities require surprise visits; other services such as collection and disbursement of funds require financial audits.

Complaints. Relying on citizen complaints is almost always a basic part of contract monitoring. Sometimes complaints come directly to the contractor and are summarized in the contractor report; other times the contracting agency fields complaints. If the contractor is the one compiling complaints, Rehfuss recommends the agency should use additional means, such as customer satisfaction surveys, to check performance.

Title IV-D agencies use all three methods to monitor child support enforcement contracts. The contract document typically specifies that monthly, quarterly, and annual reports must be filed and specifies the content for the each report. Agencies also conduct regular audits of financial transactions and examine a random sample of case records semiannually to ensure compliance with program quality and performance standards. Often, the state's Title IV-D program, including its contractors, is subjected to additional audits by federal and state legislative auditors. A standard provision in all child support privatization contracts is that the contractor must cooperate with all audits.

Who Should Monitor?

In establishing a monitoring system, a key decision regards who should monitor the contract. One option is to use employees from the department that once performed the service. Called "line" or "operating department" monitors, these employees have a strong familiarity with the program and are perhaps the best judges of quality. An alternative is to use "centralized" monitors from the office that arranged and awarded the contract, usually the purchasing or procurement office. Although knowing less about the service than line workers, they are more likely to be objective in their assessments, and their involvement reduces the possibility of collusion between program officers and the contractor. In addition, a line worker who previously performed the function taken over by the contractor can sometimes harbor a grudge or have a preconceived notion of the best way to conduct business that does not correspond to the contractor's approach. This can bias evaluations in a negative direction.

Having clear outcome and performance standards can obviate much of the argument over whether to use operating department or centralized monitors; either one can look at the data and determine whether the contractor is meeting the goals of the contract. The larger issue then becomes how the monitor will use the information. If the monitor will merely issue a report to child support officials who will decide what to do with the findings, then it is a matter of cost: which is less expensive-in-house or outside monitors? On the other hand, if the monitor is also expected to troubleshoot and help the contractor overcome deficiencies or improve performance, program staff from the Title IV-D agency should serve as monitors.

Handling Customer Complaints

A similar conundrum revolves around the issue of whether the contractor or the Title IV-D agency should handle customer complaints. It has been done three ways: by the contractor, by the agency, and by both simultaneously. Factors influencing this decision include how well agency personnel trust the contractor, how important it is for the agency to be directly involved in resolving complaints, and how controversial the privatization decision was. In controversial cases, it may be best for the agency to monitor complaints-even if it has complete faith in the contractor to give an honest accounting-because it will help instill public confidence that the agency has not abandoned responsibility for child support enforcement and is in fact keeping an eye on the contractor.

In any event, it is important for the Title IV-D agency to also conduct client satisfaction surveys to augment complaint data and obtain a complete picture of program operations. The Virginia child support enforcement administration, for example, conducts telephone interviews with clients of its privatized offices, as well as a mail survey which it conducts for all offices. This way satisfaction can be compared between public and private offices.

Managing for results is different from contract monitoring. Monitoring consists of gathering information on the contractor's performance, comparing actual accomplishments to predetermined standards or targets, and rewarding or penalizing the contractor according to the terms of the contract. Managing for results involves using all available management tools in combination with careful monitoring to constantly improve program performance and outcomes over the life of the contract.

Management tools available to the contracting agency include:

• using incentives and penalties as specified in the contract,
• requiring corrective actions,
• publicly praising the contractor for a job well done,
• engaging in joint planning and problem solving with the contractor, sharing best practices,
• reserving the authority to approve key personnel decisions,
• requiring ongoing training of contractor staff,
• modifying the contract when necessary to improve results.
  

The contractor also has a variety of tools that can be used to promote continuous improvement in the privatized program. Among these are the contractor's ability to reorganize the workforce as needed, individual and group incentives that motivate superior performance from staff, and the use of quality circles or other methods to promote innovative practices. A key decision for the contracting agency is whether it will rely mainly on the contractor to manage the privatized program or whether it will employ its own management tools as well.

Delegating Management Authority

In a privatization contract, the contracting agency will always be responsible for program oversight, but the degree of management authority it delegates to the contractor can vary greatly (see Figure 8-1). At one extreme, the agency can take a hands-off, "let the chips fall where they may" approach in which the contractor has full responsibility for program management and operations and is solely responsible for its results. Under this scenario, the agency's function would be mainly to monitor the contractor's compliance with federal and state standards for program operation and to determine whether the goals of the contract have been achieved. Rewards and sanctions would be applied as stated in the contract, perhaps by formula.

The hands-off approach, which is advocated by many contractors, can work well when the agency has full faith and trust in a contractor. The trust must be earned, however, through previous contracts with the agency or by the contractor having an industry wide reputation for management integrity and effectiveness. An advantage of this approach for the agency is that it requires the least amount of staff resources for managing the contract.

Figure 8-1

The other extreme verges on micromanagement. The contractor operates the program, but all important decisions are made by the contracting agency. This can be a legitimate approach to privatization if previous research or experience has shown that there is a single best way to deliver services or if services must be standardized across sites. The contractor in this case would deliver services "by the book." Also at this end of the continuum are personnel contracts in which a private contractor merely supplies workers to fill positions in public agencies and handles all administrative tasks for these individuals such as recruitment, certification, payroll, and benefits administration. The contractor has little or no control over the program, which is directed by public managers.

In the middle of the continuum is a public-private partnership in which the agency and the contractor share management responsibility as well as credit or blame for program results. Under this scenario, the contract manager and the contractor meet frequently using outcome and performance data to review progress, jointly plan next steps, and celebrate success. It is a more fluid situation than at the extremes of the continuum, where the division of management responsibilities is more clear cut and unchanging. In a dynamic partnership, the division of responsibilities negotiated between the contractor and the agency during the contracting process may shift over time as a result of joint problem solving and innovations. Thus, this approach may result in more frequent and substantive contract modifications.

For each privatization contract, the Title IV-D agency must decide where on the continuum it wants to start the management process. This will determine the amount of resources the agency will devote to contract management, the types of reports the contractor must prepare, the frequency of reporting, and the tools the agency will use to manage the contract.

Managing for Results in Child Support Enforcement

The cross-sectional study of child support privatization conducted for this guide revealed that child support enforcement agencies are still feeling their way through the process of managing privatized services, particularly in the area of full-service privatization. Title IV-D directors noted that there are many "gray areas" in managing contracts. For example, contractor staff may commit minor transgressions such as neglecting to read and respond to e-mail on a regular basis. At what point do minor problems become major ones, and how does the contracting agency respond? Also, what happens when the contractor identifies particular agency policies that it believes interferes with the contractor's ability to do the best job?

How does the agency ensure that the contractor works all cases, not just the easy ones?

In describing how they dealt with these issues, Title IV-D directors and contractors interviewed for this study revealed a number of ways in which contracts can be better managed to achieve results:

Commit sufficient resources for contract management

A critical piece of advice from Title IV-D directors is that the agency must commit sufficient management resources if the partnership approach is to succeed. Most directors acknowledge that they initially failed to commit enough staff time for managing (as opposed to just monitoring) the contract.

Sometimes the contract manager must become an advocate for the privatized program within the agency, removing barriers to performance, pushing for procedural reforms, or shifting resources so that the contractor can do a better job. The contract manager may also have to assume the role of mediator to resolve differences between the contractor and others. All of these factors can make contract management labor-intensive. It also means that the contract manager must have sufficient authority to effect needed changes.

Select the contract manager carefully

The directors recommend selecting someone who can "facilitate success." While it is important for the contract manager to have a thorough knowledge of the program and the contract requirements, the attitude and management style of this individual is also important and can have a tremendous impact on the success of the contract. Both child support directors and contractors recommended against using contract managers whose primary means of overseeing the contract is "to play gotcha." The contract manager must be able to use all appropriate tools-incentives, praise, corrective action plans, penalties, etc.-to help ensure superior performance from the contractor. In addition, this person should be able to facilitate cooperative relationships among all parties: the contractor, Title IV-D agency staff, and staff in partnering agencies.

Meet and communicate regularly

Frequent communication between the contract manager and the contractor's project director can help prevent minor problems from becoming crises. Contact will be frequent, of course, during contract start up as roles and responsibilities are clarified and transitional problems are resolved. But, in addition to required reports and reviews, some sort of regular, less formal contact should be maintained throughout the life of the contract. One manager reported that she routinely calls contractors every two weeks for an informal chat to check progress, get a heads up on potential problems, brief them on matters of interest, and generally show that the agency is interested in the contractors' issues and concerns.

Focus on results

In managing the contract, the main purpose of all decisions, actions, and interactions should be on improving program outcomes and performance. This is why it is so important to have reliable, current outcome and performance data available for regular periodic review by both the contract manager and the contractor. Monthly reports issued by the Title IV-D agency that indicate how well each contractor has done on outcomes of interest can keep the program focused. After reviewing current statistics and trends, the contract manager and the contractor can decide-independently or jointly, depending on how much management authority has been delegated-whether additional management tools are needed. The report itself can be fairly simple. As one collections contractor stated, "We don't need an elaborate system of monitoring and reporting. The agency should be happy if collections are up and there are no complaints."

Respond promptly to contractor requests

Contractors often ask the Title IV-D agency to do things such as provide training on systems or procedures, clarify rules and policies, or help resolve conflicts with other agencies or child support staff. These requests should be handled promptly. Contractors complain that there sometimes appears to be a double standard: the child support agency expects them to provide information or respond to directives quickly, yet it often takes months for the agency to react to their requests.

Include the contractor as part of the team

Contractor staff should be included in meetings, allowed to serve on committees, and receive the same information (memos, newsletters, etc.) as public sector employees who are part of the child support enforcement effort. For example, the directors of privatized child support offices in Virginia and Wyoming are treated just like directors of publicly operated offices and included in all state and regional meetings.

Use incentives and penalties creatively to boost results

Rather than stating exactly what the incentive or penalty will be for each level of performance, some contracts allow the Title IV-D agency greater latitude in determining how much to reward or penalize a contractor's performance. For instance, the full-service contract in Maryland allows the child support enforcement administration to refund all or part of any penalties assessed if the contractor corrects problems and improves performance in subsequent reporting periods. Another tack is to pay larger incentives for greater gains in performance or pay more for successfully working public assistance cases. When there are multiple contractors providing the same service, the agency might want to award incentive payments only to the top performers for each quarter. Using incentives and penalties creatively like this, rather than relying on all-or-nothing formulas, gives the contracting agency additional leverage to boost performance and outcomes throughout the contract.

Throughout this guide we have stressed the importance of competition-both among private providers and between the private sector and public workers. David Osborne and Ted Gaebler (1992) call competition the "key that will unlock bureaucratic gridlock." John Rehfuss (1993) asserts that promoting continued competition among service providers is the single most important technique for improving service quality, keeping costs down, and preventing contracting problems.

The Title IV-D agency should do more than just rely on market forces to foster competition. It must play an active role in creating and maintaining a competitive environment. The agency has two major opportunities to promote competition: during the bidding and rebidding process and during the contract period itself.

Competition During Bidding and Rebidding

Rehfuss suggests a number of ways to encourage competition in the bid/rebid process. Most of these have been described in earlier chapters and are summarized in Exhibit 8-2.

The Title IV-D agency sometimes may have to become quite active in ensuring that there is an adequate number of competitors for the contracts it lets. In some areas, such as full-service privatization, only a handful of firms exist who compete nationally for contracts. Frequently, the agency has only two bids to evaluate. To promote the type of competition that will keep service quality high and costs down, the agency may want to "grow" some competitors in-state. It could start by issuing a sole-source, fixed fee contract to a local entrepreneur to serve a small portion of the caseload or a small region of the state. Following an incubation period during which it is carefully mentored by agency staff, the contractor could be barred from receiving further sole-source contracts and forced to compete on equal terms with other providers. If the incubation process is successful, the contractor will have gained the skills and experience required to attract sufficient capital so that it can compete and win against the more established firms. The strategy could also be targeted to small and minority business enterprises or groups of public employees who want to go private.

PROMOTING COMPETITION DURING THE BID/REBID PROCESS

• Have government employees compete with outside bidders.
  
• Divide service areas into smaller units. Small contractors, often lower-cost producers, may be able to compete for a smaller unit.
  
• Encourage individual contractors, particularly smaller ones, to bid.
  
• Avoid excessive performance bonds and similar contract provisions that discourage bids and ultimately drive up costs.
  
• Avoid lengthy bidding documents and unnecessary reporting requirements that may intimidate or overwhelm potential contractors.
  
• Pay contractors on time. More providers will bid if the agency has a reputation for prompt payment.
  
• Do not create overly detailed specifications. Focus on outcomes and let the bidder propose the best way to meet them.
  
• Rebid contracts regularly. This helps ensure that ineffective contractors who have developed cozy relationships with public officials are replaced if they fail deliver.
  
• Use sole-source contracting only when competitive bidding is impractical.
  

Adapted from Rehfuss (1993)

Promoting Ongoing Competition

Competition is not restricted to the bidding process; it can-and should-continue long after the contract award. Only a few child support services are contracted out statewide to a single provider. The rest are delivered by multiple private contractors or by a combination of public and private units. Compiling and distributing report card-type reports that show how the various providers are doing on the outcomes of interest is an inexpensive and effective way to kindle the competitive spirit. Add a little fuel in the form of bonuses for the top performers and you have ignited a blaze of competition.

Even when there is only one statewide provider for a service, such as payment processing, competition can be injected beyond the bidding process by comparing the contractor's performance to that of firms or government agencies performing the same task in other states. Performance incentives for being above the national average on selected outcomes or for being in the top ten could significantly boost performance, even when there is no local competition.

No matter how it decides to do it-and the possibilities are limited only by imagination and the ability to convince federal and state authorities go along-the Title IV-D agency should encourage and promote competition at every opportunity.

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