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 paper shown how the FPS Social Security strutcurated the negotiation process of 15 performance agreements with the help of both thories. The paper made also some statements about the validity and the usefullness of both theories in coordinating principal-agent relationship

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
1

2. (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
2

3. 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
3

4. 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
4

5. 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).
5

6. Policy cycle merged
Monolithic Organizational
structure
1 proliferation
3
2
Policy cycle disconnected
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
6

7. 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
7

8. 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 allowance
incapacitation
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).
8

9. 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
9

10. 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).
10

11. 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.
11

12. Belgian government
Minister of
Ministre
Policy Minister of
Ministre
Ministre
Policy the Civil
Ministre Minister of the Civil
de Minister
Tuelle
de Tuelle Intercabinet working Minister of Service
de Minister
Tuelle
de Tuelle Service
groups the Budget
the Budget
Support to the
Support to the political political level
level FPS Soc
FPS Soc FPS Budget
FPS Empl FPS Budget
FPS Empl
Support
Commissionar
Commissionar Commissionar
Commissionar Support
of the Minister of the
of the Minister of the
Policy Minister Concertation en task Budget
Policy Minister Budget
division
Control,
Control,
following-up
following-up
concertation
concertation
SSPI’s College
CEO
CEO CEO
CEO CEO
CEO CEO
CEO CEO
CEO
Mgt-board Mgt-board Mgt-board Mgt-board Mgt-board
Mgt-board Mgt-board Mgt-board Mgt-board Mgt-board
Social Security Social Security Social Security Social Security Social Security
Social Security Social Security Social Security Social Security Social Security
Public Public Public Public Public
Public Public Public Public Public
Institution Institution Institution Institution Institution
Institution Institution Institution Institution Institution
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.
12

13. 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;
13

14. 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
14

15. 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?
15

16. 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.
16

17. 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).
Original Temporary Final
input
Step 1 Output
Step 2 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
17

18. 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;
Internal decision-making
Internal decision-making
Belgian State
Belgian State
Quality check
Quality check
Quality check
Quality check
budgetary
budgetary
process
process
Yearly
Yearly
NEGOTIATING
NEGOTIATING
THE
THE
CONTRACT
CONTRACT
Internal decision-making
Internal decision-making
SSPI
SSPI
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
18

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.
19

20. Budget
Budget
Prefiguration
Prefiguration DS 2 DS 3 Gov
2006
2006
budget 2006
budget 2006 Gov
Proposal
Proposal
Bud getarry discussions
budget
budget
decision
decision
Toets door
Toets door
begroting
begroting
Trilaterale
Trilaterale
meeting
meeting Proposal
Proposal
Approbation, siganture and publication
Trilateral
Approbation, siganture and publication
meeting
Trilateral
budget
meeting
budget
Phase 4 200 6
200 6
P roposal
Proposal
contract
contract Phase 6
+ file
+ file
Process mapping
Phas e 1 budget
budget File for
File for
2006
2006 gov
gov Contract
Contract
definition
definition
Attemps
Attemps
Strate gical discussions
Toets door
Toets door
ministers
ministers
Voogdij-
Voogdij-
meeting
Bilateral
meeting
Bilateral
Phase 3
Informal
Proposal
Informal
Proposal
output
output
Bilaterale
Bilaterale bilateral
bilateral
meeting
meeting contacts
contacts
Phase 7
Phas e 5
Phase 2
Quality check
Fase 8
Analyzing quality
Analyzing quality Analyzing quality
Analyzing quality Analyzing quality
Analyzing quality
ouput ouput ouput
DS 1 ouput ouput ouput
Preparation Negotiation Conclusion
Figure 5 : Mapping the negotiation process
20

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.
Operating costs & HRM costs
Main mission
Investments
Investments
Projects
Operating costs & HRM costs
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
21

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
22

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
23

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.
24

25. Process mapping
4
3,5
Quality control 3 Follow up process
2,5
2
1,5
1
0,5
Substantive discussion 0 Organizational support
Process adaptation Quality framework
Mapping interpretation
Central coordination FPS Social Security Selfcoordination
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
25

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
26

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
27

29. Négotiations foresseen by planning Political negotiations
Political negotiations
between ministries’ advisers
between ministries’ advisers Political
Political
Political negotiations
Political negotiations about the budgetary
about the budgetary compromise
compromise
between ministries’
between ministries’ demands
demands
advisers about the
advisers about the Political negotiations
Political negotiations
budgetary demands
budgetary demands between ministries’
between ministries’ Political
Political
advisers about the new
advisers about the new compromise
compromise
remarks of the Budget
remarks of the Budget
Government approval
Government approval
Government decision
Government decision
Trilateral contacts
Bilateral contacts
Trilateral contacts
Bilateral contacts
Trilateral contacts ::
Trilateral contacts
Trilateral contacts ::
Trilateral contacts
Preparations
Preparations
integration of common
integration of common
agreement on
agreement on Adaptation of the
Adaptation of the
chapters
chapters
individual chapters but
individual chapters but contracts :: fully respect
contracts fully respect
The Budget « asked » for
The Budget « asked » for
7 SSPI rejects the
7 SSPI rejects the of the political
of the political
changes in the individual
changes in the individual
allowed budget
allowed budget compromise
compromise
chapters
chapters
Political negotiations
Global negotiation ::
Global negotiation
budgetary framework
budgetary framework
Global negotiation :: State’s engagements
Global negotiation State’s engagements
Global negotiations
June-October 2005
June-October 2005 November 2005 – Janurary 2006
November 2005 – Janurary 2006 Februari – March 2006
Februari – March 2006
Figure 8 : Implementation of the negotiation process 2005-2006
29

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
30

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.
31

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
32

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
33

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.
34

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
35

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.
36

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