The current medium term strategic plan of Dumko Municipal Assembly (DMA) has overall objective of improving the performance of the Assembly. One critical strategy towards attainment of this goal is adoption of new public management strategy to increase participation of private sector in the provision of public services without losing sight of the differences between public sector and private sector. In fact, some of these differences are so fundamental that they cannot be washed away any time soon.
The Chief Executive suggested outsourcing as a key strategy in improving the delivery of public services at local level through the private sector. DMA is currently bedevilled with poor revenue mobilisation, lack of proper data on the Assembly’s activities, and poor infrastructure provision. Other supporting activities like cleaning and security are not well performed or performed at very high cost by internal staff. These issues have been tabled at the first strategy meeting convened by the Chief Executive.
Required:
i) Describe THREE fundamental differences between public sector and private sector entities that DMA should take cognizance of in pursuance of the new public management strategy. (3 marks)
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- Objectives are different. Objective of public sector entities is to deliver public goods and services to all citizens in order to maximize welfare of the citizenry. However, the principal objective of the private sector entities is to make profit on the goods and services they produce and sold in the market.
- Means of funding is different. Public sector entities are financed largely from the public resources resulting from taxes, levies and other public moneys whereas private sector is financed through capital contribution of owners such as shares. Therefore, public entities are collectively owned by the citizens without equity interest but equity interest is the basis of private ownership.
- Accountability structures are different. Public sector entities are accountable to citizens through parliament but private entities are accountable to the shareholders through the board of directors.
- The nature of goods and services they offer is different. Public sector is engaged in the provision of public goods and services which are non-excludable and non-divisible. Private sector is involved in the provision of private goods that are rivalry, divisible and discriminatory. Thus, public sector operates in a monopolistic market while private sector operates in a competitive market.
- The regulatory environment is different. Public sector entities are established by a specific enactment of Parliament whereas private sector entities are governed by general commercial enactments and other industry specific enactments.