As infrastructure markets are diversifying and liberalizing, their organizational structure is becoming increasingly complex. One of the processes taking place throughout these developing infrastructures is unbundling: different tasks that used to be performed by the same company – for instance maintenance and operations – are now divided among separate companies or units. This creates new challenges.
“Unbundling is generally applied to stimulate fair competition in the market,” says researcher Bill van Mil, director of Kwink Groep. “To make sure that public values are safeguarded in this competitive environment, governments usually make performance agreements with the companies. They draw up certain standards that the companies have to meet in order to keep certain subsidies or prevent certain fines. My research focuses on how to make these performance agreements effective.”
A well-known example of a performance agreement is the arrangement between the Dutch railroad company NS and the Ministry of Transport, whereby standards are defined for the punctuality of the train services. “The interesting thing was that the main consumer organizations were involved in deciding how to measure punctuality,” says Van Mil. “This creates an atmosphere that eliminates any suspicions beforehand. It prevents conflicts between parties that would otherwise look at different parameters.”
Van Mil has drawn up a list of recommendations to ensure that performance agreements contribute to safeguarding public values – rather than jeopardizing them. It is imaginable that when standards are strict and sanctions severe, companies will develop strategic behaviour. If NS is punished severely for low punctuality, this could stimulate them to make their timetable less sensitive, for instance by increasing stopover time at stations. This strategy is referred to as ‘gaming the numbers’. Although this would lead to improved punctuality, it would not be in the travellers’ best interest, since a trip would cost more time. “This is a perverse effect,” states Van Mil. “It can be avoided, for instance by publicizing not only data on punctuality, but also on travelling time.”
Van Mil cautions agains a system that uses excessive sanctions or bonuses. In any case, judgment on the basis of performance indicators should always be done in a balanced way. After all, some indicators are not straightforward. A bad score doesn’t necessarily reflect a bad performance, and the other way around.
Another recommendation is that it pays off to introduce performance agreements gradually and avoid major areas of conflict at the start. Van Mil: “Don’t try to change everything at once. Work with increments that are realistic. After all, reality cannot be framed in rules.”
