The practice of signing performance contracts is a relatively new but rather futile fad in Nepali bureaucracy. Initially, in July 2016, the beginning of the fiscal year 2016-17, the government announced that it would sign yearly performance contracts with the chiefs of development projects. When the majority government headed by KP Sharma Oli took over in February 2018, it widened the practice of signing the contracts well beyond the projects chiefs and chief executives of the state-owned enterprises. At the federal level, the prime minister signed such contracts with his ministers, the ministers with the secretaries, the secretaries with the director generals of government departments, the department heads with the divisions and so on. Now, the Ministry of Federal Affairs and General Administration is preparing a framework to enable the chief ministers of the provinces and mayors of municipalities to sign similar performance contracts with government managers reporting to them.

The practice of using performance contracts was initially experimented with by developed countries like New Zealand and the United Kingdom in 1980 to improve the efficiency of public service delivery. A seminal publication 'Bureaucrats in Business' policy report by the World Bank in 1995, defined the performance contracts in the public sector as 'the relationship between the government and government employees managing a state-owned enterprise.'

What is important here is, such contracts were originally conceptualised towards 'managing a state-owned enterprise', not anything or everything related to manage the general administration where the monitoring parameters, both on the outcomes and performance of the signatories, are largely subjective and, more often than not, the scope of work for bureaucrats is also articulated by separate laws or bylaws. In the case of Nepal Civil Service Act 1993, The Administrative Procedures (Regulation) Act, 1956, Good Governance (Management and Operation) Act, 2008, the Local Government Operations Act 2017, among others, provide enough latitude for the state mechanism and government managers who are duty-bound to optimally discharge their duties.

Do they work?

As such, the exact legal standing of these contracts remains unresolved. Whether the performance of the government executives who entered into such contracts actually improved is highly questionable. The mechanism to 'reward' the better performers and 'punish' the laggards seems to exist nowhere. Nevertheless, the practice not only continues unabated but only seems to have expanded. But the implementation of these contracts has been incessantly flaunted by the signatories at the highest levels.

Just to cite an example, Prime Minister Oli signed the performance contracts with his cabinet members. But, in the ex-post appraisal, the prime minister refused to sack the worst-performing cabinet members like water supply minister Bina Magar, the daughter-in-law of former co-chair of the ruling Nepal Communist Party Pushpa Kamal Dahal, and his own most trusted lieutenants like then finance minister Yubaraj Khatiwada and communication minister Gokul Baskota. Instead, Khatiwada turned out to be among very rare personalities in Nepali history to be able to grab endless top positions in the government despite miserably failing to manage the economy including the time of the Covid-19 pandemic. This is only the tip of the iceberg.

Then why has the practice continued, despite it clearly failing to yield any desirable impact on public service delivery? The most straight forward answer is that Nepal's government structure has completely failed to internalise and validate the practice that is blatantly imposed in the interest of a few influential development partners. These development partners in the pretext of 'supporting the public service delivery by improving the efficiency of civil service' are preparing the template documents for these contracts and coaxing the government to adopt them and sign. There is palpable apathy to it in the entire bureaucracy, and, therefore, there is a subsequent lack of ownership even after signing. Because, to reemphasise, the adherence to the contract, or even absolute lack of it, is unlikely to have any impact on their career paths.

Impossible to adhere to

There are several structural issues that hinder the enforcement of these contracts even if one assumes to have a sincere purpose in signing them. Key bureaucrats who sign such contracts in one capacity are indiscriminately transferred to entirely new positions in the middle of the contract period. An objective appraisal system is ubiquitously absent in the entire bureaucracy. It is extended to the realms where it was impossible to create indicators. The contracts include all components just to make it appear holistic, which are really impossible to be accomplished by any single officer.

The issue of resources, both human and financial, is overbearing everywhere. At the local government level, particularly in rural areas, only a small number of bureaucrats compared to designated positions are filled. Any ambitious performance contract, for example by a mayor of the municipality, is bound to hit speed bumps in the absence of required technical and logistic support. And, even without any contractual obligation, the law has a defined role assigned to the mayoral position, thus making any additional contract a redundant exercise.

Besides, the performance contract exercise in Nepal's public sector has failed to uphold universal best practices, recognised by the institutions like the World Bank. First, the performance contract document needs to be developed only after freely negotiating between the signing parties, whoever they are, to ensure its ownership and implementation. Otherwise, as in our case, it will be 'accepted overtly but resisted covertly'. Second, the fairness of the contract can only be ensured with the presence of a third party for the ex-post evaluation, which has not been brought into practice in Nepal yet. Third, the most glaring gap in the contracts signed by the government managers lies in the failure to develop and define the success indicators, their plausibility of realistic measurement and, of course, incentives for 'good' or 'bad' performance based on rewards and punishments linked to the career development of the performers.

As seen thus far, the monolithic thrust on expanding the performance contract practices up to subnational levels without much-required groundwork, required resource support and thorough evaluation of the lessons learnt is unlikely neither to improve overall governance nor the quality and efficiency in public service delivery.