Procured reliability? Effects of competitive tendering processes on critical service reliability.

Abstract

This PhD thesis focuses on how the competitive tendering of publicly procured critical services affects the reliability of these services. Maintaining the supply of critical services, i.e., services that are essential for ensuring the basic needs of the population, is a core aspect of societal safety. The thesis draws upon theories from organizational reliability literature and seeks to contribute toward the further development of this field. Initial studies of high reliability organizations (HROs) have identified organizational characteristics that are decisive, though not necessarily sufficient, for the safe and reliable provision of services by complex organizations in hazardous industries. Later organizational reliability research on critical infrastructure services has demonstrated that the restructuring of these services, involving a splitting of service provision between organizations and the introduction of new logics to service supply, has added to the complexity and challenges of reliable critical service provision. However, given that few studies have focused on the reliability of procured critical services, the effects of tendering processes on reliability remain to be further researched. The thesis answers the following research question: How can competitive tendering processes affect the reliability of publicly procured critical services? In addressing this issue, the thesis aims to contribute new knowledge on how procurement and tendering processes affect organizational reliability. It additionally aims to contribute new knowledge on the relationship between reliable service deliveries (referred to as output reliability in the thesis) and organizational reliability (meaning the organizational structures and processes that enable this delivery). Finally, the thesis aims to explore whether specific governance forms can contribute to maintaining the reliability of publicly procured critical services. This work draws on empirical material from air ambulance service procurement in Norway, where air ambulance transport is procured from commercial and non-profit operators by a national health trust. In the thesis, empirical findings from the most recent rotor-wing (helicopter) and fixed-wing (aircraft) tendering processes are discussed. Overall, the rotor-wing ambulance procurement resulted in a successful transfer of responsibilities between the outgoing and incoming service suppliers. By comparison, the fixed-wing ambulance procurement led to profound conflicts and negative effects on service deliveries. The thesis consists of five articles, which all contribute towards answering the research question. Article I is a review of literature relevant for researching the effects of tendering on the resilience and reliability of critical services. The article explores how safety science has traditionally focused on individual organizations and discusses that interorganizational service provision can introduce interface challenges to critical service delivery. Article II analyses empirical material from the fixed-wing ambulance procurement. The article establishes that tendering processes involve a ‘temporal fragmentation’ of critical service supply: service delivery is split into contract periods with potentially different contracted service suppliers. The article demonstrates that organizational factors related to the tendering process can affect output reliability negatively during the transition from one contract period to another, as well as in the immediate aftermath. Article III broadens the analysis of the indicator used to assess output reliability in Article II and in this thesis. Approaching this indicator as a “boundary object”, the article shows how the seemingly neutral indicator used by the procurer to monitor operator output is subject to interpretation, with actors attaching different meanings to it. Moreover, the procurer’s indicator assessment is dynamic, reflecting both operator responses to the indicator and the external attention towards the indicator during the conflicted fixed-wing ambulance tendering process. Article IV discusses effects of the procurement cycle on the continuous change processes known from previous research to enhance reliability. The article complements organizational reliability literature with theories on temporality from the organizational research field. The article discusses how procurement cycles frame the timing and tempo of change processes. It demonstrates that the procurer acts as a “macro pacer”, deciding the timing and speed of processes while simultaneously being restricted by procurement legislation. For service suppliers, the tendering processes can demand substantial organizational attention and cause instability, at the expense of quality development processes. Article V discusses the contributions and limitations of relational governance towards the reliability of procured critical services. Relational governance, complementing the contractual governance that characterizes public procurement, involves a holistic approach to the procurer-supplier relation, thus encouraging flexibility and joint problem solving. In this sense, it resembles the reliability-enhancing approaches of HROs and high reliability networks (HRNs). In the article, relational governance is shown to be crucial in making the implementation of new contracts work. At the same time, the article identifies that in situations of profound conflict, neither contractual nor relational governance are necessarily sufficient to ensure reliability. Overall, the thesis discusses that tendering processes can have several negative implications for critical service reliability. The fixed-wing ambulance procurement exemplifies that tendering processes can result in instability and conflicts, undermining conditions that are known from HRO research to enhance reliability. Procurement can also introduce new organizational interfaces between incoming and outgoing service suppliers. Unlike organizations in previously studied HRNs, these suppliers do not necessarily share a goal of continuous service supply. On the contrary, the fixed-wing ambulance procurement exemplifies that conflict between suppliers and between procurer and supplier can affect output reliability negatively. Not all effects of procurement are reflected in indicators of service output; tendering processes can also influence the quality developments that are important for critical service supply outcomes. On the one hand, procurement enables a thorough evaluation of the existing service and the introduction of systemic changes for each new contract period. At the same time, procurement legislation frames how continuous quality developments can take place, by defining limits to the introduction of changes in existing contracts. Moreover, tender participation can demand substantial organizational attention from tenderers and contracted suppliers and draw attention away from continuous change processes known to enhance reliability. To achieve reliable service provision, the procurer can draw upon both contractual and relational governance. Governance options are however framed by procurement legislation and by procurer interpretations of this legislation. While relational governance, by encouraging flexibility and give-and-take attitudes, contributes towards reliability, the procurer must ensure that this flexibility does not come at the expense of stability. Also, if profound conflicts exist between the procurer and supplier, neither contractual nor relational governance may be sufficient to resolve these.