Contract Plans and Public Enterprise Performance

Abstract

Roughly 100 public enterprises in developing countries are using contract plans - negotiated performance agreements between the government/owner and the enterprises'managers or directors. Contract plans have not improved the financial performance of public enterprises dramatically. The process is probably more important than the product. They do however, produce clearer goals, open a dialogue between management and the state, and offer such benefits as better accounting, auditing, and management information systems, including physical and financial performance indicators and performance targets. The problem is, they have been oversold. They are not the mechanism for healing a sick company. They work best with firms that operate commercially and already have decent management and sound reporting procedures.

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