“Do not trust the horse, Trojans. Whatever it is, I fear the Greeks, even though they bring gifts.” (Virgil, The Aeneid) Do you recall the ancient tale of the giant wooden horse with the hollow belly concealing the Greek army? In their drunkenness and celebrating, the Trojans didn’t examine the horse. They assumed it must be what it appeared to be – an offering of peace. After ten years of battle, the Trojans lost the war because their trust in the horse was misplaced.
In many of life’s relationships, trust is a foundational component that sometimes turns out to be so strong that it is the glue that holds the relationship together in tough times. When we trust someone, we have a belief in and reliance on that person’s integrity and ability. Through trust, we have the confidence necessary to go forward because trust is based on definite evidence or past experience.
Trust plays a crucial role in government outsourcing. Adrian Moore of the Reason Foundation says that “the less tangible things are, the more important trust is.” In outsourced infrastructure projects, trust is less important. A project to construct a bridge, for example, is tangible in that you test to establish whether it was built soundly.
But in a contract for such services as child adoption placement, managing a prison or welfare benefits, the outcomes are open-ended. Much of what the government wants to happen is well defined and measurable, but a lot of it is not. That type of circumstance will require trusting the vendor a great deal.
When Trust is Most Important
Moore believes there are two circumstances when trust is crucial in government outsourcing. The first is when the customer cannot clearly define what end results it wants to accomplish. For an eGovernment project, for example, the customer would want citizens to have electronic access to services. Another result would be seamless data sharing. “You may have a lot of concepts,” he says, “but exactly what the end result is going to be is not entirely clear. So if you don’t have a vendor you can trust to be able to morph their vision of where you’re going together over the span of the relationship, you are going to wind up in trouble. You want a vendor who can understand your vision and your constraints and agree to a flexible enough partnership that, as you move forward, you can change your shared vision and then work to achieve that.”
The second situation where trust is very important is when there is a long-term contract. A lot can change in ten years. Technology, people and the elected officials who control the budget change.” Long-term relationships require a lot of flexibility of the part of both parties in order to be able to adjust to the inevitable changes. Moore points out the need, in this instance, to select a vendor that can be trusted to want to sustain the relationship and work together to accomplish the government’s visions and goals.
In a long-term, private sector contract, both parties have common information about future changes and can come to an agreement. “But where the public and private sectors are mingled,” he says, “that is a lot less likely to be the case. The private sector’s set of information about what the future might hold and the government’s information may not be anywhere near each other – especially in high-tech areas. So the vendor is going to have a big information advantage in that respect. The government will want a vendor that it can trust to share that information and not use it to get more out of the contract.”
Where To Look for Trust
Trust is derived in these relationships from two sources. “One is the government structuring the arrangement in such a way that an incentive drives the trust,” Moore explains. The second source is an understanding of the market.
The contract must be built around performance measurements and incentives to ensure that both parties’ interests will be aligned to continue the relationship the way it was envisioned originally. The private vendor must have an incentive to minimize costs or implement new technologies.
Most of trust is built on an understanding of market forces. The government must learn how to tell if a vendor is trustworthy. “Unlike the private sector, the government is really bad at checking on customer satisfaction of vendors. It’s very rare that they call existing and past customers to find out about the relationships with the vendor.” This strategy also works in reverse. It should be used in the contract as part of the incentives. “Then there will be a real objective for the vendor to make sure it leaves a satisfied customer at the end of the relationship.”
Does trust impact privacy? Moore believes the government is confident that it can set standards for privacy and security, measure whether those standards are being achieved, and hold vendors accountable. Trust in this instance is important at the front end, in due diligence to ensure that the vendor’s employees and practices will keep private information confidential. But on an ongoing basis, trust is not as important as are good performance standards, measurements and accountability.
“Maybe the best way to think about the issue of trust,” ponders Moore, “is that accountability and trust are like the two pans on a scale. Depending on the type of service you are dealing with, you need more accountability. In that case, trust becomes less important with things that are measurable. The less measurable they are, the more trust you need. The less measurable they are, the less accountability is practical.”
Lessons from the Outsourcing Primer
- Being able to trust the vendor is crucial when the buyer cannot clearly define what end results it wants to accomplish.
- In a long-term contract, select a vendor that can be trusted to want to sustain the relationship and work together to accomplish the goals even as circumstances change.