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Separating Client and Supplier Function

Most countries have either already done this, or are working towards it. When these activities are all combined within one organization, the road agency has too many conflicting responsibilities. It acts both as the customer (or client), as well as the provider of these services. This creates an obvious conflict of interest that weakens financial discipline and compromises efforts to control costs and maintain quality. As a result, the costs of in-house road works are typically 20 to 30 percent higher than work subjected to competition. Countries have tackled this problem in three main ways (PDF 49 KB). They have: (i) kept an integrated structure, but have clearly separated the client and supplier functions within the organization; (ii) contracted out the supplier function; or (ii) contracted out both the client and supplier functions. These reforms have produced spectacular results. The general message is that separating planning and management from implementation of works can reduce costs by up to 20 percent, whilst contracting work out to the private sector can reduce costs by a further 5 percent.

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