Public & Private Administration

Introduction
● Administration is a process of management which is practised by all kinds
of organisation from household to the most complex system of the
government.
● Administrative may be public or private.
○ When it refers to the activities of a household, club, cooperative
society, political party, church or a company. It is called private
administration.
○ When it refers to the activities of the state performed by the central,
provincial or local government it is called public administration.
● Is public administration different from private administration?
○ One school: there is no difference between the two and that the
administrative techniques are similar in all organisations, whether they
be public or private.
○ The other school: there are important points of differences between the
two
 Similarities
Both Public & Private administration exhibit many common and fundamental characteristics.
(Henry Fayol, Mary Parker Follet & Urwick)
● Skills: There are skills, techniques and procedures which are common to both (Accounting,
statistics, office management & procedures, purchases, disposals and stocking & many
activities are common to both). A Statistician or engineer may be doing the same work
whether in government or private company. Also retired civil servants are re-employed in
private sectors. Sometimes, the Public sector Undertaking burrow the service of experts from
private sector. Eg. In UK the employees who were Iron & Steel Industries prior to their
nationalisation were absorbed by the government.
● Influence each other: Today, business practices and standards have influence PA especially in
matters like office management & running of commercial enterprises. The whole idea of the
public corporations and companies is to import in to PA the organisation & management of
private administration. Likewise, big business organisations too have been influenced by
government practices in such matters as staff welfare, superannuation benefits etc.
● Administrative Set up: There is certain kind of hierarchy & administrative set-up in both. Both
have some kind of organisational structure, higher & lower employees & both have clear
demarcation of work, duties & responsibilities. In both cases, there are people who take policy
decisions and others to implement them.
● Research & Improvement: Both feels that there is always scope for improvement. None
of them can claim perfection both in quality & quantity of their work. Research is always
done in both to improve upon procedure & techniques.
● Public relations: Both believe that there should be maximum contact with the masses. If
contact is lost, administrations is bound to be a failure as it shall come to know about
the needs and necessity of the people whom they are required to serve.

Similarity is evident when a private undertaking is taken over by government. Eg. LIC in
1956 (did not involve the government in a number of fresh problems).

Academic Staff College at Hyderabad imparts training to personnel drawn from industry,
commerce & government organisations in the belief that administration in these
different spheres has common features. Since private organisations grew in size all
over the world, it has assume the impersonal character of public administration. This is
why, principles of democratic management, public responsibility and popular control on
administrative discretion are as much in vogue in both.
 The Differences
● Despite many common characteristics, both are distinct from each other. The following people
are of the opinion that there are crucial differences.
● Paul H Appleby in his book “Big Democracy” state that PA is different from Private administration
in three ways: breadth of scope, impact & consideration; public accountability & Political
Character. No NGO has the breadth of government.
● Ludwig Von Mises: Private Adm has an incentive and method of calculation - money profit, which
is unavailable to PA.
● John Gaus: their activities are different in kind & scope.
● Josiah Stamp: different in the sphere of uniformity, impartiality, responsibility, accountability &
serviceability.
● Peter Drucker: PA: service motive; Private A: profit motive-different in their purpose, objective.

The popular image of PA is that of bureaucratic nature, characterised by red tapism, inefficiency, inertia
whereas Private Adm is efficient & business like.
 The Differences
● Prestige:Public
PA enjoys high prestige & social status as compared to private
administration esp. in third world countries. This is due to power vested in
government machinery. PA has more opportunities for rendering service to the
people & commands more respect than the private administration.
● Political Direction: Unlike Private adm. PA is subjected to political direction in most
policy matters (Minister commands and bureaucrats implements). An administrator
has to carry on orders with little option of his/her own.
● Profit Motive: PA is service oriented and Private administration is profit motive. A
businessman will never undertake a a venture which is not likely to yield any profit to
him. In PA there is no correlation between income & expenditure, since most
government departments are spending departments and even in the so called
revenue producing departments, the primary motive is always public service.
● Uniformity of Treatment: Pa is consistent in procedure & uniform in dealings with the public. It is not
expected to show discriminatory attitude like private adm. (need not worry about uniformity in
treatment). Business Adm. does believe in discriminatory treatment towards its regular customers.
Eg. A shopkeeper will be inclined to attend his regular customer more promptly than the one who is
an occasional visitor. A booking clerk at the railway station will make the people stand in queue
before issuing tickets “First Come, First Served motto”.
● Legal Framework & Procedure: PA has to operate strictly according to law, rules & regulations-brings
in rigidity in operation in public sector. There is always the fear of audit. Contrastingly, Business Adm
is relatively free from similar constraints. There are of course general laws regulating business but
individual business have less flexibility to adapt their operations to changing situations. This possible
because of their freedom.
● Essential Services: PA performs urgent and essential needs of the people eg. food, defence, law &
order, education, health care etc. related to public life. Negligence or any lapse in such duties results
in paralyzation of public life. Eg. Manufacturing of cloth which falls in the domain of private adm is
not important as defending the borders of the country.
● Scope of activity: The activities of PA is comprehensive and extends to all types of activities
pertaining to the individuals. Its jurisdiction extend beyond limits such as police, fire protection, public
works, education, recreation, sanitation, social security, agricultural research, national defence and
others. Private adm does not cover so many aspects of people’s life.
● Monopolistic: Many services rendered by the government are of a monopolistic nature. No
individual is allowed to run services, which are being handled by the government itself. That is not
in the case of private adm. Many private organisations may be suppliers of the same commodity at a
time. In private organisation, there is efficiency because of its competitive nature.
● Public responsibility: PA has responsibility to the public - public scrutiny and accountability
(criticism from public, press and parties). These are missing in private administration. Civil
servants has to think carefully about possible public reactions. Private administration does not
have any great responsibility towards the public. They are under the radar of public.
● Financial Control: PA is subjected to a very extensive financial control. It is the Legislature that
passes the Appropriation Bill which authorise the executive to spend the money. In India CAG
controls our national finances and presents his reports to the Parliament. The Parliament also
controls national finances by different means and methods. Thus, there is a dichotomy between
administration and finance unlike in private administration.
● Social Necessity: PA exists to meet the social needs of the people. The government is undertaking
many social welfares to promote the weaker sections of the society. Private administration does
not exist for social necessity. It is mostly concerned with providing marketable consumer goods to
public rather than hospitals, schools, roads and postal networks.
● Efficiency or Effectiveness: In Business Administration, efficiency is usually measured in terms of
resource use. It is a matter of input-output relationship, the implication being the least cost
approach to organisational performance. Efficiency is thus considered in terms of profit earning.
But to assess performance merely by profit indicator would be taking a narrow view of the public
sector. More Than efficiency, effectiveness assumes critical significance in PA. It refers to
successful achievement of specific policy goals. In times of crisis, government cannot sit down
and calculate the costs of operation to reduce expenditure. Immediate relief rather than minimum
cost weighs heavily in government’s mind in such circumstances.
● Public Criticism: Actions of public sector organisations are much more expose to public gaze. An
achievement rarely gets publicity, but a little fault hits the newspaper headline. This wide public
criticism is not found in private administration nor it is very closely watched by the public and the
publicity media. Huxley observes, “The state lives in a glass house, we see what tries to to, and all
its failures, partial or total, are made most of. But private enterprise is sheltered under good
opaque bricks and mortar.”
 Public-Private Partnership
● Today the gulf between the two is narrowing. The line between them becomes so blurred that is is
difficult to tell where government leaves off and private business begins. Eg. the use of private
contractors and companies by the government (government by contract). PA is also penetrating in
private administration.
● Private business is also regulated and control by the law of the land and profit is not only its sole
aim. Its object too is the provision of service of the people. Unfair practices are being forbidden.
● PPP describes a government service or private business venture which is funded and operated
through a partnership of government and one or more private sector companies. These schemes
are referred to as PPP or P3. There is no universally accepted definition but are developed
according to their functioning, ruling and processing. Brazi, Ireland, South Africa, UK, India ect.
● It refers to an arrangement between the government and a private sector in which partially or
traditionally public activities are performed by the private sector.
● PPP is policy decision and initiative of the government at any level to promote public interest
and public good on mega or major projects. It is long term & contractual partnership between
the two.
● (Partnership/collaboration/participation of the private sector is sought.) Eg. Toll Expressway
project.
● Share Risk allocation
● Value should be for both sides.
● Under the PPP format the government role is not reduced, but is a facilitator and enabler, whereas
the private sector plays the role of financier, builder and operator of the service or facility.
● Special Purpose Vehicle: private sector consortium- to develop, build, maintain and operate the
asset for the contractual period. SPV is usually made up of a building, a maintenance company and
bank lenders.
● Privatisation: involves the outright sale of public service or utility to the private sector. It may take
several forms
○ Deregulation-while retaining the ownership and responsibility for existing public services in its
own hands government allow the entry of the private sector for development of new assets
through contractual relationship. This is normally done through: BOT-Build, Operate & Transfer
& BOOT-Build, Own, Operate and Transfer.
○ Divestiture (disinvestment): paves the way for the monopolisation of existing state resources
like state or public sector enterprises. Eg. SEB have been de-monopolised in Delhi
(privatisation of the distribution).
○ Various PPP forms and formats: Service contract, management contract, Lease, Concession
(BOOT, BOT), BOT (Toll) & BOT (Annuity), Municipal Bond Scheme, Co-production, Franchising
India Infrastructure Finance Company Limited, National Skill Development Mission