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AGRICULTURAL KNOWLEDGE & INFORMATION SYSTEMS (AKIS)GOOD PRACTICE NOTE

Contractingfor Extension

The World BankRural Development FamilyAgricultural Knowledge & Information Systems (AKIS)

Work in progressfor public discussion

December 2000

Prepared by William M. Rivera,Willem Zijp, and Gary Alexwith inputs contributions by Vincent Ashworth,L. Van Crowder, and Jon Anderson,and case study materials fromcontributors worldwide

Review of EmergingPractices

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Agricultural Knowledge & Information Systems is a thematic team focusing on agriculturalextension, education, and research within the Rural Development Department of theEnvironmentally & Socially Sustainable Development Network of the World Bank.

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Contents

Foreword iv

Executive Summary 1

Introduction 2

Contracting for Delivery of Extension Services 2Separating Functions of Financing and Service Delivery 3Options for Contract Financing and Service Delivery 3Case Studies of Extension Contracting Arrangements 5

Policy Issues in Contracting Extension Services 8Reducing Barriers to Entry for Private Sector Providers 8Developing Explicit Contracting Procedures 8Comparative Cost-Efficiency and Impact Effectiveness 9Social and Equity Considerations 10Additional Costs When Out-Sourcing Extension Services 10

Requirements for Successful Extension Contracting 11Essential Preconditions for Publicly Contracted Extension 11Operational Requirements for Contracting Extension 12

Recommendations for Practitioners 14Strategies for Contracting Extension Services: Diagnostic vs. Recipe 14Redefining the Role of the State 15Initiating Programs to Contract for Extension 15Ensuring Clarity in Contract Documents and Process 16Fostering Public-Private Partnerships 16Expanding Beneficiary Ownership of Extension Services 16Monitoring Future Experience with Contracted Extension 16

References 17

Annex A: Contracts and Agreements 19

Annex B: Advantages and Disadvantages of Contract Extension 21

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Foreword

“AKIS Good Practice Notes” are intended todisseminate views, experiences, and ideas thatmay assist World Bank Task Team Leaders,national counterparts from Borrower countries,and other partners with preparation and imple-mentation of projects to strengthen agriculturalresearch, extension, and education programs.The series contains lessons from innovative ex-periences in World Bank projects and elsewhere,and makes this information readily available forcomment and use by project teams.

AKIS is the Agricultural Knowledge andInformation Systems Thematic Team, composedof World Bank staff working in or interested inresearch, extension, and education programs.The overall team objective is to enhance the ef-fectiveness of Bank support to agriculturalknowledge and information system develop-ment, and thus contribute to the Bank’s objec-tives of alleviating poverty, ensuring foodsecurity, and improving sustainable manage-ment of natural resources. The AKIS team em-phasizes policy, institutional, and managementissues associated with agricultural research,extension, and education, recognizing that otherthematic teams will focus on technical issues.The team mission is to “promote the develop-ment of sustainable and productive agriculturalresearch, extension, and education systems inBank client countries.”

Extension systems are under extreme pres-sure to improve performance and impact, andcontracting is one strategy being used to expandextension coverage and improve performance.The AKIS Group, in collaboration with the Uni-versity of Maryland, College Park, has compileda set of 26 case studies on contracting for exten-

sion. This Good Practice Note summarizes thisworldwide experience with contracting for ex-tension services. Details on individual case stud-ies, including those cited in this Note, will beavailable on the World Bank/AKIS Website atwww.worldbank.org/akis.

Analyzed and edited by William M. Rivera,Willem Zijp, and Gary Alex, the compilationincludes case studies by: Trevor Webb, JohnCary, and Andrew Campbell (Australia); ArturCristovão (Portugal); Rodolfo Rodriguez andTito Rodriguez (Colombia); L. Van Crowderand Jon Anderson (Mozambique and Uganda);Dinh Duc Thuan, Nguyen Ba Ngai, and BardolfPaul (Vietnam); Jean Sibiri Zoundi (BurkinaFaso); Liu Yonggong (China); EduardoZaffaroni (Brazil); Julio Berdegué and CristianMarchant (Chile); Ülar Loolaid (Estonia); JochenCurrle, Volker Hoffmann and Andrew D. Kidd(Germany); Regina Laub-Fischer (Madagascar);E. Fermet Quinet and J. Gauthier (Mali); JetProost and Paul Duijsings (The Netherlands);Joseph Seepersad and Wayne Ganpat(Trinidad); Burton E. Swanson, MohamedSamy, and Patrick D. O’Rourke (United States/Illinois); John Barnett and Satish Verma (UnitedStates/Louisiana); Tajul Islam and M.A. Ghani(Bangladesh); M. Hassanullah (Bangladesh);Riikka Rajalahti and Eija Pehu (Finland). Au-thors of analytical papers prepared as part ofthis study include: William M. Rivera, WillemZijp, Vincent Ashworth, Jon Anderson, and L.Van Crowder.

Marie-Hélène CollionChair, AKIS Thematic Team

Executive Summary

1

Contracting for delivery of agriculturalextension services is a widespread strat-egy used in many countries and situa-

tions. In developing countries, contracting oftenshifts delivery of extension from public to pri-vate providers. In some cases, this is reversed,with private sector entities contracting withthe public sector for specialized services.Analysis of 26 case studies from 19 countrieson five continents underscores the variabilityin approaches to contracting for extensionservices.

Continued economic liberalization is likelyto result in a growing number and greater di-versity in extension service providers, as de-mand for new products, information, andservices develops and incomes rise. Farmersand rural dwellers already have access to anincreasing number of information sources.Steady improvement in rural infrastructure andrising standards of literacy will change the na-ture of demands, and continued governmentfiscal restraint will force reduction of subsidizedstate extension for market-oriented producers.These developments are likely to lead to a risein the numbers and types of contracting andpartnership arrangements for extension.

Public sector contracting for extensionservices can provide significant advantages inflexibility and increases in efficiency and effec-tiveness. Major policy issues need to beaddressed: removing barriers that restrict de-velopment of private service providers; devel-oping transparent contracting procedures;

introducing cost awareness and cost analysis inprograms; addressing equity concerns with pri-vate service providers; and managing addi-tional costs to the public sector in contractingextension.

Successful contracting of extension servicesrequires: (i) political will for extension programreform and contracted extension; (ii) clarity ininstitutional roles, opportunities, and benefitsof contracted extension; (iii) adequate capacityof service providers; and (iv) effective demandfor extension services. Contracted extension ser-vices require collaboration and partnershipscharacterized by good will, and all parties needto be results oriented. Clients (producers) willbe more involved in selecting extension agents,evaluating extension services, certifying agents,sharing costs of programs, contracting services,determining content of extension programs, anddeciding how services are allocated.

Recommendations emerging from casestudies include the need for: situation-specificanalysis of objectives, and the advantages anddisadvantages of contracting-out of extensionservices; a change in the role of governmentfrom service delivery to facilitation and qualitycontrol; detailed terms of reference and contractdocuments that ensure clarity in both processand responsibilities; increased client ownershipof programs and more public-private partner-ships; and clarity in objectives and strategieswhen initiating a program of contracted exten-sion. Experience with contracted extension isstill relatively new, and there is much to be

2 Contracting for Extension: Review of Emerging Practices

Introduction

learned from evaluation of these programs asthey mature.

Contracting for delivery of extension is rec-ommended for two reasons: (1) Contractingstrategies tend to promote a greater number andvariety of providers of agricultural extension

information, and thereby encourage competi-tion in an area that has been criticized for itsineffectiveness and inefficiencies; and (2) Con-tracting strategies foster cost sharing by clients,which helps to increase responsiveness and ac-countability of service providers to clients.

There is a growing acceptance that statemonopoly of agricultural extension service de-livery is neither desirable nor sustainable. Ag-ricultural extension programs are underpressure to change, because of growing fiscalpressures and questions about effectiveness andefficiency of their service. Changing views ofagriculture and the role of government, new op-portunities in market economies, and pressuresfor increased public participation and good gov-ernance are leading to a reassessment of thecost-effectiveness and the relevance of agricul-tural extension (Farrington 1994). Strategies in-creasingly being employed with private serviceproviders in extension programs (Rivera and

Cary 1998) are cost recovery, commercialization,privatization, and subcontracting.

Extension reforms are most advanced inindustrial countries where previously state-owned and managed extension services havebeen completely or partially privatized (for ex-ample, New Zealand, United Kingdom, TheNetherlands). The impact of these reforms hasyet to be fully evaluated, but there appears little,if any, move to return to previous systems oforganization and governance. This suggests thatthe clients of extension—producers and otherstakeholders—are not dissatisfied with thetransformation and welcome the evolution tomore truly demand-driven services.

Contracting for Delivery of Extension Services

The need to reform public extension services isperhaps greatest in developing countries, whereinitiatives for cost recovery, commercialization,and contracting service provision are becomingmore commonplace. Major reforms of state ex-tension services, some including radical inno-vations, have been implemented (Chile, Mexico,Colombia, Nicaragua) or are underway (Zim-

babwe, Zambia, Uganda). Tools being used toimprove extension efficiency include decentrali-zation of government services, increased plu-ralism of service providers, and developmentof more client-responsive extension methodolo-gies to increase customer “ownership” and in-fluence on extension services. Contracting forservices and cost sharing with private sector for-

3Contracting for Delivery of Extension Services

profit firms and individuals, nongovernmentalorganizations (NGOs), and farmer organiza-tions are on the increase.

Current views on the optimum role of gov-ernment stress the need to decentralize and de-volve; to downsize, cut costs, and become moreefficient; and to develop partnerships with otheractors (Rivera 1996). In parallel with generaltrends in civil service reform, there is an increas-ingly common view that, while governmentmay need to continue to fund extension services,the actual delivery of these services can, in manycases, be subcontracted to private sector pro-viders.1 Conventional wisdom holds that gov-ernment extension is ineffective and inefficientand has been too monolithic, heavy handed, andcontrolling. There is concern that governmentshave created extension bureaucracies that areover-staffed, have little funding for operatingexpenses, use unsustainable approaches, andare overly supply-driven, particularly in cen-tralized economies.

Issues regarding extension reform are wellknown and discussed in-depth elsewhere(Smith 1997; Carney 1998; Feder, Willet, andZijp, 1999), but one frequent response to theseperceived problems is that of contracting out(or out-sourcing) extension delivery to the pri-vate sector (either for-profit or not-for-profit).For example, by hiring more efficient NGOs toprovide extension services, governments cantrim public payrolls and use savings for oper-ating costs that make remaining staff more op-erational and effective.

Separating Functions of Financingand Service Delivery

Contracting is a means of providing incentivesfor individual extensionists and service agen-cies (state and nonstate) to deliver specifiedoutputs (farmers trained, demonstrations pre-

sented, information services delivered, advisoryservices provided). Outputs must be specifiedin contracts, which provide for payment onlyon completion of outputs, and which may pro-vide special incentives for efficiency or effec-tiveness in completion of outputs. Contracts canalso provide incentives based on achievementof results or outcomes of the contracted services(increased producer incomes, productivity, oreven poverty reduction). Contracting alongthese lines between township extension bureausand producers is widely practiced in China.

Contracting for extension services soundsquite straightforward, but review of currentexperience reveals a wide range of approachesto separating functions of financing, procure-ment, and delivery of services. Alternatives in-clude both public and private financing, publicand private contracting for services, and publicand private service delivery. Options also varywith the type of public or private financier, con-tracting entity, or service provider. The publicsector may be represented by the national, stateor provincial, or local government. The privatesector might be for-profit business or consult-ing firms, nonprofit or civil society institutions,individual farmers or farmer organizations.

Options for Contract Financingand Service Delivery

Two contracting options are well known: private-financing/private-delivery and public-financing/public-delivery. The first is essentially privateenterprise, exemplified by farmers purchasingadvisory services under contract, or agriculturalcompanies supplying information services tofarmers to sell inputs or to buy produce. In theseinstances, extension involves private provisionand technology transfer usually for mono-cropping or specialized production. Purely pri-vate extension systems generally lack incentives

1 This Note uses the term “private sector provider” to refer to all “non-state sector providers,” includingprivate for-profit firms, NGOs, individuals, farmer and community organizations, civil society organiza-tions, and private educational institutions.


to address public concerns, such as long-termsocial and environmental issues.

Public-financing/public-delivery is the typicalpattern for government extension services. Thisgenerally does not involve contracting, exceptin systems where one public agency purchasesservices from another, or staff within an agencycommit to deliver services based on definedterms of reference and cost.

Two other options mix public and privatesectors in financing and service delivery, andare the basis for most new contracting initia-tives. Public-financing/private-delivery (orcontracting out) is the approach commonly pro-moted in reform of extension services. Anotheroption, that of private-financing/public-deliveryhas been generally neglected, but field experi-ence indicates that it is prevalent in many coun-tries. It may have significant potential toprovide farmers and farmer organizations withquality services. In some countries such asUganda (Box 1) and Mozambique, NGOs hirewell-known, public extension advisors to helpprovide services. In other countries such as Is-rael, farmer organizations contract with publicsector extension for specialized services.

Contracting Private Provisionof Public Services

In contracting out extension delivery, publicfunds are used to contract private providers ofservices. Anticipated benefits include: greateroperational efficiency and cost-effectiveness;greater accountability of extensionists to per-form and produce results; and a greater varietyof providers of extension services (see AnnexA). When publicly financed extension servicesare contracted out, the role of governmentchanges from that of implementing agency tothat of quality controller, overseer, and providerof training and technical information to agen-cies contracted. In some cases, as in Mozam-bique, both the public and private sector may

provide services, with division of labor by dis-trict and province.

With private sector service delivery, exten-sion workers can more easily be rewarded forgood performance and dismissed for poor per-formance. Although there are obvious and well-documented problems with public sectorextension systems, there is no guarantee thatextension provision by the private sector is go-ing to be more effective. White and Eicher (1999)observed that “there is a lack of conclusive evi-dence that NGOs are more efficient than gov-ernment or private agencies in delivering farmersupport services.”

Chile (Box 2), Hungary, and Venezuelaachieved successful public-funding/private-delivery of extension services. In Chile, servicestend to be provided by private for-profit firms,in Hungary by universities, and in Venezuelaby NGOs. These cases illustrate the range ofpotential service providers and the options forcontracting services from universities, NGOs,or farmer organizations when contracting withfor-profit private service providers is not animmediate possibility.

Box 1 Uganda: Private sector contractingof public extension services

In Uganda, NGOs and donor projects contractpublic extension workers and provide operationalfunds, travel allowances, per diem, and in somecases salary supplements to augment low civil ser-vant wages. Although a form of secondment, thisarrangement is also a form of the private sectorcontracting public sector extension staff. In onecase, an international NGO was contracted by adonor to provide grants to local NGOs for fieldactivities focused on increasing basic food produc-tion. The local NGOs in turn contracted public-sector extension staff to extend improved farmingtechniques to groups of farmers.

Source: Uganda case study by Van Crowder andAnderson.

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Box 2 Chile: Design issues

Chile’s agricultural advisory service for small farm-ers has evolved gradually from 1980 to 2000 whilekeeping the key feature of private delivery andpublic funding. Important changes over time in-clude:• Objectives. Gradual change from a system con-

cerned with increasing production to one fo-cused on promoting competitive commercialprojects implemented by farmer (“producer”)organizations.

• Role of farmers. There has been a shift in respon-sibility from government to farmers for deter-mining program objectives, and for selectingand controlling the organizations that provideservices.

• Content of advisory services. As challenges fac-ing small-scale agriculture became more de-manding with the opening of the economy inthe late 1980s, services diversified from

agricultural production advice to include com-mercial, financial, farm management, post-harvest, value-adding, and legal advice.

• Farmers’ organizations. The system has changedfrom providing services to farmers on an indi-vidual basis to working with farmer organiza-tions.

• Heterogeneity of beneficiaries. The Chile extensionsystem balances support for farmers with greatereconomic potential and assistance to very poorhouseholds. There is a policy of providing spe-cific services for different types of householdsand farming systems.

• Quality versus quantity considerations. Servicesrecognize the trade-off between number ofhouseholds served and quality and intensity ofthe services provided to each household.

Source: Chile case study by Berdegué and Marchant.

Commercializing Publicly Provided Services

Although emphasis is generally on public sec-tor contracting for services, there are frequentinstances of cost-recovery or fee-for-service sys-tems in which private sector entities contract thepublic sector for delivery of specialized services.In these situations the private sector pays for,and the public sector delivers, extension ser-vices. Fee-based public extension services existthroughout Europe. Commercialized publicextension recognizes that many extension ser-vices are private goods for which users are will-ing and able to pay, but for which economies ofscale and scope make it more efficient for gov-ernment to develop and deliver the service.

NGOs, farmers, farmer organizations, pri-vate companies, religious organizations, andother groups often enter into agreements withgovernment extension agents (usually at thelocal level) to provide services (particularlytechnical advice) to their members or clients.These entities are generally agreeable to agents

staying with the government not only for eco-nomic reasons, but also to ensure linkages withthe government and to facilitate access to pub-lic services and resources. Moreover, NGOs andprivate companies often find cost advantagesin collaborating with government extension ser-vices, as they can tap technical skills on an as-needed basis without carrying staff on theirpayrolls.

Case Studies of ExtensionContracting Arrangements

The AKIS review of 26 cases of extension con-tracting in 19 countries confirms the extensiveuse of contracting as a means of enhancing thedesign, funding, delivery, and monitoring ofextension. The cases display a wide variety ofsources of financing for extension contractualarrangements, and an equally wide variety ofextension service providers operating undercontract (see Table 1). Although useful, thematrix in Table 1 tends to oversimplify the re-



Table 1 Different arrangements for financing and implementing contract extension

Source of Financing Provider under Contract Case Study Examples

Public institution Bangladesh International donors

Private for-profit organization Mali

Farmer organization Australia, Finland, Portugal

Private NGO Bangladesh, Vietnam

Public sector institution Bangladesh

National governments

Private for-profit organization Bangladesh, Brazil, Chile, Estonia, Trinidad

State or local governments Public sector institution China

Universities Public sector institution Finland

Farmers or farmer organizations Private for-profit organization USA/Louisiana, USA/Illinois, The Netherlands

Agribusiness Agribusinesses Finland

NGO Colombia, Mozambique, Uganda

Public sector institution Bangladesh, Burkina Faso

Multiple sources

Private for-profit organization Germany, Madagascar

ality of field extension services. Funding anddelivery of extension services often involvemixed public and private arrangements withjoint financing and collaboration between thepublic and private sectors in service provision.

Contractual arrangements for extension fallwithin two main groupings: two-party contractsand multiparty contracts.

Two-party contracts: The review found fivetypes of two-party contracts, each with severalvariations:• Donor projects provide financing for gov-

ernment agencies to subcontract for exten-sion services. A Bangladesh project hasthree different contracting arrangements forprocuring extension services from privateagribusinesses, public sector experts, andprivate consultants.

• Governments contract services throughministries of agriculture, regional govern-ments, and national institutes. In Bangla-

desh, the government contracts with NGOsfor provision of extension services to farm-ers. In Trinidad and Tobago the governmentextension unit contracts with mass mediato provide extension messages. Brazil con-tracts services from a “cooperative” ofagronomy specialists. And, in Vietnam (seeBox 3), the Ministry of Agriculture contractstraining services from the National ForestryUniversity.

• Farmer organizations contract public or pri-vate sector entities for extension advice. InBurkina Faso, farmer organizations contractthe Institute of Environmental and Agricul-tural Research to promote cowpea produc-tion.

• Individual farmers contract directly withprivate entities for extension advice. Chileprovides public funding for small farmersto contract private delivery of agriculturalextension. Germany (see Box 4) providespublic funds for farmers to contract with

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registered extension providers. In Portugal,apple producers contract services of privateintegrated pest management specialists foradvice on orchard pests.

• Agribusiness companies contract with pro-ducers to provide advice to them. In Loui-siana, cotton companies employ privatecrop consultants to provide advice to pro-ducers. In Greece, the sugar beet industrycontracts with farmers to provide extensionservices.

Multiparty contract arrangement: Where sev-eral partners are involved in extension servicedelivery, costs for all must be considered inevaluating system efficiency. These “coalitionsystems,” however, seem to have advantagesthat go beyond economic/staffing consider-ations, and may relate to functional comple-mentarities, institutional comparative advan-tage, and commitment to effective serviceprovision. The many arrangements involvingseveral partners seem to reflect attempts to drawon complementarities and strengths of differ-ent partners rather than simply a search for ad-equate financing.

Multiple partner agreements may promotesustainability by being both demand-driven

Box 3 Vietnam: Building capacity throughcontracting extension training

Vietnam’s extension system lacks capacity andmost staff are poorly trained and inexperienced.One response to this situation has been to contractthe Social Forestry Training Center to work withlocal extension institutions, community leaders,and villagers to train extension workers. This sys-tem uses a “process-based” training of trainersapproach; bases training on “learning by doing”;and encourages open collaboration between threemain parties: foreign experts, Vietnamese special-ists, and extension staff. The program developscapacity of extension staff, while providing localpeople with extension services.

Source: Vietnam case study by Dinh, Nguyen, and Paul. Box 4 Germany: Impacts of contracting outfor extension

In Germany, since each of the sixteen Federal Statesis responsible for agricultural extension, organi-zation of extension is quite diverse. In the State ofThuringia, extension services have been contractedout to private companies since 1998. Major impactshave been:

Rapid adjustment in extension content: Changein the content of advisory work was extremelyrapid. Farmers pay only for what they need.

Reduction in the demand for extension: Trans-ferring part of the cost of extension to farmers ledto a dramatic decrease in requests for extension.In the last year of the free public extension ser-vices, 80 percent of farmers sought advice in oneform or another, but this fell to about 13 percentafter privatization of extension under the contractsystem. About 88 percent of larger farming enter-prises (over 500 hectares) paid for advice, whereasonly 9.3 percent of farms smaller than 500 hect-ares paid. Fees were perceived as relatively high,despite a subsidy from the state, and it seems pri-vate companies did not pass on subsidies to theirclients, but rather invested in offices and infrastruc-ture. The fall in demand in Thuringia led to aneffective oversupply of advisers, with many certi-fied extension advisors working outside the stateand outside the field of extension.

Reduction of public costs: Public funding forextension dropped over 50 percent.

Source: Germany case study by Currle, Hoffmann,and Kidd.

and responsive to public concerns, such as soiland water conservation, food security, genderequity, family planning, and AIDS. The threetypes of multiparty contracts found in the AKISreview involved varied agreements betweenproducers, service suppliers, and fundingagents. The multiparty contracts were between:• A local municipality, producers, and an in-

vestment fund (Colombia);• Local populations, service organizations,

and a ministry (Madagascar); and• Farmers, extension service centers, and

other partners (China).



Although the contractual arrangementsfound in the study do not represent an exhaus-tive list of possible arrangements, they under-score the variety in contracting arrangements.These may include contracts between: officialgovernment and private entities; universities

and private organizations; projects and privateassociations; individual farmers or farmer or-ganizations and institutes, cooperatives, andprojects; and agribusinesses and farmers. Con-tracts may be for commodity-specific servicesor for general extension services.

The efficiency and effectiveness of contractedextension services depend on many of the samefactors that influence any extension program.Macroeconomic and fiscal instability increasescost of capital and reduces the propensity forprivate investment. Inadequate protection forproperty rights reduces producers’ ability tosecure credit and invest in long-term produc-tive enterprises. Government controls and mar-ket interventions reduce the efficiency of inputsupply and output markets, and thus limitfarmer ability to respond to market incentives.All of these policy issues condition the abilityof extension—whether via contract or not—toimpact on productivity and innovation in agri-culture.

Still, strategies for contracting extension ser-vices—particularly public financing of privateservice delivery—present some importantpolicy issues for national extension systems.Many countries have few private sector serviceproviders. Contracting procedures are impor-tant, but may vary considerably. Relative cost-effectiveness and cost-efficiency of public andprivate providers is important. Social and eq-uity issues must be considered, as must pro-gram impacts on government budgets and statecapacity to manage contracted extensionservices.

Policy Issues in Contracting Extension Services

Reducing Barriers to Entry for PrivateSector Providers

The limited availability of competent nonstateproviders in many developing countries reduceschoice and competition, thereby restricting oppor-tunities for contracting extension services. Thismay be due to lack of demand for services, exces-sive government regulation, or government ser-vices having “crowded out” private participation(Box 5). Expanding private sector capacity im-proves producer access to a range of services thatcan serve the needs of a diverse clientele. Ser-vices of one provider may well strengthen thedemand for others, as good advice from inputsuppliers might raise incomes and increase de-mand for specialized advisory services.

Before outsourcing extension services, gov-ernment should review the type and range ofpotential service providers and their technical,managerial, and operational capacities. Thecomparative advantage of different providersfor different services needs to be analyzed, to-gether with their track record of performance.

Developing Explicit Contracting Procedures

Public contracting of private service provisioncan be politically sensitive, if there is even the

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Common barriers to expansion of private sector ex-tension services are:• Unstable policy environments due to unneces-

sary government intervention in response toperceived “market failure,” or to political pres-sure from special interest groups;

• Lack of clarity as to the core functions and pri-orities for government service providers, and theareas in which government considers the privatesector should play a major role;

• Limited career opportunities and prospects forprofessional staff in a nascent private sector ex-tension service;

• Lack of purchasing power for most small farm-ers prevents them from paying full costs for ex-tension services, and a lack of strong associationsof smallholders limits economies of scale in pur-chasing extension services;

• Inadequate rural infrastructure increases busi-ness operating costs and constrains private sec-tor propensity to expand operations in manyrural areas;

• A continuing “dependency” mentality amongfarmers and the private sector, as a consequenceof past government policies, reduces demand foruser-pay services;

• Lack of understanding within governments thatonly pluralistic approaches to extension servicedelivery can meet needs of diverse rural com-munities, and the rapidly changing socioeco-nomic environment.

• Stifling bureaucracy frustrates many potentialprivate sector contractors and increases costsof doing business with government agencies.

Box 5 Barriers to development of private extension services

appearance of nepotism or unfair competitionin the award of contracts. Contracting processesrequire complete transparency. Transparency isfacilitated by clear procedures and accountabil-ity mechanisms, such as certification of serviceproviders, competitive contracting processeswith broad-based selection committees, andregular reporting and routine financial audits.

Competitive selection procedures are desir-able to ensure fairness in contractor selection,and to establish competitive prices for con-tracted services. Contracting procedures mustbe clearly defined and documented with:• Legal contract documents to formalize

agreements between parties;• A detailed “Operation Manual” describing

contracting procedures and roles and re-sponsibilities of parties involved;

• Clear terms of reference to guide the bid-ding process, outlining the type of propos-als expected, and objectives of the contract.Services must be specified sufficiently toestablish a contract for: work to be done,responsibilities of the parties, geographic

area (if applicable), target clients, and prod-ucts or outputs expected;

• A contracting process that advertises widelyfor service providers, and provides ad-equate time and information for potentialproviders to prepare and submit proposals;

• A technically qualified selection committeeto evaluate proposals;

• Contracts signed promptly upon award;and

• A procedure to inform all parties of the se-lection results, giving unsuccessful biddersinformation on how to improve proposalsfor subsequent calls for proposals.

Comparative Cost-Efficiencyand Impact Effectiveness

Cost/benefit estimates and cost accounting areimportant aspects of extension program man-agement, but few extension staff are adequatelytrained to carry out these tasks. Contractingprocedures that require attention to unit costscreate strong pressures to keep costs in line, and

Policy Issues in Contracting Extension Services


to purchase services from suppliers having com-petitive cost advantages (Scott 1996).

Private providers are expected to use re-sources more effectively or be more likely todeliver desired outputs and goals, since mostpublic extension services appear to neglect cost-effectiveness indicators and lack real incentivesfor good staff performance. Costs are likely tovary from country to country, and will dependon the type and intensity of services. As a refer-ence point, extension advisory service programsin Nicaragua and Mozambique are estimatedto have annual unit costs per farm family of$400.

Social and Equity Considerations

The AKIS case studies underscore the variedimpacts contracting extension services had onsocial and environmental issues. In ten casescontracted services addressed poverty issuesand increased farmer incomes. Three cases re-ported greater equity in the distribution of ben-efits from extension, but four reported negativeimpact on poor farmers. Contracting positivelyaffected women farmers and laborers in fivecases, and stakeholder participation in programdecisionmaking increased in 15 cases. Sevencases had positive environmental outcomes andcontracting enhanced capacity of institutions toprovide advisory services in 22 of the 26 cases.

Social and equity issues are important con-siderations for extension policy, especially forcountries with a high proportion of small, re-source-poor farmers and endemic rural poverty.Public policy generally seeks to direct servicesto poverty alleviation and social equity, whilefor-profit private firms are thought to be lessconcerned with these issues than is the statesector. (However it must be admitted that gov-ernment agencies’ record of achievement withpoverty and social programs leaves much to bedesired.) Gender-equity also requires thatcontracts consider gender issues in servicedelivery.

How can contracted extension systemsavoid having negative impact on services forthe poor? Contracting extension services canspecifically target small, poor, and marginalfarmers, and require contractors to work withthese groups and address poverty issues. Pri-vate sector for-profit providers are willing toservice difficult areas under favorable contractterms, and NGOs often have greater aptitudefor working effectively with disadvantagedcommunities. Government policy needs to en-sure that the poor have access to services neededto improve social indicators and productivity.Contracts can also target the poor by stratify-ing clients according to income level, as is donein some Latin American extension programs(Chile, Mexico).

Additional Costs When Out-SourcingExtension Services

Moving to contract provision of extension ser-vice entails some long-term costs. Managingcontracted extension services requires skilledstaff with capacity to monitor, supervise, andevaluate work of contractors. Financial manage-ment and administration systems in many stateagencies also require strengthening to handlecontracted extension. Other costs are the loss ofinstitutional memory, when contractors developexclusive expertise and retain experience withextension programs. In the extreme, this canlead to an effective monopoly on service provi-sion. A further cost is the loss of key govern-ment staff, who might be presented withcomparatively attractive employment condi-tions in the private sector.

Out-sourcing services might also requireheavy initial costs, if reforms include staff redun-dancies and retirement packages in addition tofinancing of contract services. Political and socialconcern over downsizing public sector staff is fre-quently an obstacle to contracting services fromprivate providers. However, a well-managedprogram of training, grants, and severance pack-

11

ages to assist staff into retirement and new oc-cupations can mitigate this problem. Over themedium term, private sector expansion leads to

1 Indeed, the development of new services and innovations by the private sector may result in morepeople being employed in extension, as in New Zealand, where extension has been totally privatized andthere are now more extension consultants than when extension was a state monopoly (Walker 1993).

progressive increase in private sector employ-ment opportunities and facilitates rationaliza-tion of government staff numbers and cost.1

This Good Practice Note focuses mainly on gov-ernment out-sourcing of extension services forfarmers, though many of the principles areequally valid for other contracting systems. Al-though the cases tended to emphasize field ad-visory services, some covered other activities,such as group formation, mobilization, market-ing, product preparation, and farm manage-ment. In all cases, the requirements for success-ful contracting of extension were similar.

Essential Preconditions for PubliclyContracted Extension

A sound policy environment for agriculturaldevelopment (including farmer access to inputsand markets) is basic to any meaningful exten-sion service. The AKIS case studies revealedfour additional preconditions for successful pro-grams of contracted extension: political will topromote system reform, clarity in institutionalroles, adequate capacity in service providers,and effective demand for extension services.

Political Will to Promote Extension Reform

Reform of agricultural extension is an urgentneed in many countries. If government opera-

Requirements for Successful Extension Contracting

tions are improved by contracting for servicedelivery, farmers can receive better services,public expenditures can be reduced, and pri-vate enterprise can be expanded. Change threat-ens all, however, especially vested interests, andthe shift to contracted extension implies a fun-damental change in the traditional view of gov-ernment in many countries.

For contracted extension services to be suc-cessful, adequate funding is required – whetherfrom donors and government, the private sec-tor, farmer organizations, or a combined effortby the various parties concerned. There mustbe a willingness to cooperate among all parties,including politicians, service providers, and cli-ents. Government agencies must be responsiveto clients’ needs, whether expressed directly orthough the contracted service provider. Build-ing trust and political will for reform is the es-sential first step in initiating a strategy ofcontracting extension services.

Clarity in Institutional Roles

The government role needs to be spelled outand clearly understood in systems of contract-ing services. Governments have an essential rolein looking after public goods and the public in-



terest. This frequently requires government tomaintain a role in training extension advisers,contract oversight, program monitoring andevaluation, and overall strategy formulation.Contracting for extension ideally involvescoproduction of services with collaborationbetween government, service providers, andfarmers.

Contracting arrangements provide oppor-tunity for extension providers (including gov-ernment, NGOs, private venture companies,and farmer organizations) to share experiencesand resources, and to engage in collaborativeplanning. Collaborative planning with clientsencourages a sense of local ownership and tendsto enhance program effectiveness. Contractsthat ensure client participation in decisions oncontent and delivery of services strengthen de-mand-driven systems, and increase relevanceof information services provided.

Adequate Capacity in Service Providers

One of the common constraints to contractingextension services is the real or perceived lackof qualified service providers. Barriers to entrycited above limit the number of institutions en-gaged in provision of extension services, butoften institutions are active in the field, eventhough “invisible” to government officials andagencies. Establishment of a registry of serviceproviders is helpful to facilitate the contractingprocess. Private sector agencies, both for-profitand non-profit, are innovative and quick to en-ter a field, when funding is available.

Contract extension arrangements can ex-ploit the comparative advantage of service pro-viders. However, provider professionalism andtechnical capacity are fundamental to success.Training and education (through strong coali-tions among agricultural education institutions,research and extension) may be essential inthe short term for upgrading, and in the longterm for advancing a professional consultingindustry.

Effective Demand for Extension Services

The other aspect of the technical services mar-ket is the demand-side. This is usually weakerthan the supply-side of service providers, asfarmers are usually small and not formally or-ganized. Furthermore, past experience withtop-down extension services has not stimulateda great appreciation for the value of technicalservices. Public programs to finance or co-finance services for farmers, and approachesthat put the farmer in charge of the extensionagenda, help strengthen demand for extensionservices.

Farmer organizations are critical to strength-ening the demand for technical services, becausethey provide economies of scale and a mecha-nism for promoting small-farmer interests.Technical competence of farmer organizationsis important in dealing with service providersand farmer education and training are crucialto enhance agricultural development over thelong term.

Operational Requirements forContracting Extension

Contractual arrangements often involve an evo-lutionary process and move through phasesbefore reaching maximum efficiency and equity(as in Chile). Success depends on finding prac-tical solutions to local problems. AKIS case stud-ies found seven operational issues important tocontracted extension.

Selection of Extension Agents

Success of extension activities depends largelyon extension agents and their relationship withfarmers. Selection of extension agents is there-fore critical to program success, and contract-ing services should allow greater discretion andflexibility in selecting them. Farmers or membersof farmer organizations should play a greater role inselecting the extension agents who serve them.

13

Monitoring and Evaluating ContractExtension Services

Government, sometimes with input from NGOsand farmers, is generally responsible for moni-toring and evaluating the work of contractedextension agents. Each extension contractshould include a plan to monitor the perfor-mance of the consultant and/or the consultantfirm. Evaluation records should be kept to main-tain a record of available consultant firms forextension work, and to record the assessmentof the firm’s performance. Capacity to monitorand evaluate contracts is crucial.

Time-bound milestones should be includedin contracts, and contract objectives should beclear and backed by verifiable monitoring indi-cators. In Zambia (Box 6) a separate unit hasbeen established dedicated to this purpose, anda similar development is planned in Zimbabwe.Monitoring and evaluation mechanisms mustprovide for monitoring both performance ofcontract service providers and impact of con-tracted services. Farmers and farmer organizationsshould be more involved in monitoring and evaluat-ing the work of extension agents.

Certification of Extension Agents

A system of professional accreditation is neededfor quality control and monitoring qualifica-tions of extension service providers and/or ex-tension agents. In most cases, government isresponsible for maintaining a registry and cer-tifying capacity of private service providers fi-nanced by public funds. The certificationprocess can be problematic and can open gov-ernment staff to charges of abuse or favoritism.Farmers, professional associations, and otherprivate entities also maintain professional reg-istries, evaluate consultant capabilities, andvalidate credentials, so farmers should probablybe more involved in evaluating extension agentsand certifying their capabilities. Private sector orcivil society mechanisms for certifying extensionagents and service providers should be a long-termobjective in contract extension systems.

Box 6 Zambia and Zimbabwe: Out-Sourcingspecialized services

Projects in Zambia and Zimbabwe illustrate howNGOs can be contracted to provide services inareas with low productive potential, where pov-erty is endemic, infrastructure poor, and socialindicators are low. For-profit service providerstend to focus on productive accessible areas andmarket-oriented higher income producers, butNGOs generally have greater aptitude for work-ing in difficult areas and with disadvantaged com-munities.

The Peoples Participation Project in WesternZambia and the Chivi Food Security Project inSouthern Zimbabwe are both in remote areas withlow productive potential, recurring drought,chronic food scarcity, endemic poverty, and poorinfrastructure. Both projects have achieved mostof their objectives through partnerships and cost-sharing between donor, NGO, and government,and user self-help. Low-cost, group facilitationrather than transfer of technical knowledge, de-velopment of marketing linkages with agri-business, and effective promotion of self-helpcharacterized both projects.

In addition to regular agricultural extensionservices, contractors are providing discrete ser-vices, especially in the animal health field. In Zam-bia, for example, tsetse control is being carriedout by a private sector contractor (Clinch, 1999,personal communication) and a similar arrange-ment is being introduced in Zimbabwe.

Source: Analytical paper by Ashworth.

Payment/Cost Sharing of Extension Costs

Government continues to provide funding formost contractual extension arrangements, butcost-sharing arrangements between govern-ments and farmers are increasingly prevalent.In industrial countries, farmers are paying ei-ther a large portion or all costs for extension.Farmers also cofinance extension services fromthe for-profit private sector, NGOs, and researchinstitutions. Cost-sharing arrangements with farm-ers and other agencies should be encouraged in pub-licly financed contracted extension programs.Cost-sharing is greatly facilitated when farm-



ers are involved in selecting, monitoring, andevaluating extension agents, and in determin-ing program content.

Contracting Extension Services

As governments move to outsource extensionservice provision, the initial approach is usu-ally that of government contracting services onbehalf of farmers. Although this is expedientand government maintains a certain level ofcomfort with the management of public funds,it maintains a top-down mentality and a rela-tionship of government doing something for theclient. Empowering farmers to purchase theirown services gives them true responsibility forservice provision. Many community and pro-ducer organizations are weak and poorly orga-nized, but experience indicates that theyfrequently can contract services efficiently andeffectively (De Silva 2000). Programs should relyless on government contracting and encourage farm-ers and farmer organizations to assume responsibil-ity for contracting extension services. This is likelyto be a gradual process in most countries.

Deciding on the Content of Extension Messages

Governments continue to determine the exten-sion messages to be provided to farmers,

although they now more often do so in consul-tation with NGOs. Farmers and the for-profitprivate sector are less involved in determiningcontent of extension services. Farmers, NGOs, theprivate sector, and research institutions should beclosely involved in decisions on extension programcontent. Diversity in sources of technology (re-search, private sector) is important, especiallyin countries where extension must serve manytypes of farmers.

Deciding Who Will Receive Extension Services

The decision as to who should receive publicservices is very much a political decision andwill be affected by the political process. To theextent that clients value services and lobby forthem, this is a legitimate means of allocatingservices. There are, however, important publicgoods issues involved in targeting services.Equity concerns dictate that services be targetedto the poor, women, or minority groups, to ad-dress specific problems. Environmental con-cerns may dictate a need to focus activities on aparticular area or problem. A broad range ofstakeholders have interests in, and need to beconsulted on, allocation of extension services.Governments should consult widely with stakehold-ers and use objective indicators in decisions on whowill receive extension advisory services.

Recommendations for Practitioners

Future best practice in contracting for extensionwill likely evolve from experience gained fromcurrent initiatives. The following recommenda-tions are intended to assist policymakers inplanning contractual arrangements for exten-sion services.

Strategies for Contracting ExtensionServices: Diagnostic vs. Recipe

Experience indicates that design of programsfor contracting extension varies greatly fromcountry to country. While some general lessons

15

may serve to guide practitioners, local diagnos-tic work is essential and “blueprint” approachesare to be avoided. Case studies illustrate the factthat contracting for extension can have variedobjectives and various contractual arrange-ments. Governments may wish to get out of thebusiness of extension delivery and shift thatresponsibility to private organizations. Alterna-tively, a public extension agency may simplyneed to expand its capacity by contracting ex-tension providers to cover certain specific ar-eas. Program design also depends on thesocioeconomic and agricultural systems preva-lent in the area to be served. An agency mightcontract for services in one area and not neces-sarily in others (livestock but not crops, or for-est seed production but not development offishponds).

Contractual arrangements may involve two,three, or more parties, and variation in contractarrangements can lead to confusion. Systems arebest characterized on the basis of the entitiescarrying out three major functions—financing,purchase of services, and provision of services.Each of the three functions can be split betweenpublic (local, regional, or national level govern-ment) and private sectors (NGOs, farmers,agribusiness, or for-profit firms). Increasingly,demand-driven extension systems involve cen-tral government providing financing for localgovernment or farmer groups to contract ser-vices from private sector providers.

Redefining the Role of the State

With contractual extension arrangements, thestate role changes from service delivery to en-suring quality of the services provided undercontract. The days of government commandand control over extension delivery are num-bered, but the role in oversight and regulatoryfunctions continues to be very important. Thequality control function extends beyond con-tract oversight to addressing second generationproblems, especially the links between serviceproviders and support services that ensure qual-

ity extension—subject matter specialists exper-tise, research and development, training, andmonitoring and evaluation.

Governments will likely continue to influ-ence extension processes so that public goodsare taken into consideration. As Christoplos andNitsch (1996) state: “Hopes that the private sec-tor and civil society will simply expand to fillthe vacuum in basic services have proven to beenormously exaggerated.” To that end, publicagencies must have the capacity to design soundterms of reference, set the rules of the game forfair tendering processes, monitor contractimplementation, and evaluate the results.

More experience is needed to define goodpractice in facilitating the transition from tra-ditional to contractual extension systems. Inparticular, there is an issue of what to do with apublic service system existing in parallel withthe contracted services. Contractual extensionarrangements are not appropriate to all situa-tions, although they are likely to spread to newareas where they have potential to addressproblems facing many traditional extension sys-tems. The World Bank needs to be able to assistBorrowers to assess and design appropriate pro-grams for contracting extension services.

Initiating Programs to Contractfor Extension

When initiating a program of contracting forextension, situation-specific assessments of ob-jectives, advantages, and disadvantages of con-tracting extension services is necessary. Pilotprojects might be useful to establish proceduresand best practice and to encouraging develop-ment of private service providers and appro-priate partnerships.

Contracting extension services can result inservices being provided only to those able to payor in areas most easily served. Identifying thetarget client population in well-designed termsof reference is important. Contracting withNGOs with a special mandate or methodologyfor reaching the poor should help ensure equity.



Ensuring Clarity in Contract Documentsand Process

Detailed terms of reference and good contractdocuments and procedures are important toproperly functioning programs. Terms of ref-erence should be specific about deliverables andthe timetable for delivery, as well as expectedresults to be achieved. The full contractingprocess includes preparation of requests for pro-posals, legal contract documents, and a proce-dural manual outlining the precise roles andresponsibilities of all parties. When governmentis issuing the contract, responsibilities for over-sight and regulation must be spelled out, alongwith procedures at all levels (central/provin-cial/and local) for monitoring and evaluatingperformance of the contracted service provider.

Fostering Public-Private Partnerships

Many countries/areas lack significant numbersof potential service providers, though localNGOs and other organizations are emerging tofill this role. The question remains as to howbest to promote the emergence of alternate pri-vate sector service providers. Clearly, govern-ment must provide a policy environment thatfosters emergence of private services. As farm-ers and the private sector develop greater ca-pacities, and as demands on agriculturalsystems expand, new partnerships and institu-tional relationships will prove essential to linkfarmers, government, and private institutions.Many of these relationships will be based onsharing information and coproduction of ser-vices. Complementarities between institutionsare important, and partnership arrangementscan exploit those complementarities.

Expanding Beneficiary Ownershipof Extension Services

The traditional manner of financing extensionservices involves a top-down flow of funds fromthe government or donor to the service pro-

vider. With very few exceptions, the chain ofaccountability for performance is upwards tothe financier and producers; service users areexcluded from the chain. Reversing the finan-cial flow by providing funds directly to the pro-ducer to contract services from providers canchange the entire incentive and accountabilitystructure. This fundamental reversal of fund-ing and accountability has several advantagesin that:• Providers must deliver relevant services of

value to their paying customers;• Services are more likely to have a positive

cost-benefit ratio since producers are un-likely to pay for services they do not con-sider beneficial;

• Services are more likely to be sustainableafter the withdrawal of state/donor fund-ing;

• Empowering beneficiaries promotes com-petition among providers and spurs furtherefficiency gains;

• Introducing cost-sharing arrangements isfacilitated, because producers are alreadydirectly involved in financing and will pur-chase services they truly need and value;and

• Poor and marginalized individuals andgroups can be provided with real buyingpower.

Monitoring Future Experience withContracted Extension

Much is yet to be learned about systems for con-tracting extension. These systems are generallytoo new to show much evidence of impact ofmoving from traditional to contracted services.The case studies were generally positive and/or claim good impact, but none of the case stud-ies had any sound impact evaluation. There istherefore no evidence of reduced costs undercontracting systems, although it seems likelythat effectiveness has increased. Bank supportwould be useful to develop evidence of impactand cost-effectiveness. Issues worth further

17

study include: empirical analysis of true unitand aggregate costs of contracting extension,mechanisms for fostering ownership, continu-ity of contracted extension systems, and the

potential to enhance sustainability of contrac-tual extension arrangements by linking themwith other services (input supply, credit, mar-keting).

Carney, D. (1998). Changing private and public rolesin agricultural service provision. London: ODI,Natural Resources Group.

Christoplos, I. and U. Nitsch. (1996). Pluralism andthe Extension Agent: Changing Concepts and Ap-proaches in Rural Extension. Swedish Universityof Agricultural Sciences.

De Silva, S. 2000. Community-based Contracting: AReview of Stakeholder Experience. World Bank.

Farrington, J. (1994). Public sector agricultural exten-sion: is their life after structural adjustment? Lon-don: ODI, Natural Resources Institute.

Feder, G., Willet, A., Zijp, W. (1999). Agriculturalextension: generic challenges and some ingredientsfor solutions. Washington, DC: World BankPolicy Research Working paper 2129.

Rivera, W.M.; (1996); Agricultural Extension in Tran-sition Worldwide: structural, financial andmanagerial strategies for improving agricultural

References

extension; Public Administration and Development,vol. 16:2, May, 151-161.

Rivera, W.M. and Cary, J.W.; (1998); Privatising ag-ricultural extension; In: B.E. Swanson, R.P. Bentz,and A.J. Sofranko, (eds.). Improving agriculturalextension: a reference manual. Rome: FAO.

Scott, G.C. (1996). Government reform in New Zealand.IMF occasional paper 140. Washington DC, In-ternational Monetary Fund.

Smith, L.D.; (1997); Decentralisation and Rural De-velopment; Rome: FAO/SARD.

Walker , A. B. (1993). Recent New Zealand experiencein agricultural extension. Proceedings of the Aus-tralia-Pacific Extension Conference, Gold Coast,Australia.

White, R. and C. K. Eicher (1999). NGO’s and the Afri-can Farmer: A Skeptical Perspective. East Lansing,MI: Michigan State University, Department ofAgricultural Economics, Staff Paper No. 99-01.


The content of each contract will vary depend-ing on the purpose of the exercise and the natureof the agreement. Memoranda of Understand-ing (MOU) or Letters of Agreement (LOA)might be considered forms of contracts. Achecklist of issues to be addressed in contractagreements would include:

1. Objectives and purpose of the agreement;2. Roles, responsibilities and obligations of

the parties;3. Specific tasks to be performed – clear and

unambiguous terms of reference, includ-ing where applicable, the methodology,staff qualifications and experience re-quired, and other inputs to be supplied;

4. Outputs or products to be produced andhow they are to be measured and/or, if aresults-based contract, the outcomes orresults to be achieved through provisionof the services;

5. Costs in total and by type of main expen-diture;

6. Payments, total amounts, and schedule forpayments;

7. The time-frame of the agreement; proce-dure for extension if necessary;

8. Actions to be taken in case of conflict ofinterest;

9. Procedures for resolution of disputes withpossibly the use of independent third-party arbitrators and the procedure fortheir selection;

10. Names and/or designations of the officialagents and contact persons for the respec-tive parties, and to whom notices and cor-respondence should be addressed;

11. Reporting and information requirementsincluding the format, broad content and

Annex A: Contracts and Agreements

timing for required reports; ownership ofinformation and products;

12. Liability of the respective parties in casesof accident, loss or damage to property andstaff of both parties;

13. Means of monitoring and supervising thework and contractor performance; theprecise indicators to be used for assessingperformance and impact; and who is re-sponsible for monitoring;

14. Risks involved if any and how they wouldbe mitigated;

15. Responsibilities for project management,if applicable;

16. Process and or actions for termination ofagreement;

17. Geographic areas to be covered and or de-scription of target group, if applicable;

18. Terms and conditions of employment, in-cluding all payments and allowances forstaff seconded or attached from otheragencies;

19. Definition of cost-sharing and cofinancingrequired; responsibilities and proceduresfor payment; and cost-share for each fin-ancier;

20. Procedures for staff dismissal/replace-ment in case of sickness, accident, poorperformance, or death;

21. Procedures for dealing with situations anddevelopments not covered within theagreement;

22. Incentives for good performance, sanctionsfor nonperformance, and definition ofwhat would constitute nonperformance.

Not every agreement or contract would re-quire or include all of these elements. To avoidor reduce the possibility of misinterpretation

19


and or disputes, agreements should be as thor-ough and specific as possible. This notwith-standing, they should also avoid being toocomplex or rigid and should always provideroom for changes and flexibility in implemen-tation. Perhaps most critical to any agreementis the working relationship between the con-

tracting parties. A good agreement with a badworking relationship will not work, whereas agood working relationship can help resolvemany contract issues. A good agreement,however, avoids contract disputes and helpsto preserve goodwill and good working rela-tionships.

Private Extension Services – Advantages and Disadvantages

Potential advantages

More market and commercially oriented, with an increase in market-oriented programs

More efficient and effective delivery of services due to profit incentives, greater flexibility, and quicker decisionmaking

Greater accountability to the customer and greater responsibility for good advice and quality service generate greater demand for services, whereas poor advice and service result in less demand and lower incomes

Usually more cost-effective with a greater cost-consciousness at all staff and management levels, and an appreciation of the value of time and efficient resource allocation

More analytical approach to investment in capital goods (vehicles, information technology, office structures and equipment, training) with a basic question as to whether these will improve productivity and increase competitiveness

Overhead costs of administration and management are minimized (in most cases) especially where competition exists

More motivated staff and higher quality service; greater staff job satisfaction for most professionals; more propensity to learn from farmers as to what works and what doesn’t; income depends on offering sound practical advice

More professional client-customer relationships (greater confidentiality)

More likely to provide economic advice with technical information

Greater sense of “ownership” by farmer customers

Greater propensity to take risks and be innovative in the search for efficiency and new ways of providing services and information

Allows public services to allocate resources to core functions and public goods services

A more altruistic philosophy within the nonprofit sector makes it more inclined to work at grass roots with poor and disadvantaged

Possible disadvantages

Comparatively weak linkages with research and new technology developments; tendency to focus on single crop

Unless under contract with the public sector to do so, a reluctance to operate in remote areas and among the lower income groups

Private sector providers more likely to have agenda which may be at variance with public policy and development goals (for example, monocropping versus diversification)

Clients with a low capacity to pay can be disadvantaged, unless subsidized directly or indirectly by government, since private providers usually charge for their services

Potential profit opportunities and drive to “sell” input can distort advice to the ill-informed buyer, as with sale of pesticides, fertilizer, machinery (Note: This problem is not unknown to public sector service providers.)

Possibility of reduced government control of the type and quality of services provided, unless contract provides for adequate controls

Problems in accountability for the use of public funds

Environmental sustainability concerns may be neglected

May neglect staff training due to concern to keep “unproductive” costs to a minimum

May cover comparatively small area (especially NGO programs)

Agro-processors and marketing firms might exploit farmers for short-term gains and increase long-term costs for producers or disillusion them with prices and services provided

Women and minority needs for services may be neglected unless specifically addressed in contract terms of reference

Annex B: Advantages and Disadvantages of Contract Extension

21


Public Sector Extension Services – Advantages and Disadvantages

Potential advantages

More in tune with government policy

More development and socially oriented

Greater concern for environment

Slow but sure career path for staff; greater security of employment

More suited to regulatory and mass media

Potential for stronger linkages with research, which can enhance technical skills and knowledge

Better able to coordinate programs

Can pay more attention to staff training and development

More focus on poor and poverty reduction

Better able to articulate government policies and solicit outside support

Except for “political” influences, more suited to giving impartial advice not influenced by the need to “sell” a product

Possible disadvantages

Slow, comparatively cumbersome decisionmaking

Inertia inherent in bureaucratic management system, administration, and culture

Often weak administration and financial management

Difficulty attracting and retaining quality, innovative staff in competitive environment

Comparatively unresponsive to client priorities and lack of customer-first focus

Management that does not willingly take note of or act on the advice and experience of lower level staff

Little consciousness of costs of operation and management including cost of time

Commonly overmanaged with high administration and overhead costs

Little relationship between performance and income with focus on controlling inputs rather than achieving outputs and goals

Susceptible to “politicization” of decisionmaking

Risk aversive with little incentive to be innovative and try new approaches

Annex B (continued)

23

Out-Sourcing Services – Some Possible Advantages and Disadvantages

Advantages

Reduces investments in assets and frees up resources for other purposes; may initially increase costs due to need for capacity for contract management

Reduces permanent staff requirements and allows redeployment of resources to higher-priority or sensitive areas

Enhances extension impact by accessing providers with special skills or comparative advantages in providing specific services

Creates partnerships and working relationships with other providers

Enhances flexibility and credibility in responding to special needs of diverse clientele

Is useful for testing innovative and higher risk “new” systems

Enhances flexibility and decisionmaking process

Increases provider accountability

Forces more attention to and capacity development for financial management

Disadvantages

Institutional memory may not be enhanced, but may be lost

Some nonstate providers may be reluctant to pass on all information related to new skill development and lessons learned

Increased need for skills of contract negotiation, supervision and monitoring performance

Increased demands for skilled accounting and financial management (an advantage if this forces providers to strengthen their capacity)

Increases staff dissatisfaction and may contribute to brain drain if private sector providers have access to more resources

High initial costs (if not offset by staff reductions) due to need for new skills and upgrading financial systems

Annex B (continued)

Annex B. Advantages and Disadvantages of Contract Extension