Middle management
3.1.2. Performance contracts
In twelve countries, all or part of the direct public funding for HEIs is awarded in accordance with a ‘performance’ contract concluded between the State and the institution concerned. In addition to the allocation of a budget, these contracts are based on the principle of defining strategic objectives for a particular HEI. They may also represent an instrument for measuring whether institutions actually do achieve their objectives. For the public authorities, therefore, performance contracts represent a powerful mechanism that enables them to guide the institutional strategic policies.
Countries differ with regard to the importance of the performance contract in the allocation of public funding. Contracts that influence the main part of the public funding are concluded following a negotiation. This is the case in France (8) (since 1989), Luxembourg (since 2003), Austria (since 2007), Romania (since 1998,
revised in 2006), Finland (since the mid 1990s) and Iceland (since 1997). In Greece, this type of contract was adopted very recently. In Denmark, performance contracts, which were introduced recently and are not legally binding, are a precondition for receiving public funding but do not govern the publicly-allocated amounts.
In France, given the fact that the salaries of teacher researchers are paid essentially by the state,public
funding distributed through contractual agreements only covers 10 % to 15 % of university budgets and the situation varies from one university to the next. The block grant for operational activity is allocated according to a funding formula. The aim of this policy is to reinforce the share of contractual credits attributed based on a qualitative evaluation of results, compared to credits attributed on a purely quantitative basis. In Austria, the budget allocated under the performance contract corresponds to 80 % of the block grant for universities, with the remaining 20 % based on a funding formula. In Romania, the annual contract relates to all public grants. In Finland and Iceland, aside from public funding for specific research projects, the agreement on performance covers the remaining public grants. Also in Finland, 6.5 % of the amount ratified by the agreement is awarded for projects relevant to national political strategic priorities.
When performance contracts are a main mechanism for the allocation of public funding to HEIs, they contain strategic objectives that the HEIs set themselves as well as national strategic aims (see Chapter 1) which involve a large part of the institutional activities. In Romania and Iceland, these aims are established separately for each individual institution. Contracts are established for a period of 3 years in Austria and Finland, 3 to 4 years in Denmark, 4 years in France, 5 years in Iceland and 1 year in Romania.
In Denmark, the performance contracts draw up the universities’ strategic objectives, means and target areas focusing on the four core activities, namely: education, research, dissemination of knowledge, and knowledge exchange. In France, contracts set objectives for universities and involve the quality of provision and research, governance, the fight against inequality, etc. They must articulate the requirements of the national public service in terms of higher education, with policies and strategic options for development of the individual institutions. In Luxembourg, the contract concluded between the university and the state focuses on the general policy of the institution and its strategic choices, objectives and activities in the fields of teaching, research, student mobility, documentation and administration. In Austria, the contract has to contain the universities’ strategic objectives, study programmes and services, planned developments and incentives in terms of human resources management, as well as plans for developments in research, contributions to social progress (including measures to increase the proportion of women in senior positions, courses for working students, expanding areas of culture and research with a social impact, knowledge and technology transfer), planned international activities and schemes, and inter-university cooperation. In Romania, the strategic plan on which the contract is based has to include the strategic objectives of each institution, its study programmes, and the strategies to be adopted for teaching, research, human resources management, partnerships, funding, managerial strategy and quality assurance strategy.
In four countries, performance contracts concern only a small part of the allocated public funding and are intended to finance specific projects or more specific objectives. In the Czech Republic, Portugal and Slovakia, these contracts are obtained in the framework of a competitive bidding procedure. In the Flemish Community of Belgium, funding for these contracts will be allocated according to the numbers of students between 2008 and 2010. Meanwhile performance indicators will be defined. From 2010, funding will be allocated based on the performance achieved by the institution.
In the Flemish Community of Belgium, 4 % of the direct funding is allocated through performance contracts (2000-2007) which are concerned with teaching and learning innovation and curriculum reform. From 2008 on, 2 % of the direct funding is allocated for performance contracts concerned with widening access and in academic achievement by students from under-represented groups. In the Czech Republic, 7.4 % of public funding received by HEIs for education at ISCED level 5A is allocated through an annual (but renewable) development contract. In order to receive this funding, the long-term institutional plans must be in line with the priorities defined in the 2006-2010 higher education plan established by the Ministry of Education (internationalisation, increasing the quality and excellence of academic activities and cultivation of the academic environment), and the proposed project must be related to the national annual priorities as regards teaching activities. The Ministry of Education also allocates funds to regions, intended specifically to enable institutions at ISCED level 5B to implement national conceptual intentions in the area of education. In Portugal, HEIs which seek improvement and development may apply for multi- annual funding based on a programme contract/development contract. These contracts confirm short- and medium-term strategic objectives, which may concern quality improvement, curriculum development, the strengthening and running of infrastructures, modernisation of management, etc. In Slovakia, the proportion of development contracts in public funding for teaching is similar to that in the Czech Republic. The award of a contract (annual or multi-annual) to a public HEI to carry out a development project in connection with teaching activities depends on whether the long-term strategic
There is a similar funding mechanism in Ireland, but it is not formalised by a performance contract. This Strategic Innovation Fund allocates funds to universities for projects which are in line with the national strategic priorities, on a competitive basis. This fund is entirely separate fromthe annual recurrent grant for universities.
Performance contracts may be used as an incentive, for example where public funding is decreased if objectives are not achieved. Currently, the relationship between an institution’s achievements with respect to the defined objectives and the level of funding allocated is being (re)defined in several of the countries where a large part of the allocated funding is obtained through the performance contract. When the achievement of objectives is considered, essentially quantitative indicators are used, whereas the achievement of more qualitative objectives is not (yet) a determining factor for the amount of funding allocated.
In Denmark, the achievements of universities compared to their performance contract currently have no bearing on the amount of public funding that they receive. Government strategies plan to link basic public funding for universities to an overall evaluation of results and the extent to which quality objectives have been met. The quantitative indicators contained in their contracts on universities’ results in terms of student mobility, number of graduates, patents and utilisation of research results, the amount of published research, external means and foreign researchers, could be used for this purpose. In France, the organic law concerning the 2006 financial laws defines a performance system for public management based on renewable performance contracts with HEIs, whereby the most efficient management receives higher amounts of funding. In Luxembourg, the effects of the first multi-annual contract presently in effect remain to be analysed, and an evaluation of the university’s activities must be conducted. Regardless of the results, the state has promised to provide an increasing amount of funding for the university’s activities until 2009. In Austria, during the first round of contracts (which began in 2007), universities have to submit reports on their achievements with respect to the performance contract. The results will be taken into account in the next contract. In Romania, results obtained with respect to the annual contract are considered only by means of a funding formula that includes performance indicators. In Finland, the number of qualifications actually awarded by universities compared to the stated aims of the triennial performance agreement is taken into account when calculating the amount of funding in the subsequent agreement. In Iceland, assessments concerning the contracts, for which the aims and the strategy of the HEIs themselves play a vital role, are still under examination.