ISSN 0701-3086PRE-PUBLICATION PAPER

The ProgramReviewProcess:A Deconstruction

Gilles Paquetand

RobertShepherd*

WORKING PAPER96-15

March 1996

* RobertShepherdis a lecturerat the Facultyof Administrationof the University of Ottawa,aResearchAssociateof PRIME andan Associateof The RegulatoryConsultingGroupInc.

This paperis to be publishedin G. Swimmer(ed.) Life After the Cuts:Doing LessWith Less,CarletonUniversity Press1996.

This working paper should not be quoted or reproduced without the written consentof theauthors.

Revisedversion(March 19, 1996)

THE PROGRAM REVIEW PROCESS: A DECONSTRUCTION

Gilles PaquetandRobertShepherd*

RobertShepherdis a lecturerat the Facultyof Administrationof the University of Ottawa,aResearchAssociateof PRIME andan Associateof The RegulatoryConsultingGroupInc.

Paperto be publishedin G. Swimmer(ed.) Life After The Cuts:Doing LessWith Less, CarletonUniversity Press1996

"Somecircumstantialevidenceis very strong,aswhenyou find a trout in the milk."

Henry David Thoreau

1. INTRODUCTION 1

Soonafter the Chrétiengovernmentwaselectedin the fall of 1993,it wasconfrontedwith twocrises,eachdemandingimmediateanddecisiveaction: the public financescrisis which calledfor a nationaldebtcontainmentanddeficit reductionprogram;and,a crisis of governancegeneratingdemandsfor changein the structureandfunctioningof the federation. Together,theseled the Chrétiengovernmentto initiate a strategyof GovernmentRenewalaimedat:reducingfederalexpenditures;clarifying the coreresponsibilitiesof the Federalgovernmentandrebalancingthe division of labouramongthe different levelsof governmentandthe privateandnot-for-profit sectorsin the Canadiangovernancesystem;andequippingthe federalpublicservicewith the tools necessaryto improvethe efficiency of public sectormanagement.

GovernmentRenewalincorporatedfour typesof activities:(1) broad"policy reviews" in areassuchasdefence,scienceandtechnology,employment,

socialsecurity,andforeign affairs, to determinethe extentto which existingpoliciescoincidedwith governmentpriorities andcapabilities;

(2) an examinationof the efficiency andeffectivenessof federaldepartmentsandagencieswherefinancial targetsweresetover a threeyearperiodcommencingin April 1995;individual departmentsandagenciesweregiven the responsibilityto meetsuchtargetsaccordingto their own priorities; overall, this particularactivity cameto be known astheProgramReview;

(3) a seriesof actionplanswerepreparedin concertwith provincial governmentsto reduceduplicationandto improveoverall operationalefficiency in the federation;and,

(4) an integrationof variousfederalprogramsandinitiatives designedto improveefficiencythroughalternativedelivery systemsfor governmentservicesor throughnewtechnologies.

The purposeof this essayis to examinecritically oneaspectof GovernmentRenewal- theProgramReview. Our generaldiagnosisis that it hasnot beenaseffectiveas it might havebeen.It hasundoubtedlytriggeredsomeexpendituresreductionswhich are likely to continue.However,it hasnot generateda reform of the federation'sgovernancesystemin keepingwiththe subsidiarityagendathat wasthe basisof the ProgramReview. Our contentionis that thisagendawasderaileduntil the October30 1995Quebecreferendum.Howevertherearesignsthatit could be put backon track in 1996.

Although the word subsidiarityis nevermentionedin the documentsconnectedwith ProgramReview,the principle of subsidiarityunderliesthe seriesof testsproposedby the ProgramReviewexercise. The principle is built on two assumptions:that individualsarecompetentand

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capableof taking primary responsibilityfor their own welfare;and,that governmentcanandmustplay a subsidiaryor supportiverole in helpingthe individual, andthat this help canbeprovidedmoreeffectively, efficiently andcaringly by organizationsin closeproximity to theindividual.2

In the next sections,we examinefirst the historicalcontextof the ProgramReviewprocessandthe rationalethat underliesit. Then,we probethe workingsof ProgramReviewandattempttodeconstructit drawingboth from insightsgeneratedthroughseniorgovernmentofficials'interviewsandfrom obliqueexternalperspectivessuchasthoseprovidedby the reportsof theOffice of the Auditor-General. Finally, we examinecritically the responseselicited by theProgramReviewexerciseandwe suggestsomewaysto refurbishthe processin future phasessoasto bring it closerto its original mandate. In the conclusion,we speculatenot only on therecentanastrophein the federalstrategybroughtaboutby the razor-thinvictory of the federalforcesin the October30 referendum(andhintedat in the new ’masterplan’ that is purportedtohavebeendevelopedby the federalgovernmentearly in 19963), but alsoon the likelihood thatthesenew initiatives gearedto devolvefederalresponsibilitiestowardthe otherstakeholderswillbe carriedout.

2. THE PROGRAM REVIEW PROCESS

From the 1930sto 1970s,governmentsbecameprogressivelymore involved in the operationsofthe socio-economy.This involvementcanbe attributedto manyfactors: the failuresof thelaissez-fairecapitalistsystemrevealedby the GreatDepressionandthe subsequentincreasedroleof the stateto ensureeconomicstabilization;the dawnof an eraof greaterprotectionofindividuals in the faceof interruptionof earnings,sickness,or disability causedthroughwork;and,the increasingdemandsplacedon governmentgenerallyby its citizenry.

As the pervasivenessof the statepresenceescalated,thereweredemandsfor greaterscrutinyofgovernmentactivities. Questionsaboutwhethergovernmentswereperformingtheir taskeconomically(i.e. cheaply),efficiently (i.e. doing thingsthe right way) andeffectively (doing theright things)havebecomeof pivotal interestparticularlysincethe late 1970s. Moreover,asgovernmentdeficits weremountingduring this periodandpublic dissatisfactionwith theirgovernmentswason the rise, this hasled manyto concludethat governmentoperationsmightnot be aseconomical,efficient andeffectiveasmight be desirable.

Questionsregardinggovernmentperformanceroseto the top of the agendain Canadaduring the1980s. The Mulroney governmentcreatedthe NeilsonTaskForce in 1984to explorevariousways in which governmentcould dispatchits work moreeconomically,efficiently andeffectively. Although the taskforce yieldedmanyimportantobservations,the impactof thismultistakeholderexercisewaspracticallynegligible. This wasdueto the fact that the critiquesof the "amateurishoutsiders"askedto examinethe federalgovernmentactivitieswereoften aneasyprey for "well-informed insiders". Many recommendations,howeverwell founded,couldeasilybe shownto havebeeninadroitly couchedandconsequentlywereburied.4

During the late 1980s,a numberof studiesaddressedcertainorganizationalproblemsat thesourceof the federalgovernment’sperformance: lack of vision andleadershipin government

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departments;problemsof humanresourcemanagement;lack of autonomyof front-linemanagers;and,the musicalchair syndromeattributedto the frequentrotationof deputyministers,every22 monthson average.A “vertical solitude” syndrome- a relativedisconnectionandlack of loyalty andtrust on the part of junior executives vis-à-vis theirsuperiors- wasalsouncoveredwhich wasattributedto the lack of a robustorganizationalculture: it would appearthat "the middle managementgroups...havenot internalizedaconsistentsetof public sectorvalues"andthat their superiors"havenot donea crediblejob ofcommunicatinga consistentview of public sectorculture". Among other things,this factor wasidentified asthe sourceof the growing disconnectednessbetweenseniorbureaucratsandtheirexecutives.5 Theseindictmentsled the Mulroney governmentto launcha dual initiative late in1989: Public Service2000(PS2000)andthe creationof the first SpecialOperatingAgencies(SOAs).

PS2000wasan ambitioustop-downeffort at public servicerenewalto ensuremoreefficiencyandbetterquality in the servicesto Canadiansthroughthe creationof a moreempoweredandinnovativeworkforce. The creationof the first five SOAsby decreewasan effort to createorganizationswith a greatermarginof managerialmaneuverabilityandindependenceso that theymight be ableto increasetheir efficiency andimprovethe quality of servicesto the Canadianpublic. This new organizationform wasintendedto be extendedover time to the largestpossiblenumberof governmentalorganizations.

Both initiatives weremanagedfrom the very seniorranksof the public serviceandweredesignedto modify the structureandfunctioningof government. However,they did not questionfundamentallythe governanceprocess. Moreover,theredid not appearto be the robustpoliticalcommitmentnecessaryto ensurethat theseinitiatives would be fully carriedout. A numberofreformssuchasa revisedPublic ServiceStaffRelationsAct, a new job classicationsystemandnew departmentalbudgetaryproceduresunfolded.Howeverthe sort of fundamentalreform ofgovernmentthat hadoriginally beenenvisagedandpromised(politically, manageriallyandorganizationnally)nevermaterializedfor systemicreasons.6

As the federalfinancial crisis deepenedwith the recessionof the early 1990s,it becameapparentthat nothing lessthana critical rethinkingof the state’srole andits operationsin the socio-economy(i.e. of the governanceprocess)waslikely to yield the necessarysolutions. This ledthe Mulroney governmentin 1991,to initiate a specialstudyof the sort of fundamentalgovernancetransformationthat would be required. This studywascarriedout by a “blue-ribbon” committeeof independentexpertsunderthe leadershipof Robertde Cotret. The reporthasneverbeenmadepublic, but it is widely understoodthat it proposedtwo families oftransformations:a restructuringof ministriesanda reframingof the role of centralagencies.

In Juneof 1993,the influenceof this studywasfelt whenPrimeMinister Kim Campbellimplementedthe first segmentof the de Cotret report. Shereducedthe numberof federalministriesfrom 32 to 23, regroupedthe ministriesin a morecoherentway, andeliminatedsixcabinetcommittees(including the PlanningandPrioritiesCommittee). Redesigningthe role ofcentralagencieswasnot addresseddespitethe fact the committeebelievedit wasnecessarytopermit the new ministerialstructureto managemorefreely andeffectively.

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As indicatedby Glen Shortliffe in the SecondAnnualReportto the Prime Minister on the PublicServiceof Canada1993, an advisorycommitteewascreated"to provideadviceon therestructuringof government,with a focuson the reductionof costs,increasedeffectivenessandenhancedserviceto the Canadianpublic".7 Reorganizationwasplannedto proceedin threephases.For the newly engineereddepartmentsthat werecreatedby Kim Campbell,PhaseIinvolved building new structuresandmanagementteams. For the remainingdepartments,PhaseI meantconsolidationof existingactivitiesandstreamliningoperations.PhaseI ultimately led tothe signatureof performanceagreementsbetweeneachDeputy-Ministerandthe Clerk of thePrivy Council. Performanceagreementsspelledout departmentalpriorities, expectations,andanticipatedsavings. PhasesII andIII calledfor operationalrationalizationanda fundamentalre-examinationof programsandservices.

Despitethe fact that the Liberal Partyquestionedthe rationaleof Kim Campbell’srestructuringduring the 1993electioncampaign,it did not reversethe Campbellgovernmentinitiative.Instead,it built on that initiative. Marcel Masséwasdesignatedasthe Minister for PublicServiceRenewalandthe Governmentannouncedthe continuationof the Campbellgovernment’sreorganizationinitiative: PhasesII andIII wereundertakenunderthe generalrubric of ProgramReview. The announcementwasmadein the February22, 1994budget.

The philosophyof the ProgramReviewandthe guidelinesfor its implementationwerespelledout in the form of six testswhich weredevelopedduring the Winter of 1994to assistfederaldepartmentsandagenciesin the review of their activities.Thesearepresentedin Table1.

Thesesix testswere intendedto be a seriesof questionsto be answeredsequentially. They wereto serveasfilters or screensto assistin decision-makingaboutthe value-addedof federalprograms. Onecanview thesequestionsasa decisiontree. At eachstage,a null hypothesisisput to a testandthe burdenof the proof lies with individualswho areknowledgeableaboutaprogramto demonstratethat the programmeetsall testsif they wish to defendit from cutsdemandedby budgetdeficit reductionstrategies.

Onemay divide the testsin four generalstages. In StageA (correspondingto the Public InterestTest),oneposesthe basicquestionof whetherthe activity underscrutinycontinues,whateveritspastmerits,to servea public interest. If not, it shouldclearly be a prime candidatefortermination. If it servesa public interest,it must thenbe subjectedto the StageB tests(theRole of Government,FederalismandPartnershipTests).

StageB attemptsto addressgovernanceandappliesroughly the subsidiaritytest. That is, onceit hasbeenestablishedthat the programservesa public interest,it must thenbe determinedwhetherthe federalgovernmentshouldtakeresponsibilityfor it or whetherthe activity canbedevolved,in whole or in part, to the provincesor the privateor voluntarysector. Thesubsidiarityprinciple suggeststhat the federalgovernmentshouldbe involved only incircumstanceswhereothersectorsor governmentscannotperformthe activity satisfactorily. Theoption of creatingpartnershipsis welcomed.

If the programor activity passesboth StageA andB tests,thenthe StageC testmustbe applied(Efficiency Test). The principal questionposedis whetherthe programor activity canbe

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deliveredmoreefficiently thanis the caseat present. If so, alternativesmustbe proposedtoimproveefficiency andhopefully, effectiveness.

Table 1Six Testsof the Program Review

TEST PURPOSE

Public InterestTest Doesthe programareaor activity continueto serveapublic interest?

Role of GovernmentTest

Is therea legitimateandnecessaryrole forgovernmentin this programareaor activity?

FederalismTest Is the currentrole of the federalgovernmentappropriate,or is the programa candidateforrealignmentwith the provinces?

PartnershipTest What activitiesor programsshouldor could betransferredin whole or in part to the privateorvoluntarysector?

Efficiency Test If the programor activity continues,how could itsefficiency be improved?

Affordability Test Is the resultantpackageof programsandactivitiesaffordablewithin the fiscal restraint? If not, whatprogramsor activitiesshouldbe abandoned?

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It cannotbe assumedthat the programwill passthe StageD testof “affordability” eventhoughit hasbeenshownto be a federalprogramactivity that servesa public interest,that only thefederalgovernmentcanprovide,andis mostefficiently despatched.The testsof StagesA, B andC demanda degreeof evidenceto demonstratea passor failure, the resultsof which canbedebatedand/oradjudicated.However,the questionof whetherthe federalgovernmentcanaffordsuchan activity (StageD) is subjectivebecauseonly the federalgovernmentis authorizedtodeterminewhat it canafford. Sucha decisionobviouslydependson the financial constraintsascribablethat the Canadiangovernmentmust facethat areattributablelargely to the deficit anddebtsituation.

In the Springof 1994,the six testsandnationaltargetsfor expenditurereductionwerecommunicatedto all departmentsandagencies.In June1994,the ProgramReviewSecretariatwascreatedin the Privy Council Office. The role of the Secretariatwasto analyzedepartmentalresponsesin their strategicplans. In the late spring,Marcel Massémet with all departmentalcoordinatorsfor ProgramReviewto discussimplementation.During the summer,departmentsand agenciesfinalized their strategicplansandsubmittedthemin the autumnto the Secretariatfor analysis.

During the Fall, the departmentalplanswereanalyzedby the Secretariatwith the assistanceofthe Departmentof Financeandthe TreasuryBoardSecretariat.Oncecompleted,thedepartmentalandagencyplansweresubmittedto a committeeof deputyministers,underthechairmanshipof the Clerk of Privy Council, JocelyneBourgon. The committeewaschargedwith assessingthe plansandwhetherthey were in keepingwith the guidelinesassigned.Themembersof this Committeeof DeputyMinisterswere: Mel Cappe,David Dodge,RobertGiroux, PeterHarder,SuzanneHurtubise,RanaldQuail, JanetSmith, andWayneWouters.Thoseplansthat did not meetthe expectationsof the committeewerereturnedfor additionalwork. The ProgramReviewSecretariatat the Privy Council Office waschargedwith thefollow-up.

The resultsof the work of this committeewerethenpresentedto the Ministerial CoordinatingCommitteefor ProgramReview,chairedby Marcel Masséandcomprisedof SheilaCopps,ArtEggleton,Herb Gray, SergioMarchi, Anne McLellan, André OuelletandBrian Tobin. Thisprocessled to a further screeningandgenerateda rangeof decisionsregardinggovernmentoperationswhich werepresentedto Cabinetandincorporatedinto the February27, 1995budget.

Throughoutthis elaborateprocess,a numberof departmentsandagencieswererequiredtoperformadditionalwork on their strategicplansbeforeany firm decisioncould be maderegardingparticularoperationalareas. A numberof suchfiles werediscussedin weeklymeetingsin the late Fall of 1994andwereeventuallytransferredto the secondroundof ProgramReviewslatedfor 1995-1996.8

3. A DECONSTRUCTION OF THE PROGRAM REVIEW PROCESS

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In the bestof circumstances,an evaluationof ProgramReviewwould ascertainthe degreetowhich the two basicobjectiveshavebeenachieved(i.e. to respondto fiscal pressures;and,toredesignthe federation’sgovernancesystem),andthe extentto which the objectiveshaveprovedto be complementaryor conflicting. This hasbeenundertakenat the departmentalor agencylevel in a numberof chaptersof this book. Our goal is to analyzethe processin toto.

This sort of evaluationhasprovedmoredifficult thanhadbeenanticipatedfor a variety ofreasons.First, muchof the work conductedat the level of the BourgonandMassécommitteesis not supportedby any detailedavailabledocumentation.This circumstanceis not a matterofneglect. Respondentshavemadeit clear that the lack of documentationresultsfrom a deliberatedecisionto leaveno papertrail. Indeed,it hascometo our attentionthat the Office of theAuditor Generalhasbeenunableto obtainany ProgramReviewprocessdocumentationfor thepurposeof audit. All relevantdocumentationhasbeendeclared’advice to the Minister’ andthereforeprivilegedcommunicationnot subjectto the usualaudit. Second,our interviewswithseniorofficials connectedwith the processhaveprovedperplexing. Seniordepartmentalofficialstendedto underscoreflaws in the ProgramReviewprocess,while seniorcentralagencyofficialsweremoredisposedto declareProgramReviewa successalthoughthey werequite vaguewhenaskedwhat criteria they usedto arrive at suchan assessment.

Theseconditionshaveshapedour deconstructionstrategy. This strategyis threefold. First wesketchvery briefly a frameworkto guideour work. It proposesfour plausiblecriteria that maybe usedto arrive at an evaluationof the process. This frameworkforms the basisof ourdiagnosisaboutProgramReview. Second,we addressthe formal structureof the ProgramReviewprocess. We examinecritically its internalcoherence,its ambiguitiesanditscontradictionsin order to makesenseof its evolutionover the last two years. Third, we mentiona few instancesof dérapage(slippage)in the outcomeof the ProgramReviewprocess,purelyfor illustration purposes.Thesenuggetsof informationhavebeengleanedfrom evaluativeworkcompletedby the Office of the Auditor Generalwhich surveyedthe sameterritory recentlyusingothermethods. Thesearenot meantto be substitutesfor the ProgramReviewprocessin eachagencyor department.We merelywish to highlight that circumstantialevidencewould appearto confirm that ProgramReviewmay not havebeenimmuneto both errorsof Type I (rejectionof demonstrablydesirableprogramsaccordingto the six tests)anderrorsof Type II(perpetuationof demonstrablylessdesirableprogramsaccordingto the sametests).9

A. A Framework

We haveretainedfour criteria in our evaluationof ProgramReview. Theseare:1. the extentto which the ProgramReviewwasinstrumentalin implementinga philosophy

of subsidiarity;2. the extentto which it haseffecteda profoundorganizationalreform of the governance

system;3. the extentto which it examinedseriouslythe efficiency andaffordability of all existing

federalprogramsandthe degreeto which delivery mechanismswereenhanced;and,4. the extentto which it hasgeneratedsignificant reductionin federalgovernment

expenditurelevels.

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To gaugeProgramReviewaccordingto thesefour tests,we havedrawnfrom threesetsofobservations:first, a summaryof the plannedfederalexpendituresreductionsandre-allocationsreportedin the February1995budget,in PaulMartin’s economicstatementof December6, 1995andin the March 6, 1996budget;second,a setof interviewswith personscloselyconnectedwith ProgramReview;and,third, a gleaningof supportiveevidencefrom parallelevaluationefforts by the Office of the Auditor Generalto corrobarrateinterview evidence.

In essence,we havecometo the conclusionthat ProgramReviewhasdrifted awayfrom itsoriginal rationalethat wasembodiedin the six questions. What wasoriginally envisagedasarethinkingandreframingof the role of the statewithin Canada’sgovernancesystemandof therole of the federalgovernmentwithin it, wasalreadydwarfedto an exerciseof federalexpenditurereductionby the endof 1994andto an efficiency-seekingexerciseby the endof1995. The extentto which this drift was intentionalis far from clear. Our impressionis thatmuchof it evolvedby default. Although it mustbe left to the specificchaptersof this book todeterminewhethertherehasbeena significant increasein the efficiency of delivery mechanismswithin the existinggovernancesystem(criterion # 3 above),onemay proposea broaddiagnosisaboutthe relativesuccessof the ProgramReviewon the basisof the other threebasiccriteria.

As a federal expendituresreduction strategy, Program Review has beenrelativelysuccessful.

Although a numberof federalprograms(andin particularthosepertainingto major transferstopersonsandother levelsof government)haveremainedunscrutinized,thereis little doubt thatthis exerciseled to an importantlist of federalexpenditurereductionsaswitnessedby theFebruary1995budget. It mustbe notedhowever,that it is extremelydifficult to determinetowhat extentProgramReviewhasgonefar enoughfast enough. Therearewidely divergentpointsof view on this question.10

As an exerciseof organizational reform of the federal governancesystem,Program Reviewhas receivedvarious and mixed evaluations.

Some,like Arthur Kroeger11, haveheraldedProgramReviewasa part of a critical changeinthe governancesystem. However,this view is basedmuchmoreon the changein the transfersto the provincesandthe proposedCanadaSocialTransferthanon the impactof ProgramReviewper se. Others,andwe areof this view, fail to seeanythingof the sort. Despitethe importanceof the budgetcuts,it cannotbe saidthat the governancesystemhasbeenre-engineered.Only ifoneassumesa systematicfollow-up of ProgramReview(andnot only in Year I andII) wheremorefundamentalre-organizationsareforthcoming,canoneconcludethat a metamorphosisofthe governancesystemhascommenced.It may be that the resultsof the October30threferendumwill trigger sucha move,but, the experienceto the endof 1995hasnot generatedsignificantorganizationalreform exceptin somevery well-definedareasandmainly asanunintendedconsequenceof the strategyof overt federalexpenditurereduction.

As an exerciseto implement a philosophy of subsidiarity, it can be argued that theProgram Review has beenineffectual.

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Given the languageof subsidiarityof the six tests,onecanonly be startledby the fact that thefederalismandpartnershiptestshaveall but beeneliminatedfrom the consciousnessof programassessors.The only importantdevolutionactivities that haveemergedrecently(outsideofspectacularmovesat TransportCanadaandin very few otheragencies)havebeenembodiedinthe CanadaSocialTransfer: a unilateraldisengagementof the federalgovernmentratherthanreasoneddevolutionwith appropriatecompensation,a policy movethat hasnothingto do withProgramReview. Eventhougha redefinitionof the federalgovernment'srole doesnotnecessarilymeanthat it mustbe smallerin everycase,onecanpoint to a sufficient numberofrecentralizationinitiatives that havebeenimplementedwherea goodcasecanbe madefordecentralization(i.e. from insistenceon maintainingcentralizednormsandstandards,to seriousinstancesof selectiveinattentionto new realitieslike local systemsof innovationin Canadawhenrethinking reasonableindustrialpolicy) to mountquite an indictmentof the ProgramReviewon the subsidiarityfront.12

B. Scrutinizing the Process

Variousaspectsof the ProgramReviewprocessweresignificantenoughto merit attention. Theymay help to explainwhy the processevolvedthe way it did.

An importantfacetof the ProgramReviewis that it hasbeenconductedentirely by insiders(i.e.seniorpolitical andbureaucraticofficials who were likely to bearthe brunt of any serioustransformationof the governancesystem). In somecases,therewasinvolvementfrom juniorbureaucrats.HoweverProgramReviewhasbeenimmunizedagainstany meaningfulinput byboth the stakeholders/clientsof the agencyandthe citizenry andits electedofficials. This sortof curiousapproachresemblesthat of the Public Service2000exerciseandstandsin oppositionto the traditionalpreceptsof a democraticsocietywherethe citizenry hasthe moral right andobligationto decidehow it wishesto be governedanda say in any processwhich proposestochangethat system. Canadahasoptedin the pastto utilize mechanismslike royalcommissions,externalevaluativereviews,etc. or at a minimum, to institutesomeconsultationprocesswith stakeholdersandthe public who havea direct interestin the change. In this case,the processwasorchestratedfrom the top with limited internalconsultationandwithout anymeaningfulexternalconsultationin most instances.

While "outsiders"areoften easyto finesse,it is lesstrue whenthey are importantstakeholders.Moreover,whenstakeholdersandcitizensare involved,onemay expectthe politiciansto bemore likely to standup for the policy decisionsproposed. In both PS2000andthe ProgramReview,the limited attentionaccordedthe processby the politiciansandtheir relative lack ofconcernaboutthe policy outcomes(exceptin so far asthey brushagainstbroadpoliticalsensitivities)could only indicatethat the dual focuson governancetransformationanddeficitreductionwould not be maintained.

ProgramReviewmay haverequiredeachdepartmentandagencyto assesseachprogramon thebasisof the six detailedcriteria. However,thereis no assurancethat this wasdonein asystematicmanner. Indeed,nothingbettersummarizesthe view we haveobtainedfrom seniorpublic servants(outsideof TreasuryBoardandthe Departmentof Finance)thanthe followingstatement,registeredon July 18, 1995,from a very seniorpublic servantwith extensive

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knowledgeof the review process.

From my perspective,the FederalProgramReview,while producingdramaticresultsin termsof dollars or job cuts,wasprimarily a scramblefor cash,and didnot representa "re-design"or "re-invention"of governmentas had beenclaimedby some.FederalDepartmentscut what could be cut, and little real attentionwaspaid to the six starting criteria.

Therewaslittle or no attemptmadeto examinethe structureand processofgovernmenton a horizontalbasis,to lessenthe pressureswhich requiredepartmentsto incur suchenormousoverheadcosts(e.g. the massiveimpactofbloatedCentral Agenciesand their multiple controlsand demandsondepartments,the costsof the unwieldy, obsoleteand ineffectivepersonnelsystem- which everycritic sinceGlasscohasvainly tried to reform - and the undulycentralizedand control-orientedfinancial and administrativesystems).

Thereis little evidencethat the ProgramReviewwaseither strategicor guidedbyany overall notion of wherethis will takethe Federal role.13

The criteria utilized by the BourgonandMassécommitteesto determinereview priorities withrespectto the governancesystemhavenot beenmadeclear to the public. No blueprintorstrategicplan or setof guiding principleshadbeenpreparedfor thesetwo committeesto assistthemin their work. Consequently,they were ill-equippedto focuson the elementsof thegovernancesystemthat could not easilybe transferredto the lower ordergovernmentsor, toidentify the natureof the coordination,harmonizationor co-decisioninstitutionsthat would benecessaryto ensurethe requisitecoordinationamonglevelsof governmentsin the eventthatsomedevolutionmight be envisagedasa resultof ProgramReview. Therewasno generalsetof principlesakin to thoseAndré Burelle hassuggested14 to help thesecommitteesarbitratesuchmatters.

An importantconsequenceof suchan absenceof a guiding philosophyis that the possibility ofexploring importantmeasuresof devolutionwasminimized. It could not be otherwisegiven thatany consideredopinion aboutthe conditionsfor the feasibility of suchactionswasabsent. Thelack of benchmarksto assessmeaningfulsuggestionsunderthe rubricsof the federalismtestandthe partnershiptestcould only leadto thosemost importantdimensionsof the governanceagendabeingmarginalized. Evenasgenerala principle assubsidiarityprovidesa basistoproceedwith a plausiblere-allocationof responsibilitiesamonglevelsof governmentandbetweengovernmentandthe privateandnot-for-profit partners. No suchprinciple wouldappearsto havebeenusedby the BourgonandMassécommittees.

From the very beginningof ProgramReview,the Office of the Auditor Generalappearsto havebeenfrustratedat the limited extentto which the resultsof the GovernmentRenewalinitiativeshavebeenreported.

Wehavea long history of reform attemptsthat did not achievetheir goals; abreakthroughis required! Strongcentral leadership- political and bureaucratic-

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will be required.Furthermore,a regular and timely report is essential- a reportthat is basedon a moresystematicassessmentof progresstoward thegovernment’spublic serviceaims,and that reflectsresultsof importancetoparliamentariansand to Canadiansmoregenerally... providing the informationnecessaryto permit Parliamentto fulfil its relatedoversightresponsibilities.[Reportof the Auditor Generalof Canada,1994,1-22,1-23]

It is our understandingbasedon respondentstatements,that this generalpositiongeneratedmuchuneasein late 1994,but not enoughto elicit seriousandenlighteningreporting. BecausetheOffice of the Auditor Generalwasdeniedaccessto basicinformation,the audit of theGovernmentRenewalprocesswhich wasexpectedto emergein its 1995Reportdid notmaterialize.

However,therehasbeena formal report to Parliamentregardingthe ProgramReview.It wassubmittedin November1995by the Presidentof the TreasuryBoard,Art Eggleton.15 Thereport is a most illuminating in that it redefinesthe very notion of ProgramReview. The"review" is not definedin termsof the six principlesstatedat the origin of the programbut as"asetof methodsfor finding answersto crucial questions,suchashow well we aredoing andcould we do better?".16

The focus is not on "substance"but on "methods". Art Eggletonstatesthat "this report is asnapshotof what review methodsarebeingusedin the federalgovernment". ProgramReviewisreducedto a modestportion of the panoplyof on-goingreview activitiesdesignedto examine"the need,affordability andefficiency of all programs".17

By the Fall of 1995,the federalismtestandthe partnershiptestwould appearto havebeenessentiallyremovedfrom the ProgramReviewobjectives. Moreover,ProgramReviewhadbeendiffusedanddiluted by drowningit in a seaof on-going"audits,evaluationsandreviews".Likewise, its governancecomponenthadbeensetasideandreplacedby a focuson qualityservicesmoreor lessrecycledfrom the PS2000exercise.18

The focuson "improvedperformance"andon "result-basedmanagement"of the quality servicesexercisehadbecomethe new centreof gravity. By concentratingexclusivelyon economyandefficiency (andquality) andeliminatingthe concernabouteffectivenessfrom the agenda,theTreasuryBoardSecretariathaddeclawedthe ProgramReviewprocessandimmunizedthefederalgovernmentandthe federalpublic servicefrom the effectsof subsidiarity.19

Until March 1996,therewaslimited attentionaccordedto the Efficiency of the Federationexercise.This portion of the GovernmentRenewalprocess,despitesomeremarkablebreakthroughs20 at the administrativelevel, providesadditionalevidencethat little weight wasaffordedto the federalismtestoverall.Administrativeaspects,including issuessurroundingefficiency,were left to individual departmentsto pursueasappropriate.Generalefforts toorchestratefederal-provincialfora on a cross-departmentalbasiswereabandoned.

It is only on the occasionof the March 6, 1996budgetthat mattersof overlapandduplicationatthe federal-provinciallevel cameto be singledout asa centralissueboth for deficit reduction

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andfor governmentrenewal.The documenttabledthe day after the budgetby the Privy CouncilOffice (GettingGovernmentRight) emphasizedthe centralimportanceof new partnershipswithdifferent stakeholdersasa way to "bring the federalgovernmentcloserto communitiesandcitizensby moving decision-making,programdelivery anddesigncloserto citizens"andcelebratedthe successesof the Efficiency of the Federationinitiative on this score.21

It is quite clear that the governanceagendahasbeengiven new prominencebut it is not easytodetermineto what extent.

C. SomeIllustrative GleaningsAbout Outcome

The fact that "governmentpriorities" haveremainedunstateddoesnot necessarilymeanthat an"unwritten plan" exists,but thereis enoughobliqueandcircumstantialevidenceto supportthehypothesisthat sucha plan existsandhasbeena determiningforce.

For the centralagencyrespondents,anomaliesin the processweresimply randomflaws in aprocessthat neverclaimedto be perfector the resultof the dual screeningof the Bourgonandthe MasséCommitteeswhich wasobviouslydesignedto ensurethat "governmentpriorities"werepursued.

We wereprovidedwith numerousexamplesof variousanomaliesthroughoutour interviews(i.e.decisionsthat would appear,for no obviousreason,to be at oddswith what any straightforwardapplicationof the six testswould suggest). Theseinstancesmay reasonablybe interpretedasevidencethat someraison d’état may haveprevailed. Moreover,departmentalofficials havecomplainedthat their efforts to reconfigurefederalactivities(in particularin the directionof newpartnerships)werescuttledby "a degreeof intractability on the part of TreasuryBoardandothers..".22 It is difficult to "demonstrate"how widespreadtheseanomaliesor blockageshavebeen,but onemay at least"illustrate" the existenceof suchanomaliesandblockages,andattemptto identify someof the patternsthey appearto reveal.

Four anomalies

We havesketcheda few examplescited by respondentsthat might be consideredas likely"ProgramReviewerrors": Type I errors(rejectingor cutting a programwhenit wasmostsatisfactoryaccordingto the tests);or, Type II errors(maintainingprogramsthat would appearnot to meetthe six tests). Citing theseexamplesis not intendedto suggestthereshouldnot havebeenexceptionsto the diktatsof the ProgramReviewtestsfor raisonsd’état of onesort oranother. Our intention is to illustrate that in fact the processwasnot infallible. Decisionsweremadewhich prima facie would not appearto follow the ProgramReviewlogic. Suchprogramdecisionsmay simply reveala certainframeof mind or a patternof “unstatedobjectives”.

Indian Affairs and Northern Development- On-ReserveCapital Facilities and Maintenance

The purposeof the On-ReserveCapital Facilities and MaintenanceProgram is to providesupportfor Indian andInuit communitiesto acquire,operateandmaintainbasicfacilities suchasschools,libraries,andoffices. Total fundsallocatedto this activity wereapproximately$570million in 1994/95. Accordingto the Auditor-General23, “In its approachto devolution,the

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Departmenthascontinuedto transferresponsibilitiesto First Nationsfor deliveringcapitalandmaintenanceprojects. However,... the Departmenthasnot targetedandcontrolledareasof highrisk..., the Department'srisk andexposurefrom failure to properlymaintaincapitalassetsarehigh”. Specifically,continuationof this programdoesnot satisfy the “Role of Government”test.Although somecommunitiesarecapableof managingcapitalassetstherebysatisfyingthe“Partnership”test,mostcommunitiescannot for variousreasons.The Auditor-Generalargues,therefore,that a universalapproachto devolutionwhich inducesinefficiency, is not appropriate.Devolutionhasbeenencouragedin situationswhenmanycommunities'capacityto assumeresponsibilityhasbeenandcontinuesto be insufficient. The continuationof this programin itspresentform may be regardedasan error of type II. It may be moreappropriateto ensure,viapre-determinedperformancecriteria whethera communityhasthe capacityto managesuchprojectsor pursuea processof transitionwhich includessomedegreeof training.

Environment Canada - National ContaminatedSitesRemediationProgram

The purposeof the National ContaminatedSitesRemediationProgram is to managetheremediationof wastecontamination(including radioactivity)on federallands,andthe clean-upof contaminatedsitesin federaljurisdiction. Total fundsallocatedto this activity wereapproximately$250million in 1989for the developmentof remediationtechnologyandforactualsite cleanup. Respondentsfamiliar with this programindicatedthey believedthisprogramsatisfiedall ProgramReviewtests. In fact it absorbedimportantcuts. Whenfundingfor this initiative endedon March 31, 1995,“...no nationalplan or federalfund hadbeencreatedfor cleaningup the remainingcontaminatedsites(i.e. 37 of the 48 sites)that poserisks tohumanhealthandthe environment.”24 This programwhich forms part of the National GreenPlan, would appearto havebeenan ideal candidatefor renewalor amendmentin someformespeciallygiven the high degreeof public supportassuggestedby the Auditor-General:“...thatwhenrating environmentalproblems,Canadiansrank hazardouswastesecondonly to ozonedepletion”.25

Clearly, the programservesthe public interest(Public InterestTest)especiallysinceonly afraction of siteshavebeenremediated.Given that the sitesidentified are in federaljurisdictionandthat the Crown contributedto the problemof contamination,responsiblitylies in whole or inpart with the Crown (Role of GovernmentTest,FederalismTest). Transferringthis programandsubsequentproblemswould not be politically acceptable.With respectto efficiency, respondentsagreedthat with adequatefunding, improvementscanbe madeto implementation.Financialcutsto a programwhich enjoyshigh public support,andaddressesa problemwhich is clearly federalresponsibilitymay be regardedasan instanceof Type I error.

WesternEconomicDiversification

The principal objectiveof the WesternEconomicDiversificationProgramwasto build apartnershipbetweenthe federalgovernmentandwesterngovernmentalandprivatesectorinterestsin order to promoteeconomicdevelopmentanddiversificationin the westernprovinces.Respondentsindicatedthat the programservedthe public interestfor thereis a needfor such

vital investmentin the West to promotegrowth. Respondentsbelievedthe programqualified asan appropriategovernmentfunction, for it is intendedto createpartnershipsin the effort to

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stimulatethe economy(i.e. FederalismandPartnershiptests). Although respondentsbelievethatthe programcould be mademoreefficient by ensuringthat partnersareclearasto theirrespectiverolesandresponsibilities,the programwasseento be fulfilling its objectives.Investmenthasbeenincreasingin the areaandjob creationhasbeenrebounding. Whenaskedaboutaffordability, most respondentsagreedthat the programwasyielding importantdividendsandwasworth the investment. Yet, the programwascut. Overall, the programexemplifiesaType I error.26

Indian Affairs and Northern Development- Native Claims Programs

In 1969,the federalgovernmentagreedasa matterof policy that its “lawful obligations” toaboriginalpeoplehadto be recognizedif its relationshipwith thosegroupswereto improve.Since1974variousclaimsprogramsincluding comprehensiveclaims(involving settlementofdisputesregardingtraditionalnativeuseandoccupancyof land), andspecificclaims(involvingsettlementof disputesregardingthe fulfilment of treaties,governmentadministrationof reservelands,bandfunds,andotherassets)were institutedto remedypastandin somecircumstances,presentgrievances.In 1991,a numberof recommendationsweremadeby First Nationrepresentativesandthe Ministersof JusticeandIndian Affairs to improvecurrentguidelinesincluding the removalof the “pre-confederationbar” so that claimantscould be allowedto filegrievancesregardingviolationsprior to confederationin 1867. Almost $280million wasallocatedto the settlementof varioustypesof claims(exceptland claims) in 1994/95.Respondentsfamiliar with this programindicatedthat continuanceof this programdid not satisfyProgramReviewtests:the programcould not be defendedasservingthe public interest“otherthanto provideFirst Nationswith anothersourceof funding”. They saidthat major outstandinggrievanceshavebeenaddressedby the program. Grievancesbeingpresentedto the federalgovernmenttodaywerearguedto be highly questionable.Investigationof suchgrievancesisboth costly andtime-consumingtherebyclearly failing the affordability test. Whenaskedwhetherthe programservesany public interest,respondentsarguedthat the rationaleof theprogramis no longerclearor its objectivesrelevant. Overall, it wasarguedthat the politicalagendaandseniormanagementpriorities placedtheseprograms“high in importancewithquestionableapplicationof the [Program]review”. This is an instanceof Type II error.

Nature of the Blockages

ProgramReviewwasinviting critical thinking from public serviceranks,but someforceswouldappearto havebeenat work to obstructthe processfrom beingcarriedout to its logicalconclusion. Our interviewspoint to threemain forcesthat may havestifled the process.

First, it wassuggestedby a manyrespondentsthat the negativeeffectsassociatedwith thefailuresof the MeechLake andCharlottetownaccordshadstrengthenedthe resolveof thefederalgovernmentto assumeasmuchcontrol over mattersof governanceaspossible.Therejectionof thesedecentralizingaccordswasinterpretedin federalcirclesasa call for a strongfederalgovernmentin the faceof a new threatto nationalunity generatedby the emergenceofvarious"identity groups"(i.e. personswith disabilities,seniors,homosexualcommunity,Quebeckers,Westerners,women'sgroups,etc.). The numberof interestsassociatedwith suchgroupsis so extensivethat it definesandrepresentsthe whole person. This is why they are

15

often termed"identity groups".27

Suchgroupsaresuspectedof beingmorecorporatistthanpluralist: they do not representonesegmentof an individual'sconcerns.They representthe entiretyof the person:"many of anindividual’s interestsareboundup andrepresentedby a singlegroup". Societyis perceivedasbecominga groupof groups,lessandlesscapableof understandingandtalking to oneanother.28

It hasbeenarguedthat nationalinstitutionsfor “discursivedemocracy”might generatea betterappreciationof the limits imposedby mutual responsibilities. Indeed,often identity politics canbe harnessedby enablingpeopleto debateanddecideon the conditionsof their interdependencein an inclusiveforum. But this is not the strategyenvisagedby the Canadiangovernment.Ratherthanattemptingto build sucha forum wheremostgroupsmay learnfrom eachotherandgeneratedebateandarrive at compromises,our centralgovernmenthascometo perceiveitselfmorecapableof constructingsuchcomprises.Insteadof listeningandpromotingsocial learning,it hasbeenled to centralizein order to imposewhat it copnsidersasthe relevantcompromises.This propensityto centralizewould appearto be reinforcedat a time whenglobalizationforceshaveweakenedconsiderablythe nation-stateandhavecalledfor a moredistributiveform ofgovernance:largeprivateandpublic organizationshavehadto reorganizeinto networksofautonomousunits that areagile, andbetterableto adaptto everchangingcircumstances.29 Acertainschizophreniais boundto emerge.

Second,manyanomalieswould appearto reveala centralizedmindsetwherebythe federalgovernmenthasmadea consciouseffort to maintainandre-affirm control over variousactivitieswhich havebeenan integralpart of its responsibilityin the past,whateverthe logic of ProgramReviewmight suggest. This is a trait that would appearto afflict manynationalgovernmentsill-suitedfor a "dispersiverevolution" that drainspowerfrom it (outwardto global institutions,laterally to multinationalenterprises,anddownwardto sub-nationalorganizations).30 Thiscentralizingmindsethasblockedchangein Canadaperhapsmorethanin othercountriesduetoour "economicculture".

HerschelHardin hassuggestedthat our economicculturehasbeencharacterizedby apredispositiontowardpublic enterpriseanda preferencefor inter-regionalredistribution. Thesefeatureshelp to explainour particularlystrongpropensityto centralizefor onecannoteffect suchmassiveinter-regionalredistributionwithout a high degreeof centralization.31 Although theLiberal Party throughits “Red Book”, recognizedthat the trendin the governancesystemwastowarddecentralization,therearereasonsto believethat this centralizingmindsetin stillparamountin the currentgovernment.32

In the caseof WesternDiversification,for example,it would appearthe federalgovernmentinan effort to get its “fiscal housein order”, haselectedto assumesoleresponsibilityfor mattersof funding therebyensuringa centralizedfocus. In the caseof the On-ReserveCapitalFacilitiesandMaintenanceProgram,it wassuggestedby a few respondentsthat by placingFirst Nationson the fast-trackto devolution,negativeresultswereexpectedin manycases,therebyallowingthe federalgovernmentto arguethat its presenceis still required. Thereis evidenceof a patternwherebythe federalgovernmenthassetout to strengthenits role in variousareas. The

16

consequencesof this mindset,however,is that it canstifle any innovationin the directionofdecentralizationevenwhenit is demandedandneeded.

Thirdly, in the faceof conflicting demandsfor change,it is not unreasonablethat a solutionofdespairbe characterizedby a returnto the basicrulesanda re-affirmationof proceduralrationality asan anchor. Accordingto our respondents,this would explain the new prominenceof the TreasuryBoardSecretariatandthe new reverencefor perennialrigid expenditureandhumanresourcemanagementpolicies.

However,suchrigidity hasinhibited innovationandcreativity.For example,it wassuggestedthat, asa consequenceof ProgramReview,it might be prudentin somecasesto entera jointventurewith a privatesectororganizationto assistin the provisionof somespecificdepartmentalservices. In this way, the costsandrisks associatedwith the responsibilityof providing aservicewould be sharedwith the hopethat a newly refinedservicewould be costeffectiveandperhapsprofitable.However,uponsubmissionof this sort of ideato TreasuryBoardvia theprogram'sbusinessplan, they weresummarilyrejectedas inappropriate.33 Althoughresponsibilitywasnot assignedusually to TreasuryBoardspecifically for suchstoppage,itwould appearthat the “managementregime” in goodcurrencydid not offer the flexibility northe legislativemaneuverabilityfor innovationdueto the new centralityof rulesasa sourceofstability.

The joint impactof theseblockageshasbeenimportant.Seniorofficials of the Canadiangovernancesystemhavebeencaughtin a significantdilemma. Variousnew groupsin Canadiansocietyhavegeneratedparadoxicaldemandsfor devolutionanddecentralizationwhile at thesametime echoingsupportfor a strongcentralgovernment.Thesedemandsareclearlycontradictoryandhaveprojecteda Rorschak-typebackgroundwhich federalpublic officials haveinterpretedaccordingto their own proclivities. This hasgiven yet moremomentumto thetraditionaleconomiccultureof centralizationthat hascharacterizedCanadiangovernment.

With this backdrop,it is not difficult to understandthe growing role of TreasuryBoard in settingbasicruleswhenthe technologyof governancewould appearto be in needof repairs. It hasbecomean anchorat a time whenthe country is beingpulled in different directionsby therequirementof minimal integrationandthe logic of subsidiarity. This is a propitiousterrain forthe centralizedmindset. A new rationalefor a strongcentralgovernmenthasthereforeevolvedin the form of the needfor processandrules. This is the meansthroughwhich ownershipofProgramReviewhascometo be claimedby the TreasuryBoardSecretariat,not so muchbydesignasby default.

Thesethreeblockages(political, mentalandmanagerial)havecreateda gauntletin which theProgramReviewhasbeenengulfed. Unwittingly, the consolidationof identity groupshasservedasa major lever to re-inforcethe centralizedmindsetof the Canadiangovernment.This newenvironmenthascreateda dynamicin which contradictorydemandshavegiven a newimportanceto thoseupholdingthe rules.Accordingly, the TreasuryBoardhasemergedas“keeperof the rules” within the Canadianfederalstructure.

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4. WHY WAS THE PROCESSDERAILED AND CAN IT BE PUT BACK ON TRACK?

The ProgramReviewprocesswasallowedto drift awayfrom its original rationalefor a numberof reasons.

First, given the complexityof issuesfacing the governmentanda paucityof alternativeideasdebatedin the public forum, the citizenshavebeenproneto conformto any strategythat wouldgive the appearancethe governmentwasaddressingimportantissuesof governancerationally.

Second,given that the objectivesandimplementationof the ProgramReviewwerecloselyguardedby seniordecision-makers,it wasvery difficult for the public at-largeto detectthenatureandthe extentof the drift until it hadbecomea reality.

Third, therewasno forum in which the public could contributesignificantly to the process.Dueto its emphasison secrecy,the ChrétiengovernmenthadimmunizedProgramReviewboth frompublic scrutinyandpublic opprobrium. Someimmunity wasalsoderivedfrom the overallpopularityof the Chrétiengovernmentandfrom its marketingof ProgramReviewasits way totransformthe governancesystem.

Finally, therewould appearto be a perceptionamongmanyobserversof the ProgramReview(i.e. media,academia,interests,etc.) that evenif affordability hadbecomethe driving factor forchange,the meansof achievingsuchchangewerenot as importantasthe outcomesachieved,financial or otherwise. Combinedwith this perceptionwasthe belief that changeis evolutionaryandthat it may be too early to detectresults. This could only weakenany call for a realitycheckundersuchcircumstances.

Yet, the processcanbe salvagedbut certainconditionsmustbe met. We cannotestablishthecanonicallist of necessaryandsufficient conditions,but we would like to draw attentionto threeimportantnecessaryconditions: additionalfiscal pressure,allaying of the fear of balkanizationanda new momentumin the commitmentof the federalgovernmentto respondto publicdemandfor bettergovernance.

First, a lessfaint-heartedattackon the deficit anddebtby the federalgovernmentis necessarytoforce the "real" questioningof all programs. Only dramaticpressureto significantly reducegovernmentspendingcaninfluencechangeof the governancesystem. Thereweresignsin theDecember6, 1995economicstatementthat the Minister of Financeis still somewhatfaint-hearted,unwilling or unableto obtainconsentfrom the ChrétienCabinetto proceedmoreassertivelytowardthe zero-deficittarget. This de-emphasisof deficit anddebtreductionhasbeenre-affirmedin the Budgetspeechof March 6, 1996. “Holding the course”on the deficit isseenasassertiveactionandacrossthe boarddepartmentalcutsasdemonstratingaction.

Governancecannotbe changedeasily.Therearevestedinterestsin the presentsystemlikely topreventthe requisitelevel of mobilizationof the citizenry.Somewould saythat we needthemoral equivalentof a war or the sociologicalequivalentof a defeatto mobilize the population,andthat the spectreof deficit anddebtdoesnot fare well asa mobilization lever.But it may bethe only onewe have.Given this context,the senseof diminishedfinancial pressurethat has

18

beencommunicatedby the Minister of Financeover the last few monthsis a significantmessage.It may encouragethe searchfor alternativemechanismsof programdelivery (withinthe presentunmodifiedgovernancesystem)asa fully satisfactorystrategy. Only if the fiscalpressureis extremelyhigh will the governmentbe forcedto challengeits rolesandresponsibilitiesseriouslyandto effect changesin the governancesystem.

Second, the renewalof governancedoesnot necessarilyentail devolutionin all cases. Therearemanyotherdirectionsin which governancecanbe reframed.However,the fear of thedisintegrativeimpactof the devolutionprocesshasbeenimportantin building legitimacyforefforts to counterthe subsidiaryagendaunderlyingthe ProgramReviewprocess. This is amisguidedandpotentargumentwhich mustbe addressedsquarely.

Decentralizationneednot balkanize.It simply forceslocal andprovincial governmentsto providethe level of servicesthey canafford anddesire. Becauseregionsareendowedwith differentresources,valuesystemsandpublic servicesis not balkanizationbut ratherthe resultof the freeflow of resourcesin a barrier-freeeconomy. Sucha marketeconomydoesnot ensureidenticallocal conditionseverywhere. Indeed,the very differencesamonglocal conditionsandprovincesarethe triggersthat commandresourceflows amongareas. Mobility betweenlocalitiesandprovincesensuresthat local authoritiesarepreventedto effect inefficient policies.

It is only whenbalkanizationis falsely construedasthe obverseof homogenization(which is aseriousmisunderstandinganda very misleadingdefinition) that the unreasonableconclusionthatdecentralizationautomaticallytriggersbalkanizationemerges.In fact, this bizarremis-definitionis not innocent. Rather,it is an attemptat obfuscation. Whenbalkanizationis definedproperly,the main sourceof balkanizationin Canadawould appearto be not decentralizationbutcentralization.

Thereis no balkanizationwhenthereis a clearconnectionbetweenthe pricesof goodsandservicesin a particularplaceandtheir productioncosts,andwhenthereis nothingto preventthenormaladjustmentof resourceflows to the differentialsin costsor prices. Balkanizationoccurswhenthereis a wedgebetweenthe pricesof goodsandservicesandtheir productioncostsandwhensomethingpreventsthe normaladjustmentto this distortion.

Whenthe federalgovernmentimposesregulations,standardsor equalizationmechanismsuponthe provinces,suchactionsmay be arguedto distort prices,diminish provincial andlocalresponsibilitiesfor their inefficient policies,andpreventthe movementof resourcesto areaswherethey arevaluedmost. Suchprocessescanbe regardedasa tradebarrier. Given thesecircumstances,provincial governmentsareable,dueto federalenforcement,to behavelessefficiently given that the federalgovernmenthasshiftedthe burdenof their implementinginefficient policy to othermembersof the federalclub. Indeed,asMigué states,underthepresentequalizationrules,"the more inefficient the provincesare,the morethey arecompensatedby the centralauthority".34

Third, it is not sufficient to experiencegreaterfiscal pressureandto exorcizethe fear ofbalkanization-by-decentralizationto generatea genuineprocessof governancetransformation.Onemustalsobe ableto counton the commitmentby the federalgovernmentin place.

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Otherwise,the denialsyndromewill prevail. Indeed,the failure of ProgramReviewup to theendof 1995may be regardedmainly asthe resultof a failure of political will. What MeechandCharlottetownhavefailed to realizethroughthe high roadof constitutionalreform might havebeenaccomplishedby administrativemeansif ProgramReviewhadbeenhighly focusedandfuelled by a meaningfulpolitical will.

Neither the Speechfrom the Throneof February27, 1996,nor the addressby the PrimeMinisterJeanChrétienin his responseto the Speechfrom the Thronein the Houseof CommonsonFebruary28, 1996,nor the BudgetSpeechof March 6, 1996havegiven any sign of a newresolveof the ChrétienGovernmentto give a secondlife to ProgramReviewandto the wholeGovernmentRenewalexercise.Yet a documenttabledby the Privy Council Office on March 7th,1996may be regardedasa harbingerof somepossibility of reframingof the debate.35

GettingGovernmentRight would appearto constitutea boostfor the GovernmentRenewalproject.First, it is clearly a documentthat separatesclearly the governance-directedissueofgettinggovernmentright from the efficiency-directedconcernsof makingthe federalgovernmentwork better. Second,the documentwould appearto indicatethat the Privy Council Office thatwasat the origin of the ProgramReviewprocessandhadlost control to FinanceandTreasuryBoardmay wish to regaincontrol of it. Three,the documentwould appearto provideevidencethat somesocial learninghasoccurredin the world of federalpublic officials asa resultof theOctober30th referendumandthat the governanceagendahasagainrisen in prominence.

Although thereis still somereluctanceto stateclearly that subsidiarityis the guiding philosophy,its spirit permeatesthe sectionon new partnerships(pp. 17-18)of the March 7th documentandthereis a sharpeningof focus.The federalgovernmentwould appearto be willing to sketchexplicitly the contoursof the areaswhereit feelssomefederalpresenceis essential:

* for the benefitof the economicandthe socialunion,* to pool nationalresources,* to protectCanadianvaluesandidentity, and* to defendCanada’ssovereignty.

This leavesan immenseamountof latitudein the processof clarification of the federalrolesandresponsibilitiesthat the documentidentifiesasthe first key objective,the othersbeingto devoteresourcesto the highestpriorities, to providebetter,moreaccessibleandmoreparticipativegovernment,andto achievea moreaffordablegovernment.While "a swallow a summerdoesnotmake",it would appearthat theremight be a shift in emphasisbackto governancein theconductof the next phaseof ProgramReview.

Thesethreeconditionsarenot sufficient to ensurethat the ProgramReviewprocessis refocusedandsuccessful.However,unlessthe fiscal pressureis more intense,the spectreof balkanizationallayed,andthe governancethrustof ProgramReviewreaffirmed,it cannotbe expectedthat thepromisedtransformationwhich is urgentlyrequiredwill materialize.Many benefitsmay berealizedfrom expenditurereductionandfrom the pursuitof efficiency.However,the essentialsto reframegovernancewill be missed.

5. CONCLUSION

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The GovernmentRenewalprocesswasnot borneonly out of difficult fiscal times,it wasareasonedCartesianresponseto fundamentaldemandsfor changein the governanceof thefederation. Although thesedemandshavebeenarticulatedin contradictorytermsin manyforaover the last few years,the poignancyof themhasbeenfelt in the recentdebatessurroundingthe MeechLake andCharlottetownaccordsandin the heateddiscussionsthat led to the October1995referendumon Quebecseparation.

The ProgramReviewexercisewasa crucial componentof this renewalprocess.It held thepromise,in its original form, andstill holdsthe promise,if its integrity is restoredandif thesystemicbarriersin its way areremoved,of accomplishingby administrativemeans(togetherwith the othercomponentsof the GovernmentRenewalProgram),muchof what both MeechandCharlottetowncould not deliver. If this opportunityis allowedto slip, we risk tumbling into adynamicof fragmentationanddecay. We know that the Canadianpublic hasbecomeincreasinglydisenchantedwith the mannerin which changehasoccurredin Canadaandthatapproximately29% of the Canadianpopulationfirmly believesthat by the year2000"thecountryaswe know it will no longerexist"36.

The derailmentof ProgramReviewandits subsequentreductionto a federalexpendituresreductionsprogramcumquality servicesexercise,cannot andmustnot be gaugedsolely by theusualindicatorsof fiscal policy or gainsin productivity. It mustbe evaluatedin termsof thebroadobjectiveof reinventionof governance.Any belittlementof this objectivein the wholeequationcannot but invite a further erosionof the federalsystem.

Both the fiscal perspectiveandthe quality servicesperspectiveon theseissuesare importantintheir own right andmay be defendedasusefulcontributionsto bettergovernment.However,they areunduly reductivewhencomparedwith the original mandateof ProgramReviewandtothe challengesconfrontingCanada.Thesesideroadsdo not leadto Oz, andby proceedingalongthesesideroads,the effectsof ProgramReviewareassuredof beingnegligible. AllowingProgramReviewto play itself in thosenew ragsor to boardthis new trek would amounttostagingHamletwithout the Princeof Denmark.

Fortunately,1996may providea uniqueif small window of opportunityfor the refurbishmentofthe governanceagendaof ProgramReview. The panicgeneratedby the resultsof the October30th 1995referendumon Quebecseparationcombinedwith increasingdemonstrationsofdissatisfactionacrossthe country,would appearto havestruck(howeverfaintly) to the heartofthe Chrétiencabinet. The ’masterplan’ revealedby Maclean’sin its February5, 1996issueappearedto indicatethat seniordecision-makershavebeenled into taking devolutionseriously.Sucha circumstancemay provebeneficial.However,oneshouldnot discountthe powersofdynamicconservatismandthe possibility that variousinstrumentalitiesandmantraslike qualityservicesandthe searchfor alternativeprogramdeliveryand financingwill be favoredby all assanitizedavenuesthat may turn out to be desirablebecausethey arewaysto effect changeswithout truly changing.

At the time of writing (mid-March1996),after the Speechfrom the Throne,the March 6 Budgetspeechandthe seriesof papersreleasedin their aftermath,thereis ampleevidencethat theforcesof dynamicconservatismarestill hegemonic.First, the Chretiengovernmentis

21

consideringan early election.Therefore,the debtanddeficit problem,lessresolvedbylackadaisicalpoliciesthanattenuatedby a fall in the rateof interest,hasbeenpushedto thebackground.Second,the rhetoricof balkanizationremainsomnipresent.Thirdly, the March 7thdocumentfrom the Privy Council Office doesnot indicatein any meaningfulway that the’masterplan’ evokedby Maclean’sin February1996will be carriedout after all.

The sort of crisis neededto kickstarta ’renewed’ProgramReviewis still not clear.It may arisefrom the meetingof First Ministers in the Springof 1996,or the rashof meetingsbeingorganizedby dozensof groupsof concernedCanadiansacrossthe country. In any case,however,the likelihood that anythingsubstantialmight be initiated to transformthe Canadiangovernancesystemis inverselyproportionalto the time elapsedsincethe October30threferendumanddirectly proportionalto the relative importanceof the non-constitutionalroute intheir proposals.37

References1. The authors are most grateful for the critical comments ofGene Swimmer, Elizabeth Dandy, John de la Mothe and David Zussmanon an earlier version of this paper. They should not bear anyguilt by association for our work. As will become obvious, wehave not always chosen to follow their helpful advice.

2. For additional details, see C. Millon-Delsol, Le principe desubsidiarité . Paris: Presses Universitaires de France 1993.

3. M. Janigan and E. K. Fulton " The Master Plan" Maclean’s , 109,6, pp. 18-19.

4.V.S. Wilson [1988] "What Legacy - The Neilsen Task ForceProgram Review" in K. Graham (Ed.) Conservatives Heading into theStretch . Ottawa: Carleton University Press, pp.23-47.

5. This is extremely clear in D.R. Zussman and J. Jabes, TheVertical Solitude , Halifax: Institute for Research on PublicPolicy, 1989, especially chapter 4; see also T.W. Plumptre, TheBottom Line: Management in Government , Halifax: Institute forResearch on Public Policy, 1988.; G.F. Osbaldeston, KeepingDeputy Ministers Accountable , Toronto: McGraw Hill Ryerson, 1989.

6. J. Jabes et G. Paquet, "Réforme administrative dans lafonction publique fédérale au Canada: préliminaires à uneévaluation" in M. Charih et M. Paquin (Eds.) Les organisationspubliques à la recherche de l’efficacité , Sainte-Foy, Qc: Ecolenational d’administration publique (Université du Québec) 1994,pp. 27-47.

7. G. Shortliffe, Second Annual Report to the Prime minister onthe Public Service of Canada, Ottawa: Supply and Services, 1993,p.12.

8. For example, External Affairs which had been subjected to abroad policy review and had inherited of a new deputy ministerwas transferred to the second phase; in the same way, IndianAffairs and Northern Development and other departments haveremained relatively underscrutinized.

9. In analyzing programs, one must presume that if the programhas been put in place, there must have been reasons to supportsuch a move. In statistical parlance, our null hypothesis istherefore that the program under evaluation is valuable. Type Ierror is the error of rejecting the null hypothesis when it istrue (i.e. the error of rejecting a truly valuable program). TypeII error is the mistake of accepting the null hypothesis when itis false (i.e. the error of supporting a progarm when it is trulynot valuable).

10. On the one hand, some like Arthur Kroeger do not hesitate tocharacterize the 1995 Martin budget very much based on theresults of Program Review as "a bookend... after fifty years ofactivist, interventionist and, above all, self-confidentgovernment" but much of his argument is based less on the ProgramReview impact on the Martin budget but on the substantialreductions that are to be made in federal transfers to theprovinces and the proposed consolidation of federal support intoa single program to be known as the Canada Social Transfer. (A.Kroeger, "The 1995 Federal Budget" Opinion Canada, 3, 2, April1995, pp. 1-5; also A. Kroeger, "Changing Course: The FederalGovernment’s Program Review of 1994-95" in A. Armit and J.

Bourgault (Eds) Hard Choices or No Choices , Toronto: TheInstitute of Public Administration of Canada, 1996, pp. 21-28.)

On the other hand, one indication that it may not have beencompletely successful as a deficit reduction process is theconfidential International Monetary Fund document obtained bySoutham News and largely publicized in the press on December 5,1995. The IMF warns that the process of deficit reduction hasbeen "unduly slow"; in their view, a perfectly successful ProgramReview exercise might have generated much deeper and fasterfederal cuts in expenditures. (E. Beauchesne, "World WatchdogUrges Deeper, Faster Federal Cuts" The Ottawa Citizen , 5 December1995, A1-A2.)

Be it as it may, there were deep cuts in the federal spending ina large number of departments and agencies as a result of ProgramReview, so nobody would deny that it was relatively successful.

11. A. Kroeger, "Changing Course..." op.cit.

12. For instance, see G. Paquet and J. Roy "Prosperity ThroughNetworks: The Small Business Strategy That Might Have Been" in S.Phillips (Ed.) How Ottawa Spends 1995 , Ottawa: CarletonUniversity Press, 1995, pp. 137-158.

13. Private communication.

14. Burelle builds a plausible scenario of decentralization usingexplicitly as a compass the principle of subsidiarity. Hedevelops a series of classes of more or less overlappingjurisdictions and proposes a specific reallocation of activitiesamong levels of government together with the array of managementand decision-making mechanisms that would have to be set up tohandle the requisite coordination, harmonization and co-decision.See André Burelle (1995) Le mal canadien . Montréal: Fides.

15. A. Eggleton (1995) Strengthening Government Review . Ottawa:Annual Report to Parliament by the President of the TreasuryBoard (November) 45p.

16. Ibid. Foreword.

17. Ibid, p.1.

18. This diversion culminated in October 1995 when the TreasuryBoard Secretariat produced ten pamphlets on Quality Serviceswhich were widely distributed thoughout the federal departmentsand agencies.

19. Diversions from original initiative objectives are notuncommon. The PS-2000 exercise of the early 1990s suffered such afate. As noted by the Auditor-General, “PS-2000 was initiallydesigned and communicated to staff as a “management-drivenexercise”. Yet its philosophy is one of participativemanagement... Despite the notable efforts of some departments toinvolve staff at all levels, executives point to a lack of staff

involvement and “ownership” of the initiative as a majorimplementation failing... In addition, inconsistency is perceivedbetween some of the principles of PS-2000 and other initiativesor actions. These include: ongoing downsizing and operatingbudget cuts; the 1991 budget that helped to precipitate anational public service strike and led to wage restraintlegislation; the Al-Mashat affair; the the decision to reduce thenumber of public service executives by ten percent.” [Report ofthe Auditor-General of Canada, Ottawa: Minister of Supply andServices of Canada, 1993, ss. 6.84, 6.85, page 174].

20. On December 21, 1993, the First Ministers agreed to makeimproving the efficiency of the federation a collective priorityof their governments. They agreed that this initiative wouldbegin with a systematic assault on overlap and duplication andthat, in the long term, (1) it would determine which order ofgovernment was best suited to deliver a program or a service and(2) it would make policies and programs more effective andaffordable. The vehicle developed to focus these commitments bygovernment leaders are government-to-government action plans.This is a new approach for governments to work together in theirprogram delivery. A large number of action plans dealing withissues as varied as business service centers, internationalbusiness development, food inspection, initiatives to deal withthe underground economy, etc. have been signed. The Efficiency ofthe Federation Initiative was very much an initiative parallel toProgram Review and inspired by the same general philosophy. Thelack of support and interest for this Initiative at the federallevel has led to its fizzling out at the end of 1995 with theresignation of the federal senior executive in charge thisInitiative. Se T.R. Robinson, "Federal/Provincial AdministrativeRelations: opportunities and Constraints" Remarks at theInstitute of Public Administration meeting in Charlottetown onAugust 29, 1994; also private communication from T.R. Robinson(31 March 1995) and The Efficiency of the Federation Initiative -Information Update (October, 1 1995).

21. Privy Council Office [1996] Getting Government Right - AProgress Report , March 7, 1996, p. 15-16. It is important to notethat this document would appear to represent evidence that thePrivy Council Office is now taking the initiative once again inProgram Review after having allowed the initiative to slip awayto Finance and Treasury Board, as we will see.

22. We have heard many contentions that Program Review had ofteninitiated attempts to improve departmental operations bydeveloping more flexible approaches. However Treasury Board andother central agencies often responded to requests for innovativearrangements by enforcing “archaic” regulations and disallowingwhat may be perceived as innovative solutions.

23. Report of the Auditor General of Canada, Nov. 1995, Ch. 23.

24. Report of the Auditor-General, Chapter 2, May 1995, page 2-5.

25. Ibid., page 2-8, s. 2.13.

26. Moreover, as stated in the 1995 Report of the Auditor-General(Chapter 20), as the Program Review was in full operation, therewas a parallel and significant process of recentralization of theprogram by the federal government when devolution would haveappeared more appropriate: 60 percent of financial assistance forthis program had to receive the approval of the Minister’s Officein 1988, compared with 100 percent of all assistance in 1994/95.

27. M.J. Piore, Beyond Individualism - How Social Demands of theNew Identity Groups Challenge American and Political Life .Cambridge: Harvard University Press, 1995.

28. M.J. Piore (1995) Beyond Individualism p.21.

29. This is the core of Naisbitt’s "global paradox" which hestates as "the bigger the world economy, the more powerful itssmallest players" J. Naisbitt, Global Paradox - The Bigger theWorld Economy the More Powerful its Smallest Players , New York:Morrow & Company Inc, 1994; G. Paquet, "Institutional Evolutionin an Information Age" T.J. Courchene (Ed.) Technology,Information and Public Policy , The Bell Canada Papers in Economicand Public Policy, 3, Kingston: John Deustch Institute for theStudy of Economic Policy, 1995, pp.197-229.

30. J. de la Mothe and G. Paquet, "The Dispersive Revolution"Optimum , 25, 1, 1994, pp.42-48.

31. H. Hardin, A Nation Unaware . Vancouver: J.J. Douglas, 1974.

32. G. Paquet and J. Roy (1995) "Prosperity Through Networks.."p.148. This propensity to centralize has been defended andrationalized by many observers who claim that already Canada isone of the most decentralized federations and that "a deeplydivided society, a regionalized economy, and a decentralizedfederalism all make it harder to respond to global challenges"(R. Simeon (1990) "Globalization and the Canadian Nation-State"in G.B. Doern and B.P. Purchase (Eds) Canada at Risk? CanadianPublic Policy in the 1990s . Toronto: C.D. Howe Institute, p. 57).We have shown this defense of centralization and enforced’national standards’ as a source of ’social efficiency’ of thefederation and as a foundation for better economic and socialintegration to be bogus (G. Paquet (1996) "Gouvernance distribuéeet habitus centralisateur" Transactions of the Royal Society ofCanada (1995) (in press).

33. Respondents have provided numerous examples from variousdepartmental initiatives at Industry Canada and at Public Worksand Government Services. In such cases, Treasury Board wasintrumental in torpedoing the partnerships by withholding theautonomy demanded by the partners in connection eith certaintasks and activities.

34. Migué has even ventured some back-of-envelope estimates ofthe extent to which federal spending is distortionary (in thesense just mentioned) and has come to the conclusion that (aftertaking into account the expenditures in the nature of truly

national public goods i.e. providing most efficiently collectiveservices to the national community) this subtle balkanizingeffect, which already characterized 60% of federal spending in1960, now characterizes some 76.5% of federal spending. This isquite an indictment of the federal authorities which have inducedthe setting of all sorts of arrangements to meet nationalstandards and then have claimed that, since the provinces andmunicipalities are spending de facto a larger portion of thetotal public expenditures, the federation is becoming moredecentralized. In fact, provinces were often coerced into suchspending, or at least put in a position where they could notpolitically abstain from embarking on such programs. This is notdecentralization by any meaningful definition of the term. J.L.Migué, "The Balkanization of the Canadian Economy: A Legacy ofFederal Policy" in F. Palda (Ed.) Provincial Trade Wars: Why theBlockade Must End. Vancouver: The Fraser Institute, 1994.

One can only note with concern the statement in the March 1996budget defining a floor level below which federal-provincial cashtransfers will not be allowed to fall. While some may feelreassured that this will ensure the maintenance of a certaindegree of inter-regional redistribution, others may equally beconcerned that this represents a clear declaration on the part ofthe federal government that it intends to maintain its capacityto balakanize the country by centralized policies whatever thediktats of Program Review might be.

35. This document entitled Privy Council Office, GettingGovernment Right - A Progress Report was tabled the day after theMarch 6, 1996 Budget.

36. A.R. Gregg, "Can Canada Survive?" Maclean’s , 108, 52,December 1995/January 1996.

37. G. Paquet, "The Dowtrodden Administrative Route" Inroads # 5,1996 (in press).