Funding Through Contracts: European and Institutional Perspectives

With the New Public Management (NPM)-doctrine that has swept the public sector since the 1990s (Pollitt et al., 2007), many reforms in the funding of higher education have been implemented across Europe. Together with the introduction of more market-oriented governance approaches, public authorities have started to use contracts and performance-oriented approaches to shape the budgets of national higher education institutions and research organisations. Contracting and performance-based budgeting (PBB) are two trends that emerge in this chapter from the short tourd’horizon of funding mechanisms for higher education institutions. PBB and contracting are reshaping the relationships between the national authorities and budget receiving organisations. Performance-based budgeting seeks to link performance measures to budget allocations and as such it is expected to improve the management and accountability of higher education institutions (HEIs). It is also expected to contribute to a higher degree of cost consciousness and goal orientation in the budgeted organisation. Quoting Herbst (2007):