Own the Podium (OTP) is a relatively recent arm’s length agency created by the federal government to improve the outcomes of Canadian athletes at the summer and winter Olympic games. Their recent successes at the Olympic games demonstrate how an arm’s length agency can produce results that would not materialize under traditional government organizational arrangements.

During the mid 1990s Canada gained a reputation internationally for public sector innovation. As governments around the world adopted new management principles borrowed from the private sector in order to achieve efficiency and savings in their day-to-day operations, Canadian governments also developed new ways of providing government services to the public. The international movement was labelled New Public Management (NPM) and one key element in the transformation of government was the acknowledgement that government should not continue to have a monopoly over the delivery of public services.

Attracted by the prospect of less expensive government, governments in Canada at all levels embarked on a number of limited innovations through the creation of alternative service delivery (ASD) mechanisms like Special Operating Agencies (SOAs) and other variations of arm’s length agencies.

The Program Review exercise that led to the 1995 cost-cutting federal budget took advantage of the targeted program reductions given to departments to begin to develop novel ways to deliver services or organize themselves along the NPM principles. It also unleashed some serious rethinking about the governance process in Canada including the integration of federal and provincial services to citizens. Good examples of the federal government’s experimentation with arm’s length arrangements in the mid ’90s were the creation of an integrated food inspection agency, a national revenue agency, and a national parks agency.

However, the history of arm’s length agencies has not been entirely positive. The evidence suggests that many of the promised savings have not yet been realized, there has only been some integration of federal and provincial services, and executive compensation has grown considerably faster than salaries in the core public service without apparent management benefits.

Moreover, recent problems with a number of provincial arm’s length organizations such as Ornge, eHealth, Alberta Health Services and the Ontario Gaming and Lottery Commission have highlighted how arm’s length agencies can become uncontrollable without sufficient management oversight. The management problems in some arm’s length organizations led Ontario Premier Dalton McGuinty to point out in 2009 that “just because you operate at arm’s length from the government doesn’t mean you have the right to straight-arm taxpayers. You have a responsibility to be held accountable and our job is to make sure that happens.”  

In general, there is a wide array of possible arrangements that are usually defined by the degree to which the organization can act independently of the government. Since the earliest days in the 1990s, the suitability of potential arm’s length arrangements was determined largely by whether they could be more responsive, more efficient and able to partner with the provinces to provide better services to citizens.

The first generation of Canadian arm’s length agencies represented a cautious approach. For example, at the federal level, Special Operating Agencies remained typically within the government’s administrative net and fell under the direction of a minister who remained accountable for the agency to Parliament. In this context, they were intended to operate at a limited arm’s length from the hierarchal “spine” of central ministries. They were to carry out public tasks, were staffed by public servants, financed by general taxation, and were subject to public law.

Since the ’90s there has been a steady increase in the number of the arm’s length agencies with the prospect of lowering costs by developing more efficient program delivery systems. At present, at the federal level, there are 289 agencies that work at arm’s length from the government and 17 of those are SOAs.  

These are impressive numbers since innovative public administration was never high on the political agenda of recent federal governments. While the numbers suggest that arm’s length agencies are an important innovation, the current efforts in Canada have been characterized by observers as “not systematic, intellectually coherent, or backed by strong support among political executives.” Instead the growth in the number of arm’s length agencies has depended on entrepreneurs in the bureaucracy who have seized the opportunity to be innovative when the occasion arose.  

While the arm’s length agencies have not revolutionized public management in Canada, they are good examples of modern public administration. The established arm’s length agencies typically have a more explicit accountability regime than traditional organizational structures, are a good way to develop innovative human resources practices, bring decision making closer to citizens, reduce political interference, and create better work environments since the organizations are usually small in size and more singular in purpose.

Given the ongoing need to constrain public funding due to large annual operating deficits, the timing is good for the federal and provincial governments to develop a second generation of arm’s length agencies. First, this could be accomplished by identifying organizations that might benefit from moving to a more independent governance model.

Second, by reviewing the governance structures of current arm’s length agencies to ensure that their current accountability practices support good governance principles. At a minimum, the oversight provisions for arm’s length agencies should be equivalent to those in place for government departments and to ensure unbroken lines of accountability between minister and the agency.

Third, developing a new arm’s length agency policy that reflects changes in governance practices and technological developments in Canada and creating a centre of excellence where best practices could be shared.

Finally, by engaging parliamentarians in a conversation to determine those sectors where Canadians would like to experience higher levels of service than is current the case.  

At this point, there are a number of compelling arguments to support moving forward with a new generation of arm’s length agencies for a number of reasons. First, recent advances in communications technology and data management methods have created opportunities that are new and cost effective. Second, governance of public institutions has evolved over the past two decades to the point that the public and decision makers are more willing to include external stakeholders in the governance and management regimes of publicly funded institutions.  

Ultimately, the question is whether there is value in modernizing arm’s length agencies by being more innovative or concluding that arm’s length agencies need a shorter line of sight between the minister and the program operations to guarantee risk-free program administration.

The Own the Podium example vividly demonstrates the potential of arm’s length organizations to achieve goals that do not easily fit into the traditional administrative government model. It is this kind of thinking that produces gold.

David Zussman holds the Jarislowsky Chair in Public Sector Management and is the Director of the Graduate School of Public and International Affairs at the University of Ottawa (dzussman@uottawa.ca).