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Principal Agent Theory And Hampton Routes

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This partnership can make it hard to discern who is accountable for issues if they arise, refer to (Figure 2:1). Privatization, may add another level of complexity to the arrangement. At one level, government acts as an agent to sailors. When the DoN provides goods or services, it does so as an agent on behalf of sailors. When DoD enters into partnership, however, the DoN becomes the principal, and Hampton Roads, PPV becomes the agent. The DoN is only accountable to monitor Hampton Roads, PPV, LLC. In essence, the DoN must adopt a dual role- agent to the sailors, but principal to Hampton Roads, PPV, LLC. It can be hard for the pubic sector to hold private organizations accountable (Dicke & Ott, 1999: Heilman & Johnson, 1992). The practical application of principal- agent theory is complicated by three factors. First, privatization arrangements generally create multiple levels of principal-agent relationships. This makes it impossible for government to monitor all agents. No matter how much monitoring a principal does, some …show more content…

The agent, (Hampton Roads, PPV) are self-interest motivated and therefore, they will maximize the profit and minimize the cost. The DoN (principal) also maximize the satisfaction of goods and services by seeking the lowest price. Principal Agent theory suggests the government is the DoN “principal”, and the private sector Hampton Roads, PPV is the “agent”. This is true in most cases, sometime the principal can act as the agent for the needs of the consumer or citizens. The DoN is the goal setter, and has demands and standards. PPV, LLC’s goal is to reduce costs and cut back as much as possible but still remain efficient. Pubic-private partnerships are risky business, knowledge of who you are dealing with is

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