California local government contracting after proposition 13

Recent fiscal constraints have forced many local governmental jurisdictions to search for alternative service delivery approaches. One approach frequently discussed is contracting out services to the private sector. While local governments in the state of California have been involved in such contracting for many years, the fiscal pressures which brought abut the passage of Proposition 13 have refocused increased attention to activities in this area. This article focuses on local government activities with the private sector, the reasons for deciding to provide services through the contract method, assesses probable outcomes to contracting out, and develops three future scenarios on the issue.     

Exploring Contracts as Reinvented Institutions in the Danish Public Sector

Contracts have been on the agenda in public sector reform in most OECD countries. In Denmark, contracts have been considered as one of the most important tools in reorganizing the public sector. The article examines the implementation of contract agencies in central government in Denmark during the 1990s. First, a review of contractual theory distinguishes between 'hard' and 'soft' contracting. Second, recent developments in contracting in Denmark are examined, and three phases of contract agencies are identified. Contracts have been supported by other tools for reporting on performance like annual reports. Third, it is argued that Denmark has put co-operation and negotiation before more strict management and control. The Danish experience can be seen as an alternative to the principal-agent model. The article finishes by discussing the pros and cons of the Danish approach, and suggests that although the pragmatic approach has merits, it may lead to problems in the future concerning the credibility of the whole project.     

Contracting Out: Dutch Municipalities Reject the Solution for the VAT Distortion

In 2003, the Dutch government introduced a VAT-compensation fund in order to create a level playing field for local governments with respect to Value Added Tax (VAT). This fund eliminates the effect of the tax difference between local governments that supply services themselves and local governments that contract out services to the private sector. However, as this article shows, according to most municipalities, differences in their treatment in terms of VAT did not hinder the contracting out of public services. Therefore, the VAT compensation fund lacks legitimacy. It appears to have had little effect so far, as the number of contracted-out public services has hardly increased since its introduction. In general, municipalities have a negative opinion of the fund. They state that non-budgetary effects and institutional considerations, such as the quality of services, the vulnerability of municipal activities and concern for employment in the municipality itself, are more relevant to decision making on outsourcing.     

CONTROL PATTERNS IN CONTRACTING‐OUT RELATIONSHIPS: IT MATTERS WHAT YOU DO,NOT WHO YOU ARE

The contracting‐out of public services has often been accompanied by a strong academic focus on the emergence of new governance forms, and a general neglect of the processes and practices through which contracted‐out services are controlled and monitored. To fill this gap, we draw on contracting‐out and inter‐organizational control literatures to explore the adoption of control mechanisms for public service provision at the municipal level and the variables that can explain their choice. Our results, based on a survey of Italian municipalities, show that in the presence of contracting‐out, market‐, hierarchy‐, and trust‐based controls display different intensities, can coexist, and are explained by different variables. Service characteristics are more effective in explaining market‐ and hierarchy‐based controls than relationship characteristics. Trust‐based controls are the most widespread, but cannot be explained by the variables traditionally identified in contracting‐out and inter‐organizational control studies.     

An empirical analysis of municipal choice in Portugal

Processes of European integration and growing consumer scrutiny of public services have served to place the spotlight on the traditional French model of public/private interaction in the urban services domain. This article discusses recent debates within France of the institutionalised approach to local public/private partnership, and presents case study evidence from three urban agglomerations of a possible divergence from this approach. Drawing on the work of French academic, Dominique Lorrain, whose historical institutionalist accounts of the French model are perhaps the most comprehensive and best known, the article develops two hypotheses of institutional change, one from the historical institutionalist perspective of institutional stability and persistence, and the other from an explicitly sociological perspective, which emphasises the legitimating benefits of following appropriate rules of conduct. It argues that further studying the French model as an institution offers valuable empirical insight into processes of institutional change and persistence.     

The Public Sector In An In-Between Time: Searching For New Public Values

A number of new governance structures has been introduced in the Danish public sector. These include contract agencies, user boards, boards of directors, marketization, corporatization, involving voluntary organizations in public services, EU-funded state border crossing co-operation, and Europeanization in many forms. Despite their obvious dissimilarities, these governance structures have one thing in common: they challenge the foundations of the public sector and territorial representative democracy by blurring the distinctions between politics and administration; between public and private; and between national and international. If politicians and voters are deprived of the capacity to make these distinctions, political responsibility is bound to fade away. Also, each new governance structure down-loads degrees of indeterminateness in the public sector since they may interact in unforeseen ways and introduce new actors, roles and practices in the public sector. This may cause the development of a more flexible public sector marked by 'local' appropriateness and adaptability but also by a multitude of inconsistent models and principles. To avoid the latter, a general discourse on values and their institutional requirements and the invention of public 'domains' is needed.     

From-Long Term To Short-Term Contracting

One can look at the arrival of New Public Management and the extensive public sector reforms inspired by this theory from many angles. Here we examine the shift from long-term contracting, typical of bureaucracy and traditional enterprises, to short-term contracting, borrowed from private sector governance methods. Short-term contracting has three principal uses in the governance of the public sector: (a) contracting with service providers after a tendering/bidding process; (b) contracting with the CEOs of the incorporated public enterprises; and (c) contracting with executive agencies about what they should deliver. Theoretical analysis, supported by substantial empirical evidence, suggests that short-term contracting eliminates the extensive post-contractual opportunism connected with long-term contracting, but is vulnerable to precontractual opportunism. Short-term contracting is not just another public sector reform fad, but constitutes a new tool for government which increases efficiency when handled with prudence.     

Redesigning the Hollow State: A Study of Florida Child Welfare Service Reform through the Lens of Principal-Agent Theory

While principal-agency theory has greatly facilitated our understanding of governance and management in the hollow state, close examinations of how system designs affect agency problems has been rare. The purpose of this study is to explicitly investigate the effects of different contract configurations on agent shirking, which is a common problem in third-party service delivery arrangements. Florida's recent statewide privatization and reconfiguration of its child welfare service delivery system are analyzed for this purpose. Data were collected through intensive document reviews and interviews with the public managers and the contract agents who were involved in the reform. Major structural components of the redesigned system (such as overall contract configuration, procurement policies, oversight mechanism, payment methods, and vendor governance structures) are examined and compared with those of the old system. The results of the analysis suggest that the Florida reform installed several structural devices intending to curb agent shirking that plagued the old system. The most significant changes involve a transition of the contracting scheme from a fragmented quasimarket based on dyadic contracting to an integrated service network based on a managed care model, a shift of the focus of the contract oversight from compliance and process to service outcomes, and a transfer of programmatic and financial risks and uncertainties from the government to vendors. Further, the findings of the study reveal some unintended consequences of the reform. For example, the reconfigured system that empowers communities also promotes local parochialism that hinders the government's statewide policymaking ability. The reform that consolidates contracts into the hands of a few large vendors under a standardized contract management system unites the vendors around their common interests to confront their government principal.     

Contracting out local road and park services: economic effects and their strategic,contractual and competitive conditions

ABSTRACT

The economic rationale for contracting out local services is increasingly contested by empirical research. This article aims to contribute to this literature, first by scrutinising the economic effects of contracting out in local road and park services and, second, by exploring how characteristics such as markets, contracts, municipal strategies and contracting history influence these outcomes. Drawing on original survey data from Danish municipalities, we find that competitive tendering has on average reduced costs. Further analysis shows that savings are not associated with lower quality, thus indicating that ‘quality shading’ was not taking place. Another finding is that municipalities that repeatedly contract the services experience smaller savings, suggesting that competitive tendering is subject to declining marginal returns. Finally, we find that larger municipalities and those emphasising expenditure cuts realise larger savings, whereas the characteristics of markets and contracts do not seem to explain variations in cost savings.     

A replication of “Contracting out: For What? With Whom?”

In the 1980s, governments around the world adopted New Public Management ideas about inserting competition into government as a way to improve the performance of public organizations. In many nations, contracting out was one method of making governments more businesslike. Yet, there have been few studies of how government contracting behaviors have changed since the early 1980s. We replicate Ferris and Graddy's classic 1986 study of local government production and sector choice to assess how public procurement has changed over the past 35 years. Our findings show that today, contracting out is more commonly used across 25 local government service areas. In contrast to the original study, much of the growth has been in government-to-government contracts. For profit firms are also winning more contracts for high transaction cost work, while nonprofits are receiving fewer government contracts in nearly every service area. Our analysis suggests that contracting out remains of the highest importance in 21st-century governance and that additional research is needed on how to manage contracts to achieve the best value.     

Contracting Out Local Government Services to Private Agents: An Analysis of Contract Design and Service Delivery Performance in Ghana

Contracting out is generally justified on the principle that as governments contract out part of their responsibilities in service provision to private agents, they harness the power of market competition which leads to efficiency in service provision. In working with private contractors, local governments (LGs) face problems related to agent opportunism, while agents also face risks such as dereliction of payment responsibility by LGs for services delivered. The literature shows that these problems are addressed through a web of contractual arrangements. Using agency theory, this study investigates the relationship between contract design and quality of services delivery in three Ghanaian cities (Accra, Kumasi and Tema). The study found a surprising negative correlation between contract document and agents' performance. The paper concludes that effectiveness of contracting out documents depends on contract management capacity of government administrators. In its absence, LGs that contract out are exposed to risks. The paper uses the findings to reflect on the inherent deficiencies in agency theory and Africanist literature on patronage.     

ON THE PERFORMANCE OF COMPETITIVELY TENDERED, PUBLIC SECTOR CLEANING CONTRACTS

Quantitative analysis of competitive tendering and contracting typically focuses on their effect on the cost of providing public sector services. In this article we turn to the systematic factors that appear to influence the performance of cleaning contracts. This is defined as compliance with contract specification, public perception of service quality and other qualitative measures of service characteristics as observed by the contracting authority. Our analysis attempts to isolate particular features of contract design, monitoring and enforcement that influence performance positively or negatively. Econometric results based on a sample of public sector cleaning contracts suggest that contractor selection procedures and contract enforcement mechanisms have the greatest influence on performance.     

Privatization in developing countries: ideal and reality

In both developed and developing countries, governments finance, produce, and distribute various goods and services. In recent years, the range of goods provided by government has extended widely, covering many goods which do not meet the purist's definition of “public” goods. As the size of the public sector has increased steadily there has been a growing concern about the effectiveness of the public sector's performance as producer. Critics of this rapid growth argue that the public provision of certain goods is inefficient and have proposed that the private sector replace many current public sector activities, that is, that services be privatized. Since Ronald Reagan took office greater privatization efforts have been pursued in the United States. Paralleling this trend has been a strong endorsement by international and bilateral donor agencies for heavier reliance on the private sector in developing countries.

However, the political, institutional, and economic environments of developing nations are markedly different from those of developed countries. It is not clear that the theories and empirical evidence purported to justify privatization in developed countries are applicable to developing countries.

In this paper we present a study of privatization using the case of Honduras. We examine the policy shift from “direct administration” to “contracting out” for three construction activities: urban upgrading for housing projects, rural primary schools, and rural roads. The purpose of our study is threefold. First, we test key hypotheses pertaining to the effectiveness of privatization, focusing on three aspects: cost, time, and quality. Second, we identify major factors which affect the performance of this privatization approach. Third, we document the impact of privatization as it influences the political and institutional settings of Honduras. Our main finding is that contracting out in Honduras has not led to the common expectations of its proponents because of institutional barriers and limited competitiveness in the market. These findings suggest that privatization can not produce goods and services efficiently without substantial reform in the market and regulatory procedures. Policy makers also need to consider carefully multiple objectives at the national level in making decisions about privatization.     

Dynamic-opportunistic behaviour in local government contracting-out decisions during the electoral cycle

A major question for public managers is whether municipal services should be rendered in-house or contracted out. In view of the negative perceptions often aroused by contracting out, this political decision might be framed within a theoretical model that we term ‘dynamic-opportunistic behaviour’. According to this model, the probability of municipal services being contracted out is greater in the years immediately following elections; moreover, during this period the decision is taken more quickly. In this theoretical model, not all factors (budgetary, economic, political, service characteristics and socio-economic) have an equal impact on the contracting-out decision during each year of the electoral cycle. The model was applied to a sample of 2,274 Spanish municipalities, with respect to a broad time horizon (2002–2014), and the results obtained confirm our hypotheses regarding dynamic-opportunistic behaviour in the contracting out of local public services.     

A GENDER ANALYSIS OF WOMEN IN PUBLIC–PRIVATE–VOLUNTARY SECTOR ‘PARTNERSHIPS’

The nature of work and traditional notions of the public sector have been changing with increasing collaborative governance and delivery of public services among public, private and voluntary sector organizations. In the UK, governments at national and devolved levels of government have adopted collaborative governance for service delivery through various networks and partnerships. This article explores collaborative governance from a gender perspective, specifically the perceptions of women in public–private–voluntary sector partnerships. While previous research in this area has explored aspects of collaborative governance such as power, trust, accountability, decision‐making, performance, exchange of information and participation, there is very little research on women within these networks. The article therefore provides a gendered analysis, disaggregating survey data to better understand the dynamics, for women, of collaborative governance and partnerships among public, private and voluntary sector organizations.     

CONTRACTING IN THEORY AND IN PRACTICE: SOME EVIDENCE FROM THE NHS

The contract is the main mechanism for governing transactions within public sector'quasi markets'. This article explores the nature of the contracting process in the light of new empirical data from a qualitative study of the development of contracting for hiv / aids services within the National Health Service. These data are compared with four possible models of the contracting process emerging from the academic literature, classical, relational, regulated and pseudo contracting.
The White Paper on the nhs reforms uses a classical concept of contracting, in which purchasers are represented as making well informed and unrestricted choices between competing options. This bore little relation to the process observed within the four purchasing organizations studied. Instead, elements of all the models were observed, with the dominance of any one model varying with different situations, times and localities. Competition was only patchily evident, with purchasers more commonly encouraging co-operative relationships between providers to preserve stability. Attempts to utilize the contract process to mould and reconfigure services were often hampered by restrictions imposed by regulations and slow implementation of new mechanisms. Contracting was also adversely affected by rapid organizational change and lack of adequate information. It is concluded that contracting in the nhs is an evolving process and has yet to achieve its full potential as a management mechanism.     

DESIGNING CONTRACTS FOR COMPLEX SERVICES

In this article, we employ transaction cost economics and the contingency stream of organization theory to answer two related questions. First, when contracting for complex services, do governments design contracts for flexibility? Second, is the contingency perspective relevant to understanding contract design? Examining 130 professional service contracts awarded by state government agencies in the USA, we find that task complexity and task unpredictability, two dimensions of task uncertainty, increase the probability of flexible governance. This research highlights for managers the important fact that the potential for opportunism and task complexity are different sources of uncertainty that pose different challenges and call for different governance solutions. The study enriches our understanding of transaction costs by probing the conditions under which task uncertainty matters most (and least), and further shows the utility of integrating transaction cost economics with contingency theory to better understand contract governance.     

Contracting Out Parks and Recreation Services: Correcting for Selection Bias Using a Heckman Selection Model

Despite the growing scholarly attention on the efficiency rationale of contracting out, the empirical evidence to support claims that contracting out service delivery reduces service costs has not been forthcoming. Using transaction cost theories, this research explores park and recreation service provision costs across contractor sectors, controlling for the choice to contract out a service or not. The two-stage Heckman model indicates the importance of competitive markets and economies of scale in reducing transaction cost risk which local governments must face. This research also addresses how state and local institutional settings define the context in which policy decisions are made and implemented.     

Co‐production as a route to employability: Lessons from services with lone parents

Policy‐makers claim to support personalized approaches to improving the employability of disadvantaged groups. Yet, in liberal welfare states, mainstream activation programmes targeting these groups often deliver standardized, low‐quality services. Such failures may be related to a governance and management regime that uses tightly defined contracting and performance targets to incentivize (mainly for‐profit) service providers to move people into any job as quickly as possible. This article draws on evidence from third sector/public sector‐led services in Scotland to discuss an alternative approach. These services co‐produced personalized support in partnership with disadvantaged service users (in this case vulnerable lone parents). We suggest that, in this case, street‐level co‐production and personalization were facilitated by co‐governance and co‐management in the design and organization of provision. We conclude by identifying lessons for future employability services.     

EXIT AND VOICE IN LOCAL GOVERNMENT RECONSIDERED: A ‘CHOICE REVOLUTION’?

Market‐based public management reform has introduced customer choice among competing providers of public services. Choice entails exit, an option which Albert Hirschman famously reserved for the market, while voice is the key mode of communication in political life. Based on elite and mass surveys, the article studies how exit is perceived by citizens and local political and administrative leaders in Norway and Sweden, and how the two strategic options relate to each other. Citizens are more positive towards customer choice and exit than are leaders, albeit with some variation across different public service sectors. Political and administrative leaders are positive towards customer choice models as a strategy to empower clients but more critical in terms of the potential loss of accountability and control that contracting out services may entail.