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.     

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.     

Lessons Learned from Public and Private Contract Managers for Effective Local Government Contracting Out: The Case of New Jersey

To date, very few studies have explored practical strategies for exercising effective financial management of local government contracts through two main stakeholders’ perspectives of the contracting system at the same time. Employing a series of semi-structured interviews with public officials and private contractors in New Jersey, this study attempts to fill this gap in the scholarship. The finding of this study suggests that government agencies should pay greater attention to competitive bids without favoritism, contract specificity, a statewide performance database, sufficient staffing with well-trained personnel, strong leadership, team-based structures, two-way communication, and evaluation based on both qualitative and quantitative values.