Contracting Out Local Services: A Tale of Technical and Social Services

Governments face a fundamental choice between in‐house production and contracting out for the delivery of services to citizens. This article examines the importance of ideology, fiscal pressure, and size for contracting out in technical and social services. The analysis builds on a panel data set covering municipal spending on services in all 98 Danish municipalities. The authors find that contracting out is shaped by ideology in social services but not in technical services, which indicates that social services are the contemporary ideological battlefield of privatization. The analysis further reveals that economically prosperous municipalities are more likely to contract out social services, whereas contracting out of technical services is not influenced by economic affluence. Finally, larger municipalities contract out more in technical services but less in social services, demonstrating that the size effect is contingent on the transaction cost characteristics of the service.     

Outsourcing Public Health Laboratory Services: A Blueprint for Determining Whether to Privatize and How

In a continuing effort to reform and reinvent the way public organizations do business, the outsourcing of services has become a popular tool, particularly as resource constraints limit options available to governments. All too often, the decision is made, for reasons of ideology or resource constraints, to outsource services without giving careful consideration to the impact of privatization on the core missions of an agency, or whether privatization, in fact, offers real cost savings. Purchasing tools designed for traditional commodity purchases are often grossly unsuited for making decisions on specialized technical services.
This article suggests a process for the evaluation of an option to outsource laboratory services. It suggests that, prior to contracting or privatizing services, the concerned agency should evaluate:
the impact on the agency's core mission
the availability, stability, and reliability of private sector service providers
the relative costs of internal and external (public or private sector) service providers
the potential impact on regulatory enforcement
the ability to monitor the performance of external providers
potential conflicts of interest
Based on this model, the ongoing internal evaluation of services offers public agencies management tools to obtain the best value for the taxpayer dollar, not only in terms of the raw cost per test, but also in managing the quality of the services.     

Is private production of public services cheaper than public production? A meta‐regression analysis of solid waste and water services

Privatization of local government services is assumed to deliver cost savings, but empirical evidence for this from around the world is mixed. We conduct a meta‐regression analysis of all econometric studies examining privatization of water distribution and solid waste collection services and find no systematic support for lower costs with private production. Differences in study results are explained by differences in time period of the analyses, service characteristics, and policy environment. We do not find a genuine empirical effect of cost savings resulting from private production. The results suggest that to ensure cost savings, more attention be given to the cost characteristics of the service, the transaction costs involved, and the policy environment stimulating competition, rather than to the debate over public versus private delivery of these services. © 2010 by the Association for Public Policy Analysis and Management.     

The Mythology of Privatization in Contracting for Social Services

States and municipalities have privatized services in an effort to improve their cost‐effectiveness and quality. Competition provides the logical foundation for an expectation of cost savings and quality improvements, but competition does not exist in many local marketplaces—especially in the social services, where governments contract primarily with nonprofit organizations. As government increases its use of contracting, it simultaneously reduces its own public‐management capacity, imperiling its ability to be a smart buyer of contracted goods and services. This article examines two questions about the privatization of social services based on interviews conducted with public and nonprofit managers in New York state: Does social services contracting exist in a competitive environment? And do county governments have enough public‐management capacity to contract effectively for social services? The findings suggest an absence of competition and public‐management capacity, raising the question of why governments contract when these conditions are not met.     

Evaluating the OEO Legal Services Program

During 1970 and 1971, the complex and politically sensitive OEO Legal Services Program received its first independent national evaluation. This paper describes how evaluators dealt with the policy issues arising during the evaluation. Their decisions involved the interaction of three factors: conceptual problems, access to data, and a sense of what would be relevant to public policy. They found only a small area of intersection between a large set of issues important to policy-makers and an equally large, but usually different, set of issues amenable to systematic research.One finding was that the program's use of full-time poverty lawyers is a less expensive way to provide poor clients with legal services than underwriting the fees of private lawyers would be. Another was that the Legal Services attorneys' strong emphasis on law reform apparently adds very little to the cost of providing more routine services.The writer was the government's technical representative on this contract, but the viewpoints expressed in this paper do not necessarily reflect the official position of the Office of Economic Opportunity.     

QUALITY COST IN THE PUBLIC SERVICE: IDENTIFYING, MEASURING AND REPORTING

Abstract: The identification, collection, and reporting of quality costs are necessary to achieve efficiency in the delivery of public service. This paper argues that quality costs are major elements in the total costs of delivering programs and services in the public service. To support this point, a seven-step system is described that could be used to develop a feasible modification of existing charts of account to incorporate quality cost elements. Incorporation of quality cost elements in the financial accounting system would enable the public service to use quality costs in the current wave of performance management of programs and services to bring about reliable and valid efficiency measures of deliveryfunctions.     

The politics of fund raising through grantsmanship in the human services

Funds for human service programs and services are declining, and selection criteria for funds are becoming more objective. These conditions are creating an imbalance in the system which will result in a significant change in human service funding and delivery. The climate is ripe for increased competition among those who obtain funds for human services. This article attempts to define how that competition will ultimately generate a spirit of cooperation among the survivors. To reach that point, however, grantsmen/providers, to be competitive, will need to sharpen their technical writing skills and their political skills, that is, they need to become more shrewd, prudent, and diplomatic. This article suggests some methods for improving technical grant-writing skills and developing political skills among grant writers.     

The Impact of Tax Price on Spending Preferences

In this article, we explore the influence of tax price information on citizen preferences for taxes and spending using mail surveys. We explore the effects on service support when varying levels of cost information. We also observe how the magnitude of service costs influences service support. While the presence of cost information corresponded with lower levels of respondent support for the most costly services, it was associated with higher levels of support for less expensive services. These effects were the same whether the tax price represented the respondent's actual household cost or the jurisdiction average household cost for each service.     

从教育服务产品的二重性解析独立学院学费价格体系

教育服务产品的二重属性理论认为，教育服务产品是一种兼有公共产品和私人产品属性的准公共产品。独立学院作为扩充的优质高等教育资源，较高的教育成本决定了高昂的学费，高昂的教育费用是目前中国独立学院学费价格体系的特点，试从高等教育的双重性角度解析当前独立学院学费价格体系，对独立学院的可持续发展具有重要的理论和现实意义。     

国外教育公共服务改革成效与启示

从政府教育公共服务职能、公共教育的财政投入、重视基础教育事业的发展、实施教育绩效评估、完善教育公共服务多元化体系以及加强职业技术教育等方面介绍了国外有关教育公共服务的具体做法与经验,为推进我国教育公共服务的发展提供参考借鉴。     

A Comparative Study of the Effects of Institutional Arrangements in Municipal Solid Waste Services in Korea

In Korea, local governments are primarily responsible for providing municipal solid waste services to citizens. This paper examines the effects of different institutional arrangements and characteristics on cost savings, efficiency gains and productivity in the delivery of municipal solid waste services to citizens. In order to carry out this research, a hybrid cost function approach was employed, and cross-sectional time-series data from local governments of Korea covering a ten-year period (2000–2009) were used for empirical analysis. Empirical findings indicated that there were no effects of contracting-out on cost savings, efficiency and productivity gains in Korea. Specifically, the solid waste service costs were not significantly lower under contracting-out than under direct public delivery. In addition, contrary to the arguments of the proponents of privatization or contracting-out, efficiency and productivity gains were actually higher under direct public delivery than when contracted out.     

The provision of public services by government funded decentralized agencies

Public services are often provided by lower level agencies that are funded by higher level government. Since markets for such services do not exist, normal pressures to minimize costs do not operate; indeed, usually these costs are unobservable. We study a principal-agent model which emphasizes the distinction between the financing and provision of public services. Two broad situations are analyzed: (i) the agencies are induced to reveal true costs; and (ii) in addition, to minimize costs, agencies must be induced to exert effort. The characteristics of the optimal funding contract and the marginal cost of public funds are derived in each case.     

THE CONCEPT OF PUBLIC MANAGEMENT AND THE AUSTRALIAN STATE IN THE 1980s

Abstract: The adoption of the discourse of management by Australian public services in the 1980s can be seen as a cultural revolution. Results-oriented management, subordinated to economic considerations, is the dominant approach. The upper levels of the public services have been remodelled in the form of a technically-oriented elite recruited on merit, defined in terms of higher education credentials, drawing a technical intelligentsia, or "new class", into public employment. Although "people and process" approaches, espoused in particular by women, find a place in the new culture, they are subordinated to the demands of scientific management. While the technical intelligentsia is resistant to traditional forms of bureaucratic authority and open to rational debate and new ideas, its members are not well equipped to take account of the substantive concerns of public policy and service provision. The distinctiveness of public management is submerged by inappropriate private sector models, and issues tend to be reduced to economic ones. The paradox that this culture has risen to prominence under Labor governments is explored and the developments are placed in the context of contemporary demands placed on the Australian state by private capital.     

Determining the Optimal Size of Local Government: The Case of Tasmanian Councils

We estimated the optimal size of the most significant functions performed by Tasmanian councils between 1999 and 2008 using a non‐parametric technique based on the shared input data envelopment analysis model. The principal advantage of this technique is that it not only provides an overall estimate of efficiency but it also allows for the estimation of ‘partial efficiencies’ and ‘cost shares’ when one input is shared among multiple outputs. Our results indicate that water supply and sewerage services, on average, were more efficient, whereas activities related to community health and safety and information systems warrant improvement. However, because the costs associated with water supply and sewerage services are considerably higher than the costs related to community health and safety and information systems, the elimination of these inefficiencies would result in greater cost savings for the Tasmanian local government sector.     

E‐government and public service quality in Ghana

This article contributes to the growing discourse on the potential of e‐government to transform the operations of public sector institutions, thereby improving public services. It does so by conceptualizing public service quality into efficiency, economy (cost reduction), customer satisfaction, and service accessibility and draws on qualitative data from the Ghanaian narrative for illustration. As previous studies have demonstrated, this study also affirms the potential of e‐government in improving public services delivery by increasing efficiency, reducing the cost of operations, expanding access to services, and achieving customer satisfaction. Yet, there remains a repertoire of challenges such as weak ICT infrastructure especially in towns and villages, incessant power outages and illiteracy, which are drawbacks to fully harnessing the benefits of e‐government in Ghana. The study recommends that these challenges should feature prominently in e‐government policies to increase the chances of solving them.     

Accruing Retirement Costs for Federal Employees

The president's 2003 budget proposed that federal agencies pay the full cost of their employees' pension and retiree health benefits as such benefits are earned starting in 2003. The main reason for the proposed change is to provide policymakers and agency managers with a more complete measure of the cost of providing current services. The main disadvantage of the proposal is that estimates of the accrual costs of retiree health benefits are subject to large errors. The proposed change would not increase total outlays, nor would it affect the budget deficit or surplus.     

The challenge ahead: the state agenda for the coming years

The mid-1990s promise to be extremely challenging years as state leaders and institutions struggle to bring accountability and predictability back into their political systems. Faced with continuing budgets troubles, increasing demands for services and a shift of responsibility from the federal to the state level, the American states will be hard pressed to satisfy constituent needs or improve state services. However, the tough times may result in long-term improvement in state government, as administrators streamline agencies, legislators trim inefficient or redundant programs and state leaders generally seek new and cost effective solutions to social and economic problems.     

Cheap and Dirty: The Effect of Contracting Out Cleaning on Efficiency and Effectiveness

Contracting out of public services, especially ancillary services, has been a key feature of New Public Management since the 1980s. By 2014, more than £100 billion of U.K. public services were being contracted out annually to the private sector. A number of high‐profile cases have prompted a debate about the value for money that these contracts provide. Value for money comprises both the cost and the quality of the services. This article empirically tests the contestability and quality shading hypotheses of contracting out in the context of cleaning services in the English National Health Service. Additionally, a new hypothesis of coupling is presented and tested: the effect of contracting of ancillary services on patient health outcomes, using the hospital‐acquired infection rate as our measure. Using data from 2010–11 to 2013–14 for 130 National Health Service trusts, the study finds that private providers are cheaper but dirtier than their in‐house counterparts.     

Three Strategies to Prevent Unintended Pregnancy

This paper presents results from fiscal impact simulations of three national‐level policies designed to prevent unintended pregnancy: A media campaign encouraging condom use, a pregnancy prevention program for at‐risk youth, and an expansion in Medicaid family planning services. These simulations were performed using FamilyScape, a recently developed agent‐based simulation model of family formation. In some simulation specifications, policies’ benefits are monetized by accounting for projected reductions in government expenditures on medical care for pregnant women and infants. In a majority of these specifications, policies’ fiscal benefit‐cost ratios are less than 1. However, in specifications that account additionally for projected savings to programs that provide a broader range of benefits and services to young children, all three policies have benefit‐cost ratios that are comfortably greater than 1. The results from my preferred specifications suggest that the simulated policies would produce returns to taxpayers on each dollar spent of between $2 to $6. On the whole, the results of these simulations imply that all three policies are sound public investments.     

The Cost‐Effectiveness of Welfare‐to‐Work Programs: A Meta‐Analysis

This article uses the tools of meta‐analysis to assess cost–benefit studies of 50 mandatory welfare‐to‐work programs that were targeted at Aid for Families with Dependent Children recipients and evaluated by random assignment. The findings suggest that the costs of a typical evaluated welfare‐to‐work program probably exceeded its benefits from the perspective of the government, but those assigned to the program, and possibly society as a whole, may reap small positive net benefits. However, there are individual programs that are very cost‐beneficial. Further analyses of the determinants of the cost‐benefits of welfare‐to‐work programs to government and society as a whole show that some services are cost‐neutral, but others entail net costs, which are sometimes substantial. The findings suggest that less successful programs might be made more cost‐beneficial by dropping vocational training and basic education as program components, leaving mainly lower cost components, such as mandated job search and sanctions, but also possibly the more costly financial incentives.