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.     

Is There a Future for Contracting in the Australian Public Sector?

Contracting has moved from the margins to the centre of public management. Significant sections of the public workforce, from benefits delivery to corporate services, now find their functions open to tender. Governments prefer to concentrate on policy analysis and development, leaving service delivery to the market. As purchasers rather than providers, governments are redefining the role and scope of the state. But are Australian governments ready for this shift to contracting? Do they possess the full array of control and reporting mechanisms necessary if contracting is to deliver its promised benefits? There are significant difficulties finding evidence that answers such questions. Yet on the basis of concerns discussed across Australian jurisdictions, it appears contracting has developed so quickly it outstrips the capacity of government to monitor what is happening, and so learn from mistakes. In time governments will become better at maintaining accountability for contracted functions, because experience reduces the risks of moral hazard.     

Contract–Management Capacity in Municipal and County Governments

Under pressure to do more with less, governments across the country have moved from direct service provision to providing services by contract. Proponents argue that contracting can reduce costs and improve flexibility and customer satisfaction. Critics point to a growing number of failed contracts, arguing there are numerous pitfalls associated with contracting. Missing from these debates is a discussion of how governments' managerial capacity can improve contract performance. In this article, we identify specific capacities that governments can use to harness the promise of contracting while avoiding its pitfalls. We present analyses of data on municipal and county government contracting activities that show how governments invest in contract– management capacity in response to several internal and external threats to effective contract performance. Because government investment in contract–management capacity is uneven—that is, some governments invest in less capacity even when circumstances would call for more—our analyses may help to explain why some contract arrangements are more successful than others.     

Government-to-Government Contracting: Stewardship,Agency, and Substitution

ABSTRACT

This paper provides empirical evidence detailing the distinctive nature of service delivery provided through contracts with other governments. The results of a survey of Ohio city and county managers both confirm and stand in contrast to implications derived from stewardship theory. Consistent with stewardship, our data demonstrate that contracts with public sector service partners generate less intensive monitoring by contracting governments than do services contracted with private entities. In contrast to stewardship theory, we find that contracting governments do not use other governments for services requiring intensive monitoring. In an era of accountability and results-oriented management, reliance on trust may not satisfy constituents who seek evidence of effective service delivery. The inability of the contracting government to affect another government's service delivery reduces the attractiveness of that government as a contracting partner. If the tools of stewardship prove to be inadequate, the imposition of carrots and sticks appropriate for a principal-agent relationship could undermine the trust central to stewardship. Given these tensions, it is not surprising that governments are contracting less with other governments.     

Understanding Business Improvement Districts: A New Governance Framework

What is the current state of research on business improvement districts (BIDs)? What is an appropriate framework for analysis? What are key questions for advancing future BID research? BIDs can be understood best within a network governance framework. The research shows, first, a blurring of the line between the public and private spheres as a result of BIDs; second, BIDs are increasingly important actors in urban governance; third, BIDs engage in collaborative, conflictual, and co‐optative relations with local and state governments; and fourth, difficult accountability and management problems are created by their interdependent relationships with local governments. Future research needs to focus on understanding the role of BIDs in urban governance and assessing their impacts on metropolitan areas, as well as their inherently complicated public accountability and management challenges.     

Contracting for management: Assessing management capacity under alternative service delivery arrangements

Contracting critics suggest that when governments outsource, they reduce their capacity to produce services and manage service delivery. In this paper, we decompose the service delivery decision into service production and service management components. When governments contract for service production, they may also choose to contract for a portion of service delivery management. Studies that only compare the management activities of contracting and direct service delivery governments, without examining the management activities contracted to vendors, are likely to be incomplete and biased. Drawing on a unique survey of governmental refuse collection service directors, matched with a survey of refuse collection vendors operating under municipal contracts, we show that the vendors' management activities offset the decline in management capacity that occurs when governments contract for service delivery for this particular service. Governments can “buy” management activities when contracting for service production. © 2006 by the Association for Public Policy Analysis and Management     

Differences Between State and Federal Public Forest Management: The Importance of Rules

In United States federalism, public policy responsibilitiesbelong to multiple jurisdictions. This article compares statewith federal public forest management. Data come from four cases,each comprising two forests sharing similar physical characteristicsbut under the authority of different governments. Systematiccomparisons suggest that officials in the national forest agencyface greater statutory, regulatory, and planning constraintsthan do state agency officials. These constraints require morepublic input and higher levels of environmental protection.Outcomes reflect these differences: federal officials provideless limber, at lower net profit, than do state officials, andthey transfer less revenue to local governments. Concurrently,federal officials make greater environmental protection efforts.     

Citizen political knowledge and accountability: Survey evidence on devolution in Kenya

Devolution complicates citizens’ ability to assign responsibility for the provision of public goods and services to different tiers of government. Misattribution of responsibility limits the effectiveness of electoral accountability in the nested principal–agent relationships comprising voters, politicians, and bureaucrats. This raises two important questions. First, how do citizens learn about the functions of different tiers of government under devolution? Second, how do levels of political knowledge condition citizens’ evaluations of subnational governments? Using cross‐sectional and panel survey data from Kenya (2014–2018), this article shows that voters accumulate knowledge through exposure to government services, and that gender and partisanship mediate knowledge accumulation. In addition, exposed citizens are more likely to give positive evaluations of subnational politicians, despite the fact that such exposure may reveal subnational governments’ low capacity, ineffectiveness, and governance gaps. These findings advance our understanding of the dynamics of political accountability under devolution.     

Intergovernmental Structure and Fiscal Management Strategies: A Crossnational Analysis

Does intergovernmental structure have a systematic effect on the impacts of local governments' fiscal policy responses? Using empirical data from more than 800 local governments in five countries, the article concludes that intergovernmental structure is associated with the impact attributed to various fiscal management strategies. Such strategies have generally had greater impact in local governments in federal systems than those in unitary state systems. There are similarities between federal and unitary local governments regarding the fiscal management strategies that have least impact, and both types stress the importance of productivity gains via technology. But the differences in relative importance and level of impact are more striking than the similarities. In particular, fiscal management strategies involving the relations of the local government with other governments, such as obtaining intergovernmental revenue and shifting service provision to other governments, have greater impact in significantly more federal systems than in unitary state systems. These federal local governments also experience greater impacts from increasing user charges and raising local taxes. In contrast, local governments in unitary state systems place greater reliance on the more politically expeditious strategy of across–the–board expenditure reductions and on reductions of capital spending. These findings suggest that local governments in more decentralized systems have greater flexibility to manipulate relations with other governments in order to enhance their own fiscal situation. The data also suggest that the government's level of fiscal stress is not systematically associated with the level of impact from most fiscal management strategies, especially in the unitary state systems.     

Adam Smith or Machiavelli? Political incentives for contracting out local public services

Why do some local governments deliver public services directly while others rely on providers from the private sector? Previous literature on local contracting out and on the privatization of state-owned enterprises have offered two competing interpretations on why center-right governments rely more on private providers. Some maintain that center-right politicians contract out more because, like Adam Smith, they believe in market competition. Others claim that center-right politicians use privatization in a Machiavellian fashion; it is used as a strategy to retain power, by ??purchasing?? the electoral support of certain constituencies. Using a unique dataset, which includes the political attitudes of over 8,000 Swedish local politicians from 290 municipalities for a period of 10 years, this paper tests these ideological predictions together with additional political economy factors which have been overlooked in previous studies, such as the number of veto players. Results first indicate support for the Machiavellian interpretation, as contracting out increases with electoral competition. Second, irrespective of ideological concerns, municipalities with more veto players in the coalition government contract out fewer services.     

ASSESSING INTERGOVERNMENTAL COORDINATION IN COASTAL ZONE MANAGEMENT

One of the primary incentives to state governments to participate in the national coastal zone management program is the legal requirement that federal resources use activities as well as federal projects and federally permitted activities that affect state ocean and coastal areas must be consistent with federally-approved state coastal programs. The "consistency provisions" are among the most innovative attempts to insure intergovernmental coordination in resource management. In assessing the implementation of the consistency provisions, we find that this legal requirement has led to the development of a variety of formal and informal collaborative mechanisms for intergovernmental coordination in ocean and coastal management. While these mechanisms have led to the resolution of the vast majority of federal-state conflicts in coastal areas some important federal-state conflicts have not been resolved. This has more to do with the character of these particular conflicts than the general effectiveness of the mechanisms for collaboration that have been established.     

Contract Management Capacity Breakdown? An Analysis of U.S. Local Governments

Research indicates that successful government contracting depends on sufficient internal management capacity. Numerous studies have examined the decision to contract out and its pitfalls, but few have tracked government contract management capacity. This study explores whether a change is observable in the capacity of U.S. local governments to engage in effective contracting from 1997 to 2007. The authors discuss whether this change represents a decline or degradation, and in which form and type of government it occurred. Using data from 537 local government units, the analysis reveals that some aspects of capacity have declined as local governments continue to contract out for highly complex services. The authors speculate on the reasons behind the findings and suggest capacity enhancement strategies.     

Using Local Government Corporate Plans in Victoria

The Victorian state government has required local governments to publish their corporate plans and this paper explores the information provided by their corporate plans. These plans demonstrate diversity in the form and content, but several themes emerge. First, despite the purpose of corporate plans being to demonstrate accountability to the local community, the lack of performance targets reduces the usefulness of these plans for accountability purposes. It also explores objectives which are of major importance to the sector, such as local economic development, which is an issue difficult to control in the local area, being largely determined by federal and state policy. Other important objectives include financial and asset management together with emphases on the local community and accountability, issues which were the drivers of the state government's reform agenda. This article assists those who want to enhance the practice of corporate (strategic) planning in local government.     

Parkinson's Law and the New Public Management? Contracting Determinants and Service‐Quality Consequences in Public Education

Why is contracting used more frequently under some circumstances than others? What is its impact on spending for core mission and on service quality? These questions are explored with data from more than 1,000 Texas school districts. The evidence for a recent three‐year period shows that contracting is negatively related to spending on school districts' central task and is not positively associated with district performance. Why, then, do districts contract? While several variables are associated with the degree of contracting, the most interesting is the relative size of a district's bureaucratic staff. Furthermore, the relationship between contracting and bureaucracy is reciprocal: Each is associated with subsequent growth in the other. The dynamic suggests an updated version of Parkinson's law. These findings indicate the need for researchers to probe the causes and consequences of contracting more thoroughly to help public managers assess this important option.     

Contracting for Indigenous Health Care: Towards Mutual Accountability

In Australia and other industrialised countries, governments contract with the non‐government sector for the provision of primary health care to indigenous peoples. Australian governments have developed policies and funding programs to support this health sector, but the current arrangements are unduly complex and fragmented. The results of our study show that the complex contractual environment for Aboriginal Community‐Controlled Health Services (ACCHSs) and their funders is an unintended but inevitable result of a quasi‐classical approach to contracts applied by multiple funders. The analysis in this article highlights potential policy and program changes that could improve the effectiveness of funding and accountability arrangements, based on the use of an alliance contracting model, better performance indicators and greater clarity in the relative roles of national and jurisdictional governments.     

Caught in the Act: The Smoking Gun View of Ministerial Responsibility

While any discussion of ministerial responsibility must in part focus on ministerial resignations, finding out when ministers resign is only the tip of the iceberg. A full assessment of ministerial responsibility would look at the relations between ministers and their senior bureaucrats, as discussed in Bill Blick’s article. It would look at the impact of managerialism on ministerial accountability, especially in the light of privatisation and contracting out. It would assess the impact of other mechanisms of accountability, including the senate. The subject of this article must always be put into a broader context. This article concentrates on ministerial resignations drawing on evidence from Britain, Canada, the federal government in Australia and the government of New South Wales. When do ministers resign?     

Incentivizing self‐regulation: Federal vs. state‐level voluntary programs in US climate change policies

How does program sponsorship influence the design of voluntary programs? Why and how do voluntary programs on climate change sponsored by the state and federal governments in the United States vary in their institutional design? Scholars emphasize the signaling role of voluntary programs to outside stakeholders, and the excludable benefits that induce firms to take on non‐trivial costs of joining voluntary programs. Scholars have noted several types of benefits, particularly reputational benefits programs provide, but have not systematically studied why different programs emphasize different types of benefits. We suggest that excludable benefits are likely to take different forms depending on the institutional context in which program sponsors function. We hypothesize that federal programs are likely to emphasize less tangible reputational benefits while state programs are likely to emphasize more tangible benefits, such as access to technical knowledge and capital. Statistical analyses show the odds of a voluntary program emphasizing tangible benefits increases by several folds when the program is sponsored by the state as opposed to federal government.     

Federal Frustration, State Satisfaction? Voters and Decentralized Governmental Power

An analysis using the 1996 American National Elections Studyand measures of state government responsiveness and performancefinds that feelings about one's state government are largelyideological in orientation and have little to do with any perceivedfailures on the part of the federal government or the actualperformance or perceived responsiveness of the respondent'sstate government. National economic performance was the onlynon-ideological factor that consistently related to feelingsabout the federal government and state governments. Feelingsabout the federal and state governments, and for the principleof big government in general, were powerfully linked to candidatevote choice in the 1996 presidential election, even after partisanand ideological factors were taken into account.     

State Social Services Contracting: Exploring the Determinants of Effective Contract Accountability

This article examines the effectiveness of contract accountability in social service contracts. The analysis is based on five case studies of Kansas contracts for selected welfare, Medicaid, and foster care and adoption services. Results indicate the state has achieved moderate to high levels of accountability effectiveness, especially in terms of specifying social service contracts and selecting appropriate accountability strategies. However, accountability is undermined by the use of risk shifting, reliance on a system of multiple competing providers, and the adoption of new information technologies. These conclusions contradict the conventional wisdom, theory, and existing research on contracting.