Outsourcing Public Service Delivery: Management Responses in Noncompetitive Markets

Authors


  • Amanda M. Girth is assistant professor in the John Glenn School of Public Affairs at The Ohio State University. Her research interests include government contracting and public–private partnerships, with a focus on performance and accountability. E-mail: girth.1@osu.edu

  • Amir Hefetz is a researcher at Haifa University in Israel. His research focuses on the privatization practices of U.S. local governments. E-mail: ahefet01@campus.haifa.ac.il

  • Jocelyn M. Johnston is associate professor of public administration and policy at American University. Her current research focuses on public management and alternative public service delivery, specifi cally, government contracting and collaborative service delivery networks. E-mail: jocelyn@american.edu

  • Mildred E. Warner is professor of city and regional planning at Cornell University. Her research focuses on privatization, decentralization, and economic development policy among U.S. local governments. E-mail: mew15@cornell.edu

Abstract

Capturing the benefits of competition is a key argument for outsourcing public services, yet public service markets often lack sufficient competition. The authors use survey and interview data from U.S. local governments to explore the responses of public managers to noncompetitive markets. This research indicates that competition is weak in most local government markets (fewer than two alternative providers on average across 67 services measured), and that the relationship between competition and contracting choice varies by service type. Public managers respond to suboptimal market competition by intervening with strategies designed to create, sustain, and enhance provider markets. In monopoly service markets, managers are more likely to use intergovernmental contracting, while for-profit contracting is more common in more competitive service markets. The strategies that public managers employ to build and sustain competition for contracts often require tangible investments of administrative resources that add to the transaction costs of contracting in noncompetitive markets.

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