Contracting Out for Employment Services in the Netherlands: A Decade of Experience

Abstract:     
Today many Western welfare states are under reform. An important part of these reforms is the introduction of forms of privatization. In many countries this has led to the increased use of contracts as a governance tool for the delivery of employment reintegration services. In this paper we describe the overall development of how Dutch local governments (municipalities) buy these kinds of services and analyze how they deal with the challenges associated with contracting out and more specifically the challenge of maintaining control over service delivery. For this we make use of data collected through a case study at nine municipalities and the analysis of about 20 tender documents used to buy these kinds of services.

Based on our findings we conclude that the idea of large scale privatization of the delivery of employment reintegration services in the Netherlands must be revised. Indeed, these days’ municipalities appear to buy far less parts of the service task then was the case in the early years, when contracting out was introduced. Moreover, we find that municipalities buy services with a strong emphasis on maintaining control by limiting the discretionary leeway given to the agents when delivering the services. In addition, it becomes clear that for contracting out to be successful requires not only investment in drafting and designing suitable contracts but also requires significant investments in internal capacity for implementing, monitoring and managing the contracts used to deliver services. Something, that even in successful municipalities is not always given.

Overall, we can conclude that over the years municipalities have learned that it requires a significant amount of internal capacities to maintain control over how services are delivered. This has meant that in part municipalities have chosen to provide a substantial part of the services internally as this provides for better control over service delivery. While at the same time the municipalities have developed a modular buying strategy that has allowed them to deconstruct the service task into more bite-size chunks. That in turn allow for easier digestion from a contracting perspective. Opting to buy those elements that are well suited to be contracted-out and keeping the elements that are difficult to contract for, closer to home

Number of Pages in PDF File: 17

Keywords: contracting-out, welfare to work, employment re-integration, public services, privatisation, welfare reform, Netherlands, lessons

JEL Classification: I3, I38, L33

working papers series