Sector Choice: Its Role in Explaining Contracting Performance

Abstract

Voluminous literature examines contracting out or “outsourcing” by government agencies for the delivery of services. Despite the great interest in contracting, the research literature remains sparse for one level of government: the states. In addition, although theoretical inquiry has described the presumed effects of government contracting with organizations from the different sectors - for-profit, nonprofit, and public - little empirical work has been undertaken in this area. The present inquiry addresses these lacunae. First, based on surveys conducted in 1998, 2004, and 2008 in the American State Administrators Project, the article examines trends in contracting by state agencies and the extent and consequences for service delivery at the end of the first decade of the twenty-first century. Second, the article presents and tests a model of contracted service delivery and explores the effects of sector of vendor on the results obtained by state government agencies with respect to service cost and quality. Findings show that state agencies that contract with organizations from multiple sectors are more likely to achieve desired results from contracting, and that contracting exclusively with private sector firms is least likely to yield those results.

Keywords: contracting,outsourcing,privatization,state government