The Efficiency of Contracting out Local Public Services
| Authors | |
|---|---|
| Year of publication | 2014 |
| Type | Article in Proceedings |
| Conference | Proceedings of the 18th International Conference: Current Trends in Public Sector Research |
| MU Faculty or unit | |
| Citation | |
| Field | Management and administrative |
| Keywords | contracting; efficiency; local public services; Slovakia |
| Description | Under contracting arrangements, a government retains responsibility for providing a service, but hires private firms to produce and deliver it. The theory of contracting suggests that, provided certain conditions are met, contracting out has the potential to improve efficiency without sacrificing quality, compared to direct supply by public organizations. In developed countries, contracting out can sometimes improve the performance of the public sector. In countries making the transition from socialism to market-based economies, the situation is much more complicated. The study examines the experience with contracting out among municipalities with focus on the Slovak conditions. Despite some methodological problems, the data suggests that externalization of production (i.e., contracting out) generally delivers neither improved efficiency nor quality compared with internalized production (direct provision of public goods and services by governments). Although the data overall supports the case for internalization, it also reveals examples of effective contracting, thereby indicating the potential value of contracting if it is properly implemented. The possible policy responses to the current situation are also offered. |
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