Using agency and stewardship theories, this study examines how public administrators manage contracting relationships with nonprofit organizations. Interviews were conducted with public and nonprofit managers involved in social services contract relationships at the state and county level in New York State. The use of trust, reputation, and monitoring as well as other factors influence the manner in which contract relationships are managed. The findings suggest that the manner in which nonprofits are managed evolves over time from a principal-agent to a principal-steward relationship but with less variance than the theories would suggest. This results in part from the contextual conditions that include the type of service, lack of market competitiveness, and management capacity constraints. The intergovernmental environment in which social services are implemented and delivered presents complex challenges for public managers responsible for managing contract relationships. The findings from this study document those challenges and the corresponding management practices used with nonprofit contractors.

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.

Theories of nonprofit density have assumed a variety of dispositions toward the state, including opposition, suspicion, indifference, and mutual dependence. In this article, we conduct the first large-scale simultaneous empirical test of the two most prominent nonprofit theories: government failure theory and interdependence theory. The former characterizes nonprofit activities as substitute or oppositional to state programs, accounting for the limitations and failures of government-provided services and more reflective of the heterogeneity of demand for services. The latter emphasizes the more complementary and collaborative nature of nonprofit activities, focusing on the overlapping agendas of nonprofits and the state and the mutual dependency that arises from partnership. The theories are difficult to test empirically because both predict the same relationship between state capacity and the size of the nonprofit sector, albeit for theoretically distinct reasons. A true joint test requires the separation of government support from private support for nonprofits. Using a newly constructed panel dataset in which we separate out nonprofit revenue sources normally agglomerated in the Internal Revenue Service 990 data, we examine the empirical merits of both theories to answer the question of whether human service nonprofit organizations thrive when government fails or when government collaborates. Our findings suggest that government funding has a more favorable effect on nonprofit density than private donations. The findings raise several policy and management implications that need evaluation.

Th e contracting of public services has been an integral part of public managers ' work for a long time, and it is here to stay. Th is essay sums up current research on the topic for busy practitioners and scholars. Where are we today with respect to the problems and pitfalls of contracting out, from balancing equity with effi ciency to confronting the frequent problem of imperfect markets? C ontracting proponents, who often have roots in public sector economics, champion contracting as a way to reduce service costs through competitive effi ciencies and economies of scale. Contracting critics, who often have roots in traditional public administration fi elds, counter that contracting tends to sacrifi ce key public interest values (e.g., equality of treatment) and reduces servicedelivery capacity. In the midst of this discussion, several things are clear at this point in the evolution of the contract state:• Contracting is and will continue to be a major task facing public managers. • Public managers do not always have a choice about contracting and may be required by elected offi cials to do so under less-than-optimal market conditions. • Public managers charged with contracting operate in politically charged environments that put a premium on balancing competing stakeholder values. • One-size-fi ts-all judgments about contracting are generally unrealistic: Contracting can improve service delivery or it can be a disaster, depending on the underlying market conditions and management effi cacy.So what are managers to do? Th e prescriptive literature on contracting to date tends to off er step-by-step procedures for managers to identify service delivery decisions and apply contract management techniques, but it fails to provide a strategic foundation for managing the complicated and often politically charged trade-off s of contracting. Meanwhile, strident ideological debates have crowded out discussion of how rigorous, theory-driven, multidisciplinary analyses of contract management can inform service delivery. Yet the lessons discerned from these analyses may allow public managers to reframe the debate over contracting in their political jurisdictions.With this in mind, we take up Kettl ' s (2002) charge to off er public managers and scholars a more comprehensive strategic framework for practicing and studying contract management than has been off ered to date. Our approach is founded on the interaction of three central factors culled from the strategic management and planning, public law and institutions, and economics literatures. Th ese are, respectively, public values, institutions, and service markets. In our framework, (1) stakeholder preferences and democratic processes establish the values to be optimized in service delivery;(2) public law and organizational arrangements determine the contracting tools available for balancing competing values; and (3) the characteristics of service markets infl uence which contracting tools and vendors are best suited to achieve stakeholder values.In elaborating our approa...

Th e contracting of public services has been an integral part of public managers ' work for a long time, and it is here to stay. Th is essay sums up current research on the topic for busy practitioners and scholars. Where are we today with respect to the problems and pitfalls of contracting out, from balancing equity with effi ciency to confronting the frequent problem of imperfect markets? C ontracting proponents, who often have roots in public sector economics, champion contracting as a way to reduce service costs through competitive effi ciencies and economies of scale. Contracting critics, who often have roots in traditional public administration fi elds, counter that contracting tends to sacrifi ce key public interest values (e.g., equality of treatment) and reduces servicedelivery capacity. In the midst of this discussion, several things are clear at this point in the evolution of the contract state:• Contracting is and will continue to be a major task facing public managers. • Public managers do not always have a choice about contracting and may be required by elected offi cials to do so under less-than-optimal market conditions. • Public managers charged with contracting operate in politically charged environments that put a premium on balancing competing stakeholder values. • One-size-fi ts-all judgments about contracting are generally unrealistic: Contracting can improve service delivery or it can be a disaster, depending on the underlying market conditions and management effi cacy.So what are managers to do? Th e prescriptive literature on contracting to date tends to off er step-by-step procedures for managers to identify service delivery decisions and apply contract management techniques, but it fails to provide a strategic foundation for managing the complicated and often politically charged trade-off s of contracting. Meanwhile, strident ideological debates have crowded out discussion of how rigorous, theory-driven, multidisciplinary analyses of contract management can inform service delivery. Yet the lessons discerned from these analyses may allow public managers to reframe the debate over contracting in their political jurisdictions.With this in mind, we take up Kettl ' s (2002) charge to off er public managers and scholars a more comprehensive strategic framework for practicing and studying contract management than has been off ered to date. Our approach is founded on the interaction of three central factors culled from the strategic management and planning, public law and institutions, and economics literatures. Th ese are, respectively, public values, institutions, and service markets. In our framework, (1) stakeholder preferences and democratic processes establish the values to be optimized in service delivery;(2) public law and organizational arrangements determine the contracting tools available for balancing competing values; and (3) the characteristics of service markets infl uence which contracting tools and vendors are best suited to achieve stakeholder values.In elaborating our approa...