A contractual framework for new public management theory

Intervention on The Role of Procurement Service Unit

“…Principal agent (PA) theory often promoted as one of the most useful tools for investigating and understanding problems relating to corruptionwhen people definitely do the wrong thing when they are not being watched (Widmalm, 2016). PA theory defines the issues that arise when the parties to a contract have divergent goals and there is information asymmetry between them (Ferris & Graddy, 1998). This model forms the basis for a formal model of contractual relationships to make it easier to understand how governments manage to produce publicly available services.…”

Innovation in Public Management: Is Public E-Procurement a Wave of the Future? A Theoretical and Exploratory Analysis

“…Agency theory, as a variant of market theory, operates similar to the transaction cost theory by focusing on principal-agent relationships (Ferris & Graddy, 1998, see Figure 4). Agency theory considers all social life as contracts between an agent and a principal (Farazmand, 2002b).…”

Police Services

“…This is theory that focuses, in its most simple form, on the relationship between the 'commissioner' of a task (or service provision activity)-'the principal'-and the 'contractor' who undertakes the work-'the agent'. A familiar problem in such situations, however, is that the agent (as contractor) will often know rather more about the tasks involved than the 'principal'-the problem of 'information asymmetry' as it is usually described (Ferris and Graddy 1998;Bandyopadhyay 2013)-and may well seek to exploit that superior knowledge to their own advantage, for instance, by suggesting a largerscale job than is really needed, and/or by charging more than is reasonable. The key challenge, then, for the 'principal' is to ensure that appropriate checking processes and incentive arrangements are in place to ensure that the interests of the commissioner are protected and the contractor does not exploit the situation.…”