Municipalities’ Choices of Service Delivery Modes: The Influence of Service, Political, Governance, and Financial Characteristics

Abstract

This study investigates the influence of service, political, governance, and financial characteristics on municipalities' choices of four service delivery modes (in-house, inter-municipal cooperation, municipality-owned firm, and private firm)

Political and Institutional Explanations for Increasing Re-municipalization

“…However, Hebdon and Jalette (2008) for Canada found that elected politicians reduce privatization rates and, therefore, have hesitation with a solid restructuring agenda. In addition, a recent study using Dutch local government data (Schoute, Budding, and Gradus 2017) showed that in this context, ideology plays a significant role in choices of service delivery modes, so the debate is still open.…”

Contracting out local road and park services: economic effects and their strategic, contractual and competitive conditions

“…The theoretical starting point of this study is the literature on contracting for public services, which frames the importance of political motives, institutional context, contractual arrangements, and service markets for contracting decisions and outcomes (Amirkhanyan, Kim, and Lambright 2010;Brown, Potoski, and van Slyke 2016;Entwistle and Martin 2005;Hart, Shleifer, and Vishny 1997;Hefetz and Warner 2012). Several public service contracting models have been discussed in the literature, including models based on competitive tendering, negotiations, and coorporation (Dehoog 1990;Schoute, Budding, and Gradus 2017). As mentioned in the introduction above, our focus here is limited to the former, which involves the award of public contracts through formal rounds of tendering among the providers in the private market.…”

“…The finding suggests that, at least in the context of road and park services in Danish municipalities, tendering and contracting out is working relatively effectively as a political and/or organisational strategy for reducing the service delivery costs. An important point of notice is that contracting is used for many different (and sometimes competing) political, organisational, and economic reasons (Brown and Potoski 2003;Schoute, Budding, and Gradus 2017). Public organisations may thus focus on cost reductions to a varying extent, which is reflected in the economic results that municipalities obtain from contracting the service.…”

“…A major impact of the last four decades of New Public Management (NPM) reform has been the increased involvement of private providers in public service delivery (Alonso, Clifton, and Díaz-Fuentes 2015;Pollitt and Bouckaert 2011). This trend has been particularly pronounced in the local government sector, where many services have been made subject to contracting out (Schoute, Budding, and Gradus 2017). From an economic perspective, which is our focus in this study, contracting out is characterised by the establishment of ex-ante price competition by putting out services for tender in auction-like processes, whereby competing organisations are invited to submit bids for contracts with public clients (Domberger and Jensen 1997).…”

“…The analysis indicates that cost savings are greater when services are first tendered, whereas frequent contracting is associated with declining marginal returns. Finally, in order to further explore factors that contribute to cost savings from contracting out, we include some variables from the literature on contracting determinants (Bel and Fageda 2007;Schoute, Budding, and Gradus 2017) and find that large municipalities and those that emphasise spending cuts realise the largest gains, whereas the characteristics of markets and the contracts do not seem to explain variations in costs.…”