The Efficiency of Contracting out Local Public Services

Investor logo
Authors

MIKUŠOVÁ MERIČKOVÁ Beáta NEMEC Juraj

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

Faculty of Economics and Administration

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.
Related projects:

You are running an old browser version. We recommend updating your browser to its latest version.