Trevor L.

Brown
Ohio State University
Matthew Potoski
Iowa State University
David M. Van Slyke
Syracuse University

Theory to Managing Public Service Contracts: Aligning Values,

Practice
Institutions, and Markets

Trevor L. Brown is an assistant professor The contracting of public services has been an integral rigorous, theory-driven, multidisciplinary analyses
at The Ohio State University, where he part of public managers’ work for a long time, and it is of contract management can inform service delivery.
teaches public management and organiza-
tional theory. His research focuses on
here to stay. This essay sums up current research on the Yet the lessons discerned from these analyses may
contracting out and contract management, topic for busy practitioners and scholars. Where are we allow public managers to reframe the debate over
performance measurement and manage- today with respect to the problems and pitfalls of con- contracting in their political jurisdictions.
ment, intergovernmental relations, and
democratization.
tracting out, from balancing equity with efficiency to
E-mail: [email protected]. confronting the frequent problem of imperfect markets? With this in mind, we take up Kettl’s (2002) charge to
offer public managers and scholars a more comprehen-
Matthew Potoski is an associate

C
professor at Iowa State University, where he
ontracting proponents, who often have roots sive strategic framework for practicing and studying
teaches politics, policy, and administration. in public sector economics, champion contract management than has been offered to date.
His research studies public management contracting as a way to reduce service costs Our approach is founded on the interaction of three
and contracting, environmental policy, and
public organizations.
through competitive efficiencies and economies of central factors culled from the strategic management
E-mail: [email protected]. scale. Contracting critics, who often have roots in and planning, public law and institutions, and eco-
traditional public administration fields, counter that nomics literatures. These are, respectively, public values,
David M. Van Slyke is an assistant
professor of public administration at
contracting tends to sacrifice key public interest values institutions, and service markets. In our framework,
Syracuse University’s Maxwell School of (e.g., equality of treatment) and reduces service- (1) stakeholder preferences and democratic processes
Citizenship and Public Affairs. His research delivery capacity. In the midst of this discussion, establish the values to be optimized in service delivery;
and teaching focus on public and nonprofit
management, privatization and contracting,
several things are clear at this point in the evolution of (2) public law and organizational arrangements deter-
policy implementation, and strategic the contract state: mine the contracting tools available for balancing com-
management. peting values; and (3) the characteristics of service
E-mail: [email protected].
● Contracting is and will continue to be a major markets influence which contracting tools and vendors
task facing public managers. are best suited to achieve stakeholder values.
● Public managers do not always have a choice

about contracting and may be required by elected In elaborating our approach, we illustrate what the
officials to do so under less-than-optimal market existing research suggests about how managers can
conditions. use the lenses of stakeholder and public interest
● Public managers charged with contracting operate values, institutions, and service markets to improve
in politically charged environments that put a pre- service delivery. We examine the interaction of these
mium on balancing competing stakeholder values. factors in three key stages of contract management:
● One-size-fits-all judgments about contracting (1) deciding whether to “make or buy” the services,
are generally unrealistic: Contracting can improve (2) selecting vendors to produce them, and (3)
service delivery or it can be a disaster, depending on deploying monitoring tools for overseeing the imple-
the underlying market conditions and management mentation of contracts. We conclude by suggesting
efficacy. areas for future research that can advance both
practice and theory building on this important service
So what are managers to do? The prescriptive litera- delivery component of the hollow state (Milward and
ture on contracting to date tends to offer step-by-step Provan 2000).
procedures for managers to identify service delivery
decisions and apply contract management techniques, The Foundation of Government Contracting:
but it fails to provide a strategic foundation for man- Public Values, Institutions, and Service
aging the complicated and often politically charged Markets
trade-offs of contracting. Meanwhile, strident ideo- We start from the premise that contracting is an
logical debates have crowded out discussion of how economic exchange among actors in which the
Managing Public Service Contracts 323
 government’s central management challenge is to ● The make-or-buy stage centers on whether con-
align public values, institutions, and service-market ditions are suitable for contracting (e.g., Donahue
conditions across the three contracting phases. Public 1989). Managers decide whether market conditions
managers operate in a crucible of swirling and often are likely to support a competitive environment
political values: effectiveness, efficiency, accountability, for contract service delivery (e.g., Sclar 2000) and
responsiveness, equality of treatment, and service identify the service-production and management
quality, to name a few (Frederickson 1997; Moe 1996; components for outsourcing (e.g., Brown and
Rainey 2003). Managers experience these values as Potoski, 2006).
pressures from internal or external stakeholders that ● After deciding to contract, public managers need

they must balance or optimize as they deliver services. to structure and execute a competitive bidding
In some cases, these values are codified through the process (e.g., Lavery 1999). Designing contracts is
political process into institutions, public laws, and very complex, requiring public managers to make
organizational arrangements that determine the range many public-value-laden decisions, including speci-
of tools and resources that public managers can fying a vendor’s obligations and tasks, defining the
employ for service delivery. The services themselves contract’s renewal provisions, and specifying its
and the character and composition of their markets incentive and performance-measurement systems
influence the ability of public managers to optimize or (e.g., Shetterly 2000).
balance competing values through service delivery. In ● After a vendor has been selected and the contract

particular, transaction costs—“the comparative costs awarded, public managers must shift focus and
of planning, adapting, and monitoring task manage the contract, which includes monitoring
completion under alternative governing structures” vendor performance, communicating with service
(Williamson 1981, 552–53)—make achieving values recipients, and executing incentive programs (e.g.,
such as effectiveness and efficiency through Kelman 2002a, 2002b).
contracting more challenging for some types of
services than for others. An important first step for either practicing or
studying contracting is identifying and prioritizing the
Values often politically contentious stakeholder preferences
Whether government provides services directly or at each stage. In this way, public managers can weigh
through contract, effectively optimizing value trade- relevant values (e.g., equity and efficiency) against one
offs and executing core management functions are the another in the context of externally imposed con-
central management imperatives in public service straints (e.g., disagreements about contracting among
delivery (deLeon 1995; Van Slyke, Horne, and city council members). Service recipients and their
Thomas 2005; for a review, see Boyne 1998). The interest groups may be concerned primarily with
challenge is that values sometimes conflict, equality of treatment, elected politicians may focus on
particularly in politically contentious arenas. political accountability and responsiveness, and man-
Consequently, managers must either frame the trade- agers may be most attuned to cost efficiency. Yet effec-
offs for key decision makers to consider or, as is often tive management requires going beyond passively
the case, use their discretion to make these trade-offs receiving value signals from stakeholders and instead
as they make service delivery choices and implement actively reaching out to identify broad stakeholder
them (Moe 1996; Seidman 1998). preferences and frame trade-offs among them regard-
ing services.
In practice, the degree to which managers can achieve
values through service delivery is likely to vary across Identifying and balancing stakeholder values are po-
circumstances. Some conditions lie beyond a manager’s litically challenging tasks. Fortunately, a rich literature
control. For instance, managers typically have little in- describes how public managers can gauge and manage
fluence over the laws and rules governing service deliv- stakeholder values (Kraft and Clary 1991; Serra 1995;
ery, such as those that allow the use of some Thomas 1995). Surveys can reach large numbers of
management practices or service delivery approaches but people, for example, but they are quite expensive. To
prohibit others. Still, all things being equal, services with reach stakeholders with more intense and deeply held
inherently lower transaction costs are more favorable preferences (e.g., interest groups, service recipients,
contracting targets, freeing resources to lower costs or to elected officials), public managers can rely on public
purchase more service quality. On the other hand, ser- meetings and hearings, requests for comment and in-
vices with higher transaction costs pose greater contract- formation, advisory committees, and focus groups.
ing problems, consuming more resources and inhibiting Recently, managers have invited stakeholder participa-
a manager’s ability to optimize competing values. tion in developing service delivery goals prior to
beginning the contract process to help prioritize
Nevertheless, managers have opportunities to opti- competing values and preferences. Several techniques,
mize, balance, or trade off stakeholder values in each such as stakeholder value mapping (e.g., Bryson
of the three contracting stages noted earlier: 2004), “backward mapping” (e.g., Elmore 1979/80),
324 Public Administration Review • May | June 2006
and balanced scorecards (e.g., Kaplan and Norton 2003a; Van Slyke and Hammonds 2003) suggests, for
1996) can be used. (The extended version of this ar- example, that building human capital for contract
ticle on the PAR Web site discusses these techniques management involves developing basic skills in one’s
more broadly in terms of substance, process, and workforce for the following:
transaction costs.)
● Planning and coordinating service delivery
Institutions ● Negotiating with vendors
As managers identify stakeholder values, they also ● Monitoring task completion and executing

need to identify the tools, resources, and constraints incentives

that define the range of action they might take in ● Having specific technical skills, such as writing

delivering services. Here, two “institutions” are central contracts

to the contracting process: public law and
organizational arrangements. These define the “rules In many cases, ensuring sufficient capacity requires
of the game” (North 1991) that both public managers assigning these management responsibilities to public
and scholars ignore at their peril in practice and contract managers—a public service career track that
research. Public law sets the boundaries within which has unfortunately received low priority in recruitment,
public managers must operate, thereby permitting, training, and retention (Kelman 2002b). Weak con-
authorizing, or requiring a range of actions. tract management capacity, contentious political
environments, and few career rewards for attracting
At its root, a contract is a legal instrument, an “agree- the best and brightest managers not only increase the
ment by particular parties [who] accept a set of rules risk of failed contracts, but often result in embarrass-
to govern their relationship, whether it is for the pur- ing government scandals (Van Slyke 2003).
chase of services or for a cooperative working agree-
ment” (Cooper 1996, 125). As the law establishes Service Markets
what is authorized and prohibited, it also defines a A final set of factors in our framework for practicing
manager’s zone of discretion, either through legal am- and studying contract management involves
biguity or direct delegation. Discretion allows for con- determining whether service and market conditions
siderable flexibility, creativity, and innovation in favor contracting. Effective markets provide managers
contracting, whereas legal fiat can restrict discretion to with important information about prices and service
such an extent that managers have limited ability to quality across vendors and facilitate disciplining
manage contracts effectively. Managers clearly need a vendors who fail to meet contract standards (Hart
sound understanding of the laws, ordinances, and ad- and Moore 1999; Niskanen 1971). Moreover, in
ministrative statutes (e.g., the Administrative Proce- well-functioning markets, competition for contracts
dure Act) governing both the contracting process in can help overcome what are known in the economics
general and their particular services (Rosenbloom and literature as principal–agent problems. Such problems
Piotrowski 2005; Wise 1990). stem from relationships in which a principal (a
contracting government) contracts with an agent (a
Along with legal resources and constraints, organiza- vendor) for the production of goods and services in
tional arrangements also define the capacity, resources, which the agent has expertise. The principal looks to
and transaction costs for managing service delivery prevent the agent from opportunistically exploiting its
contracts. If the goals are innovation and efficiency, information advantages by carefully designing contracts,
then contracting with a private vendor may be more offering incentives, and monitoring the agent so that it
desirable, because private employees operate with performs according to contract specifications.
higher-powered, compensation-based, and profit-
oriented incentives. If the goal is more government Strong and effective markets, however, require some
control over service provision, then internal produc- fairly strict conditions. They need large numbers of
tion may be preferred, because government employees’ buyers and sellers, participants need to be well in-
motivations are typically better aligned with the formed about products and each others’ preferences,
agency’s mission. Yet as we will discuss later, even this and actors must be able to enter and exit the market
basic trade-off is conditioned on the institutional and and exchange resources at low costs. Markets can fail
market context of the contracting decision. because of high transaction costs, limited information,
uncertainty about the future, and the prospect that
Effective management is necessary to monitor how people or organizations will behave opportunistically
vendors and public employees are achieving service- in their interactions (Coase 1937; Williamson 1981,
delivery values (e.g., efficiency, quality, and equity). To 1991, 1996). In these instances, win–win voluntary
this end, building contract management capacity exchanges are replaced by lose–lose outcomes.
includes acquiring and nurturing physical infrastruc-
ture, financial resources, and perhaps more important, Of particular importance for our purposes are the
human capital. Prior research (Brown and Potoski varying transaction costs inherent in different market
Managing Public Service Contracts 325
 and service arrangements. In the case of contracting, difficult-to-measure services. In these cases,
because the parties cannot fully predict all possible managers must ensure adequate management
future scenarios, contracts are typically underspecified monitoring capacity to mitigate transaction
(i.e., incomplete) and may allow opportunistic ven- cost risks.
dors to exploit contracts to their own advantage at
the expense of the contracting government’s goals.
The Framework in Action
To minimize such opportunism, the contracting
In this section, we map values, institutions, and
government must incur transaction costs by clearly
service markets to the phases of contracting to
specifying the values sought in performance mea-
illustrate how public managers and researchers can
sures, writing more detailed contracts, monitoring
use the transaction cost lenses of public values,
vendors’ performance, and enforcing sanctions
institutions, and service markets in their work.
when necessary.

Consider two notable sources of transaction costs: Values, Transaction Costs, and the
asset specificity and ease of measurement. Asset speci- Make-or-Buy Decision
ficity refers to the need for physical infrastructure, Proponents of contracting argue that it is more
technology, or knowledge, skills, and abilities that can cost-efficient and better stimulates innovation
only be acquired through on-the-job experience or than direct service delivery. On the other hand,
highly specialized investments (e.g., high-cost invest- direct service delivery has been found to promote
ments in computer technology). For winning and los- political accountability, stability, and equality of
ing vendors, investing in an asset-specific service that treatment (DeHoog 1984; Donahue 1989; Kettl
cannot be readily translated to other economically 1993), although the relative strengths of direct
valuable activities (i.e., used for other organizational versus contract service delivery appear to vary across
purposes or marketed to others) leaves them vulner- circumstances (Brown and Potoski, 2006; Morgan
able to a single (i.e., monopsonistic) service purchaser. and England 1988; Sclar 2000). For example, the
This not only raises the costs for vendors to compete returns from contracting versus direct service
in the market, but more importantly makes it unlikely delivery depend acutely on legal requirements.
they will remain in the market for future rounds of Federal and state administrative procedure acts
contract bidding. Conversely, for contracting govern- mandating whistleblower and other employee
ments, asset-specific services can dangerously privilege protections, as well as open records and meetings
vendors that win the first contracts, thus constraining requirements, create both costs and constraints for
future competition. Under such monopolistic condi- government managers (Cooper 1996). Yet legal
tions, the winning vendor can exploit the contracting requirements can also restrict contracting practices
government with impunity by raising prices or reduc- (DeHoog 1997), such as those that require some
ing service quality. percentage of contracts to be awarded to female- or
minority-owned firms. Indeed, private firms and
Ease of measurement, in turn, refers to how easily and nonprofits sometimes avoid competing for public
well public managers can assess the quantity or quality sector contracts because of time-consuming and
of services. Easily measured services have identifiable procedurally complex legal requirements
performance metrics that accurately represent either (MacManus 1991; Praeger 1994). Thus, legal
the outputs or outcomes of service quantity and qual- exigencies can lower market competitiveness,
ity. But even if performance outcomes are difficult to thereby diluting the advantages of contracting
measure and observe, service performance can still be relative to in-house service delivery. Consequently,
assessed if it is relatively straightforward to monitor examining the specifics of the legal and political
the activities of the vendor, and these activities are context of make-or-buy decisions is critical for both
reasonable proxies for desired outcomes. managers involved in these choices and scholars
studying contracting dynamics.
As with asset-specific services, difficult-to-measure
services make governments vulnerable to unscrupu- Other factors—notably, characteristics of the service
lous vendors who, as principal–agent theory suggests, market—can play an even more fundamental role in
may exploit their information advantage by lowering determining the returns from contracting. Political
service quality and quantity. Under these unfavorable pressures, of course, may lead governments to retain
circumstances, managers would be wise to avoid the what should be contracted and to contract what
market altogether through internal service delivery. should be produced in house. Under the latter
The advantage of producing difficult-to-measure circumstances, managers again must either counter
services internally is that managers can monitor the lack of information and other problems such
and reward their own employees more easily than markets create or provide incentives and capacity for
vendors. Prudence aside, however, legal mandates monitoring vendors closely to mitigate opportunism
sometimes require governments to contract for and failed contracts. Proactive managers, however,
326 Public Administration Review • May | June 2006
need not be helpless victims to thin markets. They to maintain or upgrade service quality and keeping
can follow several strategies: costs low, public managers should be alert. Vendors
may favor reducing expenses, particularly if this means
● Recruit new vendors and thus engage in manag- pursuing their own (profit) goals at the expense of the
ing the market (Brown and Potoski 2004) government’s objectives.
● Split service delivery into multiple contracts

(Osborne and Plastrik 2000) In contrast, nonprofit organizations are thought to

● Allow public employees to compete against share similar missions with government, and thus may
private vendors (Goldsmith 1997) be more reliable contract partners (Hansman 1987;
● Employ “joint contracting” by retaining a por- Salamon 1995). Rather than behaving opportunisti-
tion of service delivery in house to provide informa- cally, a nonprofit might draw on its own private phil-
tion on service quality and cost while also ensuring anthropic resources (e.g., volunteers and endowments)
there is an alternative provider of the service to augment services it delivers under government con-
(Shleifer and Vishny 1998; Williamson 1991) tract. Yet nonprofits’ goals may not always be aligned
with public objectives and may instead channel re-
As a default option, where politically viable, direct sidual revenue from contracts into subsidizing their
in-house service delivery may be a preferable approach other programs (Van Slyke, forthcoming).
in thin markets.
Finally, other governments also can be service vendors.
Contract Specification Like nonprofits, other governments are thought to
Assuming that a government elects to buy rather have values aligned with the contracting government
than make the service in question, the contract because they share a similar public mission and a
specification phase is equally suggestive of public- workforce more committed to public values. However,
value, institutional, and service-market implications contracting with other government agencies for
that practitioners and scholars should heed. In services is not without risk and transaction costs.
specifying a contract, public managers decide on and Inter-governmental contracts may actually do less
implement a bid process, select a vendor, and craft than private contracts to solve the inefficiency, lack of
contract terms. Within the contours of legal innovation, weak incentives, and other bureaucratic
requirements, public managers typically have ills that can plague direct government service delivery
discretion in contracts to specify several features: (Niskanen 1971).

● Vendor tasks (e.g., the nature and scope of work) Institutional arrangements also play an important
● Outcome measures (e.g., performance-based role in determining the relative superiority of these
criteria) vendors in achieving different stakeholder values.
● Vendor qualifications (e.g., licensing or accredita- Other governments, for instance, are often subject
tion issues) to the same legal requirements as the contracting
● Vendor compensation (e.g., time and materials government, such as promoting service quality and
versus cost plus fee) equity at the expense of efficiency and innovation.
● Payment schedules Nonprofits, in turn, are regulated as tax-exempt orga-
● Contract duration (e.g., short versus long) nizations and, as such, are prohibited from distribut-
● Incentives and sanctions (e.g., rewards versus ing profits to their employees or volunteer boards.
punishments) Consequently, there may be fewer incentives for them
● Renewal provisions to engage in opportunistic behavior, at least in com-
● Reporting requirements parison to private firms. Yet public managers should
take into account that this may also curb their ability
Again, the extended Web version of this article to be innovative.
explores some of these considerations in greater detail,
but we focus here on one central contract specifi- Importantly, the type of vendor may be less important
cation decision: the type of vendor selected. Contract- for low transaction cost services in competitive
ing governments can choose among three types of markets. This is the case because the risk that vendors
vendors: private firms, nonprofits, and other govern- will become monopoly service providers is low, perfor-
ments. Private firms, whether they are publicly or pri- mance can be easily measured, and contracts are easier
vately held, are motivated by profit, and consequently to enforce. Indeed, prior research suggests that
they may focus more on innovation and efficiency governments understand this already. They tend to
(Hart, Shleifer and Vishny 1997). However, achieving contract more with for-profit vendors in such
these goals may come at the expense of other public circumstances (Brown and Potoski 2003b), exploiting
values and goals, such as service quality or equality of the latter’s competitive zeal and relatively lax legal
treatment (Moe 1996). For example, when private requirements through contract specifications and
contractors are forced to choose between taking steps enforcement mechanisms (Brown and Potoski 2004).
Managing Public Service Contracts 327
 In contrast, the type of vendor becomes more relevant contract (Kettl 1993; Praeger 1994). Well-monitored
when contracting for high transaction cost services in vendors are more likely to perform according to
thin markets—for example, when a small government contract specifications, thereby improving returns
needs to deliver a service that requires large asset- from contracting, whereas legal, institutional, and
specific investments beyond what it can afford. In service-market constraints can increase transaction
these instances, public managers would be wise to costs (Brown and Potoski 2003a).
solicit bids across the three types of organizations and
perhaps even favor nonprofits or other governments As is the case with other contracting practices, effec-
whose values best align with their own objectives. tive service monitoring requires a solid legal ground-
Again, the literature suggests that governments ing. In some circumstances, for example, information
already understand this; they more frequently choose from monitoring practices that are not contractually
nonprofit and other governments when contracting authorized may not legally be used to evaluate ven-
for high transaction cost services and in thin markets dors. In others, managers may be authorized or re-
(Brown and Potoski 2003b). quired to establish formal systems for tracking and
monitoring citizens’ complaints about service delivery
Yet even contracting with vendors that purportedly or to gauge public sentiment through citizen surveys
share the same goals is not without risks. Van Slyke (Miller and Miller 1991; Swindell and Kelly 2000). In
(2003), for example, finds that governments often these monitoring approaches, citizens can serve as
establish long-term contract relationships with non- “fire alarms” (McCubbins and Schwartz 1984), calling
profits for social services, but then they neglect over- attention to occasional vendor transgressions without
sight and monitoring responsibilities. Nonprofits, requiring governments to monitor vendors’ activities
increasingly reliant on public sector contracts, may constantly. In other approaches, managers may or may
begin to behave like conventional monopolists to not be legally authorized to audit and analyze vendors’
maintain their resource streams. Perhaps more trou- records and performance data or to do field audits.
bling are circumstances in which a government con-
tracts in a thin market out of ideological, political, or These monitoring activities, of course, vary in their
nefarious motives and then neglects contract manage- costs and efficacy depending on the nature of the ser-
ment (Romzek and Johnston 2002). vice and existing service-market conditions. For ex-
For governments that are willing and able to invest in ample, in cases in which governments face vendor
sufficient contract management capacity, however, opportunism stemming from difficult measurement,
certain types of long-term contractual relationships managers cannot simply purchase and monitor service
can foster mutual support and sharing (Artz and outcomes alone. Moreover, arms-length contract-
Brush 2000; Hart and Moore 1999; Levin 2003). In monitoring tools such as reports and field audits may
so-called relational contracts, public managers work be less effective. One countermeasure is for managers
with vendors to build a long-term relationship based to develop a deeper understanding of the service-
on trust, reciprocity, and joint involvement in devel- production process. This can be an onerous undertak-
oping and implementing the contract. To be sure, ing, beginning with uncovering the logic behind the
when compared to conventional arms-length contract- vendors’ service delivery techniques and then identify-
ing, successful relational contracting has higher short- ing and monitoring each step in the service produc-
term transaction costs for both parties. Over time, tion process. Alternatively, public managers may rely
though, effective relational contracts may lower trans- on a more relational approach to contracting, in
action costs through reduced bidding, monitoring, which each party learns experientially how the other
and legal costs (Hart and Moore 1999; Tadelis 2002). conducts its work within the framework of the con-
Nevertheless, public managers must balance the re- tract. As in the other cases noted previously, however,
turns from building a cooperative relationship with a additional research on the comparative efficacy of
single vendor against the continued risk of opportun- these approaches is needed.
ism and the perception that the vendor’s long-term
relationship stems from political favoritism. Once Conclusion
again, prior research is relatively silent on the condi- Our argument in this article has been straightforward.
tions under which the choice of conventional and re- Effectively managing or researching the three stages of
lational contracts is most likely to be effective. the contracting process requires an appreciation of the
intersection of three factors: public values,
Managing Service Delivery under Contract institutions, and service markets.
Once governments select a vendor and turn their
attention to contract implementation, managers face 1. Values, including public interest values, are
more decisions regarding trade-offs among public, the stakeholder preferences that public managers
institutional, and service-market values. Perhaps the must balance or optimize as they deliver services.
most central among these involves monitoring and Throughout the phases of contracting, public
evaluating the performance of vendors working under managers should continually identify and prioritize
328 Public Administration Review • May | June 2006
 the often politically contentious public-value frequently used alternative to direct service provision
preferences of key stakeholders. To the degree that by government—they are not the only tools public
managers have discretion, these values or value managers have at their disposal (Salamon 2002).
trade-offs should guide the use of different contract Given the theoretical foundation of our framework,
management tools, as well as inform the research the fundamental logic should hold for other indirect
strategies of scholars. governance tools, such as vouchers, grants, franchises,
2. Institutions, or the laws and organizational ar- and loans. Our call is for scholars to extend, test, and
rangements that frame service delivery, determine refine our framework to develop a more comprehen-
the range of tools and resources that public man- sive, relevant, and theoretically grounded approach
agers can employ to achieve stakeholder values. to managing service delivery in the hollow state
Public managers need to identify (and researchers (Milward and Provan 2000).
need to consider) the legal architecture that governs
contracting. Legal mandates define the boundaries
Acknowledgments
within which public managers can operate to opti-
An earlier version of this paper was presented at the
mize and balance targeted values, whereas contract
2005 National Public Management Conference.
management and monitoring incapacity increase
We would like to thank Steven Kelman, Michael
the risk of failed contracts.
Rushton, and the anonymous reviewers for their
3. The characteristics of services and their markets
helpful suggestions.
influence which contracting tools are best suited
to achieve stakeholder values. Public managers
should determine whether service and market References
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