The public management challenges of contracting with nonprofits for social services

International Journal of Public Administration

Volumn 25, Issue 4, 2002, Pages 489-517

  Van Slyke, David M ^a  

^a GEORGIA STATE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

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EID: 84937380106     PISSN: 01900692     EISSN: 15324265     Source Type: Journal    
DOI: 10.1081/PAD-120013253     Document Type: Article

References (103)

1. Savas, E.S., 1987. Privatization: The Key to Better Government 88Chatham, NJ: Chatham House Publishers, Inc.
2. Savas, E.S., 2000. Privatization and Public-Private Partnerships Chatham, NJ: Chatham House Publishers, Inc.
3. Privatization Lessons Learned, GAO/GGD-97–48. Appendix 1. Forms of Privatization and Frequency of use in State Programs and Services
4. According to Hodgkinson et al., (1996) this figures includes financial resources in the form of grants, contracts for providing services, and payments for individuals (i.e., Medicaid or Medicare). These figures are cited Myths about the Nonprofit Sector Elizabeth T. Boris of the Urban Institute can be found on page 5 of 6 at the following site –http://www.urban.org/periodcl/cnp/cnp 4.htm
5. Hammack, David C., 2001. Introduction: Growth, Transformation, and Quiet Revolution in the Nonprofit Sector Over Two Centuries. Nonprofit and Voluntary Sector Quarterly, 30 (2): 157–173. Hammack suggests the percentage of nonprofit revenue derived from the federal government since the 1980s is at least one third. However, this does not fully account for the role of states and use of block grants under devolution. Also see, De Vita, Carol J., Viewing Nonprofits across the States, table 3. This Urban Institute Briefing can be found at http://www.org/periodcl/cnp/cnp 1.htm
6. DeHoog, Ruth Hoogland. 1985. Human Services Contracting: Environmental, Behavioral, and Organizational Conditions. Administration and Society, 16 (4): 427–454.
7. Kramer, Ralph M., and Grossman, Bart. 1987. Contracting for Social Services: Process Management and Resource Dependencies. Social Service Review, 61 (1): 33–55.
8. and Kramer Ralph M. Voluntary Agencies and the Contract Culture: Dream or Nightmare? Social Service Review 1994, 68 (1), 33–60
9. Kamerman, Sheila B., and Kahn, Alfred J., 1989. Privatization and the Welfare State Princeton, NJ: Princeton University Press.
10. Netting, F. Ellen, McMurtry, Steven L., Kettner, Peter M., and Jones-McClintic, Sandra. 1990. Privatization and its Impact on Nonprofit Service Providers. Nonprofit and Voluntary Sector Quarterly, 19 (1): 33–46.
11. Saidel, Judith R., 1990. Resource Interdependence: The Relationship Between Public Agencies and Nonprofit Organizations. Public Administration Review, 51 (6): 543–553.
12. Smith, Steven Rathgeb, and Lipsky, Michael. 1993. Non-Profits for Hire: The Welfare State in the Age of Contracting Harvard University Press.
13. Salamon, Lester M., 1993. The Marketization of Welfare: Changing Nonprofit and For-Profit Roles in the American Welfare State. Social Service Review, March 1993: 16–39.
14. and McDonald, Catherine. Government, Funded Nonprofits, and Accountability. Nonprofit Management & Leadership 1997, 8 (1), 51–64
15. A private market refers to all markets in which goods and services are produced by an entity other than a public agency. See Mann, Everette E.; McMillin, J. Daniel, Rienzi, Beth, and Eviston, Linda. Implementation research on contracting for social services delivery: Testing some assumptions in a county substance abuse services program. Public Administration Quarterly 1995, 18 (4), 383–399; Commons, Margaret, McGuire, Thomas G., and Riordan, Michael H. Performance Contracting for substance abuse treatment. Health Services Research 1997, 32 (5), 631–650; and Beinecke, Richard H.; and DeFillippi, Robert. The Value of the Relationship Model of Contracting in Social Services Reprocurements and Transitions: Lessons from Massachusetts. Public Productivity and Management Review 1999, 22 (4), 490–501
16. Chi, Keon S., and Jasper, Cindy. 1998. Private Practices: A Review of Privatization in State Government 44Lexington, KY: The Council of State Governments. Figure 4
17. See Hammack, David C. 2001
18. These data are derived from various sources including reports from the Independent Sector and the Urban Institute
19. It should be noted that there are historical examples of contracting for social services prior to this time period, in addition to the extensive nature of contracting that took place during World I and II. See Burke, Colin B. Nonprofit History's New Numbers (and the Need for More). Nonprofit and Voluntary Sector Quarterly 2001, 30 (2), 174–203
20. Kettl, Donald F., 1993. Sharing Power: Public Governance and Private Markets Washington, D.C.: The Brookings Institution. In much of the literature in which government contracting is the focus, nonprofit organizations are included under the umbrella of “private agencies.” The use of the term private serves only to denote that the organizations providing the services are non-governmental organizations. In a recent study by Manpower Demonstration Research Corporation (MDRC) titled The Project on Devolution and Urban Change: Social Service Organizations and Welfare Reform, the authors note that more than 80% of all the social service providers in their sample were nonprofit organizations. A private agency is a commonly used nomenclature in that it captures both private proprietary and nonprofit organizations
21. Smith, Steven Rathgeb, and Stone, Deborah A., 1988. “ The Unexpected Consequences of Privatization ”. In Remaking the Welfare State: Retrenchment and Social Policy in America and Europe Edited by: Brown, Michael K., Philadelphia, PA: Temple University Press. A general review of this development can be found in Derthick, Martha. Uncontrollable Spending for Social Services.Washington, D.C.: Brookings Institution, 1975. For more about Purchase of Service Contracting see Kettner, Peter M.; and Martin, Lawrence L. Making Decisions about Purchase of Service Contracting. Public Welfare/Fall 1986, 30–37.; and Netting, F. Ellen; McMurtry, Steven L.; Kettner, Peter M.; Jones-McClintic, Sandra. Privatization and Its Impact on Nonprofit Service Providers. Nonprofit and Voluntary Sector Quarterly 1990, 19 (1), 33–46
22. Oversight and Implementation Issues, GAO/T-GGD-98-l46 0MB Circular A-76. June 8, 1998 testimony by J.Christopher Mihm, Associate Director, Federal Management and workforce Issues, General Government Division of the General Accounting Office, before the Subcommittee on Oversight of Government Management, Restructuring, and the District of Columbia Committee on Governmental Affairs United States Senate
23. Kettl 1993, p. 43
24. Prager, Jonas, and Desai, Swati. 1996. Privatizing Local Government Operations: Lessons from Federal Contracting Out Methodology. Public Productivity and Management Review, 20 (2): 185–203.
25. This is the case made by Donahue, John D. The Privatization Decision: Public Ends, Private Means. Basic Books, 1989; Kettl 1993; and Moe, Ronald C. Managing Privatization: A New Challenge to Public Administration. In Guy B. Peters and Bert A. Rockman. Agenda for Excellence 2: Administering the State. New York: Chatham House, 1996
26. Such research programs are being conducted by the Rockefeller Institute of Government, The Urban Institute, The Manhattan Institute, The Manpower Demonstration Research Corporation, The Brookings Institution, and the General Accounting Office
27. Van Slyke, David M., The Mythology of Privatization in Contracting for Social Services. Public Administration Review, 2001 (Forthcoming)
28. Bennett, James T., and Johnson, Manuel H., 1981. Better Government at Half the Price Ottawa, IL: Carolina House.
29. Goldsmith, Stephen. 1997. The Twenty-First Century Washington, D.C: Regnery Publishing, Inc.
30. Morgan, David R., and England, Robert E., 1988. The two faces of privatization. Public Administration Review, 48 (4): 979–986.
31. Donahue 1989
32. Kettl 1993
33. Prager and Swati 1996
34. Salainon 1989
35. Savas 2000
36. and Smith and Lipsky 1993
37. Tullock, Gordon. 1965. The Politics of Bureaucracy Washington, D.C.: Public Affairs Press.
38. Ostrom, Vincent, and Ostrom, Elinor. 1971. A different approach to the study of public administration. Public Administration Review, 31 (2): 203–216.
39. Borcherding, Thomas E., 1977. Budgets and Bureaucrats: The Sources of Government Growth Durham, NC: Duke University Press.
40. Bennett, and Johnson, 1981
41. Hansmann, H., 1987. “ Economic Theories of the Nonprofit Sector ”. In The Nonprofit Sector: A Research Handbook Edited by: Powell, W., New Haven, CN: Yale University Press.
42. Bennett, James T., and DiLorenzo, Thomas J., 1989. Unfair Competition: The Profits of Nonprofits New York: Hamilton Press.
43. Ostrom, E., 1990. Governing the commons: The Evolution of Institutions for Collective Action Cambridge, UK: Cambridge University Press.
44. Ostrom, E., 1998. A Behavioral Approach to the Rational Choice Theory of Collective Action. American Political Science Review, 92: 1–22.
45. and Boyne, George A. Bureaucratic Theory Meets Reality: Public Choice and Service Contracting in U.S. Local Government. Public Administration Review 1998, 58 (6) 474–484
46. The notion of more for less has a long history in the public administration and management literature and has taken multiple forms from scientific management to total quality management, to reinvention and reengineering. Yet, many of the management reforms have had short-term impacts because they have ignored fundamental issues such as organizational structure and form
47. Savas 1987, p. 88
48. Much of the social services privatization literature (see footnote #27) suggests that attempts to privatize certain social service program areas are more frequently based on ideological and populist pressures than competition and efficiency
49. These are consistent criticisms leveled against government action most notably by public choice theorists. For a treatment of public choice theory see Niskanen Jr., William A. Bureaucracy and Representative Government. Chicago, IL: Aldine_Atherton, 1971; and Buchanan, James M. Why Does Government Grow? In Budgets and Bureaucrats: The Sources of Government Growth; Borcherding, Thomas E., Ed.;. Dunham, NC: Duke University Press, 1977
50. However, many scholars and practitioners have questioned whether government really can define and articulate what are “democratically” expressed goods and services. In the area of health and human services there has been considerable dissension on how to define the service and the outcomes that is to be achieved
51. Though Kettl 1993 would argue that government has been anything but a smart buyer
52. The structure of competition depends on a formalized and structured solicitation and bidding process in which bids are submitted, evaluated, and an award decision made by the governmental agency. At the local level three or more providers is ideal. At the regional or national level, two providers may be enough if the organizations are competing for market share. A competitive market has enough sellers, in this case private providers, so that each has a negligible impact on the market price of goods and services
53. Saidel, Judith R., 1991. Resource Interdependence: The Relationship between Public Agencies and Nonprofit Organizations. Public Administration Review, 51 (6): 543–553.
54. Frederickson, H.George. Public Ethics and the New Managerialism. http://pamij.com/99 4 2 frederick.html, p. 9 of 15
55. Sullivan, Harold J., 1987. Privatization of Public Services: A Growing Threat to Constitutional Rights. Public Administration Review, 47 (4): 466
56. Haque, M. Shamsul. 2001. The Diminishing Publicness of Public Service under the Current Mode of Governance. Public Administration Review, 61 (1): 65–82.
57. Savas 1987 p. 59-60. His argument is that not producing the good or service doesn't mean that government must divest itself of providing it. The responsibility for providing and therefore funding a service can be retained by government while being produced by another party. What the author does not address are the potential conflicts of interest that could result from contracting out a governmental service such as eligibility determination
58. Donahue 1989, p. 3
59. Kettl 1993, p. 5
60. It might be noted that there has been some intellectual disagreement on the use of “proxies” to describe government's relationship with contractors. Specifically, the idea of a proxy assumes a linear principal-agent relationship, yet in many cases government is the agent and the contractor is the principal. This can come about when capacity shortfalls and lack of expertise makes government a dependent buyer on specific contractors. The danger also lies in that this dependence gives way to contractors not only producing and delivering goods and services but to their participation in the various phases of the policy process. See Kingdon, John W. Agendas, Alternatives, and Public Policies second edition. New York: Harper Collins, 1985. Donahue 1987, Kettl 1993, and Smith and Lipsky 1993 also discuss the role of the contractor in the various phases of the policy process
61. See Johnston, Jocelyn M. and Romzek, Barbara S. Contracting and Accountability Issues in a State Medicaid Reform: Rhetoric, Theories, and Reality. Public Administration Review 1999, 59 (5), 383–399
62. Smith and Lipsky 1993
63. Milward, H. Brinton. Implications of contracting out: New roles for the Hollow State. In Ingraham, Patricia, and Romzek, Barbara S., et al. New Paradigms for Government: Issues for the Changing Public Service, San Francisco, CA: Jossey-Bass, 1994, p. 41–62. See also Van Slyke 2001
64. Moore, Adrian T., ed. 1998. Privatization 98: 12th Annual Report on Privatization Los Angeles, CA: The Reason Public Policy Institute.
65. and Franciosi, Robert. Garbage In, Garbage Out: An Examination of Private/Public Competition By the City of Phoenix. Arizona Issue Analysis 148. Phoenix, AZ: The Goldwater Institute, 1998
66. Though more recent public administration and nonprofit research has begun to look at various elements of the government-nonprofit contracting relationship, the magnitude of this empirical body of work is small in comparison to the privatization literature in general, See Bernstein 1991, Saidel 1991, Smith and Lipsky 1993, and Van Slyke 2001 Forthcoming
67. Letting a bid is equivalent to putting a bid out for proposals from service providers
68. Smith, Steven Rathgeb, and Smyth, Judith. 1996. Contracting for Services in a Decentralized System. Journal of Public Administration Research and Theory, 6 (2): 277–296.
69. Prager, Jonas. 1994. Contracting Out Government Services: Lessons from the Private Sector. Public Administration Review, 54 (2): 176–184.
70. Wrap around services is offered to a client to make that client more employable or independent. For example, offering a client substance abuse services, transportation, job training or vocational education, and food and housing vouchers
71. Hammonds, Charles A.; Van Slyke, David M. A Privatization Paradox: Politicization and Smart Buyers. Presented at the 2000 Annual APPAM Meetings, Seattle Washington, 2000
72. Smith and Lipsky 1993
73. Kettl 1993
74. Kettl, Donald F., 1981. The Fourth Face of Federalism. Public Administration Review, 41 (3): 366–371.
75. Light, Paul. 1999. The True Size of Government Washington, D.C.: Brookings Institution.
76. Van Slyke, David M., 1999. Managing the Government-Nonprofit Contracting Relationship for Social Servics in New York State Published Dissertation, AAT 9967712, ISBN 0-599-7243-3
77. Salamon 1989, p. 11
78. Gooden, Vincent. 1998. Contracting and negotiation: effective practices of successful human service contract managers. Public Administration Review, 58 (6): 499–509.
79. See Kettl, DeHoog, Milward, Moe, Van Slyke, Johnston and Romzek
80. Beinecke, and DeFillippi 1999, p. 490. See also Sclar, Elliott. You Don't Always Get What You Pay For: The Economics of Privatization; Ithaca, NY: Cornell University Press, 2000
81. Public management capacity is having personnel with contract management and policy expertise who can oversee and hold contractors accountable While data do not exist that state the appropriate # of contracts per manager, as is the case with social workers and # of cases, it is noteworthy to point to studies in which public managers had more cases than the staff needed to handle them. See Van Slyke 1999
82. Frederickson, p. 9 of 15
83. Light 1999
84. Crawford, John W., Jr. and Krahn, Steven L., 1998. The Demanding Customer and The Hollow Organization. Public Productivity and Management Review, 22 (1): 107–118.
85. Kettner, Peter M., and Martin, Lawrence L., 1986, Fall. Making Decision about Purchase of Service Contracting. Public Welfare,: 30–37.
86. A point also supported by Kramer, Ralph M., and Grossman, Bart 1987
87. Nyland, Julie. 1995. Issue Networks and Nonprofit Organizations. Policy Studies Review, 14 (Spring/Summer): 195–204.
88. Smith, Steven Rathgeb. 1996. Transforming Public Services: Contracting for Social and Health Services in the US. Public Administration, 74 (Spring): 113–127.
89. This point also made by Saidel 1991; and Kramer 1994
90. DeHoog 1985, p. 431
91. Social Service Privatization: Expansion Poses Challenges in Ensuring Accountability for Program Results, GAO/HEHS-98-6. pp. 2–3.
92. Social Service Privatization: Ethics and Accountability Challenges in State Contracting, GAO/HEHS-99-41. pp. 4.
93. Kramer, Ralph M., 1994. Voluntary Agencies and the Contract Culture: Dream or Nightmare?. Social Service Review, 68 (1): 35
94. Robert Tyre is a managing partner at Andersen Consulting in the Change Management Practice in Government. The citation is from a speech he gave entitled “Facing the Privatization Question in Human Services,” on March 25, 1997 to the World Research Groups: Conference on Welfare Privatization in Washington, D.C.
95. The 1998 Federal Activities Inventory Reform (FAIR) Act defines an inherently governmental job as a function that is so intimately related to the public interest as to require performance by federal government employees.” Peckenpaugh, Jason (2001). “Definition of ‘inherently governmental’ could change.” Government Executive, June 8. www.govexec.com
96. Alexander, Jennifer, Nank, Renee, and Stivers, Camilla. 1999. Implications of Welfare Reform: Do Nonprofit Survival Strategies Threaten Civil Society?. Nonprofit and Voluntary Sector Quarterly, 28 (4): 452 Also see Alexander, Jennifer. The Impact of Devolution on Nonprofits: A Multiphase Study of Social Service Organizations. Nonprofit Management and Leadership 1999, 10 (1), p. 57–70
97. Bernstein, Susan R., 1991. Contracted Services: Issues for the Nonprofit Agency Manager. Nonprofit and Voluntary Sector Quarterly, 20 (4): 430
98. Smith and Lipsky 1993, p. 96–97
99. Swarns, Rachel L., January 8, 1999. “State Overseer of Troubled City Child Welfare Agency Has Its Own Problems”. New York Times.
100. Ramirez, Anthony. January 8, 1999. “Citing Mismanagement, City Ends Contract with Foster-Care Agency”. New York Times.
101. Smith and Lipsky 1993, p. 116–119
102. Mann, McMillin, Rienzi, and Eviston 1995; Commons, McGuire, and Riordan 1997; and Prager, and Swati 1996
103. Rohland, Barbara M., 1998. Implementation of Medicaid Managed Mental Health Care in Iowa: Problems and Solutions. The Journal of Behavioral Health Services & Research, 25 (3): 298