Your Competitive Side Is Calling: An Analysis of Florida Contract Performance

Abstract Competition over the allocation of scarce resources motivates many public policy choices, and increasingly influences the management of public organizations. With the rise of the business‐like approach espoused by adherents of “new public management,” competitive mechanisms are increasingly used in the public sector to improve organization and program performance. Despite the wide acceptance of competition as a viable method to improve public management, little large n empirical work has been done to determine whether competition improves performance, especially in the networked, cross‐sectoral setting of modern governance. Analyzing nearly 20,000 Florida contracts over a three‐year period, this research explores whether competitive sourcing procedures lead to improved contractor performance. Results show that competitive sourcing may be associated with higher contract spending and undesirable contract outcomes. Other factors, including experience, existing relationships, and lower transaction costs, are more likely to lead to better performance. Practitioner Points Competition is theorized to drive down costs, encourage innovation, and help hold contractors accountable for their work. Competitively sourced contracts are more likely to experience cost overruns and to terminate early than noncompetitive contracts, suggesting that competition may not always be the best approach. Instead, agency‐contractor relationships and goal alignment are better predictors of good performance.