Privatization and Its Reverse: Explaining the Dynamics of the Government Contracting Process

Empirical evidence shows local government contracting is a dynamic process that includes movements from public delivery to markets and from market contracts back to in-house delivery. This “reverse contracting” reflects the complexity of public service provision in a world where market alternatives are used along with public delivery. We develop a methodology to link responses to national surveys and create a longitudinal data set that captures the dynamics of the contracting process. We present a framework that incorporates principal agent problems, government management, monitoring and citizen concerns, and market structure. Our statistical analysis finds government management, monitoring, and principal agent problems to be most important in explaining both new contracting out and contracting back-in. Professional managers recognize the importance of monitoring and the need for public engagement in the service delivery process. The results support the new public service that argues public managers do more than steer a market process; they balance technical and political concerns to secure public value.