Most local government agencies rely on outside contractors to provide goods and services to citizens. But, what do the managers of agencies do when the contractor fails to meet the terms of their contract? A new study by Dr. Amanda M. Girth (The Ohio State University) looks beyond the terms and conditions of the contract to the front lines of contract management by assessing whether and how severely managers sanction contractors for poor performance.
“There has been insufficient research on the critical decisions made by public managers throughout the contract implementation process,” said Girth, an assistant professor at the John Glenn School of Public Affairs. “Decisions that can have a profound impact on the quality of services delivered to citizens and on the accountability of contractors to the public interest.”
The results of Girth’s research show that merely specifying the terms of the contract to include performance sanctions is not enough to hold contractors accountable, vigilant oversight is required.
“This is one of the first studies to examine the use of incentives in contract implementation,” said Girth. “Theory suggests that including incentives in contracts induces performance. Contractors want to avoid penalty and so will perform satisfactorily. Well-written contracts with specified performance measures and incentives are the first steps toward maintaining contract accountability, but these are virtually worthless if they are not carried out.”
Although public managers have contractual tools that can hold contractors accountable, Girth’s analysis identifies factors that work against their use; specifically the amount of discretion managers choose to use, the level of administrative burden associated with the sanction process, and the extent to which the purchasing organization is dependent on the poor-performing contractor’s expertise.
Girth had suspected that political support for contracting would impede the use of sanctions, but she found the opposite to be true. Public managers who work in organizations with a strong political commitment to contracting find increased support for enforcing more severe penalties on contractors. This suggests that maintaining public value and ensuring contract accountability can outweigh ideological goals that favor outsourcing policies.
One of the most important findings in the study is how reliant an agency is on a contractor plays a role in how they are sectioned for poor performance. Public managers who keep some in-house capacity are in a better position to penalize a contractor. For example, a parks and recreation director interviewed for the study reported he hasn’t given up their equipment because the contractor then knows the parks department can do the work themselves. But, retaining capacity can be problematic, because shedding assets and personnel is one of the rationales to outsource public services in the first place.
“A Closer Look at Contract Accountability: Exploring the Determinants of Sanctions for Unsatisfactory Contract Performance” is published in the Journal of Public Administration Research and Theory.