Contracting out, an Empirical Study on Motives

Municipalities may have various motives for decisions on the mode of their task execution. Empirical studies – based on both public choice and transaction costs theory have not yet provided a fully comprehensive explanation for municipal contracting out decisions. Therefore, we held interviews with Dutch municipal managers about the motives for the actual mode of service provision. This study provided the opportunity to investigate the relevance of motives on contracting out, to explore of additional motives and to test these statistically. As we find, municipalities do not regularly evaluate the service provision of their activities. Only in case of structural underperformance, municipalities consider a change of service provider, and then, the efficiency motive is most relevant. However, we conclude that institutional motives – as the stability of service provision are relevant for contracting out decisions as well. *) Ministry of Social Affairs and Employment and VU University Amsterdam, Faculty of Economic Science De Boelelaan 1105 1081 HV Amsterdam, The Netherlands 0031-6-43457651, [email protected] **) VU University Amsterdam. Faculty of Economic Science ***) VU University Amsterdam, Faculty of Economic Science and Tinbergen Institute 1 We thank Jan Verhagen, Municipality of The Hague, Rien Fraanje, Council for Public Management, before affiliated with Bureau Berenschot, and Ard Schilder, BMC consultants, for advice on the interview protocol. Maarten Allers provided useful comments on a previous version of this paper.