The document discusses competing approaches to governance of public service delivery through contracts. It presents three models - public governance with in-house delivery, hybrid governance with regulation of private delivery, and private governance aligning corporate incentives. The authors seek to establish a common analytical framework to critically assess the existing outsourcing model and explore alternative corrective strategies, noting there are no perfect solutions and debates should focus on understanding reasons for changing models.

1. bristol.ac.uk
Delivering public services through
contract: competing approaches
to the governance of complexity
Nina Boeger & Albert Sanchez-Graells
Contract Theory Workshop
University of Bristol, 21 June 2019

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Motivation
On-going discussion on meltdown of the UK’s outsourcing model,
the Government’s strategy to press ahead in the ‘Outsourcing
Playbook’ (2019) and Labour’s re-nationalisation manifesto are
heavily influenced by (irreconcilable) normative positions
We have different such views, but see a value in clarifying a
common analytical framework and not chasing ‘Nirvana solutions’

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Paper
We seek to establish a common analytical
framework based on transaction cost
economics and governance literature
Main aim is to stress issues surrounding
non-contractibility and its governance

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Functional approach
We set out the basic (simplified) governance models
We critically assess the existing outsourcing model of
contractualised (private) delivery of public service and explain the
main reasons underpinning its failure
We explore three alternative corrective strategies: one based on
public governance, a hybrid solution and one based on a different
approach to private governance

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Our conceptual models
It is important to stress that
contractualisation privatises not
solely the delivery of the public
service, but also its governance
Each model implies different
governance tools and limitations
Public governance Private governance
Public delivery
(in-house)
Regulated private delivery
(e.g. licensing)
Private delivery
(outsourcing)

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Existing contractualised
outsourcing model
Uncertainty and incomplete contracting
Rigidity in public contracts
Exploitation and strategic behavior
Public sector (in)capability
Market structure and (lack of) competition
Financialised corporate governance

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Alternative strategies
If/given that the model is failing, what
can be done?
(1) Move (back) in-house
(2) Add a regulatory layer
(3) Modify private governance:
corporate gov supplementing
contract (‘selective’ tendering)
Public governance Private governance
Private delivery
(outsourcing)
Option 3
Option 1
Option 2

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Public governance:
moving in-house
Efficiency and incentive structures
Accountability and governance
Investment in public sector capacity and
in information-recording mechanisms
Design of public ownership solution
Transition process (and its cost)

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Hybrid governance: imposing
(quasi) prudential regulation
Transaction cost issues—the permanence
of non-contractibility and the problem of
open-textured principles-based regulation
Regulatory capture and strategic
dependence due to public service
demands

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Private governance : aligning
incentives via corp gov’nce
Efficiency & aligned incentives - ‘win-win’?
Accountability
Transition and selective tendering
Design of corporate form(s)
Long-term effects

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Tentative conclusion
No magic bullet
Need to re-orient current debates towards seeking to gain a better
understanding of the reasons justifying a change of model
Need to invest in public sector capability and rolling out
‘institutional memory’ mechanisms to ensure possibility of
transition across models where warranted

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Thank you for your
attention & stay in touch
nina.boeger@bristol.ac.uk
a.sanchez-graells@bristol.ac.uk
@asanchezgraells