Contracting for public bus transit: do techniques employed make a difference in service outcome?
| Pages | 73-92 |
| Published date | 01 April 2002 |
| Date | 01 April 2002 |
| DOI | https://doi.org/10.1108/JOPP-02-01-2002-B003 |
| Author | David R. Shetterly |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 2, ISSUE 1, 73-92 2002
CONTRACTING FOR PUBLIC BUS TRANSIT: DO
TECHNIQUES EMPLOYED MAKE A DIFFERENCE IN
SERVICE OUTCOME?
David R. Shetterly*
ABSTRACT. The evidence suggests deductions for non-performance and
competitive solicitation methods are key determinants of contractor
performance. A penalty provision is strongly associated with an increase in unit
cost, while a competitive solicitation method reduces unit cost. The evidence is
inconclusive for fixed price contract and contract length. The findings support
the idea that contracting techniques impact contractor performance. The
potential for cost savings may not be fully realized unless techniques that focus
on competitive contracting are employed. Future research that addresses
contract design factors for other services in other settings will provide
information to help policy makers choose among the numerous contract design
options.
INTRODUCTION
A survey of alternative service delivery methods for 62 municipal
services reflects over 12,000 instances of local governments using
contracting as a delivery method (Miranda & Anderson, 1994, p. 35). A
local government that decides to implement service contracting is faced
with a number of decisions. This paper focuses on decision factors
associated with the pre-solicitation and contractor selection phases. It
explores the relationship between contract formation decisions made in
the two phases and contractor performance.
Local governments provide a variety of services in such areas as
public works, transportation, utilities, safety, health, parks, and recreation
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* David R. Shetterly, Ph.D., is an Assistant Professor of Public Administration,
Troy State University Atlantic Region. His teaching and research interests are
in public procurement and privatization.
Copyright © 2002 by PrAcademics Press
74 SHETTERLY
(Miranda & Anderson, 1994, p. 35). Not all services are the same.
Some are relatively easy to contract, while others are quite difficult. In a
broad sense, services may be classified as either hard or soft (Savas,
1987; Hayes, 1989, p. 79, DeHoog, 1985). Hard services are those with
a recognizable production process that produce visible results (Savas,
1987, p. 267). Hard services are considered easier to contract because
they are less complex, more conducive to objective outcome measures,
and can be described with greater specificity. In contrast, soft services
generally involve a close client/provider relationship and have a less
visible result (Stein, 1990). Soft services are considered difficult to
contract because they are more complex, harder to measure, and more
difficult to describe. The context for this research is public bus transit,
which has hard service characteristics. The research question may be
stated as follows: What influence do contract formation decisions have
on the cost of fixed route bus transit services?
THE CONTRACTING DECISION: CONCEPTUAL FRAMEWORK
An important element of the decision to contract is the process
involved in establishing and maintaining a legal contractual relationship
with a private firm. This process is conceptualized as occurring in three
phases; pre-solicitation, contractor selection, and contract management.
Pre-solicitation
The pre-solicitation phase begins when local officials first consider
the possibility of relying on a private provider for a particular public
service. The focus is on the probability of adequate market competition,
the characteristics of the service in question, the political and social
obstacles to contracting, and the fiscal ramifications of a decision to
contract. Among other considerations, the jurisdiction must decide on
the type of work specification, the type of solicitation method to use, and
the type of contract to award. Embedded in these decisions are other
important considerations such as contract length, the use of incentives
and penalties, and how oversight will be conducted. This phase ends
when the work force and community have been notified of the initiative
and the necessary contractual instruments have been written to solicit
bids or proposals from the private sector.
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