CONTROL PATTERNS IN CONTRACTING‐OUT RELATIONSHIPS: IT MATTERS WHAT YOU DO, NOT WHO YOU ARE
| Author | ILEANA STECCOLINI,MARIANNUNZIATA LIGUORI,ANGELO DITILLO,MARIAFRANCESCA SICILIA |
| Published date | 01 March 2015 |
| DOI | http://doi.org/10.1111/padm.12126 |
| Date | 01 March 2015 |
doi : 10. 1111/p adm .12126
CONTROL PATTERNS IN CONTRACTING-OUT
RELATIONSHIPS: IT MATTERS WHAT YOU DO, NOT
WHO YOU ARE
ANGELO DITILLO, MARIANNUNZIATA LIGUORI, MARIAFRANCESCA SICILIA
AND ILEANA STECCOLINI
The contracting-out of public services has often been accompanied by a strong academic focus
on the emergence of new governance forms, and a general neglect of the processes and practices
through which contracted-out services are controlled and monitored. To ll this gap, we draw
on contracting-out and inter-organizational control literatures to explore the adoption of control
mechanisms for public service provision at the municipal level and the variables that can explain
their choice. Our results, based on a survey of Italian municipalities, show that in the presence
of contracting-out, market-, hierarchy-, and trust-based controls display different intensities, can
coexist, and are explained by different variables. Service characteristics are more effective in
explaining market- and hierarchy-based controls than relationship characteristics. Trust-based
controls are the most widespread, but cannot be explained by the variables traditionally identied
in contracting-out and inter-organizational control studies.
INTRODUCTION
Over recent decades, governments have increasingly moved from the direct provision of
services to contracting them out (Brown and Potoski 2003; Van Slyke 2003; Bovaird 2006;
Brown et al. 2006), giving rise to the emergence of new governance forms where public
and private actors and interests interact (Bevir and Rhodes 2003; Miller et al. 2008). This
requires the development of new systems to manage the contracting process, from the
assessment of its feasibility,to its implementation, to its monitoring and evaluation (John-
ston and Romzek 1999; Romzek and Johnston 2002; Brown and Potoski 2003; Van Slyke
2007).
Much literature has focused on the identication of the most efcient governance forms
to provide the service (the rst stage of the contracting process) (Johnston and Romzek
1999; Brown and Potoski 2003; Bel and Warner2008; Hefetz and Warner 2012). In the light
of the interest in contracting-out issues shown by many scholars, it is perhaps surpris-
ing that the phases of monitoring and evaluation of contracted-out public services have
rarely been investigated (Miller et al. 2008). This neglect often reects the limited attention
towards the phase of contract evaluation (Kettl 1993; Brown and Brudney 1998; Sclar 2000),
which sometimes translates into a decit of monitoring and, in general, contract manage-
ment capacity (Brown and Potoski 2003; Van Slyke 2007). Consequently, calls have been
made to better understand such monitoring practices in view of their importance in ensur-
ing the effectiveness of contracting-out (Johnston and Romzek 1999; Romzek and Johnston
2002; Cristofoli et al. 2010).
The authors are listed in alphabetical order. Angelo Ditillo is in the Accounting Department, Bocconi University, and
the Accounting and Control Department, SDA Bocconi School of Management, Milan, Italy. Mariannunziata Liguori
is in the Management School, Queen’s University,Belfast, UK. MariaFrancesca Sicilia is in the Dipartimento di Scienze
Aziendali, economiche e metodi quantitativi, Bergamo University,Milan, Italy. Ileana Steccolini is in the Public Policy
and Management Department, Bocconi University, and the Public Management and Policy Department, SDA Bocconi
School of Management, Milan, Italy.
Public Administration Vol.93, No. 1, 2015 (212–229)
© 2014 John Wiley & Sons Ltd.
CONTROL PATTERNS IN CONTRACTING-OUT RELATIONSHIPS 213
This article combines the contracting-out (Donahue 1989; Marvel and Marvel 2007;
Van Slyke 2007; Hefetz and Warner 2012) and the inter-organizational control (Van der
Meer-Kooistra and Vosselman 2000; Langeld-Smith and Smith 2003; Caglio and Ditillo
2008a, 2008b) literatures to explore variables relating to the adoption of control mech-
anisms for public service provision at the municipal level. The contribution is twofold.
First, by combining the traditional contracting-out and the inter-organizational control
literatures, we explore whether the variables traditionally used to explain contracting-out
choices have explanatory potential. Second, unlike previous studies, we consider both the
intensity and the types of control (i.e. hierarchical, market based, and trust based). The
analysis is based on a survey of Italian municipalities, where public services have been
increasingly contracted out, requiring the deployment of a combination of controls over
the public service providers. The article is structured as follows: the next section reviews
the relevant literature on monitoring and control systems in public service provision; this
is followed by a discussion of types of control and possible explanatory variables regard-
ing choice of control method (as a basis for developing two propositions); subsequent
sections outline the research methods, the results, and a discussion of the results; and the
nal section draws conclusions and suggests further research avenues.
MONITORING AND CONTROL SYSTEMS IN PUBLIC SERVICE PROVISION
The contracting-out literature has mainly focused on outsourcing forms and their deter-
minants (Brown and Potoski 2003; Van Slyke 2003; Bel and Warner 2008; Hefetz and
Warner 2012; Albalate et al. 2013). Contracting-out behaviours have been studied looking
at service-delivery choices and consequences, often adopting a transaction-cost approach
and proposing explanatory variables, such as asset specicity, output measurability, task
uncertainty, and task interdependence (Ferris and Graddy 1991; Milward and Provan
2000; Brown and Potoski 2003; Malatesta and Smith 2014). In a comprehensive analy-
sis of contracting-out, Hefetz and Warner (2012) nd that the most important factors
explaining delivery mode choices (in-house, delivery by government, by for-prot or
non-prot entities) are the extent of market competition, citizen involvement, and the
place characteristics.
Only a few studies, drawing mainly on economic theories, such as transaction-cost eco-
nomics (Williamson 1981) and agency theory (Jensen and Meckling 1996), have focused on
the monitoring of public services in contracting-out contexts. According to these, monitor-
ing systems are put in place in order to minimize transaction costs and goal misalignment
between principal and agent. However, Van Slyke (2007) nds that the degree of vari-
ance in the level of monitoring is much lower than expected, and he suggests that both
agency theory and rational management theory (related to goal congruence issues) have
strong explanatory limitations. He also argues that the explanation of different monitoring
devices in different public services may necessitate the adoption of alternative theoretical
perspectives.
Contrary ndings are presented by Marvel and Marvel (2007), who investigate the inten-
sity of monitoring mechanisms contrasting transaction-cost and performance-measure
ment literatures. They nd that, consistent with literature expectations, the delivery
mode (in-house, delivery by government, by for-prot or non-prot entities) can actually
affect the intensity of the controls put in place as a consequence of the divergence in
the provider’s goals. Their study shows that the intensity of ex ante process and ex post
monitoring does not differ between in-house and for-prot provision. Furthermore,
Public Administration Vol.93, No. 1, 2015 (212–229)
© 2014 John Wiley& Sons Ltd.
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