Outsourcing, bureaucratic personnel quality and citizen satisfaction with public services

Published date01 March 2018
AuthorMaria Tyrberg,Carl Dahlström,Marina Nistotskaya
Date01 March 2018
Outsourcing, bureaucratic personnel quality
and citizen satisfaction with public services
Carl Dahlström | Marina Nistotskaya | Maria Tyrberg
Department of Political Science, University of
Gothenburg, Gothenburg, Sweden
Carl Dahlström, Department of Political
Science, P.O. Box 711, University of
Gothenburg, Gothenburg 41030, Sweden.
Email: carl.dahlstrom@pol.gu.se
Funding information
Riksbankens Jubileumsfond (the Swedish
Foundation for Humanities and Social
Sciences), Grant/Award number: SGO14-
This article investigates the relationships between outsourcing,
bureaucratic personnel quality (BPQ) and citizen satisfaction with
public services. Our baseline expectation is of a negative associa-
tion between outsourcing and service quality; however, we argue
that this tendency can be counteracted when the government
buyer has a more competent and motivated personnel, not only in
managerial positions, but across the board. Better-educated and
paid public employees are likely to have an important moderating
effect on service quality through their input into quality specifica-
tions, their ability to recognize the provider's consummate or per-
functory behaviour, and their willingness to act on the observed
performance. Using data from a cross-section of Sweden's munici-
palities, our analysis reveals a robust association between higher
levels of outsourcing and lower levels of citizen satisfaction, but
the data do not provide unambiguous support for the hypothesis
that the strength of this association diminishes when BPQ is
Market delivery of government-funded public services (outsourcing) was one of the dominant themes of the admin-
istrative reform of the 1980s and 1990s (Hood 1991; Pallesen 2011), known as New Public Management (NPM).
Today, outsourcing is a widespread modus operandi of governments around the world: for example, in 2013, the
OECD countries spent on average about 9 per cent of their GDP on purchases from market providers (OECD 2015,
p. 81), ranging from 17 per cent of GDP in the Netherlands to 3 per cent in Mexico.
Although outsourcing has attracted considerable scholarly attention, most studies have focused on the anteced-
ents of outsourcing, highlighting a host of factors explaining the extent of outsourcing across polities, often munici-
palities (for review see Bel and Fageda 2009). Those who have studied the effects of outsourcing have primarily
As these figures include both goods and services required for government consumption (such as office supplies or ICT services)
and provided to citizens, they serve as an approximation of the extent of outsourcing.
DOI: 10.1111/padm.12387
218 wileyonlinelibrary.com/journal/padm Public Administration. 2018;96:218233.
The copyright line for this article was changed
on January 2, 2019 after original online
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and
reproduction in any medium, provided the original work is properly cited.
© 2018 The Authors. Public Administration published by John Wiley & Sons Ltd.
been interested in cost reduction, while there are only very few empirical studies that examine quality issues and
the evidence remains mixed (for review see Petersen et al. 2017). This article contributes to this nascent literature
by examining the link between the extent of outsourcing and service quality.
While the benefits of outsourcing are normally associated with competition, discipline and the entrepreneurial-
ism of private ownership, there is also a considerable literature holding that markets may not be the most suitable
arrangement to ensure a high quality of public services (Hart et al. 1997; Brown et al. 2010; Girth et al. 2012). Yet
another strand of research argues that the outcomes of outsourcing are contingent upon the capacity of the out-
sourcing government (the buyer's capacity), understood in a variety of ways from financial soundness and the num-
ber of personnel to the support of key stakeholders, such as voters and politicians (Kettle 1993; Romzek and
Johnston 2002; Van Slyke 2003; Lamothe and Lamothe 2010; Andrews and Entwistle 2015). One of the key buyer's
capacities highlighted by the literature is managerial capacity (for an overview see Brown et al. 2006), broadly
understood as the strength of management to address problems arising from imperfect market competition (Warner
and Hefetz 2008; Girth et al. 2012; Johnston and Girth 2012; Hefetz et al. 2014) and difficulties with contract man-
agement (Romzek and Johnston 2002; Brown and Potoski 2003a, 2003b; Van Slyke 2003; Brown et al. 2006). An
important element of managerial capacity is the quality of the management-level personnel (Brown and Potoski
2003a, 2003b; Van Slyke 2003; Brown et al. 2010, 2016).
In contrast to the managerial-cadres-matter argument, we argue that the quality of the bureaucratic personnel
as a whole matter. Better-qualified and motivated public employees are likely to have an important moderating
effect on the quality of services through their input into quality specifications, their ability to recognize whether the
contractor behaves in a consummate or perfunctory fashion, and their willingness to act on the observed behaviour.
By conceptualizing the buyer's capacity as bureaucratic personnel quality (BPQ), understood as the competence and
motivation of the buyer's personnel across the board, we contribute to the literature on the contingent nature of
the outcomes of outsourcing.
Our third contribution is empirical: we test the empirical proposition on the negative effect of outsourcing on
service quality arising from the costquality trade-off (Hart et al. 1997) and our argument on the moderating effect
of BPQ in the context of municipal governance in Sweden by utilizing a newly assembled cross-sectional dataset on
the extent of outsourcing in four public services where measurability of quality is particularly difficult, citizen satis-
faction with these services, a composite measure of BPQ and a set of relevant covariates for most of Sweden's
290 municipalities.
At the end of the twentieth century, an increased use of market provision of public services was motivated politi-
cally by the need to both save resources in the public sector and improve the quality of services (Osborne and Gae-
bler 1992; Pollitt and Bouckaert 2011; Hood and Dixon 2015). These goals were thought to be achievable by
inducing competition in service provision, which would eliminate the slack associated with a monopolistic market
(Niskanen 1971; Buchanan 1972) and force providers to control costs and improve quality as citizens would be able
to choose the best service available (Osborne and Gaebler 1992; Christoffersen et al. 2007; Donahue and Zeckhau-
ser 2011; Pallesen 2011).
However, there has also been considerable scepticism regarding the unconditionally positive effect of outsour-
cing. In addition to a broad critical perspective, anchored in transaction costs economics that questions the universal
superiority of markets (Williamson 1985), there are at least three counter-arguments as to why market organization
of public service provision may be at odds with service quality. First and foremost, the costquality trade-off frame-
work, developed by Hart et al. (1997) as an extension of the incomplete contracts theory, suggests that because
the quality of service the government wants often cannot be fully specified(Hart et al. 1997, p. 1128), the cost-

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