The Mythology of Privatization in Contracting for Social Services

TLDR

States and municipalities privatize social services to improve cost‑effectiveness and quality, yet competition is often lacking and expanding contracting erodes public‑management capacity. The article investigates whether social‑services contracting occurs in competitive markets and whether county governments possess sufficient public‑management capacity to contract effectively. The study finds a lack of competition and public‑management capacity, questioning why governments continue contracting under such conditions.

Abstract

States and municipalities have privatized services in an effort to improve their cost‐effectiveness and quality. Competition provides the logical foundation for an expectation of cost savings and quality improvements, but competition does not exist in many local marketplaces—especially in the social services, where governments contract primarily with nonprofit organizations. As government increases its use of contracting, it simultaneously reduces its own public‐management capacity, imperiling its ability to be a smart buyer of contracted goods and services. This article examines two questions about the privatization of social services based on interviews conducted with public and nonprofit managers in New York state: Does social services contracting exist in a competitive environment? And do county governments have enough public‐management capacity to contract effectively for social services? The findings suggest an absence of competition and public‐management capacity, raising the question of why governments contract when these conditions are not met.