Competition, Negotiation, or Cooperation: Three Models for Service Contracting

Contracting for public services from public or private suppliers is now a common prescription to improve government efficiency. The competitive bidding model is usually viewed as the ideal contracting process. However, this article explains that two other approaches—the negotiation model and the cooperation model-may be more appropriate under certain conditions. The primary factors that are likely to determine which of the three approaches is most suitable are (a) the characteristics of the external environment (especially the number of service suppliers), (b) the level of organizational resources (e.g., personnel, funds, time, and expertise), and (c) the degree of uncertainty about funding, future events, service technologies, and causal relationships between service outputs and desired outcomes. The main point is that there is no one best way to contract for services; rather, government units should adapt their contracting procedures to both internal external conditions to implement service contracting in an effective manner.