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Abstract
In this paper, we identify the implications of different levels of contract completeness for the delivery of public services. While numerous factors influence the effectiveness of more or less complete contracts, achieving a win–win outcome – in which both parties to a contract achieve their goals – is in part contingent on the degree of trust between the contracting parties. We explore how varying levels of trust interact with the degree of contract completeness to influence contract effectiveness across different circumstances. In particular, we draw on examples of two types of commonly contracted, but distinctly different public services – refuse collection and social service provision – to illustrate how contracting governments often adapt contract completeness in response to changes in the level of trust with the vendor. We show how contracts become less complete over time as trust evolves between parties, as well how less complete contracts become more complete when trust deteriorates between parties. As such, we explore when contracting is risky for both governments and vendors and how contract relations can be structured to help create win–win outcomes for both.
Notes
1 Contract completeness is an established concept in the literature on private sector contracting (Milgrom & Roberts, Citation1992), but has only recently sparked scholarly interest in the public sector (Sclar, Citation2000; Brown et al., Citation2006). A complete contract is one in which public managers seek to mitigate unforeseen contingencies through specific contract stipulations in the statement/scope of work. Some public sector scholarship champions incomplete contracts as ‘relational’ tools to build trust between contracting parties (e.g. Romzek & Johnson, Citation2005; Bertelli & Smith, Citation2005; Fernandez, Citation2005). Other research laments the excessive completeness of most public sector contracts in comparison to private sector contracts for similar functions (Marvel & Marvel, Citation2003).
2 There is a rich literature on trust; however, for the purposes of this article, a more substantive review is beyond the scope of our argument.
3 See, for example, numerous studies conducted on contracting fraud at the Center for Public Integrity, http://www.publicintegrity.org/wow/, or other such stories, http://www.govexec.com/dailyfed/0405/042805k2.htm. These are but two cases in an area where numerous examples exist.
4 For more extensive details on our sampling methods and stratification, protocol development, coding, and issues of generalisability and validity within the contexts of government contracts for refuse collection with for-profit vendors please refer to Brown & Potoski (Citation2005) and for government social services contracts with non-profit organisations please see Van Slyke (Citation2007).
5 The name of the organisation has been changed for reasons of confidentiality.
6 Ditto.
7 While non-profit vendors are often cited as more ‘trustworthy’ partners to government because of their voluntary board governance, missions, and tax associated non-distribution constraint requirements, there are also examples of non-profit bodies' malfeasance in which these charitable organisations have engaged in moral hazard during contracts at the expense of government (see Smith & Lipsky, Citation1993).
