Friday, 2 August 2013

Government Contracts With Private Organizations: Are There Differences Between Nonprofits and For-profits?

an article by Eva M. Witesman (Brigham Young University, Provo, USA) and Sergio Fernandez (Indiana University, Bloomington, USA) published in Nonprofit and Voluntary Sector Quarterly Volume 42 Number 4 (August 2013)


In this empirical study, we examine whether systematic differences exist between government contracts with nonprofit and for-profit service providers.

Based on principal-agent theory, we examine the potential comparative advantage of nonprofit organisations over for-profits in two areas: contracting process and contract performance.

We test hypotheses using data from a national survey of local government contracts with private service providers. The results provide some support for the propositions that public officials trust nonprofits more than for-profits and grant them additional discretion. Even stronger support is found for the propositions that nonprofits are monitored less than for-profits and are awarded contracts of longer duration and for services characterised by higher levels of task uncertainty than those awarded to their for-profit counterparts.

We find no significant differences in performance between nonprofit and for-profit contractors in terms of cost, quality of work, responsiveness to government requirements, legal compliance, or customer satisfaction.

Hazel’s comment:
This study was done in the USA. I wonder whether the same findings would apply in the UK. My instinctive reaction is not whilst I am thinking of ATOS, Capita and their ilk. Those examples are, however, national government contract and the authors here are talking about local government.

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