From Long-Term to Short-Term Contracting

In: Public administration: an international quarterly, Volume 79, Issue 1, p. 29-47

Abstract

One can look at the arrival of New Public Management & the extensive public sector reforms inspired by this theory from many angles. Here we examine the shift from long-term contracting, typical of bureaucracy & traditional enterprises, to short-term contracting, borrowed from private sector governance methods. Short-term contracting has three principal uses in the governance of the public sector: (1) contracting with service providers after a tendering/bidding process; (2) contracting with the CEOs of the incorporated public enterprises; & (3) contracting with executive agencies about what they should deliver. Theoretical analysis, supported by substantial empirical evidence, suggests that short-term contracting eliminates the extensive postcontractual opportunism connected with long-term contracting, but is vulnerable to precontractual opportunism. Short-term contracting is not just another public sector reform fad, but constitutes a new tool for government that increases efficiency when handled with prudence. 1 Table, 53 References. Adapted from the source document.