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Theory tells us that competition is the chief driver of improved efficiency and effectiveness in government contracting, yet contract provider markets are often noncompetitive. This study offers a detailed, contextualized examination of public administrative responses to thin contract markets. Following an inductive approach with data from semistructured interviews with contract administrators, the authors offer a preliminary typology of the conditions that give rise to thin markets, and the "market management" strategies used to create, enhance, and sustain competition in the markets from where governments purchase goods and services. The authors then review the efficacy and implications of these strategies for public services to citizens.

Capturing the benefits of competition is a key argument for outsourcing public services, yet public service markets often lack sufficient competition. The authors use survey and interview data from U.S. local governments to explore the responses of public managers to noncompetitive markets. This research indicates that competition is weak in most local government markets (fewer than two alternative providers on average across 67 services measured), and that the relationship between competition and contracting choice varies by service type. Public managers respond to suboptimal market competition by intervening with strategies designed to create, sustain, and enhance provider markets. In monopoly service markets, managers are more likely to use intergovernmental contracting, while for‐profit contracting is more common in more competitive service markets. The strategies that public managers employ to build and sustain competition for contracts often require tangible investments of administrative resources that add to the transaction costs of contracting in noncompetitive markets.