Indirect Provision of Government Services: Contracts and Productivity

Abstract

The effect on productivity of ‘contracting out’ public services, such as manpower and health care, is examined. This is done by comparing the concept of productivity and the requirements for achieving productivity gains with some of the essential features of the contract. In general, the contract, as presently used, is seen to impede productivity in the public sector. This is explained in part on the basis of the structured relations of government, relations that lead to a greater interest in contract compliance and accountability than productivity. A case study of a manpower program and an analysis of recent changes in the Medicare program are offered as examples of the ‘productivity brake’ applied by the federal government. The material is then used to derive some recommendations for increasing productivity in contracted work.