There has been a contradicting issue that has been experienced by the public agencies of whether to or not delivery the issue of public service should be contracted. According to Huque (2005), the strategy of contracting out grew rapidly due to the perception that the government is insufficient. However, the proponents who tend to have a say in the public sector highlight the reason of contracting out as the reduction of cost and cite efficiency. On the other hand, critics found in the public administration insist that contracting out does not only sacrifice the key interest values but it also minimizes the capacity of public delivery.
When it comes to efficiency, economic and effectiveness, the public sector is considered to be on the top if compared to the public sector. It has been suggested that if the government business is to compare and be at per with the private sector, then the method used by the government to do business should be uttered. The government despite the difference in contextual can learn from the private sector. There is an assumption that there are benefits when it comes to effectiveness and efficiency. It has been recorded in the United States and some western countries that the strategy of contracting out has in the resent years gained prominence.
Despite the fact that the issue of contracting tends to vary at different areas, there is evidence that contract have been used for every service that is provided by the local, state as well as the federal government. According to reports, it is said that some of these countries contract the service delivery to their citizens. The study done by the council state government indicates that over 80 of the activities of privatization that was found in the local government and state was composed of contracting out (Huque, 2005). One of the key issue when it comes to contracting out is that process of asymmetric information that is found between the government and the contractors. It goes without say that the literature of the initiative contract begin with premises that there is a principal that is admitted to the agency. This principal agent is a conflict from asymmetric information.
When it comes to contracting there is no clear answer of whether or not it improves the delivery or causes a disaster. According to Brown et al., (2006), this all depends on the market that is underlying as well as the efficiency of the management. Despite the fact that adhere have been one ideological disposition when it comes to the issue of contracting out, the best option is to have a mechanism that can enlarge the benefits while at the same time mitigating the shortcomings. Contracting out in most cases is necessary for the tasks that can be more precise and specified early in advance. However if the quality and price have not been well indicated, then it tends to be feasible. This may lead to bids that are low in terms of prices and service.
According to studies that have been done, the contracting out process tend to accept the lowest bid so as to cut on cost. This is done due to one reason, the sub-optimal results during the process of contracting out. Another reason that contracting out is important is that, it is easy to measure the performance of the contractor. This makes less chances of a contractor not doing their work. However once a contractor has been chosen, there is likely to be reduction of the competition. In most cases, the winning contractors tend to hold the government to a monopolistic business.
References
Brown, T., Potoski, M., & Slyke, D. (2006). Managing public service contracts: aligning values, institutions, and markets. Public Administration Review.
Huque, A. (2005). Contracting out and trust in the public sector: cases of management from Hong Kong. Retreived from http://www.citeulike.org/user/Janos/article/117515
