Complex Contracting: Management Challenges and Solutions

• Author: Matthew Potoski,Trevor L. Brown,David M. Van Slyke
• Date: 01 September 2018
• DOI: http://doi.org/10.1111/puar.12959
• Published date: 01 September 2018

Complex Contracting: Management Challenges and Solutions 739

Abstract: Governments at all levels buy mission-critical goods and services whose attributes and performance

requirements are hard to define and produce. Many governments—and the public managers who lead them—lack

experience and knowledge about how to contract for complex products. The contract management counsel provided to

public managers is thin. Missing is a conceptual managerial framework to guide purchasing the complex products that

are often so critical to public organizations’ core missions. Drawing on perspectives from across the social sciences, the

framework presented in this article provides guidance on how managers can harness the upsides of complex contracting

while avoiding its pitfalls. The framework helps identify conditions that increase the likelihood of positive outcomes for

the purchasing government and the vendor—the win-win. To illustrate the framework, the article provides examples

of successful and failed acquisitions for complex products such as transportation projects, social service systems, and

information technology systems.

Evidence for Practice

• Our framework is intended as a general guide to help managers identify potential vulnerabilities in their

specific circumstances, what causes them, and the types of management practices that may offer potential

solutions.

• Each complex contract has a unique context and its own combination of product characteristics, market

conditions, regulatory contexts, political considerations, and value trade-offs.

• We offer four complementary strategies for increasing the chances of a win-win outcome: understand simple

versus complex products; craft “win-win” rules that incentivize cooperation; build a reciprocal relationship

that incorporates repeated play and reputations; and achieve mutual understanding.

The World Wide Web has more than a billion

websites. From such abundance, it might seem

that websites are relatively easy to make and

easy to buy. Many were surprised, then, in the fall of

2013 when a U.S. Department of Health and Human

Services (HHS) website—HealthCare.gov—failed

to work as planned. Launched as the primary means

through which uninsured Americans would purchase

health insurance under the Patient Protection and

Affordable Care Act (ACA), the website was a

confusing mess, with would-be consumers struggling

to set up accounts, review alternatives, and purchase

coverage. On its face, a poorly functioning website

is a routine hiccup that many organizations, public

and private, bumble through. However, when a

website is the primary means through which citizens

are to participate in a politically controversial yet

potentially transformative public program, its lack of

functionality can prove catastrophic. Early registration

among young, healthy Americans would drive down

insurance costs among the uninsured entering the

market, fueling the ACA’s early success. As a group,

these young, healthy consumers were accustomed to

online purchasing. Instead, HealthCare.gov’s early

bugs stifled enrollment. The ACA had an abysmal

launch because the HHS failed to buy a website

effectively.

As it turns out, websites, like much of information

technology, are not always easy to design, build, and

operate, particularly when they require customers

to submit personal information that must then be

verified before customers can view options and make

purchases. HealthCare.gov was even more difficult to

produce because the HHS would not know how well

the site worked until users went online and tried to

use it. This was not an off-the-shelf product; it was a

complex one.

Governments at all levels—national, regional, and

local—increasingly buy products like HealthCare.gov:

mission-critical goods and services whose attributes

and performance requirements are hard to define

and produce. Buying these goods often requires the

Trevor L. Brown

Ohio State University

Matthew Potoski

University of California, Santa Barbara

David M. Van Slyke

Syracuse University

Complex Contracting: Management Challenges

and Solutions

Matthew Potoski is professor of

corporate environmental management in

the Bren School of Environmental Science

and Management, University of California,

Santa Barbara. He teaches courses on

corporate environmental management,

and his research focuses on management,

voluntary environmental programs, and

public policy.

E-mail: mpotoski@bren.ucsb.edu

Trevor L. Brown is dean of the John

Glenn College of Public Affairs, The Ohio

State University. He conducts research

and teaches on public management and

leadership, governance, government

contracting, public-private partnerships,

and democracy and democratic transitions.

E-mail: brown.2296@osu.edu

David M. Van Slyke is dean of the

Maxwell School of Citizenship and Public

Affairs, Syracuse University, and Louis A.

Bantle Chair in Business-Government Policy.

He conducts research and teaches on public

management and leadership, public-private

partnerships, government contracting, and

policy implementation.

E-mail: vanslyke@syr.edu

Public Administration Review,

Vol. 78, Iss. 5, pp. 739–747. © 2018 by

The American Society for Public Administration.

DOI: 10.1111/puar.12959.

Research Article