Ex Post Contract Market Structure: Implications for Performance Over Time

• Author: Julia L. Carboni
• DOI: 10.1177/0275074015608753
• Published date: 01 July 2017
• Date: 01 July 2017
• Subject Matter: Articles

https://doi.org/

American Review of Public Administration

2017, Vol. 47(5) 588 –598

© The Author(s) 2015

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DOI: 10.1177/0275074015608753

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Article

Introduction

Does the structure of ex post contract markets influence indi-

vidual contract performance? Government increasingly

relies on complex arrangements of providers to implement

public policy, including contracting out where government

pays another party to produce goods or services on its behalf

(Ansell & Gash, 2008; Cooper, 2003; Kettl, 2002; Milward

& Provan, 2000). To date, contracting out scholarship

emphasizes contract management strategies such as contract

design and ex post monitoring and relationship building to

promote contractor performance (see Brown & Potoski,

2003; Brudney, Fernandez, Ryu, & Wright, 2005; Hefetz &

Warner, 2004; Hodge, 2000; Romzek & Johnson, 2002,

2005; Van Slyke, 2003, 2007). The literature neglects struc-

tural aspects of ex post contract markets as predictors of per-

formance, though both the management and organization of

public program delivery may influence performance (Lynn,

Heinrich, & Hill, 2000; Milward & Provan, 2000). However,

work on interorganizational networks has long established

that external environment influences organizational behavior

(Agranoff & McGuire, 2003; Kettl, 2002; Milward & Provan,

2000).

In settings where government relies on multiple parties to

perform functions of the state, dyadic contract exchanges are

embedded in a larger structure of exchange that provides the

context for behavior. Although early work was premised on

the idea that competition would bring cost savings and higher

performance for government, more recent scholarship

establishes that government contracting out often violates

assumptions of competitive markets and complete contracts

(Brown, Potoski, & Van Slyke, 2007; Smith, 1996; Smith &

Smyth, 1996). In addition, as government capacity to pro-

duce services is reduced, contracting relationships begin to

resemble interdependent exchanges where parties rely on

each other rather than standard principal–agent relationships.

Exchange structure may provide incentives or disincentives

for performance. For example, government may become

dependent on a particular contractor or contractors may com-

pete with each other for clients after contract awards, provid-

ing variable incentives for performance behavior.

This study examines how structural variables related to

exchange influence individual contract performance over

time. Network concepts are employed to measure structural

embeddedness of juvenile justice services where contracted

programs compete for clients ex post and do not produce ser-

vices jointly. Specifically, competition among programs,1

market share of programs, and indirect links through parent

organizations are considered to determine whether the struc-

ture of ex post contract markets influence individual contract

performance over time. Contract performance on cost and

1Indiana University–Purdue University Indianapolis, IN, USA

Corresponding Author:

Julia L. Carboni, Indiana University–Purdue University Indianapolis, 801

W. Michigan St., BS 4066, Indianapolis, IN 46202, USA.

Email: jcarboni@iupui.edu

Ex Post Contract Market Structure: Implications

for Performance Over Time

Julia L. Carboni1

Abstract

Government increasingly relies on complex arrangements of providers to deliver public services. There is burgeoning public

administration literature on contract management and performance. This literature emphasizes contract management

strategies such as contract design and ex post monitoring and relationship building to promote contractor performance.

The literature does not examine effects of structural variables on contract performance in ex post contract markets, though

work on interorganizational networks has long established that structural factors influence individual performance. This

study examines the influence of structural variables on publicly funded contract performance in networked structures of

exchange using 5 years of state-level contract data. Network concepts are used to develop contracts as networked exchange

structures and develop measures of structural embeddedness for individual programs. Findings include that the structural

embeddedness of individual programs influences individual contract performance on quality and cost dimensions over time.

Keywords

contract management, contract performance, structural embeddedness, exchange structure