Toward a Multiplex Network Theory of Interlocal Service Contracting

• Published date: 01 September 2021
• Author: Manoj K. Shrestha,Richard C. Feiock
• Date: 01 September 2021
• DOI: http://doi.org/10.1111/puar.13337

Research Article

Toward a Multiplex Network Theory of Interlocal Service Contracting 911

Abstract: Debates about risk in interlocal service contracts treat contracts as discrete dyadic exchanges. We challenge

this notion by advancing a multiplex network contacting approach, which asserts that interlocal contracting represents

a multiplex network phenomenon, defined as overlapping multiple service contract networks. Simultaneous treatment

of multiple networks is required to understand how local governments mitigate contract risks. We claim that local

governments create multiplex network structures comprising more than one service contract networks in order to reduce

service contracting risks. Multivariate exponential random graph models were fit to joint high-risk and low or mixed-

risk contract networks involving eight local government services in Pinellas County, Florida. The results demonstrate

that local governments mitigate risk by creating multiplex reciprocity and multiplex network closure in contracts that

involve multiple services.

Evidence for Practice

• Addressing multiple services together allows contracting local governments to strategically configure and

combine contracts to reduce risks.

• Contracting governments adopt multiplex reciprocity and multiplex closure networks involving high-risk

and low- or mixed-risk contracts to reduce risks.

• Multiplex reciprocity is most prevalent in contracts between a county and city, highlighting the crucial role

that the county plays in local service provision.

Since the Lakewood Plan of 1954,1 interlocal

service contracts between local governments

for the supply of public services have been a

common practice as a competitive alternative for

these jurisdictions, which might otherwise produce

services in-house or purchase them in the private

market (see Ostrom, Tiebout, and Warren 1961).

Interlocal contracts offer cost savings, local control,

and flexibility in the supply of public services,

but they also carry risks. Because the parties to a

contract are boundedly rational and operate with

incomplete information, contracts are incomplete

and subject to uncertainties triggered by factors

that are external and internal to contracts. External

triggers include disturbances in the supply chain

or changes in political and managerial leadership,

for example. Problems of coordination, division,

and defection are examples of internal triggers of

uncertainties in contracts (Carr and Hawkins 2013;

Feiock, Steinacker, and Park 2009). Decisions are

particularly risky when local governments encounter

“limited information, uncertainty about the future,

and the prospect that people or organizations behave

opportunistically” (Brown and Potoski (2005,

328). Consequently, questions as to what kinds of

behavioral risks the contracting parties face, and how

they deal with such risks attract a great deal of interest

from both scholars and practitioners.

Two widely recognized sources of contract risk are

the asset specificity and measurement difficulty of

services (Brown and Potoski 2003a). Asset specificity

is the degree of specific, non-redeployable physical or

human assets required in the production of a service

(Brown and Potoski 2003a; Williamson 1991).

Greater asset specificity in production limits the

potential suppliers of the service, forcing a contracting

party to lock into a contract with a monopoly

provider tempted to charge higher price or to cut

quality (Brown, Potoski, and Van Slyke 2007).

Measurement difficulty is the degree to which the

cost or performance of the service is difficult to

determine. In that case, the contracting partner may

shirk contractual obligations or take advantage of the

contract since evasion is difficult to detect (Brown

and Potoski 2003a). Such supplier opportunism poses

risks to the contracting governments.

While the service delivery choice literature focuses on

transaction risks associated with asset specificity and

measurement difficulty (Brown and Potoski 2003a;

Ferris and Graddy 1991; Nelson 1997) and public

Toward a Multiplex Network Theory of Interlocal Service

Contracting

Richard C. Feiock is internationally

recognized as a leading scholar of

local government and local governance

institutions. He directs the Local Governance

Lab at Local Governance Research LLC and

conducts research on local government

policy and operations. He has published

four books and over 200 journal articles

related to local government policy and

management.

Email: rfeiock@gmail.com

Manoj K. Shrestha is an Associate

Professor in the Department of Politics and

Philosophy at the University of Idaho. His

research focuses on network governance

and network effectiveness in the policy

making and management of local public

goods and water resources. He has

published in the leading journals including

Journal of Public Administration Research

and Theory, Public Administration Review,

Public Performance & Management Review,

and Political Research Quarterly.

Email: mks@uidaho.edu

Public Administration Review,

Vol. 81, Iss. 5, pp. 911–924. © 2020 by

The American Society for Public Administration.

DOI: 10.1111/puar.13337.

Manoj K. Shrestha

Richard C. Feiock

University of Idaho

Local Governance Research LLC