Academic journal article Management & Marketing

Improving Performance in For]profit Contracts: A Study of Buyer]seller Communication and Red Tape

Academic journal article Management & Marketing

Improving Performance in For]profit Contracts: A Study of Buyer]seller Communication and Red Tape

Article excerpt

Introduction

During the latter part of the 20th century privatization was promoted worldwide as a popular strategic choice for the transfer of the provision of government/state-owned operations (referred to in the remainder of this paper as public sector) to for-profit private sector (referred to in the remainder of this paper as private sector) organizations. Rationales varied depending on the contextual setting from efforts to make developed economy nations more efficient to the provision of an economic structure to replace the fall of socialist nations (Fazamand, 2001). The overarching philosophy was that the private sector organization offered a better operational model compared to the purported deficiencies in the public sector ownership and control. In its broadest sense, privatization was considered to be the transfer of any measure that increases the role of the private sector in the public sector organizations (Ramamurti, 2000). The method of transfer varied greatly from the outright sale of a public sector business to the private sector, to more complicated arrangements of contracting operational units or entering into public-private partnerships in which the public sector retains a degree of ownership and control. Privatization occurred in all industry segments and at all government levels (Ramamurti, 1999). Overall, post privatization outcomes at the end of the 20th century were mixed and did not appear to exhibit a consistent pattern; in part, difficulties may rest in the extent to which there are differences between public sector and private sector organizational characteristics (Voges, 2003).

Over time more pragmatic privatization efforts evolved in the United States (Hefetz and Warner, 2012). Delivery choices became more sophisticated to include a wider range of relationship types from public-private partnerships (PPPs) in which there is a long term mutual exchange of risk and resources between public and private sector to outsourcing-contacting relationships in which internal organizational functions are handled by outside interests (Gabrisv et al., 2013). These contracts are secured not only with for-profit private sector organizations, but also with non-profit and other governmental agencies (Hefetz and Warner, 2012). Yet, despite the fracture of delivery methods to be more aligned with government need, the delivery method of forprofit contracting remains a popular choice. For example, in 2007, 20% of city/county service delivery cases in the United States were secured with a forprofit contract placing second to the direct provision of services at 51% (Girth et al., 2012). At the federal level, the use of contracts to deliver goods and services has increased from $337 billion in 2011 to $412 billion in 2013 with plans to increase the usage based on the projected efficiencies derived from this type of procurement practice (U.S. GSA Annual Report, 2013).

In all, public sector organizations continue to offer for-profit businesses a valuable market opportunity. However, while this organizational sector provides a significant market opportunity in the 21st century there remain unique challenges particularly at the operational level (Wang and Bunn, 2004). For instance, 61% of local government respondents cited bringing services back in house because of unsatisfactory service delivery (ICMA, 2007). And, survey results from for-profit contractors to the federal government indicate a significant decline in the quality of their relationship with the public sector contracting officers (Thornton, 2011). These examples illustrate the need to develop a richer understanding of how best to improve performance outcomes of the for-profit contract. Thus, the research question of interest is not of identifying what suitable criteria can be used to facilitate the choice for the best delivery method, but of finding how to facilitate performance success in the frequently chosen for-profit contact.

By definition, the provision of services by way of a for-profit contract involves a medium to long term relationship between a for-profit private sector organization (the seller) and a public sector organization (the buyer) to provide goods/services to end-using customers and citizens (Gabris et al. …

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