Friday, October 9, 2009: 5:35 PM
Objective: The optimal mix of alternative sourcing strategies for public service delivery
Abstract: Alternative sourcing strategies, regardless of public or private sector affiliation, are a topic of interest in both the management and organizational literatures. Firms consider outsourcing as a means to improve efficiency and control. However, mixing both worlds, in-house production and outsourcing, may be defined as an independent strategic decision rather than a default (Gulati and Puranam, 2006). This mixed use of delivery modes is also well defined for public service delivery (Warner and Hefetz, 2008). We frame this plural sourcing concept in a dynamic decision model over time. Mixed sourcing, rather than an unstable delivery mode, where governments outsource and bring back in the same service over time, may be, in fact, a strategic choice of local governments. This mixed delivery governance choice may improve performance of both the private and the public sector, while reducing goal incongruence. It may also improve the interactions across the triangle of citizens, the government and private firms.
Market mobility, in economic terms, means that the more mobile the market (freedom to switch between alternative market sources), the higher is social welfare (Ben-Shahar and Sulganik, 2008). However, for local governments mobility must be balanced with a certain level of stability (Hefetz and Warner 2004).
Data and Methods: We explore these issues using International City County Management surveys of local government service delivery. The breadth of service coverage (67), geography (national scope with sample sizes over 1000), and time (every five years to 2007) allows exploration of the evolving nature of market based service delivery. We develop an index which measures the optimal kernel of stability and its impact on successful sourcing choices for a full range of public services. The index weighs the set of services each government provides and fits the best mobility structure (switching choices) for different types of municipalities.
Results: The model determines the level of stability as well as the size of in-house delivery needed in order to maintain efficient set of services.
Conclusion: Mobility between alternative sourcing strategies substitutes externally internal monitoring and control. A twofold learning process is the result of this mobility: a managerial learning improves the sourcing success; and a political learning improves the social choice in regard to citizen preferences.
Literature:
By Ben Shahar, Danny and Sulganic, Eyal. 2008. “Partial Ordering of Unpredictable Mobility with WelfareIm plications”, Economica 75, 592–604
Gulati, Ranjay, and Phanish Puranam. 2006. "Complementarity and Constraints: Why Firms both Make and Buy the Same Thing?" Working Paper available at http://ssrn.com/abstract=932606.
Hefetz, Amir and M. Warner. 2004. “Privatization and Its Reverse: Explaining the Dynamics of the Government Contracting Process” Journal of Public Administration, Research and Theory. 14(2):171-190.
Warner, Mildred E., and Amir Hefetz. 2008. "Managing Markets for Public Service: The Role of Mixed Public/Private Delivery of City Services." Public Administration Review 68 (1): 155 - 166.
Abstract: Alternative sourcing strategies, regardless of public or private sector affiliation, are a topic of interest in both the management and organizational literatures. Firms consider outsourcing as a means to improve efficiency and control. However, mixing both worlds, in-house production and outsourcing, may be defined as an independent strategic decision rather than a default (Gulati and Puranam, 2006). This mixed use of delivery modes is also well defined for public service delivery (Warner and Hefetz, 2008). We frame this plural sourcing concept in a dynamic decision model over time. Mixed sourcing, rather than an unstable delivery mode, where governments outsource and bring back in the same service over time, may be, in fact, a strategic choice of local governments. This mixed delivery governance choice may improve performance of both the private and the public sector, while reducing goal incongruence. It may also improve the interactions across the triangle of citizens, the government and private firms.
Market mobility, in economic terms, means that the more mobile the market (freedom to switch between alternative market sources), the higher is social welfare (Ben-Shahar and Sulganik, 2008). However, for local governments mobility must be balanced with a certain level of stability (Hefetz and Warner 2004).
Data and Methods: We explore these issues using International City County Management surveys of local government service delivery. The breadth of service coverage (67), geography (national scope with sample sizes over 1000), and time (every five years to 2007) allows exploration of the evolving nature of market based service delivery. We develop an index which measures the optimal kernel of stability and its impact on successful sourcing choices for a full range of public services. The index weighs the set of services each government provides and fits the best mobility structure (switching choices) for different types of municipalities.
Results: The model determines the level of stability as well as the size of in-house delivery needed in order to maintain efficient set of services.
Conclusion: Mobility between alternative sourcing strategies substitutes externally internal monitoring and control. A twofold learning process is the result of this mobility: a managerial learning improves the sourcing success; and a political learning improves the social choice in regard to citizen preferences.
Literature:
By Ben Shahar, Danny and Sulganic, Eyal. 2008. “Partial Ordering of Unpredictable Mobility with Welfare
Gulati, Ranjay, and Phanish Puranam. 2006. "Complementarity and Constraints: Why Firms both Make and Buy the Same Thing?" Working Paper available at http://ssrn.com/abstract=932606.
Hefetz, Amir and M. Warner. 2004. “Privatization and Its Reverse: Explaining the Dynamics of the Government Contracting Process” Journal of Public Administration, Research and Theory. 14(2):171-190.
Warner, Mildred E., and Amir Hefetz. 2008. "Managing Markets for Public Service: The Role of Mixed Public/Private Delivery of City Services." Public Administration Review 68 (1): 155 - 166.