Contracting out local road and park services: Economic effects and their strategic, contractual, and competitive conditions

Andrej Christian Lindholst, Ole Helby Petersen, Kurt Houlberg

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Resumé

The economic rationale for contracting out local services is increasingly contested by empirical research. This article aims to contribute to this literature, first by scrutinising the economic effects of contracting out in local road and park services and, second, by exploring how characteristics such as markets, contracts, municipal strategies and contracting history influence these outcomes. Drawing on original survey data from Danish municipalities, we find that competitive tendering has on average reduced costs. Further analysis shows that savings are not associated with lower quality, thus indicating that ‘quality shading’ was not taking place. Another finding is that municipalities that repeatedly contract the services experience smaller savings, suggesting that competitive tendering is subject to declining marginal returns. Finally, we find that larger municipalities and those emphasising expenditure cuts realise larger savings, whereas the characteristics of markets and contracts do not seem to explain variations in cost savings.
OriginalsprogEngelsk
TidsskriftLocal Government Studies
Vol/bind44
Udgave nummer1
Sider (fra-til)64-85
Antal sider22
ISSN0300-3930
DOI
StatusUdgivet - 2018

Bibliografisk note

This is an Accepted Manuscript of an article published by Taylor & Francis in Local Government Studies on 04 Nov 2017, available online: http://www.tandfonline.com/10.1080/03003930.2017.1398647"

Citer dette

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Contracting out local road and park services : Economic effects and their strategic, contractual, and competitive conditions. / Lindholst, Andrej Christian; Petersen, Ole Helby; Houlberg, Kurt.

I: Local Government Studies, Bind 44, Nr. 1, 2018, s. 64-85.

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

TY - JOUR

T1 - Contracting out local road and park services

T2 - Economic effects and their strategic, contractual, and competitive conditions

AU - Lindholst, Andrej Christian

AU - Petersen, Ole Helby

AU - Houlberg, Kurt

N1 - This is an Accepted Manuscript of an article published by Taylor & Francis in Local Government Studies on 04 Nov 2017, available online: http://www.tandfonline.com/10.1080/03003930.2017.1398647"

PY - 2018

Y1 - 2018

N2 - The economic rationale for contracting out local services is increasingly contested by empirical research. This article aims to contribute to this literature, first by scrutinising the economic effects of contracting out in local road and park services and, second, by exploring how characteristics such as markets, contracts, municipal strategies and contracting history influence these outcomes. Drawing on original survey data from Danish municipalities, we find that competitive tendering has on average reduced costs. Further analysis shows that savings are not associated with lower quality, thus indicating that ‘quality shading’ was not taking place. Another finding is that municipalities that repeatedly contract the services experience smaller savings, suggesting that competitive tendering is subject to declining marginal returns. Finally, we find that larger municipalities and those emphasising expenditure cuts realise larger savings, whereas the characteristics of markets and contracts do not seem to explain variations in cost savings.

AB - The economic rationale for contracting out local services is increasingly contested by empirical research. This article aims to contribute to this literature, first by scrutinising the economic effects of contracting out in local road and park services and, second, by exploring how characteristics such as markets, contracts, municipal strategies and contracting history influence these outcomes. Drawing on original survey data from Danish municipalities, we find that competitive tendering has on average reduced costs. Further analysis shows that savings are not associated with lower quality, thus indicating that ‘quality shading’ was not taking place. Another finding is that municipalities that repeatedly contract the services experience smaller savings, suggesting that competitive tendering is subject to declining marginal returns. Finally, we find that larger municipalities and those emphasising expenditure cuts realise larger savings, whereas the characteristics of markets and contracts do not seem to explain variations in cost savings.

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