The Transactional and the Relational Approach to Contracting Out for ...

The Transactional and the Relational Approach to Contracting Out for Public Services: How Do They Work? Alessandro Sancino* Research Fellow, Catholic University of Piacenza, Italy Mariafrancesca Sicilia Assistant Professor, Bergamo University, Italy

* Corresponding Author, [email protected]

Journal of Finance and Management in Public Services. Volume 11 Number 1

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The Transactional and the Relational Approach to Contracting Out for Public Services

Alessandro Sancino & Mariafrancesca Sicilia

Abstract

but are both useful for contracting out.

Keywords: contracting out, public services, transactional contracting, relational contracting, local government.

The transactional and the relational approach to contracting out for public services: how do they work? Introduction

transactional and relational contracting.


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Theoretical background

detriment of the principal.


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resolution of contract.

attributes during the life of the contract if necessary. This approach does not resort to legal means in case of dispute because of their tendency to worsen

post failure.


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Methodology

approaches outlined in literature.


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Findings Contracting out waste management services

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“We don’t sanction our contractor because we don’t want to make the

“We try to communicate as often as possible, because we want to be sure that providers are

“Reputation is important for contractors because public managers assess past performance in order to identify future providers. Neighbouring municipalities invite us to pass judgment about our provider if they are bidding for


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“Relationships with the current provider are more

Outsourcing of home care services for the elderly

out that the contract signed at the beginning of the relationship acts as a general guideline for indicating

“the charity that provides the services works well and


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amount of money to pay the contractor depends on this.

Discussion to both the transactional and relational approaches.

relationship.


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Transactional Approach High

Medium

Relational Approach Low

High

Medium

S-Town Waste Management

S-Town

P-Town

P-Town B-Town

S-Town Home Care Services for Elderly

Low

P-Town B-Town

B-Town

P-Town S-Town B-Town

Figure 1 - Outsourcing Waste Management- and Home Care Services for the Elderly

reputation on the other.


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Conclusions

possible scenario that could occur.

adaptation to the changing conditions. to restore the balance of the control and power delegated to the contractor.

assumption that the agency theory is linked to transactional contracting and the stewardship theory is linked to relational contracting.


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