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An account is given of the movement towards the privatization of social welfare activity that has taken place since the mid 1980s. Various aspects of this are discussed: the different paths that have been taken; public erosion of retirement income; contracting out services from the public to the private sector; the larger trend of devolving responsibility for social welfare from central to local government units, and from local government to community‐based private agencies; the commodification of social care; and private ‘safety net’ accounts.

This concluding chapter contains some lessons from experience and conclusions regarding what is already known about contracting out, and how much more still needs to be found out. Four ‘lessons’ from the contracting theory and experiences discussed in the book are worth noting: first, one of the most powerful effects of the switch from in‐house production to external supply is the change in incentives; second, there is a link that is not always clearly visible between the way that contractual arrangements are implemented and the benefits that are subsequently derived; third, contracts are relationships, and as such are governed by the factors that affect all relationships; and last, contractual relationships can be thought of as lying along a spectrum that runs from spot transactions at one end to vertical integration at the other.

The political values involved in liberalism, democracy, socialism have historically been in conflict, but there is no reason why we cannot see them as complementary. A purely market as well as a fully state-coordinated economy never existed in history. The concepts of liberalism and socialism are elusive ones but they have one common origin: the capitalist revolution and modernity. The social-liberal state that is emerging out of the crisis of the social-democratic state is social because it maintains socialist commitments to social rights, while it gives more room for market competition in the coordination of the economy. It is also social-liberal because, in the social-democratic state, civil servants directly provide social and scientific services, whereas in the social-liberal state, competitive non-profit organizations contacted out and financed by the state already are or will be in charge.

This chapter considers control techniques which tend to regulate the day-to-day management details of private delegation. The focus is on executive delegators, because by their nature — and unlike the constitutional controls considered in Chapter 4, which have the potential to apply to all governmental actors — legislative and regulatory controls are not generally used to constrain legislators. The emphasis is also primarily on the executive's use of its dominium power as an instrument of delegation; in particular, the use of contract and grant as mechanisms of delegation are examined carefully. Questions considered include limiting the tasks that can be delegated to private actors through regulation and protection of vulnerable populations through procurement rules. An extensive range of legal control is reviewed including public-private partnership policy statements, private finance initiative, EU public procurement law, the EU's 2002 Financial Regulation, the US Federal Acquisitions Regulations, and US federal Circular A-76.

This chapter and the following two look at the structural changes that have resulted from the economy‐wide application of contracting out. The public sector is, perhaps, the one that has been most profoundly affected by it, and about which controversy concerning the appropriate scope of private and public production continues to smoulder. Chapter 9 considers the issues relevant to public sector contracting, including the potential benefits and problems. The emphasis is on application, and the identification of the limits to contracting activity. The different parts of the chapter are as follows: The role of contracting in public sector reform; Potential benefits of public sector contracting; Problems of public sector contracting; Private–public sector competition––a level playing field? and The limits to public sector contracting.

This chapter and the previous one outline the costs and benefits of contracting out. While there is merit in separating costs from benefits, and that is how managers intuitively think of the issue, the separation is not always easily achieved, and many of the concepts raised under the heading of benefits also appear under the guise of costs. Hence, costs and benefits become two sides of the same coin, which may not be particularly helpful as a framework for decision‐making. Aspects of the costs of contracting out are addressed in this chapter by looking at the coordination of production activity, cooperation and trust, the costs of transacting and monitoring, loss of control, and miscellaneous other costs. It is concluded that the crucial question is not whether the costs are significantly higher when contacting out than operating in‐house, but whether contracts can be designed in such a way that benefits do exceed the costs; the answer appears to be increasingly in the affirmative.

This chapter, the previous two, and the next one consider the alternative means through which a contracting strategy is devised and implemented. In Ch. 7, the design of contracts and performance management systems are discussed, with particular attention paid to obtaining adequate measures of control whilst maintaining flexibility. The important question of risk, and its allocation between the contracting parties are also considered. The different parts of the chapter are the following: Control; Controlling outcomes; Monitoring performance; Controlling risks; Allocating risks in contracts; Flexibility in contracts; and Which contract––classical or relational?

The first part of this chapter introduces the different types of government contract currently in use in central and local government. It identifies the three broad types of contracting activity that will be the focus of the book: procurement, contracting out, and the Private Finance Initiative and other Public/Private Partnerships. The chapter also identifies some other types of government contracts (employment contracts, ‘internal’ contracts) and explains why they are not to be examined in detail in the book. In the second part of the chapter, some key sectors of government contracting activity are examined: defence, information technology, transport, health, housing, and social care. The aim is to give an overview of how government uses contracts and some of the problems to which they give rise.

This chapter and the previous three consider the alternative means through which a contracting strategy is devised and implemented. Chapter 8 discusses the problems of organizational change associated with the introduction of contracting out––problems that are frequently the major obstacles to structural adjustment. The different parts of the chapter are as follows: Contracting out and organizational change; Impact on staff; Clean break or negotiated transfer? Terms and conditions of transfer; TUPE––the Transfer of Undertakings (Protection of Employment) Act in the UK, which is an implementation of the European Community Acquired Rights Directive (ARD, 1977); Managing transition; and Impact on customers and suppliers.

Chapter six explores the consequences of delegated governance through an analysis of Medicare administration in general, and of key elements of the 2003 MMA—the Medicare Advantage program and the Part D drug benefit. Although delegated governance has been politically expedient—enabling the passage and growth of government programs in an anti-government political climate—such expediency has frequently come at the cost of good governance. Outsourcing program responsibilities to non-state actors does not appear to produce more efficient or effectively-run government. Moreover, when the delegation occurs in a way that brings commercial actors into a program, this creates potential hazards (e.g. marketing abuses, fraud) that require oversight by a muscular political agency. Yet, the same hostility towards government that drives the decision to delegate governance in the first place also impedes the growth of an effective oversight body. As a result, various program failures arise that are frequently blamed on government officials who have never been sufficiently empowered to deal with these problems.

This first section of the book introduces the central issues of contracting out by asking ‘Why make when you can buy?’ This chapter begins by outlining a handful of contracting examples, most of which have been successful (Microsoft customer support, USA; Mambo Graphics, Australia; Marks & Spencer, UK), but one outright failure is also included (vehicle maintenance in Fairfax County, Virginia, USA). The chapter goes on to suggest what may have been the crucial elements of contracting decisions that resulted in success or failure. This provides an initial glimpse of the themes, the development of which is the main purpose of the book. The chapter also outlines the approach that will be taken in the book, which is not a contracting out manual, but an analytical tool to facilitate strategic thinking about contracting out.

This chapter develops the concept of delegated governance and applies it to the American welfare state. The chapter also places the American practice in historical, comparative, and cross-policy perspective, analyzing how the US differs from other countries, but also how delegated governance in the welfare state has evolved over time and differs across policy areas. Of particular interest is the shift over time from relying on non-profits to increasingly using for-profit actors and social welfare marketplaces to deliver publicly-funded benefits and services. The chapter also discusses the implications of these administrative arrangements for scholarly debates about how best to characterize bureaucratic power and authority in the United States.

This chapter and the next outline the benefits and costs of contracting out. While there is merit in separating costs from benefits, and that is how managers intuitively think of the issue, the separation is not always easily achieved, and many of the concepts raised under the heading of benefits also appear under the guise of costs. Hence, costs and benefits become two sides of the same coin, which may not be particularly helpful as a framework for decision‐making. Aspects of the benefits of contracting out are addressed in this chapter by looking at the structure of production, core activities and core competencies, the force of competition, competition and quality, the discipline of the market, and flexibility. The benefits of contracting out are summarized as specialization, market discipline, flexibility, and cost savings.

This chapter, the previous one, and the next two consider the alternative means through which a contracting strategy is devised and implemented. Chapter 6 explores how added value can be captured by the contracting organization, either through a competitive or a negotiated process. The different parts of the chapter are as follows: Competitive tendering––bidding for contracts; Pre‐selection––calling for expressions of interest; Alternative sourcing methods; The contract price; Winners and losers (a discussion of the fact that a winner's bid price may be too high and eventually lose the firm money); and Value migration.

This chapter and the previous two look at the structural changes that have resulted from the economy‐wide application of contracting out. The public sector is perhaps the one that has been most profoundly affected by it, and about which controversy concerning the appropriate scope of private and public production continues to smoulder. Chapter 11 takes a forward look at contracting trends, not by gazing at a crystal ball, but by asking whether contracting is a fad. The chapter also examines the downsizing phenomenon and the ongoing confusion between its role and that of contracting out. Lastly, it addresses the matter of where and when the bounds of contracting out will be identified, but finds no definitive answer on the basis of current trends.

This chapter examines the shifting boundaries of organizations––what they choose to do for themselves and what they increasingly rely on the market for. It briefly considers changes in the horizontal as well as the vertical boundaries of firms. Horizontal boundaries determine what range of output markets firms choose to be in, over and above their principal business activity. Vertical boundaries are determined by the proportion of activities in a firm's value chain let out to external providers of goods and services. The chapter also examines the underlying factors behind these organizational changes, in both the private and the public sectors. In addition, it contains a brief overview of international contracting trends in the G5 economies (USA, UK, France, Germany, Japan) and in Australia.

This chapter, the previous one, and the following one look at the structural changes that have resulted from the economy‐wide application of contracting out. The public sector is, perhaps, the one that has been most profoundly affected by it, and about which controversy concerning the appropriate scope of private and public production continues to smoulder. Chapter 10 analyses the structural changes in three major economies, the UK, USA, and Australia, and the role that contracting for services has played in bringing about those changes. This is done by using national accounts statistics to examine shifts in employment and output between sectors at a reasonably disaggregated level. The different parts of the chapter are as follows: The nature and significance of services in the economy; Producer services––the growth of intermediate transactions; Contracting for services and the productivity puzzle; and Contracting and producer services––which causes which?

This chapter and the next three consider the alternative means through which a contracting strategy is devised and implemented. Chapter 5 identifies the sources of added value generated through a greater degree of specialization––what the management literature refers to as the focus on the organization's distinctive capabilities. The different parts of the chapter are as follows: Redefining organizational boundaries; How does specialization add value? Specialization and competition; Patterns of specialization; and Who benefits from specialization?