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Theoretical and Applied Economics
No. 3 / 2009 (532)

The Use of Performance Contracts for Delivery of Social Services in the United States

Maria P. Aristigueta
Lynne R. Foote
University of Delaware, SUA

Abstract. Devolution and the New Public Management has increased the privatization of government service and enhanced the role for the nonprofit sector in the United States. Performance contracts are viewed as a method for holding service providers accountable for outcomes. This paper outlines the findings of a two year study which took place at the University of Delaware between September 2005 and April 2007, entitled The Forward Together Project. Ad hoc implementation of performance contracts are found in the state; some as a result of federal mandates, others as championed by leadership. Ingredients desirable for successful performance contracts are explored in this paper. Although the research cannot conclusively attribute performance contract to more effective and efficient service delivery, it does provide evidence of expanded use of performance contracts and the potential for improved accountability and service delivery relationship between state government and nonprofits.

In part as a result of the New Public Management, government organizations are devolving their responsibilities for services. This includes from the national government to states to local governments, as well as from government to non-profit and for profit organizations. The phenomenon of increasingly privatized government services and its implication for an enhanced role for the nonprofit sector in the United States is well-documented throughout much of the public administration literature.

Performance contracts are viewed as a method for holding service providers accountable for outcomes. Yet, despite their increasing popularity, many questions about this emerging trend have remained largely unanswered. A team of researchers(1) from the University of Delaware has been involved in studying various aspects of the relationship in the contractual arrangement between state government, human service agencies and non-profit organizations.
This paper will focus on the performance contract arrangements with the research questions: What is the impetus in government and the nonprofit sector in Delaware to implement performance contracts? What agencies are involved in the performance contracts? And finally, is it leadership, mandated requirements or both that promote the performance contract arrangement?

The methodology includes quantitative and qualitative data from on-line surveys conducted with nonprofit and government agencies, in person interviews with performance contract administrators and nonprofit recipients, focus group, and a workgroup that has been meeting to address issues around performance measurement and evaluation. The theoretical framework will be established through the literature on the subjects of performance contracting and leadership.

The research methods consisted of a series of 44 in-person interviews, administration of two separate online surveys for a total of 111online responses, document analysis, and focus groups. These are discussed in greater detail in the case study.

Keywords: public management; performance contracts; leadership; personnel management.

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