Outsourcing Report

City outsourcing to landscape and other contactors produces high-quality services to citizens, but only when local government managers ensure strong relationships with contractors, vendor competition, and contract accountability, finds a new study on Local Government Contracting, conducted by American University and supported by NLC.

With increased fiscal challenges for many cities across America, more cities are investigating alternative means for delivering services. While contracting is not a new concept, it does alter the service delivery landscape for city officials.

The survey finds:

Most city officials (93 percent) support government contracting.

Nearly seven in 10 officials (69 percent) indicate that their contracts produce high-quality services to citizens; 55 percent report saving money as a result of contracting services.

However, the market for vendor competition is limited, with more than one in three officials (34 percent) reporting it difficult to find high-quality vendors.

More than one in two officials (52 percent) report counseling contractors to ensure they will continue to bid on their contracts in the future.

Nearly eight in 10 managers (78 percent) agree that performance issues appear near the beginning or midway through a contract.

The ability to effectively manage contracts is often complicated by the very nature of dealing with an outside organization.

Most respondents (69 percent) indicate they are confident in their level of expertise to effectively manage contracts, but only half report having adequate staff (48 percent) or enough time (40 percent) to do so. 

One in two (47 percent) managers indicated that the greatest drawback of contracting is the difficulty of holding contractors accountable for their performance. Managers report that contractors tend to fall short in performance primarily in the areas of responsiveness, quality, and service continuity. 

In fact, about one in five city officials reported spending a significant amount of time helping contractors improve performance. When faced with poor performance, two in three (64 percent) managers surveyed elected to take formal action against the contractor, with the most common responses being financial penalty (40 percent) or contract termination (42 percent). Additionally, managers are much more likely to use sanctions to penalize for performance problems (66 percent) than they are to use rewards for satisfactory performance (23 percent).

Overall, these survey findings suggest that when municipal leaders turn to the private sector to deliver public services, most place a strong emphasis on developing, enhancing, and ensuring contract performance. They understand that merely shipping responsibility outside of government ultimately will not improve public service.