Municipalities' contracting out decisions: An empirical study on motives

Municipalities have various motives behind their decisions about the modes of their task execution. Empirical studies have not yet provided a fully satisfying explanation for municipalities' contracting out decisions. Therefore, we interviewed several Dutch principal municipal managers to evaluate the causes and motives for the choices ofthe current structures for the delivery oftheir services. This study investigates the relevance of common public choice and transaction cost motives on contracting out and explores the relevance of additional institutional and pragmatic motives. We found that municipalities do not regularly evaluate the service provision of their activities and the potential benefits of outsourcing. In fact, if the activity has an adequate performance level and complaints from municipal employees, local politicians or inhabitants do not occur, a catalyst for a discussion on the contracting out of this activity is, in general, lacking. Principally in the case ofstructural underperformance municipalities consider a change ofservice provider, and then the efficiency motive is most relevant. Thereby, institutional motives - such as the stability of service provision - and pragmatic motives are also relevant. Institutional pressures in particular initiate the evaluation oforganisational performance, whereas both economic motives as institutional and pragmatic motives are used to compare alternative service providers.