Substantial research has been conducted concerning the efficiency and efficacy of different modes of public service delivery and contracting out. This article develops a model of service delivery choice taking into account the distinction between public, private and non-profit organizations and the characteristics of the service to be delivered. Transaction Costs Economics has mainly debated the attributes of the technology involved in production and the required investments. In this article, considerations on the organizational nature of the actors participating in the process are added to this framework, pointing out that features of the internal structure and of the external mode of social control of organizational forms make them more suitable for providing certain services rather than others. The model is based on two dimensions: incentives power and authority types. Evidence from the contracting-out debate is used for discussing the implications of the model for the feasibility and efficiency of organizations in the service delivery.
Points for practitioners
Politicians and public managers daily face the challenge of choosing the best way to manage the delivery of public services to the citizenship. Our research aims at supporting this decisional process, taking into account the nature of the service and of the organization delegated to deliver the service. The incentives provided by different organizational structures and the authority types involved should be considered. Our model suggests that low or high political authority and low- or high-powered incentives can lead to the contractualization to private, public or non-profit organizations. When incentives are high-powered and political authority is low, the service delivery should be privatized.
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