Government choice between contract termination and contract expiration in re-municipalization: a case of historical recurrence?

Abstract

Since the early 2000s, the terms ‘re-municipalization’ and ‘reverse privatization’ entered the lexicon as several examples emerged of governments taking ownership of assets and services that had previously been privatized or outsourced. Various methods are used to implement re-municipalization decisions and differences are observed across countries and sectors. The approaches most frequently adopted are re-municipalization through contract termination and contract expiration. We utilize a wide database of re-municipalizations worldwide to analyse the factors that influence governments’ choice between these two approaches. The results from our multivariate analysis find a pattern of historical recurrence in the characteristics of the current re-municipalization process. Points for practitioners Most governments wait for contracts to expire but the number of contract terminations is sizeable. Re-municipalization in larger cities, network sectors (particularly water) and implemented by municipal governments have a positive association with termination. Re-municipalization of energy utilities and conducted in countries of French legal origin is positively associated with contract expiration. Patterns of contemporary re-municipalization closely resemble those witnessed in the ‘Progressive Era’.

Successful remunicipalization processes in Italian waste management: Triggers, key success factors, and results

“…to a privately-owned company. However, as UWM has "strong monopolistic characteristics and a strong public interest dimension" (Albalate et al, 2021b), early termination is possible (as in Contarina and Minerva), confirming the results of Albalate et al (2021b). Even so, neither motivation nor opportunity is sufficient to trigger a remunicipalization process without one or a few local, visionary leaders committed to improving local well-being and to making "meaningful contribution to society" (Denhardt and Denhardt, 2000: 556).…”

“…This article contributes to the literature by providing information on five UWM cases. This study, examining a small number of cases, cannot be generalized; it provides an in-depth analysis of municipalities that have experienced remunicipalization and furnishes insights into the triggers, processes (Albalate et al, 2021b; Gradus and Budding, 2020), and impact of remunicipalization (Albalate et al, 2021a).…”

“…Studies have highlighted many reasons for this trend in public service provision (Hefetz and Warner, 2004), where pragmatic motivations (e.g. seeking higher efficiency and investments or lower tariffs) over ideological drivers are prevalent (Albalate and Bél, 2019; Albalate et al, 2021a, 2021b; Clifton et al, 2019; Voorn, 2021). However, the role of policymakers, contextual factors, and policy implementation need further investigation (Albalate et al, 2021b; Gradus and Budding, 2020)—in particular, in the waste sector.…”

Examining contract modifications in purchasing personal protective equipment: A bargaining approach

“…The possibility of termination initiated by the government also increases the costs for the contractor, as they must factor in the possibility of the government prematurely canceling their agreement and them failing to receive their projected earnings. 1 Terminations are generally a modification of last resort, as contract managers are more likely to seek other ways to influence contractor performance, such as informal counseling or explanations of eligibility for future awards (Girth, 2017), or to simply allow contracts to expire (Albalate et al, 2021). There is some evidence that contract terminations are avoided altogether when private contractors have sufficient legal support to dispute them (Blomqvist and Winblad, 2022).…”

“…One of the long-standing arguments in favor of contracting is the flexibility offered to public managers to start or stop contractor relationships to adjust to changes in a given market (Lamothe and Lamothe, 2016). While terminations are often adopted for a variety of reasons (Albalate et al, 2021; Blomqvist and Winblad, 2022; Zeemering, 2018), they provide mechanisms for safeguarding the government, to discontinue business relationships that are not perceived to benefit the public interest. This threat of termination provides the government with a means for mitigating risks when initially developing contracts as they can unilaterally dismiss the contract in the case of poor contractor performance.…”