How Local Governments Structure Contracts with Private Firms

Abstract

Local governments often contract out many public services, including solid waste management. Although waste collection contracting is relatively straightforward, recycling is more complicated. Local governments have to figure out how to achieve multiple objectives: low-cost provision of service and a minimum level of service quality, along with attainment of recycling and waste-reduction goals. Who should own key assets, how fully to specify ex ante the service to be providedincluding exactly what materials to collect what prices to charge households, and how to compensate contractors are but three of the difficult questions they must address. In this study, the author summarizes the economics literature on incomplete contracts to shed light on current waste management practices. She then shows results from an International City/County Management Association survey of over 1,000 U.S. communities and a detailed analysis of the structure of contracts in seven communities that have achieved high recycling rates.

Efficient Scale and Scope of Business Models Used in Municipal Solid Waste Management

“…The complexity of the WM industry raises concerns about the technologies it relies upon and the sustainability of its business models (Björklund et al, 1999), which also depend on how contracts between MSW management providers and institutions are structured (Walls, 2005). In light of the challenging environmental goals, the efficiency of MSW management business models has become an increasingly important concern (Kinnaman, 2009); thus, their sustainability as well as their emergent role in local communities is critical (Avilés-Palacios and Rodríguez-Olalla, 2021; Esmaeilian et al, 2018).…”

Efficient scale and scope of business models used in municipal solid waste management

“…The complexity of the waste management (WM) industry raises concerns about the technologies it relies upon and the sustainability of its business models (Björklund et al. , 1999), which also depend on how contracts between MSW management providers and institutions are structured (Walls, 2005). In light of the challenging environmental goals, the efficiency of MSW management business models has become an increasingly important concern (Kinnaman, 2009); thus, their sustainability as well as their emergent role in local communities is critical (Avilés-Palacios and Rodríguez-Olalla, 2021; Esmaeilian et al.…”

Reaping the Fruits of Contracting out through Governance, Organization and Management: An Empirical Exploration of Local Governing Practices

“…A study of the introduction of high-powered performance contracts based on large, conditional cash-rewards (sometimes referred to as 'no cure, no-pay' schemes) in the Netherlands in 2002-2005(Koning and Heinrich, 2013 shows that the pre-program selection effects in terms of parking and creaming were negligible in relation to private contractors' attempts to place unemployed people in jobs, whereas the unintended negative incentive effects were considerable regarding job placement of disabled people. The negative incentive effects of high-powered performance contracts prevailed despite attempts to minimize them by assigning groups of disabled people with more or less the same job prospects to private contractors.…”

“…Others have aimed to identify the determinants of public officials' decisions to produce or buy services by looking at the transaction costs of producing and monitoring different kinds of public service and analyzing the size and competitiveness of local service markets (Williamson, 1985(Williamson, , 1991Hefetz and Warner, 2011;Greenwood, 2014). The character, content and effects of contracts made with private providers have also received considerable attention over the years (Domberger and Jensen, 1997;Walls, 2005). Most importantly, numerous researchers have aimed to assess whether the contracting out of public services leads to lower costs without the erosion of service quality.…”