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8212382

DeHoog, Ruth Hoogland

POLITICAL AND ECONOMIC APPROACHES TO GOVERNMENT
"CONTRACTING OUT*': A STUDY OF HUMAN SERVICE CONTRACTING
IN THE STATE OF M ICHIGAN

PH.D. 1981

Michigan Slate University

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Copyright 1982
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DeHoog, Ruth Hoogland
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POLITICAL AND ECONOMIC APPROACHES
TO GOVERNMENT "CONTRACTING OUT";
A STUDY OF HUMAN SERVICE CONTRACTING
IN THE STATE OF MICHIGAN

By
Ruth Hoogland DeHoog

A DISSERTATION

Submitted to
Michigan State U n iv e rs ity
in p a r tia l f u lf illm e n t o f the requirements
f o r the degree o f

DOCTOR OF PHILOSOPHY

Department o f P o lit ic a l Science

ABSTRACT
POLITICAL AND ECONOMIC APPROACHES
TO GOVERNMENT "CONTRACTING OUT":
A STUDY OF HUMAN SERVICE CONTRACTING
IN THE STATE OF MICHIGAN
By
Ruth Hoogland DeHoog

"C ontracting out" fo r p u b lic services has become a major recommen­
dation fo r improving e ffic ie n c y in the lite r a tu r e o f p u b lic adm inistra­
tio n during the la s t decade.

Yet seldom has i t been f u ll y examined from

anything but the p u b lic choice perspective.

Heretofore the em pirical

works have focused on the cost diffe ren ces between tra d itio n a l bureaucra
t i c supply and co n tra ctin g w ith outside sources fo r services in a few
lim ite d number o f p u b lic services.

Generally they have not analyzed the

procedures o f the co n tra ctin g systems, the im portant fa c to rs o f service
q u a lity and e ffe c tiv e n e s s , o r the growing f ie ld o f human service con­
tr a c tin g .

This d is s e rta tio n attempts to f i l l

these voids.

The author f i r s t examines the arguments o f con tractin g proponents
in the p u b lic choice tr a d itio n .

To meet th e ir p o s itiv e expectations

about c o n tra c tin g , three conditions are determined to be p a r tic u la r ly
c r i t i c a l —com petition in the service environment and in the contracting
procedures used by government; a ra tio n a l decision-making process 1n
which the various government actors attempt to maximize e ffic ie n c y ; and
a review process fo r m onitoring and evaluating co n tra cto rs' expenditures
performance, and e ffe ctive n e ss.

The lik e lih o o d o f re a liz in g these

Ruth Hoogland DeHoog

conditions is questioned by two a d d itio n a l th e o re tic a l perspectives
which are developed and applied to co n tra ctin g s itu a tio n s .

The economic

perspective o f market im perfections suggests th a t im perfect com petition
and Im perfect inform ation w i ll in h ib it the development o f c e rta in condi­
tio n s , w h ile the p o lit ic a l perspective o f cooptation indicates th a t
re la tio n s h ip s o f bureaucrats and p o litic ia n s w ith c e rta in contractors
w i ll produce le s s -th a n -o b je c tiv e and open decision-making processes.
To evaluate the three perspectives and t h e ir co n d itio n a l p re d ic­
tion s in the complex area o f human services, co n tra ctin g is examined in
programs o f two departments (Social Services and Labor) in Michigan's
s ta te government.

An extensive in te rvie w schedule is u tiliz e d w ith

sta te and local con tractin g o f f ic ia ls and contractors to obtain informa­
tio n about the actual process and procedures o f human service co n tra ct­
ing and the viewpoints o f those most involved in i t .
From these in te rvie w s, i t is c le a r th a t only in fre q u e n tly are the
three conditions assumed by p u b lic choice con tractin g advocates re a lize d
in human services.

Competition fo r contracts is minimal—not only

because o f the lack o f s im ila r sup plie rs o f services but also because o f
departmental and federal regulations and procedures.

C ontracting awards

are often made w ith o u t s u ffic ie n t needs assessments, wide s o lic ita tio n s ,
o r f a i r proposal reviews.

O ffic ia ls have seldom been concerned about

c u ttin g costs v ia co n tra c tin g ; ra th e r, they have used th is method to
supply c e rta in types o f services to c lie n ts .

O bjective performance

m onitoring and evaluations were found to be w o e fu lly inadequate since
reviews were la rg e ly dependent upon inform ation from contractors

Ruth Hoogland DeHoog

themselves.

In sum, th is research a ffirm s the relevancy o f the two

a lte rn a tiv e economic and p o lit ic a l perspectives fo r human service con­
tr a c tin g .

I t also cautions against applying the c o n tra ctin g p re s c rip tio n

to a ll service areas w ith o u t careful consideration o f the various factors
and conditions th a t could l i m i t it s u t i l i t y as a v ia b le , e f f ic ie n t
p u blic management a lte rn a tiv e to tra d itio n a l modes o f bureaucratic ser­
vice d e liv e ry .

ACKNOWLEDGMENTS

I accumulated a number o f o b lig a tio n s In the preparation o f th is
d is s e rta tio n .

I was fo rtu n a te to have Terry M. Moe as my d is s e rta tio n

committee chairman.

Early on in my graduate stu d ie s , he stim ulated my

in te re s t in organizations and p o lit ic a l groups, and became a c ru c ia l
source o f advice, c r itic is m , and support in undertaking and completing
th is p ro je c t.

Gary M ille r provided me w ith many h e lp fu l comments and

u n fa ilin g encouragement.

Charles Press, who also served on my committee,

gave several useful suggestions fo r the work.

J e ffre y Straussman o f the

Maxwell School, Syracuse U n iv e rs ity , f i r s t encouraged me to th in k c r i t i ­
c a lly about service co n tra ctin g and to pursue an em pirical study in the
f ie ld o f human services.

Each o f these men approached the subject

m atter from ra th e r d iffe r e n t perspectives.

This work is b e tte r fo r

th e ir in s ig h ts .
I am p a r tic u la r ly

indebted to the many in d iv id u a ls who agreed to

p a rtic ip a te in the research.

In the e a rly stages, I interview ed various

o f f ic ia ls 1n the Department o f Management and Budget and in D.S.S.

They

provided much necessary background in fo rm atio n and many leads fo r la te r ,
standardized in te rvie w s.

Reginald C arter and the Michigan Department o f

Social Services gave permission fo r the interview s w ith D.S.S. employees
and assisted in obtaining cooperation from providers as w e ll.

Various

o f f ic ia ls in the Bureau o f Employment and T ra in in g , Michigan Department
o f Labor, made i t ea sie r to conduct the interview s there and w ith
ii

contractors in a tim ely fashion.

With only a few exceptions, these

in d iv id u a ls were frie n d ly , h e lp fu l, and in s ig h tfu l.

I was impressed by

th e ir professionalism and dedication.
Final thanks are due to my lo n g -s u ffe rin g husband, Bernie DeHoog,
who helped me through my lengthy graduate studies in many im portant
ways.

ill

TABLE OF CONTENTS

Page
LIST OF TABLES ..................................................................................................
I.
II.
III.
IV.
V.
VI.

AN INTRODUCTION TO CONTRACTING OUT................................................
ADDITIONAL PERSPECTIVES ON CONTRACTING OUT:
FECTIONS AND COOPTATION

1

MARKET IMPER­
18

METHODS OF RESEARCH...........................................................................
CONTRACTING OUT UNDER TITLE XX IN THE MICHIGAN DEPARTMENT OF
SOCIAL SERVICES ..................................................................................

34
55

CONTRACTING OUT UNDER CETA IN THE MICHIGAN DEPARTMENT OF
LABO R.......................................................................................................... 126
ANALYSIS OF CONDITIONS AND EXPECTATIONS IN CONTRACTING OUT .

185

APPENDIX A:

Service Contract Interview Schedule .................................

201

APPENDIX B:

Service Contract Interview Schedule—Short Form . . .

219

APPENDIX C:

Service Contract Interview Schedule—Provider Form

.

225

BIBLIOGRAPHY ......................................................................................................

236

iv

LIST OF TABLES

Page
Reasons f o r C ontracting Out— D.S.S................................................

84

State D.S.S. Employees' R elationships w ith Providers

. . .

95

County D.S.S. Respondents' R elationships With Contractors .

96

C ontractors' R elationships w ith D.S.S. C ontracting
O f f i c i a l s ................................................................................................

97

Advocate Role o f D.S.S. Bureaucrats ............................................

99

Role o f P o litic ia n s in Social Service C ontracting ................

103

M onitoring and E valuation o f D.S.S. Contractors ....................

110

The Cost o f Social Services Under C ontract

............................

116

The Q u a lity o f Social Services Under C ontract ........................

119

State B.E.T. O f f ic ia ls ' R elationships With Providers

. . .

158

C ontractors' R elationships With B.E.T. C ontracting
O f f i c i a l s ................................................................................................

159

Advocate Role o f B.E.T. Bureaucrats ............................................

160

Role o f P o litic ia n s in B.E.T. C ontracting ................................

163

M onitoring and E valuation o f B.E.T. Contractors ....................

169

The Cost o f B.E.T. Services By P riva te Contractors

. . . .

174

The Q u a lity o f B.E.T. Services By P riv a te Contractors . . .

176

v

CHAPTER I
AN INTRODUCTION TO CONTRACTING OUT

W ithout having much s p e c ia liz e d e xp e rtise o r profound in s ig h t in to
the a f f a ir s o f governments, one can s a fe ly ch a ra cte rize the Seventies as
a decade o f doubt, se lf-e xa m in a tio n , and change a t a l l le v e ls o f
American government.

Even though the S ix tie s had brought fo r th many

new am bitious programs, s e rv ic e s , and bureaucracies, major problems
s t i l l remained as the Seventies wore on.

The knotty social problems

were jo in e d by several o th e r d i f f i c u l t issues—the Vietnam War, Water­
gate, recession, energy shortages, in f la t io n .

The obvious inadequacy

in dealing w ith these matters helped to produce a general d is tr u s t o f
government and government o f f ic ia ls among many American opinion leaders
and the general p u b lic .
This d is s a tis fa c tio n w ith government has worked i t s e l f out in
many ways throughout government.

Proposals f o r tax lim ita tio n s , spend­

ing lim it s , a fed era l balanced budget, and tax reductions have been
p a r tic u la r ly popular.

Tax burdens have been perceived as being too

heavy, considering th a t the q u a lity o f basic s ta te and lo ca l services
have not no ticea bly improved, and th a t, according to many, some have
even d e te rio ra te d 1n q u a lity .

Many o rd in a ry c itiz e n s also have not

d ir e c t ly bene fited from the so cia l programs th a t have helped to
increase t h e ir tax b i l l s .

As a r e s u lt, there has been mounting re s is ­

tance to pro vid ing generously fo r the poor and near-poor.
1

Almost a ll

2

areas and le ve ls o f government ha^e been the o b je c t o f c r itic is m .
The government bureaucracies, however, have probably received the
lo ud est, la rg e s t, and most vociferous c r it ic is m o f th a t d ire c te d a t
government.

This disapproval has taken a t le a s t two major forms.

F ir s t,

c itiz e n s have expressed a fe a r o f the growing government bureaucracy
in te r fe r in g in and c o n tro llin g many aspects o f l i f e .

In p a r tic u la r ,

the p riv a te business sector has brown weary o f try in g to comply w ith
government re g u la tio n s being produced by bureaucrats.

Secondly, dissa­

tis fa c tio n w ith the p u b lic bureaucracies' implementation o f programs and
t h e ir p ro visio n o f services has been ra p id ly in crea sing since the la te
S ix tie s .

Frequent have been the reports o f w asteful and in e f f ic ie n t

federal programs, d e te rio ra tin g urban se rv ic e s , and in e ffe c tiv e
attempts a t so lvin g problems and meeting needs.
the impression th a t there is l i t t l e

One is o fte n l e f t w ith

th a t government can do q u ic k ly ,

e f f ic ie n t ly , and e ffe c tiv e ly .
What has been the response to these c r itic is m s o f government in
general, and the p u b lic bureaucracy, in p a rtic u la r?

Recognizing the

v a lid it y of many o f the charges, elected and appointed leaders in
government a t various le ve ls have tr ie d a host o f d iffe r e n t ways to deal
w ith these issues.

Not only have they attempted many p o lic y and pro­

grammatic changes, but they have also in s titu te d o r expanded a number o f
innovations to a lt e r the way in which government operates, in c lu d in g
budgetary reform s,

an o v e ra ll increase in rigorous p o lic y analysis and

program e va lu a tio n , the passage o f federal C iv il Service reform s,
requirements fo r long-range planning, and several changes in the o rg a n i­
z a tio n a l arrangements through which services are produced, d e liv e re d ,
and consumed.

3

While a ll o f these innovations warrant fu rth e r examination, th is
la s t type o f change w ill be the focus o f th is d is s e rta tio n .

In p a rtic u ­

la r , the process o f governmental "co n tra ctin g out" fo r the production
and d e liv e ry o f p u b lic services w ill be analyzed here in d e ta il.

The

general term "c o n tra c tin g out" re fe rs to the p ra ctice o f having p u b lic
services (those which any given government u n it has decided to provide
fo r it s c itiz e n s ) supplied e ith e r by o th e r governmental ju r is d ic tio n s o r
by p riv a te ( p r o f i t o r n o n -p ro fit) organizations Instead o f being respon­
s ib le fo r fu rn is h in g the se rvice .

Several d iffe r e n t types o f contracts

and d iffe r e n t ways o f granting them have been used in many kinds o f
s e rv ic e s .1
I.

The Case in Favor o f Contracting Out
Given the h is to ric a l and p o lit ic a l framework provided above, we

can consider co n tra ctin g out as p a rt o f the e f f o r t o f many governmental
u n its to respond to c r it ic s , improve th e ir performance, and cut costs.
Contracting fo r services from e ith e r the p riv a te sector o r outside pub­
l i c agencies is n o t, however, a new method o f service d e liv e ry .

For

years, many lo cal governments e s p e c ia lly have purchased such ro u tin e
services as garbage c o lle c tio n , road maintenance, and s tre e t lig h tin g
from outside su p p lie rs.

Under the co n tra ct c itie s plan (o r Lakewood

Plan) several C a lifo rn ia c it ie s fo r some years have contracted out fo r
*1 w i ll n o t, however, Include consideration o f fin a n c ia l agree­
ments th a t are sometimes confused w ith co n tra cts, such as g ra n ts -in -a id
to lower le ve ls o f government, vouchers, research g ra nts, o r subsidies.
9

Donald F isk, Herbert K ie s lln g , and Thomas M u lle r, P riva te P rovi­
sion o f Public Services: An Overview (Washington, D.C.: The Urban
I n s titu te , 19^8),

4

th e ir basic m unicipal services— in most cases, from the county government.

3

And almost a ll government u n its th a t re q u ire roads, b u ild in g s ,

o r m ilit a r y weapons have long had contracts w ith p ro fit-m a k in g firm s fo r
a rc h ite c tu ra l and engineering se rvice s.

On the fed era l le ve l in the

post-W orld War I I era, the number o f contracts f o r s c ie n t if ic research,
complex technical o r e va lu a tive se rvice s, and defense-related services
increased ra p id ly .

4

Bruce L. R. Smith, a foremost scholar on federal

c o n tra c tin g , has stated th a t such extensive usage o f p riv a te in s t it u tio n s is a ce n tra l fe a tu re
But what the S ix tie s
u t iliz a t io n o f c o n tra c tin g

o f any modern government.
and Seventies spawned was:

I) a much gre ate r

fo r new human service programs a t a ll le ve ls

o f government, often encouraged by federal laws and reg ulatio ns;® and
2) a g re a te r con sid e ra tio n o f th is p ra c tic e as an a lte rn a tiv e ~ to t r a d i­
tio n a l bureaucratic methods o f service d e liv e ry fo r a wide v a rie ty o f
programs and s e rv ic e s , p a r tic u la r ly in the face o f fis c a l s tr a in .^
3
See e s p e c ia lly Gary J. M ille r , P o litic s o f M unicipal Incorpora­
tio n (Cambridge, Mass.: MIT Press, 1981}; Sidney Sonenblum, John J.
K ir i in , and John C. Ries, How C itie s Provide Services: An Evaluation
o f A lte rn a tiv e D elivery S tructures (Cambridge, Mass.: B a llin g e r Publi
c a tio n s , 1977); Robert 0. B a rre n , Government in M etrop olitan Regions:
A Reappraisal o f Fractionated P olitT ca'l Orq'a'nlzat'ib'n TPavisY Cat.':
I n s t it u t e o f Governmental A f fa ir s , 1966).
4
See, f o r example, Clarence Danhof, Government C ontracting and
Technological Change (Washington-, D.C.: The Brookings I n s t it u t io n ,

imy.

®Smith, e d ., The New P o lit ic a l Economy (New York: S t. M a rtin 's
Press, 1975), p. 1.
C
In the area o f so cia l s e rv ic e s , see, f o r example, N eil G ilb e r t,
"The Transformation o f Social S e rvice s," Social Service Review 51
(December 1977), pp. 624-41.
^See e s p e c ia lly P a tric ia S. Florestano and Stephen B. Gordon,
"P u b lic vs P riv a te : Small Government C ontracting w ith the P riv a te
S e cto r," P u b lic A d m in istra tio n Review 40 (Jan./Feb. 1980), pp. 29-34;
J e ffre y D. 5traussman, "More Bang f o r Fewer Bucks? Or How Local

5

What then are the arguments in fa vo r o f c o n tra c tin g f o r p u b lic
services?

Why would th is method o f d e liv e rin g services be considered

by some to be su p e rio r to tr a d itio n a l methods?

In the academic l i t e r a ­

tu re , one school o f thought has provided much o f the th e o re tic a l basis
fo r th is approach--public choice th e o ris ts in p u b lic a d m in is tra tio n who
have focused on the size o f government ju r is d ic tio n s and the economics
o f bureaucracies.

Although there are several d iffe re n c e s in su b je ct,

methods, and emphasis, the major underlying arguments o f scholars ident i f i e d w ith th is group are s im ila r.

Q

Unlike o th e r p u b lic choice academicians, th is group has concen­
tra te d on analyzing an a lte rin g s p e c ific services and the s tru c tu re s by
which they are sup plie d, w ith less concern f o r the votin g and demand
mechanisms.

Using a n e o -cla ssica l economic framework, they argue th a t

the com petitive marketplace produces goods and services e f f ic ie n t ly ,
whereas monopolies, whether p u b lic o r p riv a te , tend toward both i n e f f i ­
ciency and unresponsiveness.

They assume th a t few th e o re tic a l d i f f e r ­

ences e x is t between p u b lic and p riv a te se cto r goods and services in how
Governments Can Rediscover the P o te n tia ls (and P it f a l ls ) o f the M arket,"
P ublic A d m in istra tio n Review 41 (Jan. 1981), pp. 150-7.
Q
Probably the most re le va n t and rep re se n ta tive works include
Thomas E. Borcherdlng, e d ., Budgets and Bureaucrats: The Sources o f
Government Growth (Durham, N .C .: Duke U n iv e rs ity l>ress, 1977); Vin­
cent Ostrom and Eleanor Ostrom, "P u b lic Goods and P ublic Choices," in
E. S. Savas, e d ., A lte rn a tiv e s f o r D e liv e rin g P ublic Services Toward
Improved Performance (T oulder, C o lo .: WestvTew Press, 1577), pp. 7-49;
Ostrom and Ostrom, "P u b lic Choice: A D iffe re n t Approach to the Study o f
P ublic A d m in is tra tio n ," Pub!1c A d m in istra tio n Review 31 (M arch/A pril
1971), pp. 302-16; W illia m A. Niskanen, J r . , bureaucracy and Represen­
ta tiv e Government (Chicago: A1dine-Atherton, 1971); E. S. Savas, e d .,
A lte rn a tiv e s fo r D e liv e rin g P u blic Services Toward Improved Performance,
op. c i t . ; Sonenblum, e t a l7 , How C itie s Provide S ervices, op. d t . ;
Gordon T u llo c k , The P o litic s o f Bureaucracy (Washington, D .C .: P ublic
A ffa ir s Press, 1965}.

6

they can be supplied.

(On the demand sid e , governments a ct on b e h a lf o f

consum er/citizens and use ta x a tio n and coercive a u th o rity to foreclose
h o ld o u ts .)

Since in most program and service areas, government agencies

are service monopolies, the personnel are lik e ly to behave 1n ways th a t
promote th e ir own in te re s ts a t the expense o f the in te re s ts o f e f f i ­
ciency and the consum er/citizens.
The basic perspective o f these th e o ris ts is to encourage the use
o f quasi-m arket mechansims f o r the p ro visio n o f services th a t are
u su a lly produced by fe d e ra l, s ta te , o r lo c a l government "m onopolies."
For the production o f m ainly p riv a te goods (those th a t are h ig h ly d i v i­
s ib le and packageable) th a t the p u b lic se cto r has t r a d it io n a lly provided,
governments could tr y to re tu rn both the fin a n cin g and production o f
such services to the p riv a te se cto r e n tir e ly ( e .g ., garbage c o lle c tio n ) .
Or governments could orovide vouchers to the consumers, thus su b sid izin g
the consumer ra th e r than the s u p p lie r o f a service and thereby g iv in g
the consum er/citizen the o p p o rtu n ity f o r choice among various agents
( e . g . , e d u ca tio n ).
But these modes o f p r iv it iz a t io n (sometimes c a lle d "load shed­
d in g "), according to many e xp e rts, are not as fe a s ib le and acceptable as
is c o n tra c tin g fo r p u b lic services e ith e r to oth e r government u n its o r
to p riv a te companies.

Contracting out can be used f o r many services

w ith e ith e r p riv a te o r p u b lic good c h a ra c te ris tic s , according to p u b lic
choice w r ite r s , since both types o f goods need not be d e live re d to the
p u b lic b£ a p u b lic agencies through i t s p u b lic employees, even i f the
service is paid fo r by the taxpayers through a government u n it.

Instead

o f using i t s own bureaucracy, the re le va n t government body can purchase
the services d ir e c t ly from p u b lic o r p riv a te sources through a process

7

o f com petitive bidding o r com petitive n e g o tia tio n , thus developing
quasi-market conditions and achieving a desirable degree o f both f l e x i ­
b i l i t y and responsiveness in the process.
The essential ro le o f the government agency o r elected body would
be to perform a "watch-dog" fu n ctio n .

Not only would i t deal w ith

revenue gathering or budget a llo c a tio n s and the tra n s fe r o f payments to
the d e liv e ry agent, but th e u n it would also choose the agents, continue
to m onitor and evaluate th e ir performance, and engage in long-range
planning.

The th re a t o f the government agency co n tra ctin g w ith another

s u p p lie r (o r even producing the service i t s e l f ) would, i t is believed,
ensure th a t the producer is both e f f ic ie n t and responsive to the needs
o f the consumer/citizens and th e ir representatives.

Therefore, contract­

ing out is expected to enable governments to achieve the best service
performance a t the lowest cost because o f a d ire c t monetary in c rn tiv e —
the p r o f it motive and/or the desire to stay in business.
This is the basic argument o f co n tra ctin g out advocates w ith in
the p u b lic choice school, although not a ll who subscribe to th is fa vo r­
able view o f con tractin g would sp e ll out th e ir reasons in the same
fashion.

Perhaps the best th e o re tic a l form ulations d ir e c tly supportive
g
o f con tractin g out have been w ritte n by urban service a n a lysts, w h ile

g
Lyle C. F itc h , "Increasing the Role o f the P riva te Sector in Pro­
v id in g P ublic S ervices," in W illis D. Hawley and David Rogers, eds.,
Improving the Q ua lity o f Urban Management (Beverly H ills , C a l,: Sage,
l574T; 'Dennis R. Young, " In s titu tio n a l Change and the D elivery o f Urban
P ublic S ervices," P olicy Sciences 2 (December 1971), pp. 425-38; Savas,
"Municipal Monopolies versus Competition in D e live rin g Urban S ervices,"
in Hawley and Rogers, eds., op. c i t .

8

most o f the p u b lic choice scholars in p u b lic a d m in is tra tio n approach
th is su b je ct from a more general and o fte n more th e o re tic a l perspec­
t i v e . 10
Several w rite rs have focused on the reasons fo r b u rea ucra tic patho­
logy—e s s e n tia lly why p u b lic bureaucracies are not as e f f ic ie n t and
e ffe c tiv e as an approximation o f the com petitive marketplace.

W illiam

A. Niskanen has provided the major p u b lic choice framework f o r th is
economic c r itic q u e o f bureaucracy.11

Claiming to develop a p o s itiv e

theory o f the behavior o f bureaus and rep re se n ta tive government, Niska­
nen bases his work on an understanding o f the unique demand and supply
re la tio n s h ip in p u b lic o rg a n iza tio n s.

He states th a t bureaus and the

le g is la tiv e body (o r sponsor) form a b i- la te r a l monopoly in which the
bureaus exchange a promised s e t o f outputs fo r an annual budget appro­
p r ia tio n , since the bureaus' services u su a lly cannot be supplied a t a
p e r-u n it ra te .

Both sides operate under a monopoly because n e ith e r has

any a lte rn a tiv e s from which to choose— no o th e r budget sources f o r the
bureaus and no oth er service

su p p lie rs fo r the le g is la tu re .

Although

i t t y p ic a lly has only im p erfect in fo rm a tio n w ith which to assess the
re la tio n s h ip between the costs and the outputs a c c u ra te ly , the le g is la ­
tu re is u su a lly w illin g to give a bigger budget a p p ro p ria tio n fo r a
higher expected ou tp u t.

Niskanen assumes th a t the le g is la tu re 1s pas­

s ive w h ile bureaus are Informed monopolies, w illin g to use t h e ir
s u p e rio r in fo rm a tio n fo r t h e ir own goal o f budget m axim ization.

Bureau­

c ra ts attem pt to maximize t h e ir bureaus' budgets since such a stra te g y
10See e s p e c ia lly Ostrom and Ostrom (.1977), op. c i t . ; and Borcherd in g , e d ., op. c i t .
11Niskanen, op. c i t .

9

is expected to lead to increases in the personal rewards o f th e ir positlo n s — s ta tiis , money, in flue nce .

As a re s u lt, some bureaus produce too

much outpu t, exceeding th e -p e in t a t which b e n e fits equal co sts, thus
leading to la rg e r budgets, the in e f f ic ie n t use o f funds, and bigger
government.
Niskanen o ffe rs a number o f p re s c rip tio n s to h a lt th is in e ffic ie n c y
and unnecessary growth in government.

Among his s p e c ific proposals is

to increase com petition 1n the production o f p u b lic services by using
p riv a te sources o f supply through vouchers, subsidies, o r co n tra cts.
According to Niskanen,
The primary value o f the use o f p riv a te firm s to supply some
o f the a c t iv itie s would be to provide a source o f supply
th a t is not a d m in is tra tiv e ly dependent on the bureaucracy
and review committee a t a p rice known to representatives o f
the mlddle-demand group and, thus, to reduce the monopoly
power o f the bureaucracy and review comn1ttees. ™
In p a rt, th is confidence in outside supply is based on em pirical
study, as w ell as deductive, formal theory.

Some researchers have

examined serveral d iffe r e n t p o lic y areas to determine i f the quasi­
market approaches to service pro visio n are less c o s tly or more e f f i ­
c ie n t than p u b lic monopolies.

In the main, what lim ite d evidence there

is supports the arguments th a t the p riv a te ly (o r outside) supplied ser­
vices are a t le a s t less c o s tly (and in a few cases, more e f f ic ie n t ) than
in-house services, in the cases o f f i r e p r o te c tio n ,^ an a i r l i n e , ^ a

12I b id . , p. 217.
13

Roger S. Ahlbrandt, J r . , "E ffic ie n c y 1n the Provision o f F ire
S ervices," Public Choice 18 CFall 19731, pp. 1-15.
14

David G. Davies, "The E ffic ie n c y o f P ublic versus P riva te Firms:
The Case o f A u s tra lia 's Two A ir lin e s ," Journal o f Law and Economics 14
(1971), pp. 149-65.

10

u t i l i t y , 15 and refuse c o lle c tio n .15

Even though the evidence is not

com pelling, these studies have added more credence to the suggestion
th a t oth e r areas o f p u b lic p o lic y could be improved i f p riv a te suppliers
were used.
In a d d itio n , i t is often assumed th a t even government services
th a t have outputs th a t are more d i f f i c u l t to measure could lead to
s im ila r re s u lts in mental h e a lth , social services, education, e t c . 1^
U n fo rtun ately, almost no rigorous studies have y e t examined e ith e r these
services o r no n-co st-re la te d outcomes o f co n tra ctin g out.
major goal o f th is d is s e rta tio n to analyze:

I t is the

1) the p o lic y area o f

human s e rvice s, an area la rg e ly overlooked by p o lit ic a l science theor­
is ts and researchers, and 2) the v a rie ty o f p o lit ic a l

and service by­

products and outcomes o f purchasing such services.
In summary, what then are the major arguments in favo r o f using
outside sources to supply government services?

F ir s t, proponents

believe th a t p riv a te supply w ill lead to lower government costs fo r at
le a s t fiv e reasons.

1) Competition fo r contracts would help to reveal

the true costs o f production ande lim in a te waste, since contracts would
be awarded to those o ffe rin g
le a s t cost le v e l.

the most o r best q u a lity

services a t the

2) S u b s titu tio n o f the p r o f it motive fo r budget maxi­

m ization and em pire-building would help to li m i t budget growth in
15
Louis D eA llessi, "An Economic Analysis o f Government Ownership
and Regulation: Theory and the Evidence from the E le c tric Power Indus­
t r y , " P ublic Choice 19 CFall 1974), pp. 1-42.
15Savas, "S o lid Waste C o lle ctio n in M etropolitan Areas," in
E lin o r Ostrom, e d ., The D elivery o f Urban Services CBeverly H ills , C a l.:
Sage, 1976), pp. 2 0 1 ^
1^F1tch, op. c i t .

11

p a r tic u la r , and government growth, in general, in the long run.

3) Eco­

nomies o f scale could be re a liz e d in some ju r is d ic tio n s through the
reduction o f overhead, s ta rt-u p co sts, o r high personnel costs by
spreading supply over a la rg e r number o f u n its o r o th e r agencies ( e .g .,
c o n tra c tin g f o r sp e cia lize d medical s e rv ic e s ).

4) High personnel costs

would be reduced, p rim a rily due to avoiding p u b lic employee unions and
p u b lic personnel c o n tro ls ( e .g ., C iv il Service ru le s ).

5) Greater

f l e x i b i l i t y in the use o f personnel and equipment would be achieved fo r
sh o rt-te rm p ro je c ts , p a rt-tim e work, sp e cia lize d needs, o r new problems
--w ith o u t a conmitment to su sta in in g a bloated bureaucracy.

This a n t i­

c ip a tio n o f reduced costs o f p u b lic services is the most compelling
reason f o r both scholars and government o f f ic ia ls to fa vo r co n tra ctin g
o u t.18
A second advantage o f c o n tra c tin g out is seen as an outcome o f
com petition— i . e . , i t is expected th a t com petition fo r con tracts among
p riv a te co n tra cto rs w i ll also produce b e tte r q u a lity services f o r the
p rice pa id , since a d ir e c t monetary in c e n tiv e f o r good performance by
s u p p lie rs e x is ts .

19

I f the service d e live re d is judged to be inadequate

by the overseeing agency, another su p p lie rs could be granted the con­
tr a c t ( e ith e r to another p riv a te agent o r a government agency).

Thus,

to use A lb e rt 0. Hirschman's terms, the c o n tra c t re la tio n s h ip has a
major advantage over the usual methods, in th a t i t allows f o r both e x it

18

F itc h , op. c 1 1 .; Niskanen, op. c i t . ; Savas (.1974), op. c i t . ;
Robert M. Spann, "P u b lic versus P riva te P rovision o f Governmental Ser­
v ic e s ," in Borcherdlng, e d ., op. c 1 t . ; Niskanen, op. c i t . ; Young, op.
c it.
19

Savas (1977), op. c i t . ; Warren, op. c i t . ; Young, op. c i t .

12

and voice mechanisms to be a c tiv a te d , in the event th a t the service
q u a lity declines o r does not meet the c o n tra c t's s p e c ific a tio n s .

20

A th ir d fa c to r that some observers believe is a major advantage to
purchasing services is th a t the rapid government growth o f the la s t
decades could be slowed, i f not h a lte d , by th is means.
would have greater control over it s services.

21

Government

The a n tic ip a te d cost

savings would keep budget growth to a minimum, w hile the size o f p u b lic
employee r o lls could be lim ite d .

The power o f the c e n tra liz e d bureau­

cracy a t a ll levels could be somewhat reduced as w e ll, by allow ing
greater p a rtic ip a tio n fo r p riv a te actors in p u b lic policy-m aking.
II.

Problems and L im ita tio n s o f Contracting Out
Thus fa r , only the arguments favoring co n tra ctin g fo r p u b lic ser­

vices have been presented.

But what might lead one to oppose changing

the organizational arrangements fo r service d e liv e ry —changes which many
believe w ill re s u lt in lower costs, good services, and a slowdown o f
government growth?

Several d iffe r e n t types o f disadvantages and lim it a ­

tion s o f con tractin g out are recognized by various in d iv id u a ls and
groups, in clu d in g some who advocate the greater use o f outside sup plie rs.
The f i r s t major problem w ith co n tra ctin g fo r p u b lic services,
raised by several d iffe r e n t observers o f p u b lic bureaucracies, can occur
as a d ir e c t re s u lt o f the re la tio n sh ip s th a t develop between those

?n

Hirschman, E x it, Voice, and Loyalty (Cambridge, Mass.: Harvard
U n iv e rs ity Press, 19701.
?1
J,In p a r tic u la r, the Borcherding volume addressas th is Issue,
op. c i t .

13

granting the contracts and the p riv a te con tractors.

22

Purchasing

services from one o r a few p riv a te suppliers on a continuing basis can
produce cozy re la tio n s h ip s which are h ig h ly b e n e fic ia l fo r both sides,
but may not be in the general in te re s ts o f the taxpayers.

In a d d itio n ,

the use o f b rib e s, kickbacks, and other ille g a l a c t iv itie s have been
observed in many municipal governments and can be a p a rt o f any con tract­
ing system.

As F itch s ta te s ,

Contracts are one o f the most common and lu c ra tiv e sources
o f co rru p tio n in government. The abuse has been only dim i­
nished, not e lim in a te d , by p u b lic bidding and oth e r forma­
l i t i e s designed to improve the in te g r ity o f the process.
P riva te contractors doing business w ith the government are
s t i l l one o f the p rin c ip a l sources o f campaign funds, and
o f support fo r shady p o litlc ia n s .2 3
In e ffe c t, the c r it ic s argue, c o rre ct o r cozy re la tio n s h ip s can help to
erode both com petition and e ffe c tiv e q u a lity c o n tro l, which, in tu rn ,
leads to higher costs and lower q u a lity services.

Public o f f ic ia ls

w i ll be more lik e ly to make choices about p u b lic p o lic y , service d e li­
very, awards, and p rice based on the goals and needs o f the suppliers
ra th e r than the needs o f the re c ip ie n ts and the general p u b lic .

Such

kinds o f c r itic is m s , fo r example, have been leveled against the federal
Department o f Defense in it s crea tion o f a " m ilita r y - tn d u s tr ia l complex"
based on co n tra ctin g re la tio n s h ip s .

Most c r it ic s believe th a t the

proper re la tio n s h ip between the government and it s contractors depends
on the government agency c le a rly being in control o f the service and the
p riv a te s u p p lie r.

I t should set the goals, draw up the proper

22F itc h , op. c i t . ; Niskanen, op. c i t . ; John Hanrahan, Government
fo r Sale: Contracting Out--The New Patronage CAmerican Federation o f
S tate, County, and Municipal Employees, 137/).

14

procedures to encourage com petition, and make careful performance evalu­
ations in an o b je c tiv e manner.
A somewhat d iffe r e n t c r itic is m comes from those who are more con­
cerned about p riv a te autonomy, p a r tic u la r ly in n o n -p ro fit in s titu tio n s .
Their complaint about excessive government control is heard in regard
not only to the general lic e n s in g , re g u la tio n , and lim ita tio n o f the
24
p riv a te sector but also to the contractual re la tio n s h ip .
Neil G ilb e rt
summarizes how th is problem is viewed in the f ie ld o f social services:
A major concern from the perspective o f volun ta ry agencies
is the degree of autonomy they might have to f o r f e i t in gain­
ing access to p u b lic funds. The questions they ask are, How
much c o n s tra in t on p riv a te agency a c t iv it ie s w ill accompany
the re c e ip t o f government funds, and w ill p riv a te agency
a c t iv it ie s emerge u ltim a te ly as merely the instrum ent o f
government p o l i c y ? ”
This concern does not c a ll fo r the e lim in a tio n o f co n tra ctin g fo r human
services from p riv a te agencies, but i t does emphasize th a t the granting
o f government contracts may have some negative consequences in the long
run fo r some in s titu tio n s th a t are now being used to d e liv e r p u b lic , as
w ell as p riv a te , services.

One o f the real d i f f ic u lt ie s fo r government

agencies arises in d e lin e a tin g c le a r but not excessively r e s t r ic t iv e
s p e c ific a tio n s , g u id e lin e s, and regulations fo r p riv a te agencies to
fo llo w in Implementing p u b lic programs.
A th ir d re la te d problem w ith purchasing p u b lic services can be
noted—one th a t 1s re la te d to the two previous problems and is a major
concern in any area o f government.

The ever-present p o lit ic a l problem

^ N e il G ilb e rt, op. c i t . ; Eleanor B r il lia n t , "P riv a te o r P ublic:
A Model o f A m bigu itie s," Social Service Review (September 1973), pp.
384-96; Gordon Manser, "Im p lic a tio n s o f Purchase o f Services fo r Volun­
ta ry Agencies," Social Casework 55 (Ju ly 1974), pp. 421-7.
250p. c i t . , pp. 633-4.

15

o f a c c o u n ta b ility in p u b lic a d m in istra tio n is only magnified w ith the
a d d itio n o f non-governmental organizations carrying out the work o f
government.

In a con tractin g system whose s tru c tu re { i f i t can be said

to have one) is not a t a ll h ie ra rc h ic a l and where c le a r, s tra ig h t lin e s
o f a u th o rity are often absent, p o lit ic a l and legal re s p o n s ib ility or
a c c o u n ta b ility to a c h ie f executive o r le g is la tiv e body is said to be
d i f f i c u l t to e sta b lish and enforce.

C ritic s have charged th a t in almost

any type o f “service i t is usually more d i f f i c u l t fo r the p u b lic or pro­
gram re c ip ie n ts to hold contractors responsible and to encourage them to
react responsively than elected o f f ic ia ls and bureaucrats when the service proves to be u n sa tisfa cto ry.

26

This problem is often complicated

by the fa c t th a t n o n -p ro fit agencies can be torn in several d iffe r e n t
d ire c tio n s because o f th e ir need to be responsive to the various demands
o f the government, to th e ir boards o f d ire c to rs , to th e ir c lie n ts , and
to the community.

27

Yet a fo u rth d i f f ic u lt y w ith extensive co n tra ctin g can also a ris e ,
p a r tic u la r ly in human service a d m in is tra tio n , according to some p u b lic
p o lic y analysts.

28

Because o f a growing relia nce on the use o f p riv a te

org an iza tion s, the crea tion and implementation o f coherent p u b lic p o lic y
may become an even more form idable task fo r government agencies.

This

d i f f ic u lt y 1s p a r tic u la r ly great in some service areas ( e .g ., day care,

26

See, fo r example, Smith, op. c i t . ; Smith and D. C. Hague, eds.,
The Dilemma o f A cco u n ta b ility in Modem Government; independence vs.
Control (New York: St. M a rtin 's Press, 1971J.
27
28

B r i l l i a n t , op. c i t . , in p a rtic u la r, makes th is p o in t.

I b id . ; Bertram Beck, "Governmental Contracts With the N o n-P ro fit
Social Welfare C orporations," in Smith and Hague, ed s., op. c i t .

16

manpower programs, home health care) th a t u t il iz e a v a rie ty o f d iffe r e n t
p riv a te agencies w ith many o f the in s titu tio n s being concerned about
m aintaining t h e ir in d iv id u a l autonomy and a c c o u n ta b ility to o th e r actors.
Planning f o r and coo rdina ting the m u ltitu d e o f fragmented a c t iv it ie s o f
p riv a te service s u p p lie rs , according to th is view, only adds to the
already confused, overlapping, and c o n tra d ic to ry d iv is io n s w ith in gov­
ernment i t s e l f .
From q u ite a d iffe r e n t perspective comes another argument against
c o n tra c tin g ou t.

Defenders o f p u b lic employee u n io n iza tio n charge th a t

th is method o f service d e liv e ry is a way o f by-passing the m unicipal and
s ta te unions to use under-paid, non-union labor.

When governments

decide to switch from p u b lic employees to p riv a te firm s , union leaders
accuse the o ffen ding agency o f union-busting and p u ttin g p u b lic employ­
ees on w e lfa re .

A major o b s tru c tio n to some m u n ic ip a litie s in the

Northeast and Midwest engaging more e xte n sive ly in c o n tra c tin g out has
been th e ir p o li t i c a ll y powerful unions.

Recently, when the c it y manager

o f Benton Harbor, Michigan proposed la y in g o f f almost a ll p u b lic employ­
ees in the debt-ridden c it y government and rep la cing them w ith contracto rs , the most vociferous re a ctio n came from the municipal union.

29

(Needless to say, the manager and his plan did not la s t very long once
employees m obilized op po sitio n to c o n tra c tin g .)

To support t h e ir in te r ­

est in m aintaining the tr a d itio n a l mode o f service d e liv e ry , u n io n ists
30
are lik e ly to employ some o f the above c ritic is m s 1n t h e ir arguments.

29
W illia m F. Aste I I I , "Benton Harbor C ity Manager Proposes Laying
O ff Most Employees," The Benton Harbor Herald-Palladiurn (Feb. 3, 1981),
p. 1.
30

See Hanrahan, op. c i t .

17

C r itic s o f p riv a tiz a tio n have also responded to the argument that
co n tra ctin g helps to lim it government growth and in te rfe re n c e , w hile at
the same time strengthening the p riv a te sector and p riv a te organizations.
They claim th a t the government's ro le in the economy, in p riv a te organi­
zatio ns, in people's liv e s continues to grow— i t is ju s t th a t p u b lic
employees may be hired less fre q u e n tly to produce and d e liv e r the p u b lic
services.

Along w ith a flo u ris h in g government ro le comes a growing tax

burden f o r services and programs which governments believe they must
provide.

In her c r itiq u e o f using p riv a te in s titu tio n s fo r p u b lic

purposes, B r i l l i a n t concludes:
E ffe c tiv e ly , the mixing o f p u b lic and p riv a te a c t iv itie s
masks o r screens the growth o f government in te rfe re n ce
w ith the p riv a te sector and thereby makes I t more palatable
to average Americans. This illu s io n maintains the myth o f
less government, w h ile government a c tu a lly w h ittle s away
a t the essential substance o f p riv a te autonomy.31
These are some o f the major disadvantages and lim ita tio n s asso­
cia te d w ith c o n tra c tin g , according to a v a rie ty o f analysts.

This d is ­

cussion does not im ply, however, th a t co n tra ctin g out fo r services is a
uniform ly undesirable a lte rn a tiv e to bureaucratic supply.

Rather, we

are cautioned th a t the o p tim is tic p ic tu re painted by co n tra ctin g advo­
cates w ith in the p u b lic choice tr a d itio n may have a darker side.

Many

questions remain to be answered about implementing co n tra c tin g , many of
them revo lving around fundamental economic and p o lit ic a l issues.

310p. c i t . , p. 394.

CHAPTER I I

ADDITIONAL PERSPECTIVES ON CONTRACTING OUT:
MARKET IMPERFECTIONS AND COOPTATION

In the f ie ld o f p u b lic a d m in is tra tio n , only the p u b lic choice per­
spective has o ffe re d a th e o re tic a l foundation fo r the favorable view o f
co n tra ctin g out fo r services.

The c ite d c ritic is m s o f th is a lte rn a tiv e

to tr a d itio n a l methods o f service supply have la rg e ly come from obser­
vers o f p u b lic purchase, but these have not been well-grounded in theo­
r e tic a l approaches to the the general Issues surrounding the subject.
There are other in te lle c tu a l tra d itio n s in the social sciences th a t can
be brought to bear on th is discussion, however.

Two d iffe r e n t perspec­

tiv e s —one from the d is c ip lin e o f economics and the oth er from p o litic a l
science—o ffe r a useful framework fo r th in k in g syste m a tica lly about con­
tra c tin g .

They suggest various disadvantages th a t could be associated

w ith it s usage, and they p o in t to underlying problems which would have
to be overcome f o r it s successful implementation.
I.

Analysis o f the Pro-C ontracting Argument
Various p u b lic choice th e o ris ts have focused on the p o s itiv e

expectations o f co n tra ctin g out.

In p a rtic u la r , they argue th a t th is

innovation w i ll lead to more e f f ic ie n t ly provided services—th a t lower
costs (o r increased output) can be re a liz e d .

A dditional be n e fits o f

th is p ra c tice w i ll include b e tte r q u a lity services and a slowdown in
governmental growth.

But fo r these expectations to be re a liz e d , are
18

19

governmental growth.

But fo r these expectations to be re a liz e d , are

there not c e rta in necessary conditions th a t must be present?
I.

Conditions o f Contracting
Contracting advocates m aintain th a t the major b e n e fits o f co n tra c t­

ing a ris e out o f the m a rk e t-lik e com petition th a t is Introduced in to
p u b lic service p ro visio n .

When a government u n it decides to purchase a

service, monetary incentives are created fo r releva nt outside suppliers
to bid o r submit proposals fo r the co n tra ct.

Bidders/proposers must c a l­

culate not only the actual costs o f service p ro visio n fo r the s p e cifie d
services, but also the p rice o f services o f oth e r competing firm s .

Ac­

cording to the theory p u b lic choice scholars use, bidders w i ll be
encouraged to bid near the true costs o f production fo r the exact set o f
services desired by the government in order to obtain the c o n tra ct.

To

get a c o n tra c t, in p u b lic procurement parlance, the bidder must also be
viewed as responsive to the co n tra ct requirements and s p e c ific a tio n s as
well as responsible—being capable o f carrying through on the terms o f
the agreement.

Given responsive and responsible bidders, co n tra ctin g

advocates assume th a t awards w i l l usu ally be made to the lowest bidder,
whether fo r garbage pick-up , tre e trim m ing, o r employment services.
Only then would there e x is t an in ce n tive to keep costs to a minimum.
This simple model o f the co n tra ctin g process, however, depends
upon c e rta in key co n d itio n s.

Some o f these are im plied by the w rite rs

on c o n tra c tin g , but they must be made e x p lic it in order to understand
the lik e lih o o d o f a tta in in g the expected b e n e fits o f co n tra ctin g .

In

p a r tic u la r , three major conditions appear to be c r it ic a l to any con­
tra c tin g arrangements.

20
F ir s t , i t is c le a r th a t com petition is a necessary in g re d ie n t in
the c o n tra c tin g system, and in p a r tic u la r , two aspects o f com petition
are e s s e n tia l--c o m p e titio n in the environment and in c o n tra c tin g proce­
dures.

The service environment determines the a lte rn a tiv e s which can be

considered by the government u n it, as w ell as the c a lc u la tio n s made by
p o te n tia l c o n tra c to rs .

At le a s t two responsible and responsive indepen­

dent bidders (b u t p re fe ra b ly more) are required to produce a basis fo r
com petition.

I f no o th e r firm e x is ts to o f f e r i t s s e rv ic e s , what incen­

tiv e s does the s in g le bidder have to pare costs and provide high q u a lity
services?

And how can the purchasing u n it evaluate the proposed p ric e

and services when there is no method o f comparison?

(This task is p a r ti­

c u la rly problem atic when the government agency has never provided the
service i t s e l f . )
In a d d itio n , the procedures u t iliz e d by the government u n it must
promote, ra th e r than reduce, com petition.

Wide a d v e rtis in g , a c le a r and

complete s p e c ific a tio n o f the services re q u ire d , and the im p a rtia l con­
s id e ra tio n o f providers throughout the process are the prim ary methods
o f ensuring th a t purchasing services w i ll u ltim a te ly b e n e fit the consu­
mers and taxpayers.

Usually maximum u t i l i t y w i ll be re a liz e d when the

government has an adequate knowledge o f:

1) p o te n tia l service p ro v i­

ders, and t h e ir past performance; 2) the services themselves, e s p e c ia lly
as they re la te to the needs o f consumers; and 3) the methods o f service
d e liv e ry .

With th is in fo rm a tio n , those who w rite the s p e c ific a tio n s and

evaluate the s u p p lie rs ' bids/proposals w i ll understand what elements are
e s s e n tia l, p ra c tic a b le , and s u f f ic ie n t fo r good se rvice p ro v is io n .
The second major c o n d itio n f o r e f f ic ie n t c o n tra c tin g th a t is
assumed by c o n tra c tin g proponents is th a t c o n tra c tin g o f f ic ia ls w i ll be

21
ra tio n a l decision makers who are m otivated to adhere to the goal o f
maximizing cost savings, w ith adequate service performance.^

In d iv id u a l

p u b lic o f f ic ia ls f i r s t would be able to rank-order the various a lte rn a ­
tiv e s according to th is go al, w ith the in fo rm a tio n they have obtained
about co st, q u a lity , needs, past performance, e tc .

Then they would

s e le c t the best choice— the a lte rn a tiv e th a t w i l l re s u lt 1n the desired
services at the le a s t cost le v e l.
key elements:

This outcome, however, depends on two

1) the coiranon goal o f cost m inim ization w ith adequate

service p ro v is io n ; and 2) s u f f ic ie n t in fo rm a tio n to consider the major
a lte rn a tiv e s and to judge accu rate ly the a n tic ip a te d performance and
consequences o f each a lte rn a tiv e in terms o f th is goal.
This form o f ra tio n a l decision making lo g ic a lly should be u t iliz e d
in a t le a s t two c r it ic a l c o n tra c tin g de cisions— the choice between in house service supply and c o n tra c tin g o u t, and the choice among a lte rn a ­
tiv e outside pro vid ers.

I t is obvious th a t cost savings via c o n tra ctin g

can only be re a liz e d i f i t appears probable th a t outside sources would
lead to reduced government costs ( i . e . , outside co n tra cto rs should not
be used sim ply because they are a v a ila b le o r because p o litic ia n s may
b e n e fit by i t ) .
The t h ir d general c o n d itio n required by the c o n tra c tin g argument
is an e ffe c tiv e "watchdog" ro le by the government.

The co n tra ctin g

o f f ic ia ls should continuously m onitor c o n tra c to r service performance to
ensure th a t the a c t iv it ie s conform to the s p e c ific a tio n s o f the con­
tr a c t.

Where co n tra cto rs are reimbursed fo r th e ir c o s t, p a r tic u la r

^A dm ittedly, the goal o f cost reduction does not ne cessa rily
re q u ire a maximizing assumption. Conceivably, the expected outcomes
could be re a liz e d w ith s a tis fic in g behavior by o f f i c i a l s , in the
Herbert Simon t r a d itio n . But most o f the th e o re tic a l co n tra ctin g
lit e r a t u r e im plies a maximizing p rin c ip le . See James March and Simon,
O rganizations (New York: Wiley and Sons, 1958).

22

a tte n tio n must be paid to v e r ify in g expenditures—to prevent ille g a l
a c t iv it ie s and mismanagement o f funds.

O pp ortun ities should also be

provided f o r consumers o f the services to express t h e ir suggestions and
d is s a tis fa c tio n d ir e c t ly to the responsible government u n it.

These

m onitoring operations are c r i t i c a l f o r s p o ttin g p o te n tia l problems,
keeping c o n tra cto rs "h on est," and p ro vid in g tech nica l assistance to
co n tra cto rs when problems a ris e .

For human services (and any oth e r

types o f services where cause and e ffe c t re la tio n s h ip s are more uncer­
t a in ) , independent, o b je c tiv e evaluations are also necessary to de te r­
mine i f the services are e ffe c tiv e in meeting program o b je c tiv e s .

These

reviews o f c o s t, performance, and e ffe c tiv e n e s s c o n s titu te e sse n tia l
feedback in fo rm a tio n when con tracts are considered fo r renewals.

Only

by these means can the government be c e rta in th a t i t Is re ce ivin g the
kinds o f services i t de sire s.
This a n a lysis o f the three major co n d itio n s — com p etitio n, ra tio n a l
decisions to achieve cost reduction and e f f ic ie n t se rvice s, and an
e ffe c tiv e government watchdog ro le — lo g ic a lly leads to th is c ru c ia l
question:

How lik e ly is i t th a t these three co n d itio n s w i l l obtain in

the real w orld o f p u b lic bureaucracy?

Since the p o s itiv e expectations

about c o n tra c tin g appear to re s t on these assumptions, what w i ll occur
i f these co n d itio n s are not always present?

E ventually these questions

should be answered by thorough em p irica l study across a number o f ser­
vices in various government ju r is d ic t io n s .

As y e t, c o n tra c tin g advo­

cates have not considered the importance o f these c o n d itio n s , nor have
they examined them in th e ir research.
There a re , however, various scholars from the d is c ip lin e s o f
economics and p o lit ic a l science who suggest im portant ways in which the

23

real world may c o n flic t w ith the assumed, id e a lize d world o f pu blic
choice th e o ris ts .

For our purposes, these scholars can be placed in to

two groups on the basis o f c e rta in conmon themes in th e ir arguments.

To

f a c il it a t e references to them, I have labeled the two perspectives the
market im perfection perspective (from economics) and the cooptation
p
perspective (from p o lit ic a l science).
In what follow s I do not intend to describe f u ll y the a n a ly tic and
h is to ric a l bases o f these perspectives.

I w i ll h ig h lig h t th e ir major

arguments and then id e n tify some o f t h e ir conclusions th a t can be e xtra ­
polated to the subject o f c o n tra ctin g out.

While they have d iffe r e n t

f o c i, a ris e out o f q u ite d iffe r e n t contexts, and do not s p e c ific a lly
address the subject o f c o n tra c tin g , both o f these perspectives suggest
several ways in which the required conditions and, th e re fo re , the
associated b e n e fits may not be found in co n tra ctin g arrangements.
II.

The Economics o f Market Im perfection
The works th a t might be considered p a rt o f th is perspective are

extremely d ive rse , but they are commonly rooted in a longstanding e f f o r t
to get away from the id e a lize d components o f c la s s ic a l economics and
move toward a more s u ita b le framework fo r describing and exp la in ing the
r e a litie s o f economic behavior.^

A major th ru s t o f these scholars has

2

In doing t h is , I undoubtedly am placing together scholars who
would not see themselves as members o f a conmon "sch o o l," o ve rsim p lify
complex arguments, and make g e n e ra liza tio n s th a t may not accurately
represent any s in g le sc h o la r's c o n trib u tio n . This is an In e v ita b le
consequence o f any e n te rp rise which attempts to synthesize a complex,
diverse lite r a t u r e .
^Pioneering works in th is tr a d itio n are Edward Chairtserlin, The
Theory o f M onopolistic Competition (Cambridge: Harvard U n iv e rs ity
Press, 1933); Joan Robinson, The Economics o f Im perfect Competition
(London: Macmillan, 1933); John Von Neumann and Oskar Morgenstern, The
Theory o f Games and Economic Behavior (P rinceton: Princeton U n ive rsity

24

been to empahsize im perfections in the tr a d itio n a l model o f com petition,
p ric in g , Inform a tion , and automatic adjustments o f the market--market
fa c to rs which are believed to produce an e f f ic ie n t a llo c a tio n o f so c i­
e ty 's resources.

This economic model underlies much o f the p u b lic choice

tr a d it io n 's desire fo r market mechanisms in the supply o f p u b lic ser­
vices.
For th is a n a lysis, i t is most releva nt to examine two areas o f
supposed market im perfections—com petition and in fo rm atio n.

According

to th is perspective, com petition in most in d u s trie s tends to be monopo­
l i s t i c o r o lig o p o lis tic , i f i t can be described as com petition at a l l .
Decision-making w ith in them is not characterized by firm s ' automatic
adjustments to the demands, p ric e s , and com petition o f the marketplace;
ra th e r, i t is marked by market c o n tro l, interdependence, and in te ra c ­
tio n .

Consequently, prices are too high, output is too low, and

resources are a llo ca te d in e f f ic ie n t ly .

Thus, tra d itio n a l claims about

the v irtu e s o f p riv a te sector a c t iv it y and the unhindered marketplace
may not always be v a lid .
The perspective o f market im perfections also points out th a t
buyers in the marketplace fre q u e n tly have im perfect inform ation w ith
which to assess the products and services they wish to purchase.

Not

only is Inform ation lim ite d and c o s tly , but s e lle rs have many incentives
to d is tr a c t, obfuscate, and mislead consumers w ith th e ir p ric e s , pro­
duct v a r ie tie s , packaging, a d v e rtis in g , e tc.

Since consumers to a large

e xte nt depend upon s e lle r s ' Inform a tion , they may fre q u e n tly make unwise
decisions in the marketplace.

Press, 1947). Themes developed in these e a rly works have been elabor
ated on by various economists in the lib e ra l tr a d itio n .

25

Certain economists take th is problem one step fu rth e r.

They

question the cla s s ic a l economic view th a t tastes fo r p a r tic u la r products
and services are endogenous— th a t the consumer enters the marketplace
w ith a s e lf-d e fin e d idea o f which products and services s/he requires.
Instead, s e lle rs often use selected inform ation to mold consumer values
and preferences— thus fre q u e n tly crea ting "needs" where none existed
before.
Logical extensions o f th is perspective to co n tra ctin g out lead us
to question the major assumptions o f the p u b lic choice proponents o f
co n tra ctin g .

In many professional and technical fie ld s and in services

th a t require large i n i t i a l investments fo r spe cia lize d equipment, there
are often only one or two p o te n tia l firm s th a t could produce the desired
se rvice .

The Department o f Defense, fo r example, re g u la rly uses sole

source purchase procedures, o fte n because only one co n tra cto r can pro­
duce the sp e cifie d product o r se rvice .

Competitive market pressures

would c e rta in ly be minimal when the number o f p o te n tia l providers is so
lim ite d .

There is no compelling reason to believe th a t outside s u p p li­

ers w i ll necessarily provide services more e f f ic ie n t ly than bureaucratic
agencies.

Market c o n tro l, m onopolistic behavior, and the u n a v a ila b ility

o f a lte rn a tiv e s may e a s ily tra n s la te in to higher costs fo r taxpayers and
lower q u a lity services fo r consumers.

While 1n p rin c ip le the government

can replace u n sa tisfa cto ry suppliers and co n tra ct w ith more e f f ic ie n t
and e ffe c tiv e ones, th is option w i ll o fte n be absent.

Sunk con tractin g

costs and the need fo r service c o n tin u ity may even mean th a t the govern­
ment u n it may have l i t t l e

choice but to u t iliz e a p a rtic u la r su p p lie r.

Therefore, the problem o f service monopolies cannot sim ply be avoided

26

by re ly in g on the p riv a te se cto r, since the p riv a te sector i t s e l f may
not be marked by com petition among su p p lie rs.
Part o f the lack o f com petition in contracting out is due to the
fa c t th a t government services often have mainly p u b lic good c h a ra c te ris ­
tic s .

The problem is not simply th a t th is in h ib its the expression o f

in d iv id u a l demand, since government can step in to perform th is fun ction .
Rather, the problem is th a t there is often no independent fre e market
fo r supply purposes--the p riv a te sector is under-developed p re c is e ly
because demand is under-expressed.

When the government f i r s t a r tic u ­

la te s demand fo r a se rvice , th e re fo re , i t has no fu ll-fle d g e d in d u stry
to turn to and, as a re s u lt, can hardly reap the b e ne fits o f com petition
through co n tra ctin g .

Over tim e, it s demand and preference fo r p riv a te

supply encouraged the emergence o f an in d u stry which is , in e ffe c t,
governmentally created and dependent.

Reliance upon th is kind o f a

"p u b lic -p riv a te " in du stry may produce fa r less e ffic ie n c y and f le x i b i­
l i t y than the proponents o f co n tra ctin g expect.
Contracting out also requires a review process in which re le va n t,
accurate, and complete inform ation is essential fo r the government to
judge costs, performance, and effe ctive n e ss.

But the inform ation i t

requires f o r wise decisions is often d i f f i c u l t to o b ta in , fo r various
reasons, in c lu d in g :

o b je ctive inform ation is so c o s tly th a t only a

lim ite d amount can reasonably be purchased; service q u a lity and program
effectiveness are often d i f f i c u l t to define and measure; inform ation is
often c o lle c te d through contractors themselves and oth er organizations
th a t have many o p p o rtu n itie s fo r screening, b ia s, and in e p titu d e ; p r i­
vate contractors have incentives to shape inform ation about needs and
outputs to t h e ir own advantage.

Together, these sources o f

27

in form ational inadequacy suggest th a t the government may often make
unwise co n tra ctin g decisions.
The main p o in t o f th is a p p lic a tio n o f the market im perfection
perspective is th a t the p u b lic choice model o f co n tra ctin g is b u ilt on an
id e a liz e d economic foundation.

For various reasons, the conditions

th a t are assumed to e x is t to produce e f f ic ie n t c o n tra c tin g —e sp e cia lly
com petition and adequate in fo rm atio n—are not lik e ly to m a te ria liz e in
the real world.

As a re s u lt, the favorable expectations about co n tra ct­

ing w i ll o fte n be in jeopardy.
Ill.

The P o litic s o f Cooptation
While the perspective o f market im perfections has d e a lt w ith eco­

nomic m atters, the cooptation perspective developed in p o lit ic a l science
around p o lit ic a l concerns.

Like the economists, however, w rite rs th a t

can be considered as p a rt o f th is p o lit ic a l perspective also reacted to
the major paradigm o f th e ir d is c ip l ine—p lu ra l ism.

They did not accept

the p lu r a lis t s ' id e a lize d p ictu re s o f p o lit ic s as a means o f understand­
ing the in te re s t group system and i t s re la tio n s h ip w ith government.

A

reasonable extension o f th is perspective to co n tra ctin g conditions
d o ve ta ils n e a tly w ith the economic perspective to produce s a lie n t
caveats to the co n tra ctin g model.
In p a r tic u la r , these p o lit ic a l s c ie n tis ts challenged the p lu r a lis t
assumptions th a t 1) In te re s ts form spontaneously and n a tu ra lly ; 2) th a t
there is a natural balance o f in te re s ts represented before the govern­
ment; and 3} th a t government acts as a n e u tra l, mechanical referee o f

28

a c tiv e in te re s ts in so cie ty.

4

This perspective, e s p e c ia lly as a r tic u ­

lated by Theodore Lowi and Grant McConnell, believes th a t d iffe r e n t seg­
ments o f government tend to be "coopted" o r c o n tro lle d by those
in te re s ts which are most successful in organizing and a r tic u la tin g th e ir
in te r e s ts .
For the c o o p ta tio n is ts , some in te re s ts have inherent advantages
over others in achieving organized p o lit ic a l expression.

Voluntary

associations are more lik e ly to form around the intense m ate rial in te r ­
ests o f r e la tiv e ly few producers, i t is claimed, than around the more
d iffu s e in te re s ts o f many consumers.

In co n tra st to the w ell-organized

in te re s ts o f business, la b o r, a g ric u ltu re , and the professions, a range
o f broader social in te re s ts ( e .g ., concerning consumers, women, the
environment) have long struggled to achieve membership le ve ls and fin a n ­
c ia l resources th a t come nowhere close to re fle c tin g t h e ir tru e support
in society as a whole.
These biases are compounded, co o p ta tio n is ts argue, by the fa c t
th a t the policy-m aking process is n e ith e r com petitive nor t r u ly open—
as posited by p lu r a lis ts .

Because o f th e ir preponderance o f valuable

resources—votes, money, in fo rm a tio n , p o lit ic a l support, a d m in istra tiv e
cooperation— the producer groups become the favored in te re s ts in th e ir
"tria n g u la r" re la tio n s h ip s w ith c e rta in key le g is la tiv e committees and
a d m in is tra tive agencies.

R elationships in the "iro n tria n g le " tend to

4The major works in th is tr a d itio n are E. E. Schattschneider,
The Semi-Sovereign People (New York: H o lt, Rinehart and Winston, 1960);
Grant M cC o n n e ll.P riva te Power and American Democracy (New York: Knopf,
1966); Henry S. K a rie l, The Decline o f American P lu ralism (S tanford:
Stanford U n ive rsity Press, 1961); W illiam E. Connolly, e d ., The Bias o f
P lural!sm (New York: Atherton, 1969). The o rig in a l term and phenome­
non o f cooptation was explained in a c la s s ic so c io lo g ic a l work, P h ilip
S elznick, TVA and the Grass Roots (Berkley: U n ive rsity o f C a lifo rn ia
Press, 194?T

29

be coopt1ve--each o f the in sid e rs gains through re g u la rize d , supportive
re la tio n s h ip s w ith each o f the oth er like-m inded p a rts , and through
in s u la tio n from outside in te rfe re n c e .

In the a d m in is tra tiv e process,

cooptlve p o litic s is seen as even more pervasive and deeply entrenched.
Specialized In te re s t groups often have so much to o ffe r th a t they are
fo rm a lly incorporated in to agency decision making, re lie d upon to per­
form governmental fu n ctio n s, and e s s e n tia lly , delegated p u b lic a u th o rity .
Noticeably absent in a ll o f th is are inputs from those d iffu s e social
in te re s ts th a t have d i f f ic u lt y organizing and gathering resources.
From th is perspective, co n tra ctin g fo r services is lik e ly to
create more problems than 1t solves.

To begin w ith , c o o p ta tio n ists

would p re d ic t th a t p o te n tia l or cu rre n t contractors are f a r more a ctiv e
and organized than the re c ip ie n ts o f p u b lic services, or those who pay
fo r them— the taxpayers.

Thus, the inputs from the p riv a te sector about

service needs, methods o f d e liv e ry , and the r e la tiv e m erits o f p riv a te
vs. in-house pro visio n would be h e a vily weighted in th e ir fa vo r.

In the

"com petition" to land and re ta in government c o n tra cts, moreover, in d iv i­
dual agencies and firm s have every in ce n tive to employ t h e ir resources
s tr a te g ic a lly w ith bureaucrats and le g is la to rs to exclude com petitors
and gain p riv ile g e d , regularized roles in the con tractin g system.

They

may also tr y to minimize any ris k s o f com petition by cooperating among
themselves.

With c o n tra c tin g , in fa c t, the incentives fo r non­

com petitive p o litic s are even greater than they might otherwise be,
because many o f the sup plie rs become dependent upon government contracts
fo r t h e ir very s u rv iv a l.

Unless they fin d a special place in the con­

tra c tin g system, they are condemned to a year-by-year in s e c u rity .

30

For th e ir p a rt, bureaucrats and le g is la to rs cannot help but see
the o p p o rtu n itie s fo r developing m utually b e n e fic ia l re la tio n s h ip s w ith
co n tra cto rs.

L e g isla to rs have strong incentives to a s s is t those contrac­

to rs th a t have something special to o ffe r , e ith e r

d ir e c tly (e .g .,

p o lit ic a l support) o r in d ir e c tly (e .g ., economic advantage to a le g is la ­
tiv e d i s t r i c t ) .

Bureaucrats can give contractors special considerations

in s o lic ita tio n s and awards—and thereby achieve p r e d ic ta b ilit y , cooper­
a tio n , and p o lit ic a l support f o r th e ir program areas.

I f desired, they

can also be afforded the fu tu re o p p o rtu n itie s o f p riv a te sector employ­
ment in the very firm s o r agencies to which they once awarded contracts.
This in ce n tive s tru c tu re generally means th a t, lik e the contrac­
to rs , p u b lic o f f ic ia ls w i ll p re fe r to elim in a te tru e com petition in the
co n tra ctin g process.

I f they can, they w i ll not design procedures th a t

promote com petition, o b je c tiv it y , and fa irn e s s .

And co n tra ctin g deci­

sions w ill not be characterized by o f f ic ia ls seeking to lower costs,
improve service performance, and slow down government growth.

They

have few incentives to make these th e ir goals; they have many incentives
to promote th e ir own personal goals through co n tra ctin g .

Thus, 1t is

not s u rp ris in g , as Smith notes, th a t federal contracts are "no longer
predominantly set by com petitive bidding as in an e a r lie r and sim pler
day but are now to an increasing extent negotiated between the govern­
ment and the c o n tra c to r."5

Senator Howard Metzenbaum (D-0h1o) rece ntly

estimated th a t in the Department o f Defense, approximately 90 percent
o f a l l contracts are not co m p e titive ly bid —even when more than one

5Bruce L. R. Smith, "A c c o u n ta b ility and Independence in the Con­
tr a c t S ta te ," in Smith and D. C. Hague, ed s., The Dilemma o f Accounta­
b i l i t y in Modem Government (New York: St. M a rtin 's Press, 1§71J.

31

responsible and responsive s u p p lie r is a v a ila b le .

He claimed th a t sole

source procurement has become the standard because o f frie n d s h ip between
DOD o f f ic ia ls and c o n tra c to rs , as w ell as loopholes in the federal
procurement laws.

In his o p in io n , these con tracts have been the major

cause o f waste, in e ffic ie n c y , and budget growth in DOD.®
The cooptive environment in which con tracts are awarded also con­
d itio n s the review process.

O ffic ia ls have few in ce n tive s to s c ru tin iz e

compliance and expenditures o r to conduct meaningful evaluations o f
service performance and program e ffe c tiv e n e s s .

These types o f informa­

tio n are not u t iliz e d fo r most c o n tra c tin g decisions anyway, since
government actors o fte n may not choose su p p lie rs p rim a rily on the basis
o f these technical fa c to rs .

For o th e r reasons, in e f f ic ie n t su p p lie rs

can be p re fe rre d to more e f f ic ie n t and e ffe c tiv e a lte rn a tiv e s u p p lie rs .
Any in c e n tiv e they have to c o lle c t and employ e va lu a tive data has less
to do w ith t r u ly o b je c tiv e eva lu atio n than w ith co n stru ctin g j u s t i f i c a ­
tio n s f o r decisions th a t are made on p o lit ic a l grounds.
ment o v e rsig h t does not check cooptive p o lit ic s .

Thus, govern­

I t simply co n trib u te s

to the broader cooptive p a tte rn .
A ll o f th is suggests th a t c o n tra c tin g can be a counterproductive
response to government in e ffic ie n c y and growth.

C ontracting a u th o ritie s

are not in te re s te d in promoting the goals o f co n tra ctin g advocates--at
le a s t not in p ra c tis e in th e ir own l i t t l e

bastions o f power.

Nor are

they concerned w ith designing and implementing com petitive procedures
or thorough review methods.

They are in te re s te d in m aintaining e x is tin g

re la tio n s h ip s o f mutual advantage and promoting new ones.

These narrow

®Metzenbaum, NBC T e le visio n in te rv ie w , Today, May 21, 1981.

32

in te re s ts are f a c ilit a t e d by more money, more programs, and resistance
to any changes in funding le v e ls , service p r io r it ie s , and con tractin g
methods.
Conclusion
Is co n tra ctin g out a via b le s o lu tio n to the re la te d problems o f
government in e ffic ie n c y , in e ffe c tiv e n e s s , and growth?

Contracting

supporters in the p u b lic choice tr a d itio n have ge ne rally answered th is
question in the a ffirm a tiv e .

The two perspectives introduced in th is

chapter, however, lead to a d iffe r e n t response.

Taken together, the

economics o f market im perfection and the p o litic s o f cooptation suggest
th a t the various conditions assumed by co n tra ctin g adherents are u n lik e ­
ly to obtain in the real w orld.

Consequently, the p o s itiv e expectations

o f co n tra ctin g w ill not m a te ria lize e ith e r.

In th is view, con tractin g

could even exacerbate the already-serious problems o f government.
Choosing between the two sides a t th is p o in t is d i f f i c u l t to do-and may not even be de sira ble .

By themselves, each perspective may not

be an accurate model o f a complex r e a lit y , both w ith in and outside
co n tra ctin g systems.

Each has, nonetheless, something to co n trib u te to

the study o f co n tra c tin g .

Each o ffe rs a d iffe r e n t way o f looking at

c o n tra c tin g , based on the assumption o f c e rta in d is tin c tiv e conditions
in the world.

Where those conditions p re v a il, the corresponding per­

spective w i ll be most accurate in p re d ic tin g human behavior and govern­
ment outcomes.

To achieve the b e n e fic ia l e ffe c ts o f c o n tra c tin g , a t

le a s t three conditions appear necessary:

com petition, both in the

environment and in procedures; incentives fo r decision makers to value
e ffic ie n c y and e ffe ctive n e ss; and an e ffe c tiv e review process fo r
expenditures, performance, and outcomes.

The perspectives o f market

33

im perfections and cooptation suggest the negative consequences th a t
r e s u lt when these con dition s are a lte re d o r absent.
What is most necessary a t th is p o in t is em p irica l research-research which examines not only the outcomes o f c o n tra c tin g , but which
also addresses the co n d itio n s o f c o n tra c tin g .
is research which:

Of p a r tic u la r importance

1) evaluates whether the three major co n d itio n s

assumed by c o n tra ctin g proponents do occur in various se rvice areas;
2) explores the fa c to rs associated w ith these key c o n d itio n s ; 3) exa­
mines the linkages between these co n d itio n s and the outcomes o f con­
tr a c tin g ; and 4) determines i f o th e r con dition s e x is t which promote the
e ffic ie n c y goals o f c o n tra c tin g o r compensate f o r f a ilu r e in the condi­
tio n s .

These areas o f research have not been touched on in the

c o n tra c tin g lite r a t u r e .

Yet they promise to allo w us to id e n tify

s u ita b le and unsuitable contexts fo r u t il iz in g c o n tra c tin g , and perhaps
in some cases, to transform the la t t e r in to the form er.
In th is d is s e rta tio n , I attem pt to study these fo u r areas o f
c o n tra c tin g , but w ith in a lim ite d s e ttin g .

In th is way, I hope to

c o n trib u te something to our understanding o f a very complex su b je c t,
not only in terms o f how c o n tra c tin g systems work in two program areas,
but also how the key con dition s (o r t h e ir absence) help o r hinder the
attainm ent o f c o n tra c tin g goals.

CHAPTER I I I
METHODS OF RESEARCH

The previous chapter has la id the groundwork fo r understanding
p u b lic service co n tra ctin g from new perspectives.

This chapter

explains the methods used to study co n tra ctin g w ith in a more lim ite d
focus.

The in te n t o f th is d is s e rta tio n is n o t, f i r s t o f a l l , to " te s t”

the three models fo r general accuracy o f p re d ic tio n .

That is a fa r too

ambitious o b je c tiv e a t th is stage o f the lite r a t u r e .

Instead, the p r i­

mary purpose o f my work has been to develop the three perspectives and
th e ir s p e c ific a p p lica tio n s to the study o f co n tra ctin g .

Next in impor­

tance is the use o f em pirical observation to evaluate which o f the
various conditions and expectations associated w ith these approaches are
f u l f i l l e d in e x is tin g con tractin g systems and service areas.
tio n is :

The ques­

Do these perspectives and th e ir expectations have any re le ­

vance to the "re a l world"?
I.

Goals o f the Research
Although any number o f research designs, methods, and cases could

be used, three major goals guided the se le ctio n o f appropriate ways to
answer th is question.

F ir s t , I wish to broaden the study o f contracting

to Include services which have not y e t been examined 1n depth by other
scholars.

Refuse c o lle c tio n e sp e c ia lly has been q u ite thoroughly

studied, w ith a few other services rece iving somewhat less coverage, as
in dicated in Chapter One.

At th is p o in t there is a great need to go
34

35

beyond th is and expand in to new areas to determine i f con tractin g bene­
f i t s are s im ila r across a range o f services.

In a d d itio n , moving in to

q u a lita tiv e ly d iffe r e n t service areas may shed necessary lig h t on the
a p p lic a b ility o f co n tra ctin g where measuring co sts, outputs, and out­
comes is more complex and form idable.
The second goal o f th is work, which w i ll also expand research
fr o n tie r s , is to focus on a d iffe r e n t le ve l o f government besides th a t
o f the c it y —a u n it which has been the s ite o f most em pirical treatments.
Other governments, in clu d in g sta te s, counties, and regions, provide many
services to consum er/citizens through co n tra cts.

They o ffe r a d d itio n a l

se ttin g s in which to study purchased services, w ith some in te re s tin g
intergovernmental and bureaucratic features not found in most o f the
municipal stud ies.
The th ir d goal o f th is research is to consider not only the fin a n ­
c ia l costs o f co n tra ctin g o u t, but also oth e r s ig n ific a n t costs and
be ne fits associated w ith the p ra ctice and it s procedures.

Although

lower cost has been one o f the major s e llin g points o f co n tra ctin g pro­
ponents, other fa cto rs should be included in any thorough an alysis.

In

actual p u b lic decision making, cost is only one o f several c r it e r ia
used by ad m inistrators and p o litic ia n s to evaluate the u t i l i t y o f any
given change.

Some o f the a d d itio n a l considerations are suggested by

the three approaches and t h e ir expectations; others w i ll be uncovered 1n
the research e n te rp rise .
While achieving a ll three o f the goals completely in th is d isse r­
ta tio n is not po ssible, a t le a s t I hope to make a unique c o n trib u tio n to
the lite r a t u r e —not only In the th e o re tic a l presentation, but also in
the research choices and re s u lts .

Consequently, the analysis o f the

36

fin d in g s w i ll lead to the s p e c ific a tio n o f some o f the con dition s under
which each perspective could be expected to operate, as w ell as those
con dition s under which c o n tra c tin g might be considered a v ia b le p u b lic
management a lte rn a tiv e to tr a d itio n a l modes o f bureaucratic service d e li­
very.

My o v e rrid in g in te re s t as a p o lit ic a l s c ie n tis t is not so much in

any p a r tic u la r case o r service but in the comparative study o f d iffe r e n t
cases and services to produce e ve n tu a lly some g e n e ra liza tio n s and
recommendations fo r p u b lic decisionmakers as w ell as academicians.
II.

Case S election
With the above goals in mind, I chose to study s ta te le v e l pro­

grams in the areas o f human se rvice s.

The lit e r a t u r e o f p u b lic adminis­

tr a tio n and p o lit ic a l science has la rg e ly ignored the many diverse types
o f human se rvice s, and th is has extended to the c o n tra c tin g works as
w e ll.*

Yet the human services comprise a growing and complex segment o f

government a c t iv it y th a t requires rigorous examination by p o lit ic a l
s c ie n tis ts .

Since many programs 1n th is large p o lic y area are adminis­

tered from the s ta te and county le v e ls o f government, the s e le c tio n o f a
s it e n a tu ra lly follow ed from the choice o f services.
The s e le c tio n o f the s ta te o f Michigan as the s ite o f research was
less a th e o re tic a l choice than a p ra c tic a l one, considering the propin­
q u ity o f the s ta te government to ny residence.

A ra tio n a le can be con­

s tru c te d fo r studying services in Michigan, however.

In many respects,

Michigan is a "progressive" s ta te , p a r tic u la r ly in it s w illin g n e s s to
consider innovations in procedures and p o lic ie s .

I t has seen a rapid

*A noteworthy exception is Martha D e rth ick, U n con tro lla ble Spend­
ing fo r Social Services Grants (Washington, D.C.: Brookings, 1975).

37

growth in sta te services in the la s t decades, w ith much o f th is occur­
rin g in human services.

Only re ce n tly has the s ta te government been

plunged in to such a downturn due to the s ta te 's economic depression that
i t has been forced to reconsider some o f it s e a r lie r choices to provide
generously fo r many d iffe r e n t human needs.

Generally the s ta te govern­

ment and it s employees are viewed by c itiz e n s and scholars as honest,
responsive, and capable, e s p e c ia lly as compared w ith some o f the neigh­
boring governments.

Michigan s ta te government is an in te re s tin g place

to study human service c o n tra c tin g , since a wide range o f services are
provided, many by outside s u p p lie rs ; ad m in istrators are q u ite profes­
sional about th e ir work; and c u rre n tly government is c a re fu lly s c r u tin iz ­
ing what i t does, how, and why.

As a re s u lt, interviewees were found to

be generally in s ig h tfu l, in t e llig e n t , and c r it ic a l o f the system.
Michigan may no t, th e re fo re , be considered a ty p ic a l s ta te ; y e t i t can
be viewed as a good choice to study simply because i t is a large and
im portant sta te .
s ta te .

Human services a ffe c t many c itiz e n s throughout the

The systems o f co n tra ctin g are usually complex.

And Michigan

and it s o f f ic ia ls are ofte n seen as leaders in th e ir p o lic y areas— in
p o s itio n s to influence the spread to innovations to other sta te s.

The

only claim fo r g e n e ra liz a b ility o f Michigan to oth er states derives from
the fa c t th a t the programs chosen fo r study are la rg e ly funded by feder­
al monies, and th e re fo re , are subject to s p e c ific federal rules and
re g u la tio n s , as are a ll oth er states receiving funds under these pro­
grams.
In most sta te and community governments, not a ll desired goods and
services are made o r performed by p u b lic employees o f the p a rtic u la r
agency responsible fo r p ro v is io n .

Many goods and some services are

38

purchased from o th e r sources.

An understanding o f these areas o f p u b lic

procurement is o fte n hampered by term inology and a lack o f contextual
in fo rm a tio n .

Therefore, what fo llo w s is a b r ie f explanation o f the

o u tlin e s o f p u b lic purchase a t the s ta te le v e l, w ith some a p p lic a tio n to
both lo c a l and federal procurement.

With these c la s s ific a tio n s , the

reader should be able to understand b e tte r the uniqueness o f c o n tra ctin g
out in human services.
At le a s t seven major types o f purchases take place 1n s ta te govern­
ment.
1)

They are as fo llo w s , w ith appropriate examples from Michigan:

Goods—e .g ., food, o ffic e equipment, cars
--in c lu d e s purchase fo r government use and f o r s p e c ifie d pu blics

2)

Professional services—e . g . , a rc h ite c ts , management co n su lta n ts,
program evaluators
— f o r government use

3)

Maintenance se rvice s—e . g . , p a in te rs , ja n ito r s , fum igators
— fo r s ta te b u ild in g s and property

4)

C o n s tru c tio n --e .g ., highways, p u b lic b u ild in g s , half-w ay houses
- - f o r government and p u b lic use

5)

Personal services f o r clie n ts/p ro g ra m re c ip ie n ts —e . g . , day care,
chore se rvice s, fo s te r care f o r c h ild re n

6)

P a rt-tim e medical services—e . g . , ph ysician s, speech th e ra p is ts ,
psychologists
— fo r c lie n ts , program re c ip ie n ts , convicts

7)

Programmatic services—e . g . , employment and tr a in in g , money manage­
ment, p ro te c tiv e services
— f o r clie n ts/p ro g ra m re c ip ie n ts

39

In Michigan, the la s t three types o f services are provided to c lie n ts in
what is g e n e ra lly termed the "human s e rv ic e s ."
prim ary types o f outside agents are used:

W ithin th is area, fiv e

1) o th e r s ta te agencies and

departments; 2) lo cal p u b lic agencies, such as lo c a l school d is t r ic t s ,
c it y and county departments, regional agencies; 3) n o n -p ro fit p riv a te
agencies; 4) p ro p rie ta ry (p ro fit-s e e k in g ) p riv a te agencies; and 4)
in d iv id u a ls .
The legal arrangements by which services are purchased and paid
fo r are complex a t any le ve l o f government.

The term inology varies from

place to place, but in Michigan, two major methods are used:

1) agree­

ments, in which the c lie n t (s e rv ic e user) and approved o r licensed pro­
v id e r work out d e ta ils o f service d e liv e ry , and e ith e r the c lie n t pays
the p ro vid e r w ith funds supplied by the government u n it, o r the
government d ir e c tly reimburses the p ro vid e r ( e .g ., day care, home chore
s e rv ic e s ); and 2) c o n tra c ts , in which the government chooses the p ro v i­
der and draws up a s p e c ific document o u tlin in g it s requirements— type o f
s e rv ic e , number o f u n its to be d e liv e re d , bookkeeping system, e tc .

In

some instances, the p ro vid e r in turn sub-contracts fo r actual d e liv e ry
o f some o r a l l services to program re c ip ie n ts w ith o th e r agencies or
in d iv id u a ls .
Both o f these types o f agreements and con tracts should be d is t in ­
guished from g ra n ts-in -a 1 d 1n which most governments are Involved.
These terms have been d i f f i c u l t to exp la in p re c is e ly , even though they
were re c e n tly defined by the Federal Grant and Cooperative Agreement
Act o f 1977 (P .L. 95-224).

U nlike 1n the p u b lic purchase o f goods and

se rv ic e s , in grants the re c ip ie n ts o f the funds— governments, u n iv e rs i­
tie s , n o n -p ro fit agencies—de fine what they w i l l do w ith the money,

40

w ith in the given guid eline s.

Thus, grants are a form o f assistance fo r

u n its engaged in a c t iv itie s judged w orthw hile by the gra nto r.

The

grantee is not usually bound to a s p e c ific output o f goods, tasks, or
services by the source o f the funds, as are con tractors.
In th is d is s e rta tio n , the focus w i ll be on human service contracts
which sta te government makes w ith p riv a te agencies.

Contracting out

often takes place between two p u b lic agencies, but because o f the theore­
tic a l perspectives developed in the previous chapters—i . e . , p u b lic p riv a te re la tio n s h ip s —my a tte n tio n has been drawn to the p riv a te sector
s u p p lie rs , p a r tic u la r ly the n o n -p ro fit agencies, since p ro p rie ta ry firm s
in a c tu a lity d e liv e r few services to c lie n ts fo r the government.

Speci­

f i c programs w ith in two human service departments were chosen fo r in depth examination.

These programs o ffe r a v a rie ty o f services w ith in

two d iffe r e n t departmental environments, and, as a r e s u lt, have d i f f e r ­
ing procedures governing the co n tra ctin g process.

Because o f th is work's

attem pt to suggest ge ne ralizatio ns about c o n tra c tin g , some v a rie ty in
the cases, se rvice s, and procedures is v it a l.
A.

The Department o f Social Services (D.S.S.)
DSS aid to the poor and near-poor may be put in to three categories

—cash assistance (AFDC, d ir e c t r e l i e f ) , in -k in d payments fo r goods and
services (Medicaid, food stamps, subsidized housing), and social ser­
vices.

Of these, not Inclu ding a d m in istra tive overhead, social services

u su ally make up less than ten percent o f the to ta l Michigan DSS expendi­
ture s.

And a ll purchased services from p riv a te sup plie rs have been

approxim ately 50 percent o f th a t amount.

Despite the r e la tiv e ly small

amounts o f money involved, purchased so cia l services have been a

41

p o lit ic a lly and progranm atically im portant p a rt o f w elfare e ffo r ts at
a ll le ve ls o f government.
Most o f the social service programs 1n D.S.S. are funded through
T it le XX o f the federal Social S ecurity Act signed in to law in 1975
(P.L. 93-647), replacing e a r lie r , somewhat s im ila r , t i t l e s .

T it le XX

authorizes funding under a matching formula o f 75 percent federal and
25 percent s ta te fo r social services programs to low-income In d iv id u a ls
and fa m ilie s fo r the primary purpose o f reducing dependency.

Since the

la te S ix tie s several o f the approximately 15 general services w ith in
e ig h t programs have been purchased from outside agencies and in d iv id u a ls
under e ith e r agreements o r contracts.
financed in two d iffe r e n t ways:

Purchased services may be

1) s tra ig h t purchase, in which DSS pays

providers w ith federal and sta te (appropriated to DSS) funds, and 2)
donated funds purchase, in which p u b lic o r p riv a te donations are made to
DSS fo r one o f the services and are used as the match fo r the federal
funds.

Donated funds may come from oth er sta te and lo cal p u b lic agen­

c ie s , and n o n -p ro fit and p ro p rie ta ry p riv a te agencies.

This method is

more fre q u e n tly employed fo r contracted services, and th e re fo re , w ill
be examined more clo se ly.
Although DSS has been purchasing services from various sources fo r
several decades, during the e a rly Seventies DSS co n tra ctin g increased
d ra m a tica lly.

C e rta in ly the expansion o f the w elfare caseload and the

s ta te o f the Michigan econoiqy have contributed to the growth; but proba­
b ly more im portant was the a v a ila b ilit y o f open-ended federal funds.
long as money was put up by the s ta te s , the federal government had to

As

42

match almost any type o f service a t the 75 percent le v e l.

2

The incen­

tiv e s fo r ra p id expansion o f sta te social services to receive such large
amounts o f federal monies meant th a t purchase was promoted, since i t was
the quickest way to increase federal p a r tic ip a tio n .

A "cap" was placed

on the federal matching funds in 1972, but Michigan’ s DSS was not
s e rio u s ly a ffe cte d u n t il the 1975-76 fis c a l yea r, w ith the passage o f a
more s trin g e n t T it le XX, the Implementation o f HEW re g u la tio n s , and the
expenditures meeting M ichigan's fix e d li m it on federal funds.
The major development in the Michigan DSS since then has been the
d e c e n tra liz a tio n o f co n tra ct decisionmaking to the county departments o f
social services.

In the S ix tie s and e a rly Seventies the trend had been

toward gre ate r control by the sta te DSS to promote gre ate r u n ifo rm ity in
services.

This was reversed in the la te Seventies.

Instead o f the

s ta te program o ffic e s being in charge o f co n tra ctin g fo r a ll areas in
the s ta te , the counties began to regain more re s p o n s ib ility f o r assess­
ing needs, deciding which services to purchase, se le ctin g co n tra cto rs ,
and w ritin g up the con tracts.

As a r e s u lt, the changing re la tio n s h ip

between the s ta te and county departments (as w ell as those between sta te
and fe d e ra l) emerged as y e t another va ria b le in th is study.
Because o f the complexity o f the many programs and services pro­
vided by M ichigan's DSS, I decided to examine contracted services in
three major areas—the Basic A d u lt, Family, and Community programs.
This elim inates c h ild , delinquent, and p ro te c tiv e services which are
not as fre q u e n tly provided by purchase o f service under contracts and
donated funds.
2

on HEW.

See D erthick fo r the federal p o lit ic a l background and the e ffe c t

43

B.

The Department o f Labor (D .O .L.)
The c o n tra c tin g procedures in DOL o f f e r a necessary c o n tra s t to

those in DSS» even though several im portant s im ila r itie s e x is t.

I chose

to study one programmatic area w ith in DOL in the Bureau o f Employment and
T ra in in g (BET).

Under the revised federal Comprehensive Employment and

T rain in g Act o f 1978 (CETA), two special s ta te governor's and grant
programs were established in T itle s I I and IV.

Even though these grants

are separate from those provided d ir e c t ly to lo c a l (u s u a lly county-based
in Michigan) prime sponsors o f CETA programs from the fed era l DOL, many
s ta te contracts are made w ith the prime sponsors to d e liv e r o r sub­
c o n tra c t f o r c e rta in services.

In a d d itio n , the p riv a te secto r is

designed to be an in te g ra l p a rt o f the CETA programs a t a ll le v e ls in
both planning and d e liv e rin g se rvice s.
governor's grants are c le a r.

The p o lit ic a l reasons fo r the

In the S ix tie s and e a rly Seventies, many

governors resented the federal government bypassing the sta te s to o ffe r
assistance to lo c a l governments and s p e c ia lly -c re a te d org an iza tion s in
many p o lic y areas.

As a re s u lt o f the N ational Governors' Conference's

Congressional lobbying e f f o r t s , the states received grants fo r CETA
programs through which they could more re a d ily coordinate employment
p o lic ie s and se rvice s.
Although the programs in DSS and DOL are both la rg e ly fe d e ra lly
funded w ith the purpose o f helping people to change or cope w ith th e ir
circum stances, the o rg a n iza tio n a l environments, c o n tra c tin g procedures,
and department goals m anifest some in te re s tin g d iffe re n c e s .

In addi­

tio n , the procedures fo r the two t i t l e s ' con tracts d i f f e r in c e rta in key
respects.

Probably one o f the most s a lie n t d iffe re n ce s between the two

departments is th a t BET con tracts are a ll negotiated a t the s ta te ,

44

ra th e r than county, le v e l.

State o f f ic ia ls have placed a three-year

l i m it on most co n tra c ts , since many are fo r demonstration purposes.
in BET, donations are not required f o r most c o n tra cts.

And

Under the T it le

IV youth g ra n ts, however, co n tra cto rs must match some o f the to ta l
amount in the second and th ir d years o f the c o n tra c t.

While a ll o f

these CETA funds are a llo ca te d among the states by use o f a formula not
re q u irin g a match, M ichigan's BET has decided to re q u ire an Increasing
match to encourage the co n tin u a tio n o f successful p ro je c ts w ith lo ca l
funds and support.
III.

Methods o f Study
Three major types o f methods were employed in studying the

selected DSS and DOL programs.
lowing order:

These were conducted roughly in the f o l ­

1) p re lim in a ry in te rvie w s w ith o f f ic ia ls in fo u r sta te

departments, 2) a study o f p e rtin e n t governmental documents, and 3) a
series o f in-depth in te rvie w s.
The f i r s t wave o f In te rv ie w in g established the "la y o f the la n d "-the e xte n t and character o f s ta te c o n tra c tin g , sta te and federal laws
and reg ulatio ns governing the process, major problem areas, d iffe re n ce s
among the various departments, the types o f purchased se rvice s.

To get

th is in fo rm a tio n , I interview ed about twenty s ta te o f f ic ia ls e ith e r in
fa c e -to -fa c e s e ttin g s o r over the telephone in a very open-ended form at.
These o f f ic ia ls also assisted me 1n the second phase o f research by
pro vid ing me w ith many documents p e rta in in g to both c o n tra c tin g and the
programs under in v e s tig a tio n .

Of p a r tic u la r In te re s t was a le g is la tiv e

evaluation study o f DSS c o n tra c tin g ,

3

and the cu rre n t annual plans f o r

House Fiscal Agency, Purchasing Social Services Under T it le XX
in Michigan (1976), pp. 4-5.

45

T it le XX (DSS)^ and the Governor's special employment and tra in in g
grants
The th ir d research phase Involved 1n-depth Interview s w ith two
types o f In d iv id u a ls —sta te (and 1n the case o f DSS, lo c a l) contracting
o f f ic ia ls and p riv a te con tractors o r service providers.

The choice o f

the standardized in te rvie w schedule as the major approach to gathering
data was la rg e ly determined by the th e o re tic a l and substantive goals o f
the e n te rp rise and the lack o f releva nt and a va ila b le Inform ation by
other means.
A primary research goal is to explore the wide v a rie ty o f advan­
tages and disadvantages associated w ith co n tra ctin g in order to evaluate
whether the th e o re tic a l approaches have any a p p lic a tio n in r e a lity .
Some cost and performance data could have been compiled from department
sources, but it s r e l i a b i l i t y and completeness would have been questionC

able.

Even 1 f a va ila b le and r e la tiv e ly complete, these data would not

have answered my questions about the procedures and conditions o f con­
tra c tin g —an im portant p a rt o f evaluating the extent o f com petition and
the o ve rsig ht ro le o f government.

Nor would they have uncovered the

c r it e r ia used fo r choosing outside supply over in-house provision or
fo r s e le c tin g among prospective co n tra cto rs.

In s h o rt, the in te rvie w

^ T itle XX A dm inistra tion D iv is io n , DSS, Michigan Annual T it le XX
Services Plan 1979-1980 (1979).
^Michigan DOL, Bureau o f Employment and T ra in in g , Annual Plan fo r
Special Grants to Governors, Comprehensive Employment and tra in in g Act
(1360]'.
6The time period o f study was marked by what I perceived as an
unusual amount o f paranoia by p u b lic o f f ic ia ls , probably because o f
threatened cutbacks in personnel and funding. I t was d i f f i c u l t to get
any s p e c ific data about cost and performance th a t could have been used
against programs o r o f f ic ia ls .

46

approach produces a ric h supply o f inform ation th a t not only meets the
research requirements o f the th e o re tic a l perspectives but also suggests
hypotheses th a t could be tested elsewhere.
In th is study the Interview schedule also o ffe rs d is tin c t advan­
tages over the questionnaire.

A seasoned p o lit ic a l researcher, Lewis

Anthony Dexter, argues th a t the in te rvie w method is e sp e cia lly appro­
p ria te when try in g to obtain complete inform ation from e l it e or sp e cia l­
ized in d iv id u a ls —p a r tic u la r ly where the researcher is not c e rta in o f a ll
the dimensions o f the s u b je c t.7

In a d d itio n , according to other experts,

the in te rv ie w format allows the in te rv ie w e r the oppo rtunity to control
the a d m in istra tio n s e ttin g , co in te rp re t complex questions c o rre c tly fo r
the interview ee, to prod fo r fu rth e r c la r if ic a t io n or examples, to eval­
uate the v a lid it y o f the in fo rm a tio n , and to ensure th a t the interviewee
Q

considers the questions s e rio u s ly .

The re s u lt is more re le va n t, accur­

a te , and w h o lis tic inform ation than th a t obtained through a question­
n a ire .
The major weakness o f th is data-gathering method is the in te rv ie w ­
e r.

Herbert Hyman points out several p o te n tia l sources o f b ia s --1 n te r-

vlew er's p o lit ic a l o rie n ta tio n , h is /h e r b e lie fs about the true opinions
o f the population, the respondent's b e lie fs about the in te rv ie w e r's
" re a l" in te n tio n s , d iff e r e n tia l e ffe c ts due to personal in te ra c tio n s ,
system atic e ffe c ts o f group membership d is p a ritie s between in te rvie w e r
and respondent ( e .g ., race, sex, age), s itu a tio n a l determinants o f

7Dexter, E lite and Specialized Interview ing (Evanston, 111.:
Northwestern U n ive rsity Press, 19>d).
Q

Raymond L. Gorden, In te rv ie w in g --S tra te g y , Techniques, and Tactic s (Homewood, 111.: Dorsey Press, 1969), pp7 52-54.

47

in te rv ie w e r e ffe c t ( e .g ., sponsorship, anonymity).

In a d d itio n , the

in te rvie w e r can make many e rro rs in asking, probing, and recording.

g

Because o f the re s u lts o f the interview s in most cases are only as
good as the in te rv ie w e r and the In te rvie w schedule, p a rtic u la r a tte n tio n
was paid to developing a standardized schedule and standardized in te rvie w
s ty le to reduce in te rvie w e r v a ria tio n s .

I conducted a ll interview s

m yself w ith a p re -te sted in te rvie w schedule th a t used the terminology
fa m ilia r to a ll respondents.

(Appendices A, B, and C)

Because o f pre­

pared m u ltip le a lte rn a tiv e s and the complexity o f some questions, the
interviewees were asked to fo llo w the questions on th e ir copy o f the
schedule w h ile I recorded t h e ir answers on a separate copy.

I f the use

o f a prepared schedule did not e lim in a te a ll possible biases due to my
expectations o f the interview ees' opinions, a t le a s t the schedule
reduced p o s s ib ilitie s fo r d iffe r e n tia l e rro rs in asking, probing, and
recording responses.
Other biases lis te d by Hyman were also minimized. In s e ttin g up
the in te rvie w appointment and beginning the in te rv ie w , I always stressed
th a t I was working on an independent d is s e rta tio n p ro je c t about contract­
ing fo r services in p u b lic a d m in istra tio n — th a t my only purpose was to
f u l f i l l requirements fo r the Ph.D.

I re fe rre d to my student status and

my lack o f department experience in oth e r contexts a t le ast once during
each in te rv ie w to dispel any notions about u lt e r io r motives o r a f f i l i a ­
tio n s .

The need fo r th is approach was fre q u e n tly made obvious by ques­

tio n s about my use o f inform ation th a t was not complimentary about
interview ees' u n its , other bureaucrats, o r p o litic ia n s .

(Past exposes

g
Herbert H. Hyman, Interview ing in Social Research (Chicago, 111.:
U n iv e rs ity o f Chicago Press, 1954, 1975), pp. 150-192.

48

o f DSS a c t iv it ie s , in p a r tic u la r, explained th is i n i t i a l caution by DSS
respondents.)

I explained to both s ta te o f f ic ia ls and contractors that

I had received approval fo r the research p ro je c t from department author­
it ie s , but th a t th e ir answers were c o n fid e n tia l.

Interviewees were pro­

mised th a t n e ith e r th e ir id e n titie s , p o s itio n s , and organizations would
be reported to oth e r o f f ic ia ls or in my d is s e rta tio n i t s e l f .
With only fo u r exceptions, I considered th a t I was successful in
achieving good, tru s tin g re la tio n s h ip s w ith interview ees.

(And those

who did not respond w ell were generally cooperative in answering the
questions.)
h e lp fu l.

Almost a ll o f the respondents were very fr ie n d ly , open, and

The customary approach to b u ild in g rapport was to show in te r ­

est in the In d iv id u a l's own p o s itio n (o r agency), to avoid expressing
disapproval o f in te rvie w ee 's statements, and g e ne rally to be sympathetic
to the respondents' views and problems.

(The usual technique in DSS was

to acknowledge t h e ir budgetary problems and the th re a t o f the Tisch tax
cut proposal.)

In a d d itio n , I do not believe th a t interpersonal b a r r i­

ers were erected because o f my race, sex, o r age.

In fa c t, my you thful

appearance, sex, and status as a student probably aided in d is p e llin g
d is tr u s t or suspicion.

To prevent biasing the re s u lts , I did not commu­

nicate anything about the th e o re tic a l perspectives, th e ir expectations,
or my working hypotheses on c o n tra c tin g , even though I was often asked
what my personal o rie n ta tio n to the subject was.
The content o f the in te rv ie w schedule was also im portant in esta­
b lis h in g c r e d ib ilit y and rapport w ith interviewees.

The format and

questions were based on the i n i t i a l interview s and p re -te s ts w ith p u b lic
o f f i c i a l s , as w ell as my own background knowledge.

As a re s u lt,

49

g e ne rally l i t t l e

d i f f i c u l t y was experienced in the respondents under­

standing and answering the questions.
The in te rv ie w schedule was designed to examine the procedures o f
co n tra c tin g and the viewpoints o f those most Involved in the p ro c e s s s ta te and county o f f ic ia ls and c o n tra c to rs .

This in fo rm a tio n is c ru c ia l

in eva lu atin g the th e o re tic a l perspectives and accomplishing the research
goal o f in clu d in g the s ig n ific a n t advantages and disadvantages associ­
ated w ith human service c o n tra c tin g .
p a rts , in the fo llo w in g ord er:

The schedule i t s e l f has three

1) personal background questions ( e .g .,

education, pervious p o s itio n s ); 2) questions about the process o f con­
tr a c tin g (from s o lic it a t io n procedures to p ro te s ts ); and 3) opinion and
a ttitu d e questions ( e .g ., problems in th e ir work, c o n tra c tin g in general.
A v a rie ty o f question formats are u t iliz e d , in clu d in g open-ended ques­
tio n s , fix e d -a lte rn a tiv e s w ith probes, and graphic ra tin g scales.

Lewis

Dexter has stated th a t biases in wording and su b je ct acquiescence are
less o f a problem in in te rv ie w in g e lite s than in most p u b lic opinion su r­
veying; nonetheless, a tte n tio n was paid to developing questions and
fix e d a lte rn a tiv e s th a t minimized these p ro b le m s .^

Many o f the ques­

tio n s also are open-ended o r include probes th a t allowed the Interviewee
to explain o r re s ta te an answer.

While i t was Im portant to e s ta b lis h my

c r e d ib ilit y and In te re s t 1n the s u b je c t, i t was ju s t as necessary to
make c le a r to the respondents th a t I was open to being "ta u g h t" about
how c o n tra ctin g r e a lly is , in t h e ir own words.
Three d iffe r e n t in te rv ie w schedules were used w ith three d iffe r e n t
groups in both the Departments o f Labor and Social Services.
^ D e x te r, pp. 5-24.

The main

50

schedule, which included a ll three sections o f questions, was adminis­
tered to the major s ta te and county o f f ic ia ls in the departments (Appen­
d ix A).

These in te rvie w s la ste d from 90 minutes to th re e -a n d -a -h a lf

hours, depending on the respondent's ta lk a tiv e n e s s .

Because th is time

commitment could not be obtained f o r le sse r o f f i c i a l s , I conducted some
45 and 60 minutes in te rvie w s using a shortened form (Appendix B).

Most

o f the more o b je c tiv e procedural questions were o m itte d , since the in fo r ­
mation could be c o lle c te d from o th e r respondents.

The sections on per­

sonal background and o p in io n s, however, were re ta in e d .

Such questions

can illu m in a te d iffe re n ce s and s im ila r it ie s among the various types o f
c o n tra c tin g o f f ic ia ls .
A th ir d in te rv ie w schedule was developed fo r service providers
(Appendix C).

Where p o ssib le , the same questions were incorporated o r

s lig h t ly reworded to provide p o in ts o f comparison between the p u b lic
o f f ic ia ls and the con tractors they deal w ith on a con tinu in g basis.
Several procedural questions were also used to check the answers o f the
p u b lic o f f i c i a l s — to determine i f co n tra cto rs a c tu a lly observed some
re g u la tio n s put in to p ra c tic e in the form the bureaucrats said they were.
In a d d itio n , some questions were designed s p e c ific a lly fo r the contrac­
to rs .

These in te rvie w s took between one and two hours to conduct.
The s e le c tio n o f interview ees was the next p re -in te rv ie w step 1n

the research.

In the p re lim in a ry In te rv ie w s , I requested and received

the names o f the major sta te o f f ic ia ls working in the re le va n t program­
m atic and c o n tra c tin g areas.

In both DSS and DOL, most o f these o f f i ­

c ia ls were selected fo r Interview s (fo u r each from DSS and DOL), plus
about 20 percent o f the co n tra c t s p e c ia lis ts , whose names were provided
by t h e ir supervisors during in te rvie w s (two from each department).

In

51

DSS, the s e le c tio n process was complicated by the s ig n ific a n t ro le o f the
counties in c o n tra c tin g .

To ensure th a t county perspectives were

included, I chose to in te rv ie w seven c o n tra c t supervisors in counties
where p riv a te co n tra cto rs are used to d e liv e r se rvice s.

Of the 83 coun­

t ie s , on ly some co n tra c t f o r a d u lt, community, o r fa m ily se rvice s, and
only about s ix employ someone f u ll- t im e to coordinate these a c t iv it ie s .
As a r e s u lt, only the la rg e r, c o n tra c tin g counties were included in the
sample.
P riv a te service co n tra cto rs were also selected fo r in te rvie w s on a
non-random basis.

A l i s t o f cu rre n t contracts and providers was

obtained from almost a l l the DSS and DOL sta te and county o f f ic ia ls dur­
ing th e ir in te rv ie w s .

I u su a lly selected agencies from these l i s t s and

to ld the p u b lic o f f ic ia ls
courtesy.

I wanted to in te rv ie w them, as a m atter o f

I also asked o f f ic ia ls f o r the names o f o th e r con tractors who

e ith e r had not had t h e ir con tracts renewed o r had never been successful
in g e ttin g a desired s ta te c o n tra c t.

{The l i s t o f these agencies in DSS

was ra th e r s h o rt, and only a couple o f them would gra n t me an in te rvie w .)
The purpose o f th is was to o b ta in the views o f past o r p o te n tia l con­
tra c to rs as w ell as the cu rre n t ones.

The re s u ltin g c o n tra c to r sample

w ith ten providers associated w ith each department may not have been
rep re se n ta tive o f the p o p u la tio n , since they were not a c tu a lly randomly
selected.

However, I did attem pt to get some v a rie ty in the types o f

s e rv ic e s , the ta rg e t groups, and the lo c a tio n o f the agencies.
In con tactin g

p u b lic o f f ic ia ls and co n tra cto rs f o r in te rv ie w s , I

met w ith moderate success.

B ureaucratic run-around, delay, and mistakes

were fre q u e n tly e vid e n t, but u su a lly I was granted an in te rv ie w w ith the
desired in d iv id u a l.

Having the approval o f the eva lu a tio n d iv is io n head

52

in DSS and BET's deputy d ire c to rs helped to open doors,
tus as a graduate student (ra th e r

as did my sta ­

than a jo u r n a lis t, fo r example). But

I was unable to ta lk to a ll the people I had wanted to because o f
department-imposed lim its on the numbers.

For example, In DSS and DOL I

had asked fo r more program and co n tra ct s p e c ia lis ts than I was f in a lly
allowed to in te rv ie w .**
IV.

Data Analysis
One o f the obvious problems w ith th is research plan is the lack of

random sampling.

The choice o f respondents was determined by th e ir

a va ila b le tim e, departmental approval, and my own c r it e r ia fo r services
and service providers.

What may allow me to claim some rep rese ntative­

ness in analyzing the chosen programs is th a t such large percentages o f
the population were usu ally interview ed.

The lack o f a large o r random

county sample in DSS was d ic ta te d by the fa c t th a t only some counties
co n tra ct out w ith p riv a te sources

fo r many services. As a re s u lt, those

county c o n tra ct supervisors interview ed are a c tu a lly a sample o f a
lim ite d population o f co n tra ctin g counties.

12

An a d d itio n a l d i f f ic u lt y was encountered in choosing appropriate
research and s t a t is t ic a l methods as w ell as the size o f the sample.
u n it o f analysis under examination is not e n tir e ly c le a r.

The

Is 1t the

in d iv id u a l respondent, the c o n tra c t, the program, the se rvice , o r the
* * P a rtly th is was due to the workload o f the bureaucrats, and
p a rtly because they did not believe th a t I needed to ta lk to so many
people to get the inform ation they thought I wanted.
12
I lim ite d my Interview s to counties w ith a t le a s t two relevant
contracts. I included three o f the fo u r la rg e s t counties in the sample
because they had so many more contracts. However, two sm aller counties
w ith only two o r three contracts were included.

53

department?

Very l i t t l e q u a n tita tiv e research has been done in s im ila r

areas, probably in p a rt because o f th is issue.

A re la te d problem in

th is type o f research is th a t a ll in d iv id u a ls cannot be analyzed
equally regarding more o b je c tiv e procedures, because o f d iffe r e n t le ve ls
o f knowledge about c o n tra c tin g .

In both respects, then, employing quan-

t ia t iv e methods to add up, compare, and analyze responses w i l l not pro­
duce a thorough, in-depth analysis o f c o n tra c tin g out.
In some respects, two d iffe r e n t areas are being examined here—
f i r s t , the more o b je c tiv e procedures o f c o n tra c tin g , in which the depart­
ment (county o r s ta te le v e l) is the u n it o f a n a ly s is ; and, second, the
backgrounds and viewpoints o f the various c o n tra c tin g a c to rs , in which
the in d iv id u a l is the u n it o f a n a lysis.

Consequently, the fo llo w in g

analysis o f the two departments w i l l have both q u a lita tiv e and q u a n tita ­
tiv e aspects.

Q u a lita tiv e approaches w i ll be used in review ing the

methods and process o f c o n tra c tin g , w h ile some re p o rtin g o f frequencies
and percentages w i l l be employed in examining respondents' backgrounds
and view points.

Because o f the e x p lo ra to ry nature o f th is research,

these methods appear to be most ap pro p ria te .
Most o f the problems o f using the in te rv ie w schedule have already
been discussed, and minimized.

One a d d itio n a l problem which w i l l a ffe c t

the a n alysis o f the data is th a t the schedule is only a means f o r g e t­
tin g in fo rm a tio n and opinions th a t respondents are w illin g to express.
Even though the in te rvie w s were g e n e ra lly relaxed and allowed fo r
follow -ups and prodding, i t was not always c e rta in th a t the interviewees
were showing the negative aspects o f c o n tra c tin g 1n proper perspective
w ith the good.

Some In d iv id u a ls were f a r less c r it ic a l than others were

o f the same program, o f f i c i a l s , and procedures.

Whether th is was due to

54

a desire to hide th e ir true b e lie fs o r merely because o f in d iv id u a l
d iffe re n ce s is d i f f i c u l t to determine p re c is e ly .
Part o f the d i f f i c u l t y arises from the two purposes o f using the
in te rv ie w schedule— f i r s t , to d e fine the actual procedures, in which
o v e ra ll accuracy is necessary; and second, to discover the opinions and
views o f the co n tra ctin g a c to rs , in which in d iv id u a l accuracy is
req uired .

In the f i r s t , I used oth er interview ees and documents to

check on the procedures, but I could not do th a t f o r the opinion sec­
tio n , fo r obvious reasons.

During the in te rv ie w s , I t r ie d not to pro­

vide any reasons f o r respondents to d is t o r t th e ir responses.

As w ith

most questionnaires and in te rv ie w s , I must assume th a t g e ne rally the
respondents were tr u th fu l 1n t h e ir answers.
In conclusion, i t must be emphasized th a t th is research is an
e a rly e f f o r t to define some o f the major issues and problems o f human
service c o n tra c tin g , w ith in the general framework developed 1n chapter
two.

The precise frequency le v e ls are less im portant than is the

correspondence between the concepts and expectations o f the th e o re tic a l
approaches and the research fin d in g s o f the next chapters.

CHAPTER IV
CONTRACTING OUT UNDER TITLE XX
IN THE MICHIGAN DEPARTMENT OF SOCIAL SERVICES

This chapter focuses on the Department o f Social S ervices' A d u lt,
Family, and Community programs in which a v a rie ty o f services are pur­
chased by co n tra c t from p riv a te agencies.

We w i ll examine the programs

in DSS in lig h t o f the assumed co n d itio n s and p o s itiv e expectations
about c o n tra ctin g out th a t are held by p u b lic choice proponents o f th is
method o f service d e liv e ry .

In p a r tic u la r , we w i ll focus on determ ining

the e x te n t o f com petition in the so cia l services environment, and in the
procedures u t iliz e d by c o n tra c tin g o f f ic ia ls ; the ro le o f DSS in moni­
to rin g and eva lu atin g co n tra c to rs ; and economic r a t io n a lit y in govern­
ment decisions about c o n tra c tin g .
to answer the question;

More in d ir e c t ly , we w i l l also attem pt

Does c o n tra c tin g seem to achieve the p o s itiv e

re s u lts envisioned by i t s advocates?
I*

Interview ee S election
Three d iffe r e n t types o f in d iv id u a ls were used as in fo rm a tio n and

opinion sources fo r th is study o f DSS c o n tra c tin g :

s ta te DSS o f f ic ia ls ,

county c o n tra c tin g o f f i c i a l s , and c o n tra c to r re p re s e n ta tiv e s .*

F ir s t ,

*These 23 in te rvie w s were conducted during the months o f J u ly ,
August, September, and October o f 1980. This long period was necessary
because o f the heavy workloads o f p a rtic ip a n ts , vaca tion s, a budget
c r is is , and c o n tra ct n e g o tia tio n s.
55

56

at the sta te le v e l, s ix DSS employees were interviewed by means o f in te r ­
view schedules— two in programmatic areas (A d u lt, Family, and Community
Services) and fo u r 1n co n tra ct management.

(Three o f these were admin­

is te re d w ith the fu ll- le n g th form, w h ile the others were done w ith the
sh o rt form .)

A mix o f supervisors and s p e c ia lis ts were interview ed.

The

second category o f respondents, a ll given the long form, was made up o f
seven social services o r con tract coordinators in county Departments o f
Social Services.

I chose to in te rvie w co n tra ct coordinators 1n three o f

the fo u r most populous counties in the s ta te , w ith the remainder from
medium-sized counties th a t also co n tra ct out fo r some services 1n the
selected programs.

(Most o f the other 76 counties in Michigan do not

co n tra ct w ith p riv a te agencies fo r these targeted programs and services,
although some may purchase c h ild , delinquent, or p ro te c tiv e services
more fre q u e n tly by th is means.

T heir caseloads are u su a lly sm aller

and they have few lo cal p riv a te agencies th a t could be used.)
These sta te and lo cal o f f ic ia ls were selected because most o f the
DSS contracts o rig in a te and are "owned" a t the county le v e l, but are
c u rre n tly reviewed, processed, and monitored by the ce n tra l co n tra ct
management s t a f f .

State program o f f ic ia ls in te rp re t T it le XX p o lic y ,

make some service contracts themselves, review county contracts fo r prograirmatic elements, and provide technical assistance to the f ie ld s t a f f
when necessary.

As a re s u lt o f these se le ctio n procedures, I obtained

in-depth Inform ation on several counties' co n tra ctin g procedures from
the county o f f ic ia ls , and a more general overview o f a ll the counties'
DSS co n tra ct through the sta te o f f ic ia ls .

Consequently, some o f the

conclusions from th is study can be understood as applying to DSS con­
tra c tin g in general—not ju s t in the selected counties.

57

The t h ir d group o f p a rtic ip a n ts in the research consisted o f ten
p riv a te , n o n -p ro fit agency spokespersons, who were interview ed w ith the
schedule designed fo r them.

Of the te n , two co n tra cto rs had cu rre n t

state-w ide con tracts th a t were drawn

up and managed by sta te program

o f f i c i a l s , w h ile the re s t o f the providers d e a lt p rim a rily w ith various
county Departments o f Social Services.

Because two o f those cu rre n t

county co n tra cto rs had contracts w ith more than one county, they were
also able to provide in te re s tin g comparisons and g e n e ra liza tio n s about
the co u n tie s' procedures and re la tio n s h ip s .

In a d d itio n to c u rre n t pro­

v id e rs , I selected two former co n tra cto rs who had fa ile d to have county
contracts renewed.

The names and agencies o f a l l c o n tra c to r respondents

were provided by s ta te and/or county Interview ees.
As w ith the p u b lic employee in te rv ie w s , I had received o f f i c i a l
permission to conduct my research from the s ta te DSS d ire c to r o f the
evaluation d iv is io n .

T his, and my promise to keep id e n titie s confiden­

t i a l , allowed me to get appointments and s a tis fa c to ry cooperation during
in te rv ie w s .

The only p o ssib ly negative aspect o f re ce ivin g approval from

DSS was t h e ir imposed l i m it on the number o f DSS personnel who could be
used.

A fte r conducting a ll the in te rv ie w s , however, I did not be lieve

th a t having more respondents would have a lte re d the re s u lts s i g n i f i ­
c a n tly .
A.

Backgrounds o f Respondents
G enerally, the backgrounds o f the three major types o f in d iv id u a ls

interview ed o f f e r few su rp rise s.
employees d iffe re d l i t t l e

In most respects, the p u b lic sector

from the p riv a te se cto r respondents.

State

and county interview ees tended to be younger than the p ro vid e r in te r ­
viewees, but the average length o f time spent in t h e ir cu rre n t p o s itio n s

58

fo r a ll groups was three to fiv e years.

The DSS employees were more

lik e ly than agency personnel to re p o rt some graduate education, y e t
th e ir degrees were in s im ila r f ie ld s — u su a lly so cia l work.

This in d i­

cates th a t a t le a s t the p u b lic and p riv a te c o n tra c tin g p a rtic ip a n ts have
somewhat s im ila r backgrounds—something th a t can f a c il it a t e b e tte r
in te rpe rson al re la tio n s h ip s .
The most in te re s tin g fe a tu re o f the interview ee p r o f ile is th a t
some respondents o f a l l three groups had held previous p o s itio n s at
e ith e r s ta te , county, o r p riv a te agencies.

For example, some county

services o r contracts coordinators had worked f o r the s ta te DSS before,
and others had p re vio u sly worked in p riv a te s o c ia l agencies.

Several

respondents reported th a t they f e l t they had a broader, more complete,
view o f s o cia l services because o f t h e ir experiences 1n seeing the wel­
fa re system from a t le a s t one o th e r pe rspe ctive.

And some involved

d ir e c tly 1n the c o n tra c tin g process suggested th a t they may have been
chosen fo r t h e ir cu rre n t p o s itio n s in p a rt because o f t h e ir a p p re cia tio n
fo r oth er vie w p oin ts, as w e ll as t h e ir w ider knowledge.

Two o f the

c o n tra c to r respondents had moved from p u b lic to p riv a te p o s itio n s (and
vice versa fo r a county spokesman) th a t were almost d ir e c t counterparts
in s o cia l services purchasing.
These s im ila r backgrounds and patterns in careers suggest th a t a t
le a s t these in d iv id u a ls would have some a d d itio n a l knowledge about con­
tr a c tin g decisionmaking and probably have some sympathy fo r the demands
and views o f o th e r actors in the c o n tra c tin g system.

P riv a te agency

heads who have worked 1n DSS c o n tra c tin g o r program areas would also
have the advantages o f im portant frie n d s and contacts, and access to
h e lp fu l in fo rm a tio n .

One agency d ire c to r, fo r example, had been

59

in flu e n tia l in s e ttin g up the DSS purchase-of-service system in the e a rly
Seventies, and had worked d ir e c t ly under the c u rre n t s ta te department
d ir e c to r , John Dempsey.

There is l i t t l e

doubt th a t her experience and

contacts made her an e x c e lle n t choice fo r the p o s itio n she now holds.
I t is also h ig h ly u n lik e ly th a t her agency would have to fe a r lo sin g a
c o n tra c t—and not only because

the s t a f f personnel perform

a necessary service and do t h e ir jobs very w e ll.
The cooptation perspective suggests th a t frequent movement between
the p u b lic and p riv a te sectors o f re g u la to ry agencies can be an in d ic a ­
tio n o f cooptative re la tio n s h ip s , in which p u b lic o f f ic ia ls can lose
t h e ir o b je c tiv it y and the importance o f t h e ir "watchdog11 ro le .
s itu a tio n s can occur in c o n tra c tin g out.

S im ila r

And because o f the common edu­

c a tio n a l backgrounds and general work experience, some cooptive re la ­
tio n s h ip s are p o ssib le in the DSS c o n tra c tin g system as w e ll.

Therefore,

the c o n tra ctin g procedures and checks on the process by o th e r o f f ic ia ls
are p a r tic u la r ly c ru c ia l.
B.

Agency P ro file s
The ten org an iza tion s included in th e sample in d ic a te the d iv e r­

s it y o f so cia l services providers used by the DSS— even though th is
study is lim ite d to the three program areas o f A d u lt, Family, and Commu­
n ity Services.

The services supplied to DSS c lie n ts by these agencies

include money management counseling, g e r ia tr ic day care, fa m ily coun­
s e lin g , vocational and educational services fo r the severely handi­
capped, homemaker se rvice s, housing se rvice s, alcoholism r e h a b ilita tio n ,
h e a lth -re la te d services f o r m igrants, and fa m ily counseling f o r abuse
prevention.

O bviously, the ta rg e t populations vary w id e ly , according

60

to the services.

Each o f the contractors was selected fo r it s p a rtic u ­

la r e xp ertise in one o f these services.

The providers are f a i r l y spe­

c ia liz e d agencies w ith a lim ite d c lie n te le and range o f services.

The

size o f the agencies in terms o f f u l 1-time workers varied w id e ly, however,
from a low o f three employees to a high o f 155, w ith a mean o f 44.
Although one fa m ily counseling agency was established 1n the nineteenth
century, a ll the re s t got th e ir s ta r t since 1960—and several o f these
were a t le a s t p a rtly in response to the newly a v a ila b le federal and
sta te human services funds.
A ll except one o f the providers depend a great deal on government
con tracts.

(The s in g le exception was a sta te association o f counseling

agencies th a t subcontracted fo r a ll o f the DSS services in a unique,
one-shot c o n tra c t.)

Of these nine agencies, fiv e received a t le a st 75

percent o f th e ir revenues from government contracts during the 1980
fis c a l year.

The ten agencies' to ta l numbers o f cu rre n t contracts w ith

various parts o f the fe d e ra l, s ta te , county, o r c it y governments ranged
from one to 16, w ith a mean o f fo u r.

(This is separate from a d d itio n a l

grants th a t some have received from various p u b lic and p riv a te organiza­
tio n s .)

In a d d itio n , several o f the ten agencies have had other con­

tra c ts under T it le XX o r oth e r programs in the past th a t were no longer
in e ffe c t.
While each agency has had a t le a s t one DSS con tract e ith e r cur­
re n tly o r in the la s t few years, two had more than one co n tra ct a t the
time o f the in te rvie w s—one homemaker agency had two, and a money
management agency had contracts w ith ten d iffe r e n t counties.

Six o f the

contractors have had th e ir DSS contracts renewed fo r many years.
o f these were s ta rte d a t the s ta te le v e l, and then became the

Three

61

re s p o n s ib ility o f the county DSS.
one was dropped.)

(Two remained s ta te c o n tra cts, and

The co n tra ct amounts varied w id e ly , from a low o f

$4000 fo r money management in one county to a high o f almost $1,170,000
fo r alcohol re h a b ilita tio n services which are a v a ila b le to e lig ib le
c lie n ts throughout the s ta te .
Of the ten agencies Included in th is sample, a t le a s t fiv e o f the
agencies would be severely a ffected by major cut-backs or the elim in a­
tio n o f th e ir DSS con tracts.

Some probably would have to close th e ir

doors, 1 f they did not fin d an a lte rn a tiv e source o f funding— in i t s e l f ,
a d i f f i c u l t pro p o sitio n in these d i f f i c u l t times.

Although DSS has at

times encouraged contractors to fin d a d d itio n a l sources o f funds and to
use the DSS contracts as seed money, one co n tra cto r said th a t there is
little

in ce n tive to become more d iv e rs ifie d 1n funding sources in some

Instances in human services.

He noticed th a t these sources tend to pu ll

out when oth e r sources become a v a ila b le , and ju s t pay f o r programs th a t
re ly almost e x c lu s iv e ly on th e ir money.

So the agencies may not gain

anything by fin d in g new grants and con tracts.
This re lia n ce on one or two funding sources, such as DSS con tracts,
can work in two ways—one to the advantage o f p u b lic service p ro visio n ,
and the o th e r, to it s disadvantage.

I f agencies are p a r tic u la r ly depen­

dent on large DSS co n tra cts, they may be more lik e ly to respond to DSS'
suggestions fo r Improvement, since the loss o f a co n tra ct could be
devastating.

This f i t s in w ell w ith the p u b lic choice approach— that

cost w i ll be reduced and performance Improved because o f the desire to
"s ta y in business."

Both co n tra ctin g o f f ic ia ls and providers mentioned

th a t th is responsiveness to c o rre ctio n sometimes has been Important in
improving co n tra ct performance.

62

On the oth er hand, there was evidence th a t c o n tra c to r dependence
can hamstring DSS o f f ic ia ls i f agencies:

1) m ob ilize t h e ir p o lit ic a l

frie n d s , a llie s , and c lie n ts to prevent any change in program d ire c tio n ,
p r io r it ie s , funding, or awards; and/or 2) show th a t t h e ir programs w ill
not

be de livered to needy c lie n ts a t a ll i f DSS drops a c o n tra ct.

those cases, the

In

re le va n t government u n it may not have any choice but to

continue co n tra cts.

Consequently, DSS may be co n tra ctin g fo r services

th a t are determined, not by service p r io r it ie s and performance, but by
the

very fa c t o f co n tra cto r dependence.

II.

The Role o f Competition in Social Services Contracting
The p u b lic choice approach has assumed th a t a l l manner o f be n e fits

can be re a lize d by c o n tra ctin g out fo r services.

T heir arguments

la rg e ly re s t on the assumption th a t com petition w i ll ensure th a t ser­
vices w ill be provided a t a lower cost level w ith good service p e rfo r­
mance.

We w ill examine th is assumption in terms o f the DSS con tractin g

experience.

But f i r s t we w ill look at the background o f the social

services le g is la tio n .
A.

Social Services H isto ry
The source o f both the funds and regulations in so cia l services is

T it le XX o f the Social S ecurity Act.

T it le XX was passed by Congress 1n

December, 1974, signed in to law in January, 1975, and went in to e ffe c t
in the new fis c a l year—October, 1975.

This t i t l e b a s ic a lly replaced

most o f the e a r lie r t i t l e s o f the a ct.

I t retained the $2.5 b i llio n

c e ilin g th a t had been placed on federal matching funds in 1972, but
Included some oth e r s t r ic t e r requirements to prevent states from spend­
ing federal monies on a c t iv it ie s not defined as in lin e w ith general

63

s o cia l service goals.

At the same tim e, however, the law and HEW

re g u la tio n s gave the states continued d is c re tio n in determ ining which
services they wished to provide w ith in the general g u id e lin e s , the types
o f providers (in-house o r contracted) they wanted to u t i l i z e , and the
procedures to use in making these choices.

Although an annual plan f o r

T it le XX services was also required before each fis c a l y e a r's funds would
be d is trib u te d to each s ta te , the a ct and the re g u la tio n s continued to
allo w much d is c re tio n by the s ta te governments.

Attempts to li m i t s ta te

d is c re tio n d r a s tic a lly because o f previous e x p lo ita tio n o f the law had
been overcome by strong op po sitio n from s ta te governments, n a tio n a l w elfa re o rg a n iza tio n s, the Congress, and p riv a te agency groups.

2

U n til the 1975-76 fis c a l yea r, the Michigan DSS was not s e rio u s ly
a ffe c te d by the 1972 federal c e ilin g , since Michigan d id not s u ffe r the
cuts o f some o th e r la rge sta te s (New York and I l l i n o i s ) th a t had more
aggressively captured ever la rg e r amounts o f federal matching funds from
1969 through 1972.^

Although DSS had purchased a t le a s t some o f it s

services f o r many years, the ra p id growth in u t il iz in g many outside pro­
viders la rg e ly occurred between 1969 and 1975 w ith the a v a ila b ilit y o f
federal monies and an a lte re d federal p o lic y p e rm ittin g purchase o f
services (the 1967 Amendments to the Social S e cu rity A c t).

According to

a re p o rt by the House Fiscal Agency (th e LPER r e p o rt), M ichigan's
expansion in so cia l services was due 1n p a rt to pressure p rim a rily from
Governor M il lik i n 's o f f ic e and the s ta te le g is la tu re to increase ra p id ly
the le v e l o f federal p a r tic ip a tio n 1n so cia l services— the qu icke st

2
3

D e rth ick, Chapter 10.
See D e rth ick, Chapter 9, and LPER re p o rt, p. 4.

64

method being to purchase from e x is tin g p riv a te agencies.

Because o f the

donated funds provision in the law, DSS saw purchase as a way o f expand4
ing needed social services w ith ou t sta te expenditure.
P riva te or pu blic agencies th a t could arrange to donate to the
s ta te the re q u is ite 25 percent match fo r federal funds in turn received
contracts to perform p a rtic u la r services.

In e ffe c t, DSS “ allowed p r i­

vate and lo cal p u b lic agencies to determine the use o f m illio n s o f d o l­
la rs 1n federal funds w ith almost no e f f o r t to control the d is p o s itio n
5
o f those funds o r to account fo r th e ir impact on DSS c lie n ts ."
This
strategy o f using local provider/donors was f a i r l y ty p ic a l, according to
D e rth ick, and contributed to the skyrocketing cost o f the federal grant.®
When i t approached it s li m it on rece iving federal matching funds
in 1975, Michigan DSS began to reconsider some o f it s loose con tractin g
procedures.

Instead o f purchasing almost any new service w ith the 25

percent match donated, and continuing v ir t u a lly a ll previous contracts
ro u tin e ly , DSS sought ways to determine c lie n t needs and to compare the
m erits o f curre nt programs.
DSS was not immediately successful in agreeing upon and implement­
ing needs assessments and improved, more com petitive purchase procedures.
But i t did make some changes in the system a couple years la te r , during
FY79 and FY80.

From the ra th e r c e n tra liz e d , s ta te -c o n tro lle d process o f

the e a rly Seventies, DSS moved to a more decentralized system in which
4
LPER re p o rt, p. 4.
5I b id . , p. 38.
°D e rth ick, chapters 3-8. Some o f the other s ta te s , however, were
mnre involved in ourchasina e x is tin g services from other s ta te aapncies
and departments.

65

the county departments received c e rta in a llo c a tio n s fo r purchased ser­
vices and became d ir e c tly involved in determining lo cal needs, se le ctin g
pro vid ers, fin d in g donors, and reviewing the services purchased fo r
county residents.

The re s u lt was greater v a rie ty 1n the con tractin g

procedures and arrangements, since the counties were given some f le x i b i­
l i t y in th is area.

Although not s tro n g ly supported by s ta te -le v e l con­

tra c tin g o f f ic ia ls , the change was p a rt o f the national trend toward
greater lo cal d is c re tio n in various programs, which, i t was hoped, would
lead to a b e tte r a llo c a tio n o f resources.
When funds became very lim ite d in FYs '80 and '81 because o f
decreasing revenues and increasing social service needs, both the sta te
and county le ve ls had to examine more c a re fu lly what services they pur­
chased, as w ell as those provided through p u b lic employees.

Since a ll

the interview s in th is study were conducted during the summer and f a l l
o f 1980, th is c r is is provided an occasion to analyze not only the gener­
al subject o f social service co n tra ctin g in li g h t o f the p u b lic choice
approach.

I t also illu m in a te s the question about the ro le o f co n tra ct­

ing in times o f fis c a l stre ss:

is co n tra ctin g out fo r services reduced

or expanded?
From th is very b r ie f h is to ry o f social services and the Michigan
experience w ith the federal le g is la tio n , i t is c le a r th a t the Congress,
HEW, and the Governor, the sta te le g is la tu re , and DSS o f f ic ia ls have had
q u ite d iffe r e n t goals in using outside providers than do p u b lic choice
advocates o f c o n tra ctin g .

Those Involved w ith the T it le XX p o lic y pro­

cess did not seek lower costs or a slowdown in government growth—and
probably not even b e tte r q u a lity services.

Instead, they aimed to pro­

vide a w ider array o f services fo r the needy, to encourage states to

66

use both p riv a te and p u b lic sectors to accomplish t h is , and, a t le a s t
fo r s ta te o f f i c i a l s , to capture e v e r-la rg e r amounts o f money fo r sta te
reside nts w ith few s trin g s attached.
Those committed to g re a te r funding f o r the poor embraced the con­
cept o f purchase ea ge rly, since they saw th a t not only would i t mean
more services but also i t would create a broader, sta te -w id e co n stitu e n ­
cy fo r w e lfa re and so cia l p ro gra m s--larg ely made up o f p u b lic and p r i ­
vate service pro vid ers.

Once th a t constituency was formed and became

dependent upon DSS programs, the f l e x i b i l i t y envisioned f o r co n tra ctin g
out by the advocates o f th is method was decreased, ra th e r than increased.
This s ta te and lo c a l c o a litio n , combined w ith a llie s in s tra te g ic p o si­
tio n s , ensured th a t the new T it le XX would not threaten e x is tin g arrange­
ments.

Even under severe fis c a l c o n s tra in ts , i t became d i f f i c u l t to

reduce c o n tra c t amounts and e lim in a te c o n tra c to rs .

And com petition s e l­

dom was seen as a de sira ble means fo r determ ining which services to
fund and which providers to use.
As a r e s u lt o f t h e ir goals, s ta te program and c o n tra c t o f f ic ia ls
did not s e t up c o n tra c tin g procedures th a t emphasized the tr a d itio n a l
p rin c ip le s o f p u b lic procurement— fa irn e s s and com petition.

The federal

re g u la tio n s o f both the o r ig in a l le g is la tio n and it s T it le XX successor
d id not require the states to promote these p rin c ip le s when co n tra c tin g .
Nor was i t in the best

in te re s ts o f c o n tra c tin g o f f ic ia ls and contrac­

to rs to in s is t th a t com petition and fa irn e ss be ap plie d to s ta te con­
tr a c ts .

Competition among providers and in procedures can create

c o n f lic t , increased paperwork, and g re a te r u n c e rta in ty f o r a l l p a r t ic i­
pants in the c o n tra c tin g process.

Therefore, since i t was not req uired ,

67

com petition was not maintained as an im portant p r in c ip le in DSS purchase
o f services.
B.

Competition in the Social Services Environment
Competition f o r c lie n ts and funding sources has not held a strong

place in the tr a d itio n o f the s o c ia l services f ie ld .

P ublic and p riv a te

agencies have not considered themselves s im ila r to p ro fit-m a k in g e n te r­
p ris e s , where the desire f o r p r o f it s and growth can encourage competi­
tio n .

Instead, social agencies have emphasized th a t t h e ir ro le is to

serve people whose s o c ia l and economic needs have gone unmet in a p a r t i­
c u la r community.

They d iffe r e n tia te t h e ir services from each o th e r, to

avoid d ir e c t com petition and overlap.
Once the so cia l services con tra cts became a v a ila b le , not a ll so cia l
agencies were in te re s te d in them.

In the past, providers o ffe rin g s e r­

vices aimed a t the special needs o f the poor were few in number, because
o f lim ite d funding sources and the d i f f i c u l t y o f serving the needy ade­
quately.

Before the m id -S ix tie s , most p riv a te agencies had m iddle-class

o rie n ta tio n s fo r m iddle-class c lie n ts .

With the advent o f the federal

s o c ia l services g ra n ts, many o f these agencies were a ttra c te d by the
a v a ila b le c o n tra c ts —but not a l l .

For some, the funds have not provided

a s u f f ic ie n t In ce n tive fo r them to t r y to get DSS c o n tra c ts , f o r various
reasons.
Yet another fa c to r c o n trib u te d to the lack o f d ir e c t, se rvice -b y se rvice com petition among s o c ia l se rvice pro vid ers fo r DSS co n tra cts.
D ire c t services to c lie n ts depend on having a s it e th a t 1s r e la tiv e ly
convenient to those who re q u ire the se rvice s.

For many agencies u t i l i z ­

ing a v a rie ty o f experts and f a c i l i t i e s , the option o f having the agency
operate in d iffe r e n t lo c a tio n s in the sta te is not u su a lly fe a s ib le .

68

Among the DSS c o n tra c to rs , only the money management firm s have tr ie d
s e ttin g up "branch o ffic e s " in various counties in the s ta te —la rg e ly
because t h e ir services are m ainly provided through a s in g le counselor.
(As a r e s u lt, there has been some com petition between them fo r DSS con­
t r a c t s .)

The alcohol r e h a b ilita tio n center also was able to get around

th is problem, since c lie n ts are sent to i t from throughout the s ta te .
These a lte rn a tiv e s are not u s u a lly open to o th e r p ro vid e rs, however.
Each p ro v id e r is u su a lly lim ite d to competing f o r con tracts in i t s own
county.
In a d d itio n , fo r human service c o n tra c tin g , the market model is
not p a r tic u la r ly useful in understanding the buyers' ro le in purchasing.
Since they are lim ite d in number and in purchasing range, government
agencies a ct as monopoly in te re s ts — u n lik e in the market model, where
m u ltip le consumers can allo w f o r new firm s and products to emerge to
fill

f e l t needs.

Today new p riv a te , n o n -p ro fit agencies fin d i t d i f f i ­

c u lt to e n te r the "s o c ia l services market" fo r the poor, unless they
receive a p r io r co n tra c t commitment from a government agency.

(P riv a te

funds are u su a lly not enough f o r e s ta b lis h in g an agency—even these
sources want a commitment from a government u n it . )

The agencies th a t do

form tend to be ones th a t both f i l l an unmet need th a t the government is
genuinely In te re ste d in funding, and have found o th e r funding sources as
wel 1.
An e x c e lle n t example o f the problems involved in g e ttin g in to
c o n tra c tin g is provided by the new DSS c o n tra c to r th a t operates a day
care center f o r the e ld e rly .

Even though he got a c o n tra c t, the agency

d ir e c to r said th a t i t was very d i f f i c u l t to o b ta in oth e r funding
besides the DSS c o n tra c t.

CGetting th a t c o n tra c t was hard enough

69

because the agency had no experience o r track reco rd.)

Any agency,

whether established or new, usually requires more than one funding
source to survive.

But fa ilu r e to gain the necessary funds and support

from the community fo r a new program p ro h ib its e n try in to the social
services f ie ld .
In summary, com petition among p o te n tia l providers is hampered by
these b a rrie rs to entry in to the "m arket," the lo c a tio n a l lim ita tio n s ,
the unw illingness o f some agencies to compete fo r DSS c o n tra cts, and the
d iffe r e n tia tio n in agency services.
C.

The Donation Requirement
Even though com petition in the environment is minimized, there are

methods which the state and county departments could adopt to encourage
even lim ite d com petition fo r it s con tracts.

But the regulations o f

T it le XX and it s predecessor as w ell as the sta te DSS have not been
designed to promote com petition.

The donation requirement has been one

o f the primary ways by which com petition has been hindered.
For each se rvice , the T it le XX grant requires a 25 percent match
from the s ta te to receive the 75 percent federal funds.

This s tip u la ­

tio n was w ritte n w ith the idea th a t the states and lo ca l agencies should
show some commitment to the services they choose to provide.

In M ichi­

gan, some esse ntia l services have the match co n trib u te d by the state
le g is la tu re (e .g ., fo r p ro te c tiv e s e rv ic e s ), o r by county boards o f
commissioners fo r county programs.

U sually, however, the re q u is ite

donation to the s ta te is made by the very co n tra cto r th a t receives a
DSS co n tra ct.

But the a b ilit y to make the donation fo r th e ir contracts

does not necessarily correspond w ith the a b il it y to provide high qua­
l i t y , essential services a t a reasonable cost le v e l.

70

Since some agencies do not have any "e x tra " money to fund the
match, they are seldom considered fo r awards.

Only a few agencies have

been able to arrange fo r some ou tside donor to c o n trib u te the amount fo r
th e tr c o n tra c ts .

Consequently, providers w ith funds from o th e r sources

( e .g ., United Way, re lig io u s o rg a n iz a tio n s , foundation grants) o r an
a c tiv e s o lic it a t io n program are advantaged over agencies w ith o u t these
funding sources.
Not only must 25 percent o f the to ta l amount o f the c o n tra c t be
donated, but some o f the T it le XX re g u la tio n s governing these donations
help c e rta in types o f agencies more than oth ers.

P ublic agencies are

given preference over p riv a te agencies, and n o n -p ro fit providers are
advantaged over p ro p rie ta ry firm s .
For p u b lic co n tra cto rs alone, the re g u la tio n s allo w in -k in d "dona­
tio n s " ( e .g ., o f f ic e space, machines) to be made f o r almost a ll o f the
re q u is ite match—only 5 percent o f the co n tra c t amount must be made in
cash and a c tu a lly sent on to the sta te government.

A ll p riv a te agencies

must c o n trib u te 25 percent o f the to ta l co n tra c t amount in cash.
I t is also e a sie r to o b tain the donation from the n o n -p ro fits fo r
t h e ir con tracts than i t is from f o r - p r o f it firm s .

The re g u la tio n s fo r ­

bid the d ir e c t donation o f funds from p ro p rie ta rie s f o r con tracts in
which they are the re c ip ie n ts .

I f a p ro fit-m a k in g agent is used, p u b lic

o f f ic ia ls must fin d another donor (such as the county board o f commis­
sioners) o r an Interm ediary who 1s w illin g to be responsible fo r
"la u n d e rin g ” the fir m 's donation.

E ith e r o f these methods is tim e-

consuming f o r c o n tra c tin g o ffic 1 a ls --a n d c e r ta in ly does not encourage
p ro p rie ta ry firm s to t r y to get DSS c o n tra cts.

Adding to t h e ir problem

is the bias against f o r - p r o f it agencies in the social services f ie ld .

71

For two p ro p rie ta ry fin a n c ia l counseling firm s th a t perform necessary
services fo r DSS c lie n ts , the advantages o f having the n o n -p ro fit status
were so compelling th a t both formed and incorporated new n o n -p ro fit
agencies to handle the DSS business, a t the suggestion o f s ta te and
county con tractin g o f f ic ia ls .
There is one federal ru le th a t is g e ne rally given only I1p service
in DSS,

The federal regulations sp e cify th a t i f n o n -p ro fit agencies are

th e ir own donors, an "independent decision" about awards must be made—
th a t the donation is not to a ffe c t the choice o f co n tra cto rs.

In the

past, when federal funds exceeded DSS1 a b il it y to spend them, any agency
th a t put up the donation was almost au to m a tica lly given a co n tra ct.
These contracts were repeatedly renewed, w ith l i t t l e s c ru tin y u n til the
la te Seventies during the d e c e n tra liz a tio n process in Michigan.

Even

then, according to county co n tra ct coordinators, fin d in g agencies w ith
donations o r outside donors has been so d i f f i c u l t th a t l i t t l e

has re a lly

changed in who has been awarded con tracts.
While most o f the county o f f ic ia ls interview ed complained about
the d if f ic u lt ie s o f fin d in g good contractors who could also make the
donation, one contracts coordinator said th a t his county has fostered
increased com petition by e lim in a tin g the need fo r a ll contractors to
make the donation.

The board o f commissioners now supplies the lo cal

donations fo r many o f the c o n tra cts.

Since they do not need to make

th e ir own donations, more contractors have attempted to get contracts
from DSS.

This example illu s t r a te s how c r it ic a l the donation re q u ire ­

ment is in reducing the pool o f p o te n tia l contractors 1n other counties.
I t also shows th a t real com petition may not be a lto g e th e r desirable fo r
c e rta in o f f ic ia ls .

Because o f the increased com petition, some o f the

72

previous con tractors and several oth e r reputable agencies were turned
down fo r awards.

The re s u ltin g d is s a tis fa c tio n and i l l - w i l l made the

co n tra ctin g o f f i c i a l s ’ jobs only more d i f f i c u l t and uncomfortable.
In a t le a s t one other county, o f f ic ia ls have found an ea sie r and
cheaper way o f g e ttin g around the donation s tip u la tio n .

According to a

coo rd in a to r, the sa la rie s o f co n tra cto r agency d ire c to rs are sometimes
" in fla te d " to cover th e ir donation.

An agreement is made between the

county and the co n tra cto r th a t the excess funds th a t are not a c tu a lly
pocketed by the d ire c to r would be used fo r the 25 percent donation.
Because donations can be made in q u a rte rly amounts and the co n tra cto r
can usually get an advance on the c o n tra ct, the agency need not use any
of it s own money, or run in to serious cash-flow problems.

I had sus­

pected th a t th is occurred (e s p e c ia lly when sta te o f f ic ia ls complained
about some n o n -p ro fit d ire c to rs ' high s a la rie s which they had to
approve), but received no confirm ation o f th is p ra ctice outside o f the
one county.

However, the coordinator asserted em phatically th a t he knew

th a t some oth er counties used the same method o f g e ttin g the match fo r
agencies th a t otherwise would not q u a lify .

(From th is in te rv ie w , I

in fe rre d th a t only agencies w ith special re la tio n s h ip s w ith county o f f i ­
c ia ls would b e n e fit from th is arrangement.)

I f tru e , on some occasions

in e ffe c t the federal government has paid fo r the e n tire co n tra ct amount,
instead o f Its usual 75 percent.
D.

Contracting Procedures 1n DSS
Government co n tra ctin g procedures can enhance o r in h ib it competi­

tio n among p o te n tia l contractors and can expand o r reduce the range o f
choices fo r decisionmakers.

The e a rly steps in the co n tra ctin g process

73

are p a r tic u la r ly c ru c ia l — the s e le c tio n o f services to be purchased,
the s o lic it a t io n o f p o te n tia l c o n tra c to rs , and the con sid era tion o f pro­
posals (o r b id s , 1n oth er cases).

Even though some o f DSS' choice has

been lim ite d by the so cia l services environment and the donation req uire­
ment, these procedures could be designed to allo w c o n tra c tin g out to
sim ulate the ideal marketplace.

We need to examine i f th is occurs.

Before th is more d e ta ile d analysis is begun, a b r ie f o u tlin e o f the
major steps o f the DSS c o n tra c tin g process must be provided.

(They are

s im p lifie d here, and may not always take place in e x a c tly th is way, but
they in d ic a te the usual sequence.)
F ir s t , DSS o f f ic ia ls in the counties and in the program o ffic e s
tr y to determine which services to purchase.

Next, the u n it responsible

fo r the c o n tra c t— the c o n tra c t "owner"— s o lic it s p u b lic and p riv a te pro­
vid ers f o r proposals f o r the desired se rvice s.

Once the proposals are

subm itted, various p a rtic ip a n ts in the county o r sta te DSS review and
evaluate them and make t h e ir recommendations.

The county department

head, w ith the advice o f the board o f so cia l s e rv ic e s , makes the fin a l
decision f o r county co n tra c ts , w h ile program d iv is io n heads usu ally
s e le c t s ta te -le v e l c o n tra c to rs , a l l su b je ct to the sig na tu re o f the
s ta te DSS di re c to r.
The selected c o n tra c to r proposals are then sent to the DSS con­
tr a c t management d iv is io n , where s p e c ia lis ts review the proposals and
the budgets f o r compliance w ith T it le XX and s ta te re g u la tio n s .

(Here

o r e a r lie r in the process some changes in the proposals may be made and
agreed ucon.)

These In d iv id u a ls also w rite up the c o n tra c t documents,

using a standard form (o r " b o ile r p la te " ) prepared w ith the consent o f

74

the Attorney General's O ffic e .

F in a lly , a ll the required signatures are

obtained, and the co n tra ct year can begin.
In a c tu a lity , th is e n tire process is very time-consuming and com­
p le x , since many d iffe r e n t o ffic e s and in d iv id u a ls are involved.

Con­

tra c tin g o f f ic ia ls work on several contracts at one tim e, each w ith a
great deal o f paperwork th a t must be processed in a c e rta in way and
order.

When a lo cal donation is required {as i t is fo r a ll county con­

tra c ts in the three programs), a d d itio n a l forms must be w ritte n o u t, and
the donor must be included in various steps.

The procedures are s im p li­

fie d a great deal, however, under two co n d itio n s:

1) when the co n tra cto r

acts as h is /h e r own donor, and 2) when a con tract is renewed in a s im ila r
form.

Therefore, fo r bureaucrats a t both sta te and local le v e ls , there

are d isin ce n tive s both to use contractors who cannot co n trib u te the 25
percent, and to seek out new con tractors.
1.

Needs Assessments

In the past, the usual procedure fo r deciding which services to
co n tra ct out fo r was to n o tify various p u b lic and p riv a te agencies about
the a v a ila b le funds and the general regulations governing the use o f the
funds.

Few attempts were made to assess c lie n ts ’ needs s y s te m a tic a lly ,

and then to s o l i c i t only fo r those types o f services, since Michigan had
so much federal money to match.

Consequently, many d iffe r e n t service

providers received contracts year a fte r year w ith very l i t t l e

review o f

needs or th e ir performance towards meeting social service goals.

They

fre q u e n tly b u il t up th e ir agencies to accommodate the increased demand
from government, and also established good re la tio n s h ip s w ith the re le ­
vant s ta te bureaucrats and th e ir le g is la to rs to ensure the flow o f
funds over time.

75

When DSS began d e c e n tra liz in g some o f the c o n tra c t a d m in is tra tio n
by designating counties as the co n tra ct owners w ith s ig n ific a n t d is c re ­
tio n , p a rt o f the ra tio n a le was th a t lo c a l DSS o f f ic ia ls could more ade­
quately match the lo ca l needs w ith lo ca l se rvice p ro vid e rs.

They would

be able to make annual, more manageable needs assessments, and also know
who in the community were best equipped to d e liv e r the needed services.
Nonetheless, county departments also u t iliz e d most o f the previous con­
tr a c to r s —only a few were e lim in a te d o r given reduced funds.

And some

contracts were reta in e d a t the sta te program le v e l, e ith e r because they
served c lie n ts throughout the s ta te , o r, in some cases, were reported to
be " b e tte r protected" by s ta te o f f ic ia ls and p o lit ic a l in flu e n c e .
In a d d itio n , the c u rre n t county a llo c a tio n s o f T it le XX funds fo r
donated funds purchase are not based on any formula o f needs and popula­
tio n .
le v e ls .

Instead, funds are d is trib u te d on the basis o f previous purchase
In o th e r words, i f a county had purchased many services e a rly

on in the d e c e n tra liz a tio n process, i t would continue to receive more
c o n tra c t s t a f f p o s itio n s and federal funds to match than a s im ila r
county th a t had no t purchased as much at th a t tim e.

For example, fo r

the past few ye a rs, Ingham County (pop. 275,000) has received much
la rg e r a llo c a tio n s than both Genesee County (pop. 442,000, and w ith fa r
g re a te r w e lfa re needs) and Kent County (pop. 433,000).

Several o f the

county c o n tra c t coordinators complained about th is haphazard method o f
a llo c a tin g funds, and hoped th a t i t m ight be changed in the fu tu re .
According to DSS w ritte n p o lic y , the s ta te DSS' goal is "to e ve n tu a lly

76

have donated funds allocated to lo cal o ffic e s based on measures o f
social service needs.
Some o f the counties do, however, occasionally conduct needs
assessments to help decide how to a llo c a te the funds they receive.

(The

o f f ic ia l donated funds co n tra ct process as w ritte n by the central o ffic e
requires th is as one o f the f i r s t steps in the process, but interviewees
in d ica te d th a t they have not always been ca rrie d o u t.)

Assessments seem

to have been implemented by the counties which did not have many con­
tra c ts or funds before, so they had o p p o rtu n itie s to determine needs
w ith almost no p r io r commitments to c e rta in contractors and services.
The methods o f determining need p r io r it ie s vary from county to
county, but they usually have depended upon two major sources o f in fo r ­
mation and in p u t— DSS caseworkers and lo cal so cia l agencies (many o f
which may already have c o n tra c ts ).

In sm aller counties, the process is

very in fo rm a l, w ith meetings w ith the in te re ste d and involved.

A few o f

the counties rep orted ly have sent out questionnaires to the major public
and p riv a te agencies a ctive in the community.

Generally c lie n ts ' ser­

vice needs are only in d ir e c tly measured—f ilt e r e d through p a rtic ip a n ts
in the so cia l service system who have p a rtic u la r in te re s ts or stakes in
the outcome.

In tu rn , these reports are In te rp re te d by the lo cal DSS

o f f ic ia ls working in the c o n tra ctin g process—program heads, contracts
coo rdina to rs, department d ire c to rs , the social services boards, and
sometimes, the county board o f convnissloners.
In one case, a p ro vid e r complained about the process o f determin­
ing needs p r io r it ie s .

His agency had form erly had a fa m ily counseling

^Memorandum from Fred Lawless, D ire c to r o f F ie ld Services Adminis­
t r a tio n , to lo cal o ffic e managers (March 27, 1979), Attachment A.

77

co n tra c t from the s ta te , but f a ile d to get i t renewed a t the county
le v e l, fo r what he c a lle d " p o lit ic a l" reasons— the lo ca l DSS s t a f f
" d id n 't want a successful agency to show th a t i t can do counseling
b e tte r" than DSS caseworkers.

During the l i f e o f the state-awarded con­

t r a c t , he complained to o f f ic ia ls th a t the county DSS workers were not
making re fe rra ls to h is agency, as s p e c ifie d under the terms o f the con­
t r a c t.

When c o n tra c tin g was d e ce n tra lize d , h is proposals were turned

down, he be lieve d, because o f the negative a ttitu d e s o f the county admin­
is tr a to r s to counseling se rvice s, o r any o th e r services they perceived
would compare unfavorably ag ainst DSS p ro v is io n .

The county discontinued

the purchase o f counseling services a lto g e th e r sin ce , they claim ed, th is
se rvice was being performed by DSS caseworkers.

P o lit ic a l in flu e n c e via

a statew ide agency asso cia tion had helped to ob tain the previous sta te
c o n tra c t, but had fa ile d to make the d iffe re n c e in the county le v e l.
2.

C ontract S o lic ita tio n s

The s o lic it a t io n stage is the most c r it ic a l phase in the c o n tra c t­
ing process, as fa r as com petition is concerned.

The h is to r ic re q u ire ­

ments f o r com petition in p u b lic purchasing have always included the
fo llo w in g :

the presence o f two o r more a v a ila b le , w i llin g , and respon­

s ib le "b id d e rs ;" a complete, e x p lic it , and r e a lis t ic s p e c ific a tio n
package which a ll in te re s te d p a rtie s can re ce ive ; the w idest s o lic it a ­
tio n o f q u a lifie d , p o te n tia l co n tra cto rs through the use o f a bidders
g

11st; an atmosphere o f o b je c tiv it y and Im p a r tia lity .

These re q u ire ­

ments have been standards 1n the f ie l d , whether com petitive bidding o r
com p etitive nego tiatio ns are used to make awards.
O

The Council o f State Government, State and Local Government Pur­
chasing (Lexington, Ky.: COS, 1975), e s p e c ia lly Chapter 6.

78

The general ru le a t both the s ta te and county le v e ls has been
th a t the DSS s o lic ite d fo r proposals o r program d e s c rip tio n s from more
than one prospective c o n tra c to r only when new money became a v a ila b le , as
was the case when d e c e n tra liz a tio n took place.

Both before and a fte r

counties gained co n tro l o f most c o n tra c tin g , once an agency received a
c o n tra c t to provide a service th a t agency u su a lly became the on ly one
n o tifie d fo r subsequent c o n tra c ts —and u su a lly got renewals every year.
The motto in most counties as w e ll as a t the s ta te le ve l seems to have
been "Once a c o n tra c to r, always a c o n tra c to r."
For new c o n tra c ts , the number o f p o te n tia l providers th a t are
in v ite d to submit proposals is very lim ite d .

County coordinators

reported th a t between one and ten community agencies are contacted fo r
each c o n tra c t (w ith the mode a t approxim ately tw o), depending on the
size o f the county and the type o f se rvice required.

Some o f the ser­

vices DSS has wanted are ra th e r s p e c ific in nature o r in ta rg e t popula­
tio n s ( e .g ., h e a lth -re la te d services fo r m igrant H ispa nics), such th a t
only one agency e x is ts th a t could (and wants to ) perform the se rvice .
County o f f ic ia ls also have been h e s ita n t to seek out con tractors oper­
a tin g outside t h e ir own counties.

As a r e s u lt, f a i r l y sp e cia lize d

agencies w ith no com petition are in a more advantageous p o s itio n to
in flu e n c e the c o n tra c t amount, the performance s p e c ific a tio n s , and con­
tr a c t requirements than when more than one p ro vid e r competes.
Formal s o lic it a t io n procedures and "bidders l i s t s " are seldom used
by s ta te and county o ffic e s .

The usual means o f communicating about

DSS' needs when new con tracts are to be made are f a i r l y in fo rm a l.

The

county program and c o n tra c t s ta ffs g e n e ra lly depend upon th e ir knowledge
o f which esta blishe d agencies in the county could d e liv e r the services

79

in a s a tis fa c to ry manner to DSS c lie n ts , and contact only them.

A ll

counties reported using personal telephone c a lls or word o f mouth to
inform these agencies o f the a va ila b le con tracts.

Some send out b r ie f

le tte r s explaining the types o f services they desire and the amount o f
money they can a llo c a te through con tracts.

Only when funds were re la ­

t iv e ly p le n tifu l did a few o f the la rg e r counties on occasion use news­
paper a r t ic le s , te le v is io n and radio announcements, o r advertisements in
open requests fo r proposals.
Sometimes the county and sta te o ffic e s also receive new, u n s o li­
c ite d le tte rs o f in te re s t o r proposals during the year from various agen­
cies o ffe rin g to provide a service.

In the e a rly Seventies, these

proposals were usually sent to sta te program o ffic e s and fre q u e n tly
resu lted in contracts because o f the a v a ila b le funds.
counties have been the targets o f such proposals.

More re ce n tly the

I f the idea is a good

one and o f f ic ia ls believe th a t the service is needed and in lin e w ith
T it le XX g u id e lin e s, the con tractin g o f f ic ia ls could e ith e r:

1) award

a c o n tra c t w ith o u t try in g to compare the proposal to any o th ers, i f
there are some unexpended funds; o r 2) t e l l the agency to resubmit the
proposal a t the annual proposal evaluation time in the co n tra ctin g cycle
to consider i t along w ith other plans to compete fo r a share o f the
county a llo c a tio n pot.

The lim its on federal funds have meant th a t in

the la s t two years only a few o f these proposals have led to awards.
The more formal Request fo r Proposal (RFP) process is not required
by departmental p o lic y , and as a re s u lt, only in fre q u e n tly has i t been
u t iliz e d .

The few counties and sta te programs th a t have used the RFP

complained o f the extra time and expense involved in preparing the f u l l
d e ta ils o f the co n tra ct and requested services, and in sending out the

80
large package.

Others suggested th a t the RFP process might be a b e tte r

a lte rn a tiv e to the cu rre n t method o f s o lic it a t io n — th a t i t m ight promote
g re a te r fa irn e s s and com petition.
Most o f the co u n tie s, w h ile not using RFP form at, do send out more
d e ta ile d explanations to those agencies th a t have expressed in te re s t in
a c o n tra c t o r have subm itted a le t t e r o f in te n t.

Usually w ritte n by the

c o n tra c t co o rd in a to r w ith assistance from program s t a f f , th is Inform ation
gives the requirements o f the c o n tra c t and o u tlin e s the proposal format
to be used by the proposer.

The requirements u su a lly include the fo llo w ­

in g -a c c e p ta b le to ta l cost range, equal o p p o rtu n ity employment, a ffirm a ­
tiv e a c tio n program, length o f the co n tra c t (one y e a r), s p e c ific a tio n s
about the approximate number and type o f c lie n ts to be served, the 25
percent donation re g u la tio n s , record-keeping p ra c tic e s , and general
types o f services desired.

Sometimes performance s p e c ific a tio n s are

added, i f DSS is seeking a p a r tic u la r se rv ic e .
These packages seldom in clu d e , however, the c r it e r ia by which pro­
posals w i l l be evaluated.

Some o f the co u n tie s' c o n tra c t coordinators

suggested th a t the ju dg in g-of- proposals was so o fte n s u b je c tiv e , th a t
s ta tin g c r it e r ia would be d i f f i c u l t .

Others said th a t the c r it e r ia th a t

would be used were im p lic it in the s p e c ific in fo rm a tio n about the
department's needs.

N e ithe r do these packages u su a lly sp e cify the

various review methods and c r it e r ia th a t DSS would be using to m onitor
and evaluate c o n tra c to rs ' expenditures and performance.

In most cases,

these procedures, as w e ll as o th e r d e ta ils , are explained v e rb a lly in a
pre-proposal conference fo r a ll in te re s te d p a rtie s ( i f there is one), by
the c o n tra c t owner upon request, o r during co n tra c t n e g o tia tio n s .

81

I t is c le a r from th is d e s c rip tio n th a t DSS' sol 1e la tio n proce­
dures do not fo s te r com p etitio n.

In a d d itio n , during the in te rvie w s i t

was evident th a t some o f the county coordinators were not concerned
about being im p a rtia l and o b je c tiv e in t h e ir re la tio n s h ip s w ith po te n tia l
providers p r io r to awards.

Some h in te d th a t the program s t a f f had th e ir

own biases in fa v o r o f In v it in g proposals from c e rta in agencies, and not
o th e rs .

The lack o f formal s o lic it a t io n procedures, s o lic it a t io n c r i ­

te r ia ( i . e . , determ ining who would be a "re sp o n sib le and responsive"
p ro v id e r}, and proposal eva lu atio n c r it e r ia means th a t personal judge­
ments, p re ju d ic e s , and oversights can reduce the already minimal compe­
t i t i o n th a t e x is ts in the s o c ia l services environment.
3.

Proposals

A ll o f the counties and the s ta te program o ffic e s where I in t e r ­
viewed spokespersons re q u ire a w r itte n proposal before a decision is
made on c o n tra c t awards.

These proposals range in le n g th , d e t a il, and

s o p h is tic a tio n , depending upon the gu id eline s o f DSS and the a b il it y o f
the agency.

Contractors who are lik e ly to have contracts renewed are

expected to submit a proposal as w e ll, even i f i t is a copy o f the pre­
vious y e a r's plan.

Always Included w ith the proposal is a lin e -1 tern

budget o f expected costs.

In the proposal i t s e l f are a d e ta ile d des­

c r ip tio n o f the se rvice s, the plan o f se rvice d e liv e ry , and the approxi­
mate number and type o f c lie n ts to be served.

In some cases, proposals

need not meet a l l s p e c ific a tio n s o f the DSS package.

C ontractors can

request a high er funding le v e l, reduce the number o f c lie n ts , o r change
the mix o r type o f program a c t iv it ie s —and s t i l l be considered f o r
awards.

Almost a ll o f the oth e r requirements provided by DSS under

T it le XX re g u la tio n s must be complied w ith , however.

32

In a d d itio n , c e rta in counties w i ll o cca sio na lly require th a t the
proposers give an oral presentation and answer questions before the
three-member board o f social services and the s t a f f .

This usually

occurs when new contracts are being awarded—especial ly when more than
one agency proposes to provide the same type o f service.
In general, the com petition fo r contracts is minimal.

For any one

type o f service desired, according to interview ees, only one to three
proposals are received fo r consideration.

In a ll but the fo u r la rg e s t

counties, receiving more than one proposal fo r a co n tra ct is a rare
occurrence.

(When i t has happened, i t has usually been between money

management agencies th a t have greater m o b ility .)

Therefore, in most

counties the com petition is not between s im ila r agencies o ffe rin g sim i­
la r kinds o f services th a t can be compared, but among d is s im ila r agen­
cies a ll wanting a share o f the county's a llo c a tio n .
Ill.

Contract Decision Making
In advocating co n tra ctin g out fo r pu blic services, the p u b lic

choice adherents assume th a t decision makers w i ll use th is mode o f ser­
vice d e liv e ry to promote greater e ffic ie n c y and cu t the costs o f govern­
ment services.

The h is to ry o f social services contracts indicates th a t

these goals were not major considerations in the e a rly years.

But, as

Michigan has found 1t in cre a sin g ly d i f f i c u l t to stay w ith in the sta te
li m it on T it le XX a llo c a tio n s , have the DSS decision c r it e r ia changed
over time?

Have decision makers been try in g to get "the biggest bang

fo r the buck"?

There are two major points in the co n tra ctin g process

th a t w i l l be analyzed to answer these questions:

f i r s t , the decision to

purchase c e rta in se rvice s, and second, the choice o f contractors to

83

d e liv e r these chosen services.

We w i ll examine both the decision-making

process and the c r it e r ia u tiliz e d by o f f ic ia ls .
A.

Why Contract Out?
The interview s w ith p u b lic o f f ic ia ls made i t obvious th a t decision

makers do not p e rio d ic a lly review the advantages and disadvantages o f
using contractors to d e liv e r p u b lic services.

Nor do they weigh the

costs and be n e fits o f in-house p ro visio n vs. contracted se rvice s, and
make th e ir choices based on these fa c to rs .

Instead, outside agencies

have usually been u tiliz e d because DSS caseworkers have not had the
exp e rtise o r experience to provide c lie n ts w ith c e rta in services o r pro­
grams.

Even though they could have hired the necessary personnel, DSS

believed i t would be easier and cheaper fo r the s ta te to use the e x is t­
in g , experienced agencies, p a r tic u la r ly because o f the donated funds.
And the f ie ld had had a long h is to ry o f p riv a te service pro visio n to
support th is decision.

According to an e a rly p a rtic ip a n t in DSS con­

tr a c tin g , the federal funds provided a p e rfe c t op p o rtu n ity to get
m iddle-class agencies to serve the poor.
A ll o f the 23 respondents were asked to rank seven a lte rn a tiv e s in
order o f importance (from one to seven, w ith one being the most impor­
ta n t) as to why outside agencies o r firm s instead o f p u b lic employees
were used to supply social services in th e ir program area.

Although

interviewees gave various combinations, the "b e tte r services" answer was
selected by a ll three groups as the most im portant reason fo r co n tra ct1ng out (.Table 1).
q

q

Its mean was the lowest o f the seven answers, 2.8,

Several o f the respondents said th a t th is reason was r e a lly the
only major one o f the l i s t . The Importance o f the oth er a lte rn a tiv e s
must not be overemphasized.

Table 1:

Reasons fo r Contracting Out—D.S.S.

State
O ffic ia ls

County
O ffic ia ls

Contractor
Respondents

Mean of
Individuals

Mean of
Groups

Lower cost

4.3

3.9

3.0

3.6

3.7

B etter services

3.5

2.1

2.7

2.8

2.8

Greater f l e x i b i l i t y in
h irin g and f ir in g

4.3

3.8

4.8

4.4

4.3

Better oversight over cost
and performance

6.0

4.5

3.3

4.4

4.6

Mandated by fe d e ra l/sta te
laws or regulations

5.3

5.4

5.4

5.4

5.4

A way o f strengthening
p riva te agencies or firms

4.2

5.0

5.1

4.8

4.8

P o litic a l po rkba rrellin g

4.3

6.0

5.1

5.1

5.1

N= 6

N= 7

Reasons:

N = 10

N = 23

N= 3

85

and i t was most fre q u e n tly chosen as f i r s t in importance.

By b e tte r

s e rvice s, respondents said they meant not o n ly th a t outside providers
g e n e ra lly could give b e tte r q u a lity services than could DSS caseworkers,
but also th a t they have e xp e rtise in a wide range o f s p e c ia liz e d se r­
vices th a t c lie n ts need.

Otherwise the DSS could not o r would not be

able to provide the services a t a ll ( e .g ., c e rta in housing and money
management se rvice s, g e r ia tr ic day c a re ), o r could not provide them very
w e ll ( e .g ., alcoholism r e h a b ilita tio n , health services f o r m ig ran ts).
Respondents were somewhat more divided in t h e ir opinions about
what a d d itio n a l reasons were used fo r c o n tra c tin g o u t.

"Lower cost"

ranks second out o f the seven reasons fo r the combined t o t a l, even
though the mean fo r both groups o f o f f ic ia ls is the t h ir d , not the
second, lowest o f the a lte rn a tiv e s .

In te r e s tin g ly , n e ith e r o f the two

p ro vid e r spokespersons who had worked in the s ta te DSS during the e a rly
Seventies nor any o f the veteran s ta te o f f ic ia ls selected th is reason
fo r t h e ir f i r s t o r second choices.

Cost seems to have become more

im portant in recent yea rs, but was not a major reason o r ig in a lly fo r
using provate p ro vid e rs, according to the more experienced bureaucrats.
Some respondents made the im portant p o in t th a t the lo c a lly raised dona­
tio n made the services very a ttr a c tiv e f o r the s ta te government, since
no s ta te funds were necessary.

State and county o f f i c i a l s 1 considera­

tio n o f cost as a reason fo r using c o n tra c to rs , th e re fo re , does not seem
to re ly on comparisons o f DSS' and outside p ro vid e rs' to ta l per-un1t
costs o f se rvice (in c lu d in g both the federal and lo ca l amounts plus any
o th e r s ta te -in c u rre d expenses).

Rather, the ca lcu la te d costs have been

the costs to the s ta te government, using the simple rule-o f-thu m b th a t
contracted services w ith the lo ca l donation are v ir t u a lly "fre e " fo r

86

the s ta te .

I f provided through DSS caseworkers, the s ta te i t s e l f would

have to make the match.

Thus, fis c a l federalism seems to have removed

some o f the Incentives to consider cost as a c ru c ia l fa c to r in c o n tra c t­
ing— i f in fa c t costs otherwise would be a major co n sid e ra tio n .

Indeed,

even w ith the fix e d s iz e o f the Michigan T it le XX a llo c a tio n sh rin kin g
under in fla tio n a r y pressures, the contracted services look lik e a re la ­
tiv e bargain to a DSS th a t has d i f f i c u l t y g e ttin g enough funds to meet
the d ir e c t payment needs o f it s growing c lie n te le .
Other answers o f somewhat less importance were:
lity

"g re a te r f l e x i b i ­

in h ir in g and f i r i n g , " "b e tte r o ve rsig h t over cost and performance,"

and "a way o f strengthening p riv a te agencies o r firm s ."

The a lte rn a ­

tiv e s o f " p o lit ic a l p o rkb a rre lin g " and "mandated by federal and s ta te
laws and re g u la tio n s " were g e n e ra lly viewed as r e la t iv e ly unimportant
reasons f o r c o n tra ctin g o u t.

In some s p e c ific cases, however, both o f

these reasons have been p a rt o f the decisionmaking process, according to
respondents ( e .g ., sweetheart c o n tra c ts , c e rta in money management and
guardianship services which by law cannot be performed by DSS employees).
Some interview ees also commented th a t the p o litic ia n s , federal regula­
tio n s , and s ta te p o lic y encouraged c o n tra c tin g out under T it le XX, but
o v e ra ll these were no longer seen as im portant as o th e r reasons.
One o f the problems mentioned by various p u b lic o f f ic ia ls was th a t
there a c tu a lly has not been an o b je c tiv e purchasing process in DSS.
They complained th a t the s ta te p o lic y governing which types o f services
can o r should be bought is unclear, in c o n s is te n t, and su b je ct to a
v a rie ty o f in te rp re ta tio n s .

Many o f the counties have not conducted

needs assessments o r esta blishe d c r it e r ia f o r deciding which types o f
services are most necessary.

This lack o f o b je c tiv it y and a

ra tio n a l

87

decision-making process was seen as too o fte n crea ting problems in deci­
sions about both co n tra ctin g fo r services and making awards to providers.
B.

Choosing Contractors fo r Awards
The usual process o f evaluating co n tra cto r proposals in the coun­

tie s involves fo u r major groups o f o f f ic ia ls :

the county DSS s t a f f ,

the county board o f so cia l services, the department d ire c to r, and the
sta te DSS o f f ic ia ls —e sp e c ia lly those in the program and co n tra ct
management o ffic e s .

The various county p a rtic ip a n ts are given the task

o f making awards to co n tra cto rs.

But who in the county Is a c tu a lly most

in flu e n tia l in the se le ctio n varies from county to county.
F ir s t , the county co n tra ct coordinator ( i f there is one), h is /h e r
supervisor ( e .g ., services head, deputy d ir e c to r ) , and releva nt program
heads review the proposals and make recommendations.

G enerally, they

are supposed to examine them fo r "completeness, s p e c ific ity o f the pro­
gram d e s c rip tio n con sisten t w ith lo cal o ffic e needs assessments, reason­
ableness and i f w ith in the State [ T itle XX] Plan and Federal goals.
I f a proposal contains elements th a t are questionable, the proposing
pro vid er is brought in to negotiate o r revise these parts.

In many

cases, the co n tra cto r alone is the expert on the service i t s e l f —what is
p ra c tic a b le , how much various items o r elements co st, which elements are
e s s e n tia l, e tc.

Frequently, the p u b lic o f f ic ia ls have few means o f

comparison (since competing proposals fo r the same service may not be
subm itted] and few outside sources o f in fo rm a tio n .

The most ofte n nego­

tia te d items include the number o f c lie n ts to be served (u n its o f ser­
v ice ) and the lin e -ite m amounts o f the budget.

G enerally, however, the

^Memorandum, Fred Lawless to Local O ffice Manager (A p ril 18,
1979).

88

fin a l proposal form th a t is then passed along to oth er o f f ic ia ls in the
co n tra ctin g process is very s im ila r to the o rig in a l proposal submitted
by the pro vid er.
Next, the social services board examines the proposals and states
th e ir preferences o f providers.

The board's normal ro le is an advisory

one, in which i t reviews, recommends, and comments on the range o f p o li­
c ie s , programs, and problems in the county DSS.

In the area o f con­

tr a c tin g , the boards also have the a u th o rity to examine a ll DSS
contracts to ensure th a t they conform to sta te statutes and T it le XX
(P.A. 237 o f 1975).

Each county has a three-member, voluntary board.

Two members are appointed by the county board o f commissioners, w h ile
the governor appoints the th ir d member.

These in d iv id u a ls are generally

c iv ic o r business leaders, w ith an in te re s t, but not necessarily any
e x p e rtis e , in the social services f ie ld .
T heir actual ro le in co n tra ctin g decisionmaking apparently depends
upon the in d iv id u a ls who serve on the board, th e ir ro le perceptions, the
use the department d ire c to rs make o f them, and the a b il it y o f the s t a f f
to "manage" o r influence them.

In some counties, the boards were

described by interviewees as mere rubber stamps o f the decisions made
by in flu e n tia l co n tra ct coordinators o r service heads.

In oth ers,

respondents expressed some fru s tr a tio n about the co n tra ct decisions o f
th e ir boards--sinee they had not always
dations.

agreed

w ith s t a f f recommen­

For example, one county's coordinator had gone along w ith the

board's suggestion to s o l i c i t more w idely fo r another money management
firm , but concluded th a t the cu rre n t c o n tra c to r, located in the county,
should have his co n tra ct renewed.

The board decided Instead to award

the c o n tra ct to an outside firm w ith several branch o ffic e s in the

89

s ta te .

This a c tio n angered the co o rd in a to r, since the change involved

much a d d itio n a l work fo r her.
The county department d ire c to r has fin a l a u th o rity on awards (sub­
je c t to the approval o f the s ta te DSS d ir e c to r ) .

I t depends upon the

in d iv id u a l, the department, the board, and even sometimes some outside
p o lit ic a l forces as to whose recommendations fo r awards are a c tu a lly
approved.

Some d ire c to rs take an aggressive ro le in making decisions

about c o n tra c ts , w h ile others approve o f the decisions made by key s t a f f
members and/or the board.

The usual s tra te g y o f most d ire c to rs appears

to be to gain s t a f f and board consensus on awarding the c o n tra cts.
To determine the reasons fo r co n tra c t choices, I asked the in te r ­
viewees th is question:
On what basis is i t decided th a t a c e rta in firm o r agency
w i l l receive a c o n tra c t in your program area?
State and county o f f ic ia ls chose three major reasons over the o th e rs,
in the fo llo w in g order:

previous s a tis fa c to ry work in s ta te se rvice s ,

adequate s t a f f and equipment, and experience in th is general type o f
s e rv ic e .

Lowest c o st, a plan to f u l f i l l a ll c r it e r ia provided in the

s o lic it a t io n package, p o lit ic a l in flu e n c e , and wel1-reasoned arguments
why program elements would accomplish the desired goals were mentioned,
but r e la tiv e ly in fre q u e n tly .

C ontractor spokespersons selected a some­

what d iffe r e n t set o f reasons, in ord er:

experience in th is general

type o f s e rv ic e , p o lit ic a l in flu e n c e , previous s a tis fa c to ry work in
s ta te s e rvice s, and lowest co st.

These were the c o n tra c to rs ' percep­

tio n s o f what reasons were used fo r awards, ra th e r than the more d ir e c t
observations made by the p u b lic o f f ic ia ls Included in the sample.

As

f o r the lowest cost choice by c o n tra c to rs , i t was c le a r from t h e ir com­
ments th a t they were th in k in g o f the la te s t round o f c o n tra c t

90

n e g o tia tio n s, where the cost fa c to r was stressed—but usu ally was not a
major c r ite r io n fo r awards, according to p u b lic o f f ic ia ls .

Contractors

also selected the " p o lit ic a l in flu e n ce " a lte rn a tiv e more fre q u e n tly than
bureaucrats, perhaps because some had more d ire c t experience w ith p o li­
t ic a l awards, o r because they overstated the in fluence o f p o litic ia n s .
On the oth er hand, p u b lic o f f ic ia ls might be somewhat h e s ita n t to admit
th a t p o litic s has been an im portant fa c to r in th e ir professional work.
Many o f the respondents found i t d i f f i c u l t to answer th is question
about the basis o f con tract awards, since a v a rie ty o f c r it e r ia has been
used to make choices.

From th e ir vantage p o in t, s ta te o f f ic ia ls said

th a t the reasons depended on the nature o f the service desired, the
county (o r sta te ) o f f ic ia ls involved, and the a v a ila b ilit y o f providers.
Most o f the s ta te and county interviewees in dicated th a t freq ue ntly
there were few real choices to make--that previous contractors got
renewals and new contracts were awarded to the only a v a ila b le , reputable
agency in the community equipped to handle the services.

The more

c r it ic a l choice fo r small and medium-sized counties (and even the sta te
program o ffic e s ) has been deciding which services to purchase, because
th a t choice in tu rn determined which s u p p lie r could be u tiliz e d .
Some o f the counties apparently do not f i r s t consider the service
needs, s o l i c i t ju s t fo r the chosen se rvice s, and then make the choice
among the proposers.

Instead, th e ir s o lic ita tio n s are not lim ite d to a

few s p e c ific se rvice s, but are more open In v ita tio n s to in te re ste d pro­
v id e rs.

County o f f ic ia ls examine the various proposals they receive and

the agencies subm itting them; then they make th e ir awards.

In these

circumstances, 1 t is d i f f i c u l t to d is tin g u is h two d iffe r e n t decisions in
the process—one about the service needs and the other about awards fo r

91

these services.

The two decisions apparently are made as one, since the

agencies and t h e ir proposals a ffe c t the outcome.
In any case, as in d ica te d by the DSS respondents, the agencies
u su a lly chosen fo r con tracts are ones th a t, in the opinion o f de cision­
makers, w i l l supply good services f o r c lie n ts and are able to work w ell
w ith DSS o f f ic ia ls .

Comparing the costs o f various services and agen­

cies has only been done in fre q u e n tly .

Not on ly is 1 t extremely d i f f i ­

c u lt to measure and compare the costs and the b e n e fits o f very d iffe r e n t
programs, but i t has not been done because o f a lack o f choice among
providers and because decisionmakers have not been geared toward making
choices on the basis o f costs.

In one recent case o f com petition

between two money management agencies, the county con tracts co o rd in a to r
reported th a t the board o f so cia l services and the s t a f f recommended
th a t the agency proposing the lower cost w ith e s s e n tia lly the same ser­
vices not be granted a c o n tra c t.

They chose the o th e r, more experienced

agency because they believed it s costs were more r e a lis t ic f o r the
q u a lity o f services they desired.
In making choices about c o n tra c to rs , whether a c o n tra c to r is o f a
ra c ia l m in o rity group has not u su a lly been considered as a c r it ic a l
fa c to r.

I t can be im p ortan t, however, when a p a r tic u la r m in o rity group

is targeted f o r a se rvice .

In th a t case, o f f ic ia ls t r y to s o l i c i t pro­

posals s p e c ific a lly from m in o ritie s and award the c o n tra c t to a p ro vid er
o f the same group.

C ontract coordinators in the la rg e r counties w ith

s ig n ific a n t m in o rity populations and needs expressed more concern about
th is issue.

Otherwise, m in o rity c o n tra c to rs ' proposals are tre a te d in

the same fashion as are oth e r proposals.

92

C.

Reasons fo r Lack o f O b je ct!vH y and Fairness
In examining the DSS co n tra ctin g procedures, i t was apparent th a t

the s o lic it a tio n methods were not aimed a t increasing com petition, f a i r ­
ness, and o b je c tiv ity .

The DSS' award decisionmaking process does not

promote these goals, e ith e r.

Nor do o f f ic ia ls necessarily choose ser­

vices and providers or the basis o f lowest cost w ith the best q u a lity
services.
Some o f the counties' decisions on services and awards were
s tro n g ly c r it ic iz e d by sta te program and co n tra ct management o f f ic ia ls .
One o f f i c i a l , w ith a business background, complained th a t i t has been
d i f f i c u l t to tr y to get the program and county s ta ffs to act lik e they
are buying services, Instead o f merely funding them.

A program head

said th a t "some counties are too he avily involved in f a c ilit a t in g
frie n d sh ip s instead o f the program goals" th a t are set by the various
sta te program o ffic e s .

He and other state o f f ic ia ls questioned some o f

the awards made by some counties ( e .g ., choosing Dale Carnegie, Inc. to
teach General Assistance c lie n ts how to Improve themselves by winning
frie n d s and in flu e n c in g people).

In a d d itio n , according to DSS o f f i ­

c ia ls , too many o f the counties (and some sta te programs) have become
"locked In to " c e rta in o ld e r co n tra cts, such th a t they may not be pur­
chasing the best q u a lity and most necessary services fo r c lie n ts .
P art o f the explanation fo r some d is s a tis fa c tio n w ith the choices
made Is due to DSS procedures in the decision-making process i t s e l f .
F ir s t, the id e n titie s o f the proposers are known to a ll co n tra ctin g
p a rtic ip a n ts .

As a r e s u lt, fa cto rs besides the proposal can a ffe c t the

decisions, in clu d in g la te n t prejudices against c e rta in types o f agen­
c ie s , knowledge o f p o lit ic a l connections, personal fe e lin g s about

93

in d iv id u a ls associated w ith the agencies.

Secondly, most o f the coun­

tie s have not established and made known th e ir c r it e r ia fo r se le ctin g
services and providers.

D iffe re n t p a rtic ip a n ts can use a v a rie ty o f

c r it e r ia , some o f which may have l i t t l e
the costs, and the q u a lity o f services.

to do w ith the, service needs,
In w ritin g up proposals, p ro v i­

ders operate in the dark concerning the needs and expectations o f DSS,
unless they have access to some inside in fo rm atio n.

T h ird , DSS' moni­

to rin g and evaluation procedures have not served to a s s is t decision­
makers.

Interviewees suggested th a t co n tra ctin g o f f ic ia ls and the coun­

ty boards o f social services were often handicapped in decisionmaking
because they lacked adequate inform ation about the e ffe c ts o f various
programs and services on c lie n ts ' problems.
I t is not s u rp ris in g then th a t some decisionmakers also allow
t h e ir personal re la tio n s h ip s w ith providers and/or outside p o litic a l
pressures to influence t h e ir choices.

For the most p a rt, the profes­

sional bureaucrats I interviewed disapproved o f these in flu e n ce s, but
recognized th a t these fa cto rs sometimes have determined fin a l decisions.
(They were not always so aware o f t h e ir own biases and those o f the pro­
gram s t a f f s . )

Therefore, the pattern o f decisionmaking on DSS contracts

is at variance w ith th a t assumed by the p u b lic choice school.

Often the

goals and the co n tra ctin g methods o f DSS o f f ic ia ls are not oriented
towards the p u rs u it o f cost savings fo r the government.
1.

Relationships Between Bureaucrats and Contractors

Next we w i l l examine the re la tio n s h ip s th a t have been b u il t up
between the p u b lic co n tra ctin g agents and p riv a te co n tra cto rs.

Gener­

a lly , the provider spokespersons interviewed were the d ire c to rs or
a d m in is tra tive personnel who were responsible fo r the co n tra ctin g

94

process and op era tion .

On the government sid e , s ta te o f f ic ia ls are not

u s u a lly as involved w ith co n tra cto rs on a frequent o r fa c e -to -fa c e
basis as are county co n tra c t coordinators o r se rvice heads.

Both sets

o f questions 1n th is se ctio n were designed to explore whether bureaucratc o n tra c to r re la tio n s h ip s are in d ic a tiv e o f c o n tra c tin g co o p ta tio n ,
where frie n d s h ip s can reduce o b je c tiv it y in decisions about renewals and
se rvice needs.
Respondents were asked the fo llo w in g question:
Use the fo llo w in g terms to describe your own re la tio n s h ip s
w ith c o n tra c to rs /p u b lic o f f ic ia ls 1n your area o f c o n tra c t­
in g :
1.
2.
3.
4.
5.

close and personal
warm and fr ie n d ly
s t r i c t l y b u sin e sslike
cool and d is ta n t
h o s tile and a n ta g o n is tic

They were given a frequency ra tin g scale from one through fo u r {always,
o fte n , sometimes, o r never) to in d ic a te how o fte n t h e ir re la tio n s h ip s
could be characterized in the fiv e above ways.

The interview ees'

answers seemed to depend in p a rt upon th e ir moods, t h e ir recent e x p e ri­
ences (which had not been a lto g e th e r pleasant during the la te payment
problems), and t h e ir in d iv id u a l p e rs o n a litie s .

The re s u lts cannot be

understood as being very p re cise , th e re fo re .
Nonetheless, the general conclusion th a t can be drawn from Tables
2, 3, and 4 is th a t the in te ra c tio n s between bureaucrats and providers
are o fte n warm and f r ie n d ly , as described by s ta te , county, and contrac­
to r respondents (83%, 71%, 80%, re s p e c tiv e ly ).

R elationships were not

not always harmonious fo r some in d iv id u a ls , however.

A t le a s t three

interview ees in each group stated th a t t h e ir dealings were sometimes
cool and d is ta n t, and even h o s tile and a n ta g o n is tic .

Two newer

Table 2:

State D.S.S. Employees' Relationships w ith Providers

Frequency:

Close and
personal

Warm and
frie n d ly

Always

S t r ic t ly
businesslike

Cool and
d is ta n t

1
(17%)

mm

H o stile and
antagonistic

Often

1
(17%)

5
(83%)

2
(33%)

1
(17%)

Sometimes

3
(50%)

1
(17%)

3
(50%)

3
(50%)

3
(50%)

Never

2
(33%)

2
(33%)

3
(50%)

6
(100%)

6
(100%)

TOTALS

6
(100%)

6
(100%)

6
(100%)

♦One respondent in each category did not answer th is question.

Table 3:

County D.S.S. Respondents' Relationships With Contractors

Frequency:
Always

Close and
personal
..

Warm and
frie n d ly

S tr ic tly
businesslike

1
(14*)

1
(17%)

Cool and
d ista n t

H ostile and
antagonistic

__

Often

2
(29%)

5
(71*)

2
(29%)

Sometimes

5
(71%)

1
(14*)

3
(43%)

5
(71%)

3
(43%)

1
(14%)

2
(29%)

4
(57%)

7
(100%)

7
(100%)

7
(100%)

Never

TOTALS

* Due to rounding.

7
(100%)

7
(99%)*

Table 4:

Contractors' Relationships w ith D.S.S. Contracting O ffic ia ls

Frequency:

Close and
personal

Warm and
frie n d ly

Always

S t r ic t ly
businesslike

Cool and
d is ta n t

1
(10%)

—
i—

H ostile and
antagonistic

__

Often

3
(30%)

8
(80%)

5
(50%)

1
(10%)

Sometimes

2
(20%)

1
(10%)

4
(40%)

3
(30%)

3
(30%)

Never

5
(50%)

1
(10%)

6
(60%)

7
(70%)

10
(100%)

10
(100%)

10
(100%)

10
(100%)

TOTALS

10
(100%)

98

contractors (in c lu d in g the association d ire c to r) and the two providers
who had not had DSS contracts renewed reported these le s s -th a n -frie n d ly
re la tio n s .

Although the c iv i l servants more fre q u e n tly said th a t in te r ­

actions were stra in e d at tim es, i t does not mean th a t they necessarily
have a more negative view o f working w ith contractors g e n e ra lly , as
compared w ith p ro vid er views o f dealing w ith bureaucrats.

These o f f i ­

c ia ls probably have more problems because they sometimes are given the
unpleasant tasks o f hearing com plaints, reprimanding u n sa tisfa cto ry pro­
v id e rs , and try in g to explain why contracts are la te , reduced in amounts,
o r not renewed.
A re la te d question was designed to ascertain i f bureaucrats f e l t
they acted as advocates fo r co n tra cto rs, and i f contractors perceived
them behaving as such.

A bureaucratic advocacy ro le would be in lin e

w ith the cooptation approach to p u b lic and p riv a te agency re la tio n s .
State and county interviewees were asked:
How fre q u e n tly do you see y o u rs e lf acting as an advocate fo r
Service providers in your work ( e .g ., as w ith other sta te
o f f ic ia ls ) ?
Contractors were given th is version:
How freq ue ntly do you th in k th a t the service co n tra ct coor­
d in a to r s) in the state/cou nty acts as an advocate fo r your
agency and other service providers (e .g ., as w ith other
s ta te o f f ic ia ls ) ?
A ll were provided w ith the fo u r-p a rt frequency scale (always, o fte n ,
sometimes, never).

Most o f the county co n tra ct coordinators (and ser­

vice supervisors) in dicated th a t they do a ct as advocates fo r contrac­
to rs (Table 5).

E ig h ty -e ig h t percent ( fiv e out o f s ix ) said th a t they

always o r ofte n take on the advocate ro le .

Not s u rp ris in g ly , they

reported th is more fre q u e n tly than did the sta te o f f ic ia ls (w ith 50

99

Table 5:

Frequency:

Advocate Role o f O.S.S. Bureaucrats

State

Always

County

Provi ders

Totals

2
(33%)

1
(11%)

3
(14%)

Often

3
(50%)

3
(50%)

2
(22%)

8
(38%)

Sometimes

2
(33%)

1
(17%)

6
(67%)

9
(43%)

Never

1
(17%)

TOTALS

6
(100%)

1
(5%)
6*
(100%)

9*
(100%)

* One respondent in th is category did not answer the question.

21
(100%)

100

percent in these ca te g o rie s), who are fu rth e r removed from the needs o f
con tractors.

(Most contractors said they f i r s t go to th e ir county

contact i f they have any problems.)

As p a rt o f th e ir advocate ro le ,

county coordinators (as w ell as co n tra ct management o f f ic ia ls ) said th a t
they present the needs o f p a rtic u la r providers before other o f f ic ia ls
( e .g ., fo r DSS r e fe rr a ls , tim ely payments) as w ell as being an advocate
fo r using contractors to supply DSS services.
The pro vid e r spokespersons apparently did not see the co n tra ctin g
o f f ic ia ls actin g on t h e ir b e ha lf as fre q u e n tly as the o f f ic ia ls reported.
The m a jo rity (67 percent, or s ix out o f nine) said th a t th e ir coordina­
to r only sometimes advocated th e ir p o sitio n s w ith others.

(The one con­

tra c to r who responded w ith "always" to the question had only been
employed in her agency fo r a few months and p re vio usly she had worked
in c o n tra ct p o lic y fo r the s ta te DSS.)
From these answers and th e ir comments, I concluded th a t most, but
not a l l , o f the s ta te and county o f f ic ia ls t r y to help contractors
through what can only be described as a "huge bureaucratic maze," but
w ith o u t taking on the ro le o f promoting the causes o f p a r tic u la r agen­
cies when unwarranted.

While c e rta in ly sympathetic to the needs o f con­

tra c to rs and to the idea o f purchasing se rvice s, most o f f ic ia ls have not
lo s t t h e ir c r it ic a l eye.

They reported a number o f cases where con­

tra c to rs had not done th e ir jobs adequately, and where con tractors have
tr ie d to work the DSS system to th e ir own advantage (sometimes success­
f u ll y , sometimes n o t).

As a re s u lt, contractors cannot assume th a t

these o f f ic ia ls w i ll be th e ir a l l i e s . I n my view, 1 t is healthy th a t
U r t is possible th a t although the general pattern 1s not coopta­
tiv e , some coordinators may occasionally p re fe r c e rta in agencies
because o f frie n d sh ip s.

101

con tractors do not see t h e ir bu rea ucra tic contacts as always a ctin g on
t h e ir b e h a lf.

They w i l l be more lik e ly to perform b e tte r i f they are

somewhat uncertain about the frie n d s h ip o r advocacy ro le o f o f f ic ia ls .
On the o th e r hand, not a l l county c o n tra c tin g o f f ic ia ls kept a
distance between themselves and c o n tra c to rs .

In two o f the co u n tie s, I

found good evidence th a t the re la tio n s h ip s between co n tra cto rs and
coordinators were co o p tive , instead o f more o b je c tiv e .

{ I could draw

th is conclusion only f o r those counties where I conducted in te rv ie w s .
I can only conjecture from s ta te -le v e l Interview s th a t a few o f the
o th e r counties might also f i t th is p a tte rn .)

These county o f f ic ia ls

were anxious to defend t h e ir co n tra cto rs vs. the s ta te DSS; they worked
a t promoting cooperative, ra th e r than co m p e titive , re la tio n s h ip s among
c o n tra c to rs ; they spoke in very favo rab le terms about t h e ir agencies and
the need to keep them going; and they seemed to t r u s t t h e ir con tractors
im p lic it ly .

They did not see the need to have thorough reviews o f per­

formance- -o n ly enough to prove to others th a t they were doing th e ir
jo b s.
2.

Role o f P o litic ia n s and P o litic s in C ontracting

Although previous questions about c o n tra c tin g d id not show th a t
p o lit ic a l pork b a rre lin g and p o lit ic a l pressure were very Im portant
fa c to rs , several o f the respondents made vague o r disparaging comments
about the a c t iv it ie s o f p o litic ia n s in c o n tra c tin g .

To assess more

d ir e c t ly how p o litic ia n s get involved and how the respondents re a ct to
such involvem ent, the fo llo w in g question w ith s ix a lte rn a tiv e s was
asked o f a ll respondents:

102

In your experience in c o n tra c tin g , how do you evaluate the
ro le o f most p o litic ia n s ( e .g ., sta te le g is la to rs , county
commissioners, c it y counciImen) in the co n tra ctin g process?
1.
2.
3.
4.
5.
6.

generally q u ite h e lp fu l
not involved enough in co n tra ctin g
too in te rfe rin g In decision making
hardly involved a t a l l , but th a t’ s the way I p re fe r i t
only involved in contracts th a t th e ir con stitue nts
want, but otherwise hardly involved a t a ll
some other response(s)

The p ic tu re th a t emerges from th e ir answers and comments is one in
which p o litic ia n s (e s p e c ia lly state le g is la to rs and county commissioners)
can and do e xe rt some pressure on co n tra ctin g o f f ic ia ls , but th is is not
uniform ly done in a ll counties, nor was i t perceived in negative ways by
a ll respondents.

In fa c t, seven persons (30 percent) said th a t p o l i t i ­

cians were generally q u ite h e lp fu l (Table 6 ).

A county contracts coor­

d in a to r added th a t they can act as a check on the DSS a d m in istra tio n in
s p e c ific instances where otherwise im portant fa cto rs would not have been
taken in to account in decisions.

A sta te CMS supervisor said th a t

although they are h e lp fu l, they often do represent t h e ir c o n s titu e n ts '
needs as w e ll.

Some providers mentioned th a t o cca sio na lly they have

contacted th e ir local representatives or s ta te le g is la to rs , and consi­
dered them h e lp fu l in co n tra ctin g m atters.
None o f the respondents believed th a t the elected o f f ic ia ls were
not involved enough in co n tra ctin g a f f a ir s .

Five (22 percent) said

th a t they had found th a t the p o litic ia n s were hardly involved a t a l l ,
but they preferred i t th a t way.

When they did get involved, they

usually acted on behalf o f c o n s titu e n t providers* In te re s ts , not those
o f the general p u b lic o r DSS c lie n ts , according to nine (.39 percent) o f
those Interviewed.

This ro le was not always seen as a healthy one by

respondents, both p u b lic o f f ic ia ls and providers a lik e .

One respondent

Table 6:

Role o f P o litic ia n s in Social Service Contracting

Role o f P o litic ia n s :
Generally quite helpful
Not involved enough

State

County

1
(17%)

2
(29%)

—

Too in te rfe rin g in decision­
making
Hardly involved, but th a t's
the way I prefer i t

1
(14%)
—_

Only involved in contracts
constituents want

4
(67%)

Some other response

1
(17%)

TOTALS

* Due to rounding.

- -

6
(100%)

Providers
4
(40*)

Total
7
(30%)

------

—

. .

1
(4%)

2
(29%)

3
(30%)

5
(22%)

2
(29%)

3
(30%)

9
(39%)
1
(4%)

—-

7
(101%)*

10
(100%)

23
(99%)*

104

said th a t the p o litic ia n s had been too in te r fe r in g a t tim es, w h ile
another stated th a t lo c a l p o litic ia n s represented on ly the in te re s ts o f
frie n d s and re la tiv e s .
Both providers and p u b lic o f f ic ia ls to ld o f cases in t h e ir county
o r o th e r counties where c e rta in decisions were a ffe c te d by p o lit ic a l
fo rce s.

Two o f the providers interview ed had been pointed out by o f f i ­

c ia ls o r by themselves as being the re c ip ie n ts o f sweetheart c o n tra c ts -made as a re s u lt o f a special p o lit ic a l re la tio n s h ip w ith the s ta te DSS
d ire c to r and/or a powerful s ta te re p re se n ta tive .

(One o f these no

longer is a tru e sweetheart, since i t began to receive more s c ru tin y
a f t e r d e c e n tra liz a tio n .

The d ir e c to r said h is agency keeps g e ttin g con­

tra c ts becasue o f in e r t ia . )

Such con tracts are the exception, most

a ffirm e d , but they ir r it a t e d c o n tra c tin g o f f ic ia ls nevertheless, some­
times because they thought some oth e r agency could do a b e tte r jo b or
another se rvice was needed more by c lie n ts .
A s ta te program head was p a r tic u la r ly angry a t the s ta te le g is la ­
tu re as a whole, since i t had s p e c ifie d a c o n tra c t w ith a c e rta in agency
in her program area.

For two years, i t required DSS to purchase preg­

nancy counseling services from a p riv a te a n ti-a b o rtio n agency, against
the desires o f her o ffic e and the department.

(This was p a rt o f the

on-going tu g -o f-w a r between the s ta te le g is la tu re and the Governor over
the a b o rtio n is s u e .)
A s ta te DSS respondent mentioned th a t some o f the county boards o f
s o c ia l services were also h e a v ily in flue nce d by p o lit ic s — th a t some
members were a c tu a lly h ig h ly p o lit ic a l appointments, e s p e c ia lly in
sm alle r cou ntie s.

On occasion, p a rtisa n c o n flic ts also erupted in

counties w ith a Democratic county board o f commissioners (which appoints

105

two o f the three members).

One o f the providers complained o f "rampant

p o litic s " in one o f the counties where he had lo s t a c o n tra c t.

In th is

unusual case, apparently the board decided to make only one co n tra ct
instead o f d iv id in g up it s a llo c a tio n , la rg e ly due to the a c tiv e lobby­
ing o f senior c itiz e n s fo r a set o f services they wanted.
In sum, elected o f f ic ia ls have had a ro le in various con tract
decisions throughout the Seventies, according to interview ees.

On occa­

sion, they have used th e ir resources to influence co n tra ctin g o f f ic ia ls
to make choices they otherwise would not have made.

In p a r tic u la r , some

providers and th e ir constituencies have established strong tie s w ith
in flu e n tia l p o litic ia n s and appointed o f f ic ia ls .

Because o f th e ir

re la tio n s h ip s , i t has been d i f f i c u l t to reduce o r e lim in a te c e rta in
services and pro vid ers, when the s t a f f believes a change is warranted.
This p o lit ic a l muscle has not been flexed o fte n , but c o n tra ctin g p a r t i­
cipants understand t h e ir p o te n tia l power—and, th e re fo re , a ct w ith cau­
tio n in suggesting changes in services and awards.

I t is not s u rp ris in g

th a t almost a ll "o ld " contracts have been ro u tin e ly renewed in the coun­
tie s and the sta te program le v e l.

The ones th a t have been elim inated or

reduced have usually been w ith providers who did not have bureaucratic
o r p o lit ic a l a llie s in

key p o s itio n s .

be exerted only serves

to strengthen thep o s itio n

ders.

Thep o lit ic a l

pressure th a t could

o f mostcu rre n t p ro v i­

I t acts as y e t another c o n s tra in t upon co n tra ctin g decisionmaking

to narrow the range o f choices th a t the DSS can consider.
IV.

The Watchdog Role o f DSS

A.

Review Procedures
Now our a tte n tio n focuses on one o f the most im portant parts o f

the c o n tra ct process— the government's m onitoring and evaluation o f cost

106

and performance.

Those in the p u b lic choice school who advocate con­

tr a c tin g out as a s o lu tio n to government in e ffic ie n c y assume th a t the
re le va n t government u n it can determine th a t it s money is spent as agreed
upon, and th a t the performance and e ffe ctive n e ss o f the services make
the con tracts w orthw hile.

Id e a lly , then, the c o n tra c to r should undergo

rigorous s c ru tin y in three areas—expenditures, performance o f the ser­
vices as s p e c ifie d , and the longer-range e ffe ctive n e ss o f the services.
(The la s t type o f eva lu a tio n is p a r tic u la r ly necessary in the area o f
human s e rv ic e s , since the goals are u su a lly to change people, t h e ir
behavior, o r t h e ir circum stances.)

O bviously, th is ro le f o r governments

also requires the u t iliz a t io n o f these reviews—so th a t the cost and
performance feedback has a d ir e c t e ffe c t upon the fu tu re decisions made.
The c o n tra c t owner can use th is in fo rm a tio n to determine i f the co n tra c t
should be renewed, i f another service p ro vid e r should be sought, i f the
government u n it should provide the service i t s e l f in ste ad , o r i f the
service should not be provided a t a l l .

I t is only w ith these options

a v a ila b le th a t the government can a ct as an e ffe c tiv e watchdog over the
p u b lic purse and the services.
In Michigan, the two most im portant parts o f the DSS review pro­
cess are the m onitoring o f expenditures ( in accordance w ith DSS book­
keeping methods) and the determ ination o f e l i g i b i l i t y f o r service
re c ip ie n ts .

The DSS' reviews are less o rie n te d toward eva lu atin g

service performance and the long-term outcomes fo r c lie n ts .

A f a ir

amount o f v a ria tio n e x is ts among cou ntie s, however, since each county
DSS determines

the reviews i t wishes to do.

Only the p e rio d ic re p o rt­

ing o f expenditures and u n its o f se rvice 1s required o f providers by
s ta te c o n tra c t a d m in is tra tio n .

107

The s ta te co n tra c t management o ffic e is given the re s p o n s ib ility
o f overseeing the expenditure and e l i g i b i l i t y review processes and
a s s is tin g counties and providers w ith t h e ir many forms.

The o ffic e is

almost e x c lu s iv e ly concerned w ith examining co n tra c t compliance, not
w ith service performance, q u a lity , o r impact.
supposed to :

C ontract s p e c ia lis ts are

1} determine in a general way i f adequate bookkeeping

systems are in place; 2) review the p ro v id e rs ' q u a rte rly progress
reports on enrollm ents and services performed; and 3) conduct occasional
o n -s ite f ie ld v is it s to give assistance where problems e x is t, to examine
the f a c i l i t i e s and services f o r compliance, and to go through f ile s to
check a t random on c lie n t e l i g i b i l i t y .

Due to reduced s t a f f , in the

la s t year o r more, the f ie ld v is it s have been reduced in number and
lim ite d only to a few agencies o r counties w ith obvious problems.
County c o n tra c t coordinators sometimes do t h e ir own o n -s ite v is it s
as w e ll.

Expenditure and progress reports are f i l l e d out by con tractors

and sent on to the county o f f ic e .

I f any performance review or in -

depth evaluations are done, they are conducted by the county DSS, often
a t the request o f the lo cal d ire c to r o r the board o f s o c ia l services.
Because o f inadequate s t a f f and funding in most counties, these types o f
reviews are f a i r l y Inform al and in fre q u e n t.

Only three o f the seven

counties reported doing more in-depth forms o f e v a lu a tio n , and then
only f o r some se rvice s.

C lie n ts are not contacted fo r t h e ir viewpoints

and suggestions, except by some providers f o r t h e ir own eva lu a tio n
re p o rts.

Sub-contracts are not required to be reviewed fo r use o f

funds o r f o r performance, as the main co n tra cto rs are p rim a rily respon­
s ib le fo r these se rvice s.

And the Inform a tion used f o r performance

reviews is m ainly compiled by the co n tra cto rs themselves.

In s h o rt,

108

the contractors can usually "get by" w ith f i l l i n g out the required
forms, since s ta te and county scru tin y is spo tty and depends so heavily
on s e lf-re p o rtin g .
The other method th a t has been used to check on costs and compli­
ance is the p o st-a u d it o f expenditures.
ways.

This can be done In a couple

Some o f the agencies sub-contract w ith an independent accounting

firm fo r an annual a u d it and include the cost in th e ir budget.
send copies o f the re p o rt to the county and/or sta te o ffic e s .

They
Audits

are also conducted by the in te rn a l a u d it s t a f f o f the s ta te DSS.

Agen­

cies e ith e r are picked a t random fo r the a u d it, o r are selected on the
basis o f a request by program or co n tra ct s t a f f a t e ith e r government
level because o f suspicion o f frau d, inadequate bookkeeping procedures,
o r non-compliance w ith the terms o f the c o n tra ct.

Such fis c a l audits

usually take place w ith in s ix months to a year a fte r the end o f the
co n tra ct.

Therefore, th e ir re s u lts may not be known u n til a fte r con­

tra c ts have been renewed once or even tw ice.

Even though fu tu re con­

tra c ts might not be made a fte r negative fin d in g s , funds may have been
misspent fo r a period o f two or three years.

One respondent reported

th a t o f f ic ia ls have not always prosecuted in c le a r cases o f fraud
because o f p o lit ic a l pressure.

Instances o f mismanagement o f funds have

been found to pose d if f ic u lt ie s in recouping losses as w ell because o f
the c o n tra c to rs ’ apparent good in te n tio n s and the time and costs
involved.
A few contracts have, however, been revoked o r terminated before
the s p e c ifie d end o f the co n tra ct year fo r various reasons, in clu d in g
the improper use o f funds, u n sa tisfa cto ry service performance, fa ilu r e
to provide the sp e cifie d se rvice , o r fouled-up bookkeeping.

Some o f

109

these contracts were ended by mutual agreement, as in cases where the
p ro v id e r was unable to get the program s ta rte d up on tim e, w h ile oth e r
co n tra cto rs were only discovered to be in non-compliance when an a u d it
was done ( e .g ., in a case where 1 t was found th a t an agency did not
e x is t) .

In a d d itio n , in the la s t year several con tracts were term inated

and many reduced in funding because o f the s ta te 's lack o f funds.

None

o f the interview ees knew o f any o f f i c i a l suspensions o r debarrments th a t
re s u lte d from the various cases o f c o n tra c to r fra u d , although a couple
la w su its have been in the courts to get back the money th a t was paid
out.

Nonetheless, several co n tra cto rs have been u n o f f ic ia lly elim in ated

from fu r th e r con sid era tion f o r s o lic ita tio n s o r awards because o f th e ir
previous problems.
B.

Opinions About DSS Review Procedures
Two questions about the review procedures in contracted services

were asked o f a l l the respondents to help in eva lu atin g the e xte n t and
e ffe c tiv e n e ss o f DSS' watch-dog ro le .

One question o ffe re d a forced

choice:
In your area, do you be lieve th a t the m onitoring and
e va lu a tio n o f con tractors is :
1.
2.
3.
4.
5.
6.

too s t r i c t , w ith too much unnecessary and burdensome
paperwork involved
not adequate to oversee expenditures
not adequate to evaluate performance
not s t r i c t enough to oversee expenditures o r to
evaluate performance adequately
ju s t about r ig h t
some o th e r response(s)?

None o f the bureaucrats chose e ith e r o f the f i r s t two a lte rn a tiv e s
(Table 7 ).

A ll o f the s ta te o f f ic ia ls said they thought the cu rre n t

review process was e ith e r inadequate to evaluate performance (tw o, 33

Table 7:

Monitoring and Evaluation o f D.S.S. Contractors

Monitoring and
evaluation is :

State

County

Too s t r ic t , w ith too much
paperwork
Not adequate to oversee
expendi tures

Providers
3
(27%)

- -

Totals
3
(13%)

__

Not adequate to evaluate
performance

2
(33%)

1
(14%)

3
(27%)

6
(25%)

Not s t r ic t enough fo r
expenditures or performance

4
(67%)

3
(43%)

2
(18%)

9
(38%)

Just about rig h t

__

2
(29%)

2
(18%)

4
(17%)

Some other response

,—

1
(14%)

1
(9%)

2
(8%)

7
(100%)

11+
(99%)*

24
(101%)*

TOTALS

6
(100%)

+ One respondent gave two answers to th is question.
* Due to rounding.

I ll

percent) o r inadequate fo r reviewing both expenditures and performance
(fo u r, 67 p e rcen t).

None in th is sta te category said th a t the reviews

were ju s t about r ig h t.

The county coordinators and service heads were

more divided in th e ir answers.

Two (29 percent) o f them said they

thought the m onitoring and evaluation were ju s t about r ig h t in t h e ir
county, although one o f them acforitted th a t performance reviews were ju s t
barely adequate.

Three (43 percent) did not th in k e ffo r ts were s u f f i­

c ie n t fo r reviewing e ith e r costs o r performance, w h ile one (14 percent)
said th a t performance was not evaluated adequately.

(One o f the respon­

dents emphasized th a t the lite r a t u r e about m onitoring and evaluating
contracted so cia l services was also inadequate.)

Another services head

stated th a t the process was not too s t r i c t , but i t was " t e r r ib ly cumber­
some from s t a r t to f in is h , and confusing fo r p ro v id e rs ."
Some o f the providers agreed w ith th is view.

Unlike the sta te

and county respondents, some contractors chose the f i r s t response
(th re e , 27 p e rce n t), but they emphasized "the unnecessary and burdensome
paperwork" more than the fa c t th a t the process was too s t r i c t .

The p a rt

o f th e ir work th a t was h e a vily s c ru tin iz e d and required so much time was
the e l i g i b i l i t y v e r ific a tio n , not th e ir performance.

Three (27 percent)

others said the performance evaluations were inadequate, and two (18
percent) said th a t both the expenditure and performance reviews were
in s u ffic ie n t.

Of the ten p ro vid e rs, two judged the process to be ju s t

about r ig h t, although they also had some problems w ith i t , as they
revealed in the answers to another more open-ended question on the sub­
je c t.

Another agency a d m in is tra to r thought the reviews were "O .K., but

a c c o u n ta b ility is im portant, and m onitoring can be improved."
The fo llo w in g question was also asked o f a ll respondents:

112

What do you believe are the major problems involved in the
m onitoring and evaluation o f performance?
Respondents pinpointed several problems* but the consensus seemed to be
th a t DSS o f f ic ia ls did not have the re q u is ite resources to do careful
reviews— tim e, s t a f f , money, e xp e rtise —so they hardly do them a t a l l .
They usu ally depend upon the providers to re p o rt on th e ir service qua­
l i t y and effectiveness in an annual re p o rt.

State o r county reviews are

p rim a rily a paper process, not evaluations o f performance.

Because ser­

vice s ite s are p h y s ic a lly removed from them and program supervisors,
responsible county o f f ic ia ls have not been able to keep in frequent
contact w ith providers and th e ir s ta ffs to m onitor th e ir performance on
an on-going basis, as is done w ith DSS caseworkers.

Providers admitted

th a t not much m onitoring and evaluation is done by anyone, although some
suggested i t might be healthy to have greater DSS s c ru tin y , involvement,
and communication about th e ir services.
Almost a ll o f the respondents {both o f f ic ia ls and providers)
reported having d i f f ic u lt y w ith various elements o f the evaluation
e n te rp ris e , and suggested th a t these were major reasons fo r inadequate
performance reviews.

One o f the major stumbling blocks was being able

to develop "a s t a t is t ic a l evaluation tool th a t has both c r e d ib ilit y and
v a lid it y , " in the words o f a county contracts coordinator.

Interviewees

mentioned the lack o f standard evaluation measures o f service q u a lity ,
performance, outcomes, and impact.

With many d iffe r e n t services being

purchased, th is problem becomes more seriou s, since the same evaluation
too l cannot be used to evaluate a ll programs.

Then, too, a couple

o f f ic ia ls stated th a t i t is d i f f i c u l t to compare d iffe r e n t agencies'
performance and outcomes as a basis fo r decisions about the contracts

113

(because o f sole source c o n tra c tin g }—" i t ' s
oranges."

lik e comparing apples and

A s ta te program head reported th a t when her o f fic e attempted

to develop some outcome measures f o r contracted s e rv ic e s , the Attorney
General's O ffic e n o tifie d her th a t co n tra cto rs cannot be held le g a lly
accountable to meeting c e rta in d e sira b le outcomes— they could be held
accountable only fo r perform ing the services as agreed.
Several respondents also mentioned th a t id e a lly frequent c lie n t
evaluations and follow -ups shouldbedone as a way o f measuring the con­
tr a c to r s ' performance and long-run e ffe c tiv e n e s s .

According to in t e r ­

viewees, these are d i f f i c u l t to get because o f f lu i d populations in some
areas and because o f a lack o f knowledge about how "to develop a worka­
ble and honest c lie n t e v a lu a tio n ."

Some o f the p ro vid e rs, however, do

tr y to get the views o f t h e ir c lie n ts .
Others complained about the procedures to use in doing performance
m onitoring and evaluations ( i f they can be done a t a l l ) .

Both county

o f f ic ia ls and providers said th a t the s ta te does not provide co n siste n t
p o lic ie s and s p e c ific g u id e lin e s about how, when, and why reviews should
be done.
lity

A s ta te program o f f i c i a l said i t is the cou ntie s' re sp o n sib i­

to develop review and re p o rtin g systems to give them the necessary

in fo rm a tio n — but they have f a ile d to do so.

A CMS respondent said the

major problem is deciding who is supposed to do the jo b " in th is
bureaucratic mess."
Providers saw some a d d itio n a l problems in the procedures th a t are
employed.

One o f the few review methods c o n s is te n tly used by s ta te

m onitors

is to v i s i t an agency (u s u a lly annually) w ith the sole pur­

pose

o f p u llin g one o r two cases out o f the f ile s to examine them fo r

e l i g i b i l i t y , compliance, and completeness.

This was thought by some to

114

be both Inadequate and u n fa ir.

One pro vid e r also complained about the

fa c t th a t d iffe r e n t monitors look fo r d iffe r e n t th in g s , such th a t p ro v i­
ders are unsure o f how to comply w ith DSS reviews.

Adding to the gener­

al problem, according to pro vid ers, is th a t DSS reviewers know l i t t l e
about the services th a t agencies provide o r about the c lie n ts ' needs.
This ignorance a ffe c ts not only the methods and measures used to monitor
and evaluate, but also the proposal and award decisions.
These in te rvie w s w ith both p u b lic o f f ic ia ls and providers show how
weak the DSS review process is fo r contracted services.

The state and

county u n its are usu ally able to m onitor e l i g i b i l i t y , compliance, and
expenditures adequately.
w ell enough, however.

Performance and effectiveness are not evaluated

Without relevant and c o rre c t inform ation about

the services and th e ir e ffe c ts on c lie n ts , decisions about awards and
renewals must be based on oth e r fa c to rs —p o lit ic a l in flu e n c e , a ttitu d e s
o f caseworkers and supervisors, previous experience, rep uta tion in the
community, b e lie fs about what the c lie n ts re a lly need— ra th e r than
whether the services meet these needs.
V.

B enefits o f Contracting Out
Although the main th ru s t o f th is chapter has been to examine the

conditions o f co n tra ctin g th a t are assumed by the p u b lic choice
approach, we also can in d ir e c tly evaluate whether the expectations o f
lower cost and b e tte r services are f u l f i l l e d in DSS.

Contracting o f f i ­

c ia ls mentioned fre q u e n tly th a t they lack data on these m atters, but
most could estimate the general outcomes o f c o n tra c tin g .

Therefore, we

w i ll depend upon the opinions o f the various p a rtic ip a n ts to study cost
and performance.

115

A.

The Cost o f C ontracting Out
According to c o n tra c tin g advocates, the stro n g e st argument in

favo r o f purchasing services is th a t i t w i l l lead to s ig n ific a n t cost
savings f o r government.

To determine whether th is expectation has

m a te ria liz e d in DSS c o n tra c tin g , in the view o f respondents, I asked
th is question:
In the contracts and services you work w ith , do you th in k
c o n tra c tin g w ith p riv a te agencies o r firm s costs less than,
about the same as, o r more than, government d e liv e ry o f
those services would?
In response, 15 o f the 23 said th a t the p riv a te agencies/firm s could
provide services a t a lower cost than could the government (Table 8).
Not s u r p r is in g ly , the providers themselves held the stro n g e st support
fo r th is answer w ith 80 percent (e ig h t o f the te n ).

But county c o o rd i­

nators also s tro n g ly believed th a t costs are lower under co n tra ctin g
o u t, w ith 71 percent ( f iv e out o f seven) choosing th is response.

Gener­

a lly , the s ta te o f f ic ia ls in the program and c o n tra c t o ffic e s did not
share t h e ir enthusiasm—only 33 percent selected the lower cost a lte rn a ­
t iv e .

Perhaps in t h e ir p o s itio n s they can see how much is involved in

c o n tra c tin g compared to d ir e c t services.
In general, the s ta te and county o f f ic ia ls were not c e rta in about
the r e la tiv e costs, since no one had any hard data to make such compari­
sons.

Some mentioned the d i f f i c u l t y in accu rate ly assessing a ll o f the

co sts, since the c o n tra c t amount is no in d ic a tio n o f the to ta l costs o f
a d m in is tra tio n and se rvice .

The reasons they and providers gave fo r why

lower costs m ight be re a liz e d w ith c o n tra c tin g came down to one major
fa c to r —s a la rie s and frin g e b e n e fits f o r workers in p riv a te counseling

116

Table 8:

The Cost o f Social Services Under Contract

State

County

Providers

Less than
p u b lic

2
(33%)

5
(71%)

8
(80%)

15
(65%)

Equal to
p u b lic

2
(33%)

1
(10%)

3
(13%)

More than
p u b lic

1
(17%)

1
(10%)

4
(17%)

Don11 know or
no answer

1
(17%)

Cost:

TOTALS

6
(100%)

•

_

2
(29%)

Total

1
(4%)
7
(100%)

10
(100%)

23
(100%)

117

agencies are u su a lly lower than fo r county DSS caseworkers.

12

One o f f i ­

c ia l added th a t the 25 percent donation obviously made i t less expensive
to c o n tra c t out.

Another said th a t the government b e n e fits by using

ou tside s u p p lie rs th a t already have se t up an o rg a n iza tio n o f s p e c ia l­
ized personnel.
On the o th e r hand, several o f f ic ia ls argued th a t although i t seems
less c o s tly to c o n tra c t o u t, several fa c to rs cancel out the savings on
some o f the s a la rie s and frin g e s , and may even make the services more
expensive in the long run.

These fa c to rs they mentioned Include the

e x tra , sometimes hidden, costs o f c o n tra c tin g paperwork, a d m in is tra tio n ,
and review ; g re a te r expenses fo r some o f the more s p e cia lize d services
f o r which pay scales are s ig n ific a n tly h ig h e r; the b e lie f th a t '‘ there
are as many r ip - o f f a r t is t s in the p riv a te se cto r as in the p u b lic ;" and
the b e lie f th a t p e r-u n it costs o f services are lower in the p u b lic sec­
t o r , probably because o f la rg e r case loads.
B.

The Q u a lity o f Contracted Services
Even i f the cost o f DSS contracted services is equal to o r less

than p u b lic ly -p ro v id e d services would be, e ffic ie n c y and e ffe ctive n e ss
may not ch a ra cte rize the services i f the performance is not acceptable.
Therefore, the respondents were questioned about the q u a lity o f se rvi ces:
For the con tracts and services you work w ith , do you th in k
c o n tra c tin g w ith p riv a te agencies o r firm s re s u lts in poorer
s e rv ic e , about the same q u a lity o f s e rv ic e , o r b e tte r ser­
vice fo r re c ip ie n ts than government se rvice d e liv e ry would?
19

Two pro vid ers mentioned a re p o rt th a t documents th is and argues
fo r increased u t iliz a t io n o f p riv a te agencies, Michigan Federation o f
C hild and Famfly Agencies, In P artnership With the P ublic
(May,
1979), pp. 15-18.

118

With th is question, an in te re s tin g phenomenon occurred (Table 9).

Nine­

ty percent o f the providers judged the q u a lity o f th e ir services to be
b e tte r than the government's.
agree th is tim e.

County coordinators, however, did not

Instead, the m a jo rity (62.5 percent, or fiv e out o f

e ig h t) said the q u a lity was only equal to th a t o f services delivered
mainly by county DSS caseworkers.

This re s u lt may be due to a clo ser

observation o f DSS caseworkers and co n tra cto rs, or because o f a possible
cou nty/pu blic sector lo y a lty .

But on th is question, three o f the s ix

s ta te bureaucrats claimed th a t the services are b e tte r in the p riv a te
sector.

For the to ta ls , 91 percent (21) o f those interview ed stated th a t

p riv a te s o d a ! services d e liv e ry was equal to o r b e tte r than p u b lic ser­
vice d e liv e ry .

No one said th a t contracted services were poorer in

qu ali ty .
Respondents generally were less te n ta tiv e in t h e ir answer and
comments on th is question.

Athough they had no hard data comparing the

co n tra c to rs' performance w ith th a t o f DSS caseworkers, many respondents
were c e rta in o f t h e ir answers because o f th e ir personal experiences,
th e ir general social work stu d ie s, and/or th e ir a p p lic a tio n o f lo g ic to
the issue.

P ublic o f f ic ia ls who said th a t the p riv a te services were

generally b e tte r gave the fo llo w in g reasons:

"they d o n 't have to serve

DSS c lie n ts , so they d o n 't burn out o r get discouraged;" "g e n e ra lly ,
the education and experience le vel o f p riv a te s t a f f is higher" (e .g .,
higher number o f M.A. degrees); "reimbursement is based on q u a lity and
outcomes, not ex1stance—we can term inate the co n tra ct oth erw ise;" "more
f l e x i b i l i t y to drop the c o n tra c t;1' "we buy i t w ith the expectation that
the service w i l l be b e tte r than can be done in-house;" "b e tte r over­
s ig h t;" "personalized, sm aller case loads, greater v a rie ty o f services,

119

Table 9:

The Q ua lity o f Social Services Under Contract

Q u a lity :

State

County

B e tte r than
p u b lic

3
(50%)

3
(37.5%)

Equal to
p u b lic

2
(33%)

5
(62.5%)

Poorer than
publ 1c
Don't know or
no answer
TOTALS

—

—

1
(17%)
6
(100%)

8*
(100%)

Providers

Total

9
(90%)

15
(63%)
7
(29%)

• •

—

------

1
(10%)

2
(8%)

10
(100%)

24*
(100%)

* One respondent chose two responses w ith q u a lific a tio n s fo r each.

120

id e n tific a tio n w ith c lie n ts is c lo s e r, and they can se le ct th e ir c lie n ts "
(.besides the sta te re c ip ie n ts ).
Several respondents q u a lifie d th e ir statements about the q u a lity
being equal to o r b e tte r in the contracted services w ith comments lik e
these:

services are b e tte r i f i t is a "sp e cia lize d agency th a t does

things th a t the government d o e s n 't," but about the same q u a lity i f the
service is counseling; i f the service is already provided in the commu­
n ity , i t is b e tte r, but i f i t is an unpopular service, then the govern­
ment could provide b e tte r service ( e .g ., p ro te c tiv e services fo r c h il­
dren); " i t depends on the agency—some are b e tte r than o th e rs ."

Those

who claimed th a t service q u a lity was roughly equal in the two sectors
said th is was the case because o f:

equal o v e rs ig h t; the fa c t th a t

government has the money to keep an agency going; "high standards in
both the agencies and DSS;" "a c c o u n ta b ility is about equal;" they "must
see to i t ,

through m o n ito rin g ;" "th e y 're a ll s k ille d p ro fe ssio n a ls,

whether in the government o r n o t."
Agency d ire c to rs and spokespersons were even more e n th u s ia s tic
about the p riv a te services.

The service q u a lity is b e tte r, they said,

because o f "s p e c ia liz a tio n and a sm aller span o f control over q u a lity ;"
b e tte r a ttitu d e s toward work and se rvice , as w ell as b e tte r knowledge
o f how to help c lie n ts ; "DSS caseworkers have heavier caseloads, but we
have more time and personal contact" in p riv a te agencies; " s t a f f tu rn ­
over is much lo w e r;" "b e tte r s t a f f s e le c tio n and su p e rvisio n ;" "more
p a rtic ip a tio n in running program;" "sm aller u n its ;" "g re a te r m o tiva tio n ,
c r e a tiy ity , and pro fessio na lism ."

121

C.

Slowdown in Government Growth
C ontracting out proponents have not only expected th a t cost sav­

ings w ith good q u a lity services could be re a liz e d , but they have also
maintained th a t c o n tra ctin g would be lik e ly to lead to a slowdown in the
growth o f government--an im portant goal to most p u b lic choice th in ke rs .
But has th is been a re s u lt o f the DSS experience w ith contracting?
Government growth can be examined from two perspectives—growth in
the expenditures o f the government, and growth in the number o f p u b lic
employees.

In both respects, the DSS co n tra ctin g experience does not

meet up w ith the p u b lic choice expectation.

The o rig in a l federal le g is ­

la tio n was designed to spend money— and because o f the way the law and
regulations were worded, a t u n co n tro lla b le ra te s , u n til 1972.

M ichi­

gan's share o f the federal grants grew from approximately $16 m illio n
in FY71 to over $100 m illio n in FY76, in p a rt because o f the Increase in
purchase-of-service through both agreements and co n tra cts.

13

Contracts

s ta rte d o f f ra th e r slow ly and never reached the le ve ls o f many other
s ta te s ; y e t they have continued to be an im portant means fo r providing
services.

14

A fte r 1975, the sta te began to manage it s funds c a re fu lly

to stay w ith in it s T it le XX li m it .

Where government had not previously

funded se rvice s, by the mid-Seventies, the sta te had given out large
amounts o f federal money by c o n tra ct.

No one knows exa ctly how much

because o f t h e ir budgeting p ra c tic e s .

33D e rth ick, op. c i t . , p. 100.
14

B il l Benton, Tracey F e ild , and Rhona M illa r , Social Services
Federal L e g is la tio n vs. State Implementation CWashington: The Urban
I n s t it u t e , 19781, p. 111. This re p o rt o ffe rs a good overview and com­
parison o f T it le XX s ta te implementation.

122

In a d d itio n , both before and a fte r d e c e n tra liz a tio n , as DSS became
more concerned w ith a c c o u n ta b ility and staying w ith in the c e ilin g , large
numbers o f people were hired by DSS to make and adm inister the contracts.
As a r e s u lt, not only did more federal monies get spent on c o n tra cts,
but also more sta te funds were used fo r a d m in istra tio n .
Cone!usion
Although lim ite d p rim a rily to the interview s w ith co n tra ctin g
p a rtic ip a n ts , th is analysis o f DSS co n tra ctin g provides a means o f
evaluating the th e o re tic a l assumptions and expectations o f the p u b lic
choice perspective.

The evidence in th is case is a t odds w ith the o p ti­

m is tic p ic tu re o f the con tractin g proponents on several im portant
p o in ts.
Above a l l , i t is c le a r th a t DSS co n tra ctin g has seen only in fr e ­
quent com petition among providers fo r c o n tra cts, due to both the social
services environment and DSS1 procedures.

Consequently, the range o f

choices fo r o f f ic ia ls has been circum scribed, p a r tic u la r ly in sm aller
counties and more spe cia lize d services.

Some contractors and t h e ir

p o lit ic a l a llie s have also contributed to the reduction o f choice and
f l e x i b i l i t y —both o f which are supposed to be key advantages o f con­
tra c tin g fo r government.
The decision-making process in DSS c o n tra ctin g does not conform
w ell to the p ic tu re im p lic it in the w ritin g s o f p u b lic choice th e o ris ts .
C ontracting apparently does not m agically transform s e lf-in te re s te d
bureaucrats and oth er p u b lic o f f ic ia ls in to o b je c tiv e in d iv id u a ls who
sim ply judge proposals and make awards on the basis o f lowest cost w ith
the best q u a lity service output.

Rather, in d iv id u a l values o f s ta b i­

l i t y , p r e d ic ta b ility , c o n tin u ity , frie n d s h ip , and p o lit ic a l favor

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have a t times a ffe cte d th e ir s o lic ita tio n s and fin a l decisions.
To begin w ith , the search fo r p o te n tia l providers is narrow,
usu ally stopping w ith previous co n tra cto rs.

Often o f f ic ia ls s a tis fic e ,

ra th e r than maximize, by ending th e ir s o lic it a tio n process a fte r lo c a t­
ing a m inim ally acceptable, lo cal p ro vid e r th a t can also make the requi­
s ite donation.

When reviewing proposals, o f f ic ia ls have l i t t l e

outside,

o b je c tiv e inform ation to use to evaluate past and fu tu re performance.
They may not have much re le va n t knowledge about the services or c lie n t
groups' needs, and thus must depend upon the p ro vid e rs' plans and
in fo rm atio n.

In the past, cost comparisons have

ra re ly been used as a

c r ite r io n fo r awards; in ste ad , o f f ic ia ls have been concerned about con­
tra c tin g w ith reputable agencies th a t they believe (sometimes on f a it h )
could d e liv e r necessary, and g e ne rally good q u a lity services.

Even

then, however, th e ir decisions have been influenced by p o lit ic a l pres­
sure, past commitments, biases o f program

s t a f f , e tc .

A ll o f th is

adds up to an incremental decision-making process in which feedback is
lim ite d and changes in p r io r it ie s and awards are d i f f i c u l t to bring
about.
But does the absence o f a ra tio n a l decision process, o f competi­
tio n , and o f an adequate watchdog ro le mean th a t OSS is not g e ttin g low
cost, good q u a lity services?

Not ne cessa rily.

Ouc lim ite d e xp lo ra tio n

o f the expected b e n e fits o f co n tra ctin g in dicates th a t the p riv a te ly provided services are generally o f good q u a lity .

The strong pro fes­

sional e th ic , the e xp e rtise , and the commitment to the needy help to
explain why most o f the providers probably do perform w ell under con­
tr a c t.

Those contractors interview ed said they welcomed evaluation i f

i t could help them become more e ffe c tiv e .

(But what would they say i f

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these evaluations could also lead to the e lim in a tio n o f th e ir contracts?)
They were proud o f th e ir agencies and th e ir accomplishments.

And i t

probably can be sa fe ly said th a t a t le a s t some agencies work a t pro vid­
ing t h e ir services w ell a t acceptable cost le ve ls because they fe a r o f
la te (not always r e a lis t ic a lly ) th a t otherwise th e ir contracts could be
reduced o r terminated.
I am not convinced, however, th a t s ig n ific a n t cost reductions
have been re a liz e d through c o n tra ctin g .

Any savings to the sta te (as

compared w ith in-house p ro visio n ) have occurred because o f the donation
requirement and the federal source o f the funds.

And c e rta in ly the

le g is la tio n and the a v a ila b ilit y o f outside providers has con trib u te d to
the growth, not the c u rta ilm e n t, o f government in th is case.

While

these outcomes do not in d ic t co n tra ctin g i t s e l f , they do illu s t r a t e how
th is method o f service supply can be used fo r q u ite d iffe r e n t purposes
and lead to d iffe r e n t outcomes than those envisioned by con tractin g
advocates.
The two perspectives o f market im perfections and cooptation have
suggested th a t these fin d in g s about the conditions should come as no
su rp rise .

Under conditions o f few providers and inadequate in fo rm atio n,

co n tra ctin g out may not have in d isp u ta b le over in-house p ro v is io n ,
as suggested

by the economic perspective.

Competition among p o te n tia l

providers has been reduced both by the market provisions and by the
DSS

match requirement.

Therefore, o f f ic ia ls have had only lim ite d

choice fo r service su p p lie rs.

Because o f inadequate needs assessments,

DSS has also lacked necessary in fo rm atio n about the needs o f c lie n ts .
In expenditure and performance reviews, DSS has u su a lly had to depend
upon in fo rm atio n from the providers themselves, since department

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resources have been very lim ite d .

In these ways then, the perspective

o f market im perfections has more c lo s e ly approximated the actual condi­
tio n s o f c o n tra c tin g than has the p u b lic choice approach.
In c e rta in circum stances, these co n d itio n s can lead to cooptive
re la tio n s h ip s between o f f ic ia ls and c o n tra c to rs , in which co n tra cto rs
can have a major in flu e n c e on the choices o f government.
ta tio n was not obvious o r wide-spread.

In DSS, coop­

Nonetheless, s im ila r professional

backgrounds, o f f i c i a l s ' id e n tific a t io n w ith p riv a te agencies, and e ffo r ts
o f co n tra cto rs have led to some counties e x h ib itin g cooptation charac­
t e r is t ic s , and to o th e r s itu a tio n s in which b u rea ucra tic re la tio n s h ip s
w ith con tractors may have reduced o b je c tiv it y and fa irn e s s .

Moreover,

p o lit ic a l pressures have been exerted upon DSS--usually to continue
c e rta in con tracts w ith s p e c ific providers th a t otherwise would have
been term inated o r given to another p ro v id e r.

Sweetheart contracts

have also been made and perpetuated because o f the in flu e n ce o f
appointed o r elected o f f ic ia ls .

Consequently, DSS has been cautious in

a lte r in g program p r i o r it ie s , reducing c o n tra c ts , o r changing service
s u p p lie rs .

With th is analysis o f both the p o lit ic a l and the economic

fa c to rs raised by the two a lte rn a tiv e pe rsp e ctive s, our understanding
o f DSS c o n tra c tin g has been enhanced.

CHAPTER V
CONTRACTING OUT UNDER CETA
IN THE MICHIGAN DEPARTMENT OF LABOR

In a d d itio n to many so cia l se rvice s, the s ta te o f Michigan uses
federal funds to purchase various employment and tr a in in g services
under the Comprehensive Employment and T rain in g Act (CETA).

This chap­

te r focuses on contracts in the Department o f Labor (DOL) and it s re la ­
tio n s h ip s w ith p riv a te c o n tra c to rs , in the same way the la s t chapter
d e a lt w ith DSS c o n tra cts.

A comparison o f the fin d in g s in the two

departments and t h e ir programs is included 1n the next chapter.
Although both are funded la rg e ly by federal g ra n ts, the DSS and DOL
contracts have d iffe r e n t purposes, re g u la tio n s , and methods o f procure­
ment— a ll o f which have an importance fo r our con sid e ra tio n o f the con­
d itio n s and expectations o f the p u b lic choice school in it s
recommendation o f c o n tra c tin g ou t.

What makes th is study o f DOL

c o n tra c tin g even more complex is th a t CETA contracts are made under two
t i t l e s th a t are cha racte rized by several s ig n ific a n t d iffe re n ce s in
com p etitio n, procedures, awards, e tc.
The major questions th a t w i ll guide our study o f DOL c o n tra c tin g
are:

What are the key con dition s th a t re la te to co m p e titio n , d e cisio n ­

making, and reviews?
CETA t it le s ?

How do they vary in the implementation o f the two

Are they d iffe r e n t from the DSS conditions?

c o n d itio n s a ffe c t c o n tra c tin g outcomes?
126

How do these

127

Background o f State CETA Programs
The federal government has funded a large number o f employment and
tra in in g programs over the la s t two decades in response to the needs o f
the poor and unemployed.

In 1973, the Comprehensive Employment and

Training Act (CETA) was enacted to consolidate many o f the previous
categorical programs in to a new block grant approach to providing ser­
vices.

CETA tra n sfe rre d the planning and operation o f such programs

from the federal level to sta te and lo ca l governments.

This decentral­

ized, noncategorical approach allowed s ta te governors and lo ca l elected
o f f ic ia ls g re ate r d is c re tio n in providing a mix o f services in response
to the needs o f people in t h e ir ju r is d ic tio n s w ith in federal guid eline s.
In the 1978 re a u th o riz a tio n , CETA underwent c e rta in changes in
the e l i g i b i l i t y requirements, the number o f p u b lic service jo b s , and the
s ta te program.

Several re s tr ic tio n s were adopted la rg e ly in response to

the severe c ritic is m s o f CETA programs.

The most s ig n ific a n t a lte ra tio n

was the s h i f t in emphasis from p u b lic sector employment to p riv a te sec­
to r tra in in g and jobs.
Although most o f the CETA funds have always gone to lo ca l prime
sponsors (s in g le u n its o f government o r consortia o f lo ca l u n its ) , two
t i t l e s o f the revised a ct channel funds to the sta te government as w e ll,
s p e c ific a lly to provide fo r in no vatio n, experim entation, co o rd in a tio n ,
and c e rta in d ire c t services.

T it le I I , Section 202 (b )(c )(d ) and (e ),

authorizes the Special Grant to Governors to develop and operate pro­
grams th a t address issues th a t are usu ally beyond the scope o f local
prime

sponsor programs.

(This type o f grant was also p a rt o f

the e a r lie r T it le I w ith a few d iffe re n c e s .)

Although most o f the

funds are used fo r contracts w ith sta te and lo ca l p u b lic agencies, a

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v a rie ty o f coo rdina tion and special services con tracts has
with, p riv a te o rg a n iza tio n s.

been made

The goals o f the T it le I I s ta te grant were

to pro vid e Governors and t h e ir la b o r agencies w ith funds to a s s is t and
coordinate lo cal prime

sponsors, to conduct la b o r market s tu d ie s , to

set up demonstration p ro je c ts fo r groups not adequately served by lo ca l
u n its , and to provide in fo rm a tio n and linkages w ith unions and oth er
CETA-related boaies.
The o th e r con tracts examined here are funded under CETA's T it le
IV, Section 433 (a )(2 ) — the Governors' Special State-Wide Youth Ser­
v ic e s , a new d ir e c t services program fo r s ta te s .

This program was

designed to add model o r experimental youth p ro je c ts developed under
the s ta te government.

For both t i t l e s , s ta te o f f ic ia ls can choose ser­

vices from a l i s t o f fe d e ra lly approved s e rv ic e s , but T it le I I includes
c e rta in mandated programs as w e ll.

In M ichigan, both p u b lic and p r i ­

vate agencies can be used fo r these g ra n ts, but only a few p riv a te
organizations have received con tracts each year.
While the goals and expectations o f the CETA le g is la tio n and
re g u la tio n s may not have been to promote c o n tra c tin g out s p e c ific a lly
to reduce costs and government growth, the programs g e n e ra lly were
designed to provide b e tte r services to meet the needs o f the employable
poor more e f f e c t iv e ly —whether provided in-house o r via co n tra cto rs.
In a sense, then, one o f the goals o f c o n tra c tin g proponents can be
said to be found w ith in the CETA le g is la tio n .

S p e c ific a lly , the

Governors' Grants allowed states to take advantage o f the e xp e rtise
developed by p u b lic and p riv a te agencies, to proyide special services
fo r c e rta in ta rg e t groups, and to encourage innovation in employment
services.

By focusing on developing demonstration o r model p ro je c ts

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under CETA, Michigan DOL has committed i t s e l f to choosing programs
whose plans and past performance hold the lik e lih o o d o f being most
e ffe c tiv e tn a s s is tin g the needy.
Unlike the Michigan DSS and T it le XX, the federal DOL apparently
did not want merely to spend money o r expand

services to the needy.

An improved a llo c a tio n o f resources was the o b je c tiv e ,

CETA was

created to overcome various in e ffic ie n c ie s in the previous patchwork o f
manpower programs—overlap, c o n tra d ic tio n s , in co n siste n cie s, lack o f
co o rd in a tio n , federal goals th a t were incompatible w ith sta te and lo cal
needs.

The reauthorized form o f CETA in 1978 also intended to reduce

the dependence upon p u b lic service employment—work which o fte n did not
have d ire c t a p p lica tio n s to the p riv a te se cto r.

While not s p e c ific a lly

aimed at reducing government growth, in the long run these changes in
the employment and tra in in g programs would help to lim it government
growth and reduce costs o f employment programs.

In sum, even though

they were not designed to accomplish a ll three goals o f co n tra ctin g
advocates, a t le a s t CETA goals were not in co n siste n t w ith the desire
fo r reduced costs, b e tte r services, and lim ite d government growth.
I.

Interviewee S election
Two categories o f in d iv id u a ls were selected fo r in te rv ie w s —s ix

sta te DOL o f f ic ia ls in the Bureau o f Employment and Training (BET) and
ten service p ro v id e rs .*

Of the BET employees, two respondents worked

in the program and planning d iv is io n , where they had re s p o n s ib ility fo r
the e a rly stages o f the co n tra ct process—p o lic y development, program
design, and co n tra ct s o lic ita tio n s —as w ell as the design and
*These interview s were conducted in January and February o f
1981.

130

implementation o f any program evaluations.
viewees were co n tra ct a d m in istra to rs.

The fo u r other BET in te r ­

They were involved in n e g o tia t­

ing c o n tra cts, a s s is tin g co n tra cto rs, and m onitoring contracts fo r
co n tra ct compliance.

2

The ten co n tra cto r representatives were scattered throughout the
s ta te , but were located mainly in the same la rg e r county areas where I
had interview ed DSS co n tra cto rs.

Although no o f f ic ia l permission was

given (o r necessary) to obtain these in te rv ie w s , the BET interviewees
provided complete l i s t s o f curre nt and past CETA con tractors.

From

these li s t s , I chose fo u r agencies th a t had curre nt contracts from BET
fo r FY81, and s ix th a t no longer were rece iving any from th is source.
More former contractors were interview ed than curre nt ones (and more
than in the DSS sample) because o f the sm aller numbers o f current con­
tra c to rs .

Of the past co n tra cto rs, I selected only agencies th a t had

been awarded BET contracts w ith in the past three fis c a l years, to avoid
problems" caused by s t a f f turnover and fo rg e tfu ln e ss.

3

About 60 percent

o f the cu rre n t and recent past p riv a te con tractors were included in
th is sample.
A.

4

Backgrounds o f Respondents
Except fo r one v a ria b le , the backgrounds o f both the p u b lic o f f i ­

c ia ls and the provider representatives are not unusual.

In fa c t they

2

Three o f the o f f ic ia ls were given the long form; three were
interview ed w ith the sh o rt form.
3

As i t was, one o f the agencies o r ig in a lly selected fo r an in te r ­
view had disbanded since the end o f it s T it le IV co n tra ct. To take it s
place, I chose another agency.
4

cie s.

These did not include any research contracts w ith p riv a te agen­

131

are not u n like those o f the DSS interview ees.

The one obvious d i f f e r ­

ence is th a t in th is DOL sample, 75 percent (12 out o f 16) o f the par­
tic ip a n ts were women, whereas only 26 percent ( s ix out o f 23) o f the
DSS sample were women.
c a lly in the sample.

There was no attem pt to include women s p e c ifi­
I t seems th a t more o p p o rtu n itie s opened up in

these p o s itio n s fo r women in BET and in the newer f ie l d o f employment
and tr a in in g g e n e ra lly.
A few oth er d iffe re n ce s also emerged between the p u b lic and p r i ­
vate groups in th is study, but they were r e la tiv e ly sm all.

The p u b lic

employees were g e n e ra lly somewhat younger, not as h ig h ly educated w ith
sp e c ia liz e d o r advanced degrees, and were less lik e ly to have been
employed in the opposite secto r as were the p riv a te agency representa­
tiv e s .

But w ith two exceptions, the p u b lic s e cto r work experiences o f

the p riv a te respondents were not in CETA-related o rg a n iza tio n s, such as
DOL, BET, o r lo ca l CETA prime sponsors.
t h e ir experience in o th e r s ta te s .)

(Even these exceptions got

There did not seem to be the same

movement between p u b lic and p riv a te as was observed in the career p a t­
terns o f the DSS Interview ees.

In a d d itio n , the actual in te rvie w s

in d ic a te d th a t most, but no t a l l , o f the p u b lic respondents did not have
as much knowledge and understanding o f (o r sympathy w ith ) t h e ir p riv a te
co u n te rp a rts' p o s itio n s , as was evidenced in the DSS in te rv ie w s .

T h e ir

educational backgrounds may p a r t ia lly exp la in t h is , since a l l but one
o f the p u b lic respondents had no degrees 1n the re le va n t professional
fie ld s o f vocational education, a d u lt education, manpower, e tc .
Instead, t h e ir degrees were f o r the most p a rt in the lib e r a l a rts .

132

B.

Contractor Agency P ro file
As w ith the DSS p ro vid e r agencies, the ten BET con tractors used

in th is study made up a diverse group o f p riv a te , n o n -p ro fit agencies.
E ight o f the ten agencies had contracts th a t required d ir e c t service
pro vision to CETA-eligible c lie n ts in c e rta in ta rg e t groups th a t had
not been adequately served by prime sponsors--female offenders, women,
handicappers, adjudicated high school drop-outs, Hispanlcs, e tc.

The

other two agencies delivered "lin ka g e " services to CETA-related agen­
cies.
Three o f the s ix T it le I I contracts included in th is sample were
made w ith agencies th a t focused on women's employment needs, but were
no longer in e ffe c t.

The only curre nt T it le I I co n tra ct fo r d ire c t

c lie n t services was w ith an agency th a t o ffe rs pre-employment services
fo r in-school youth.

Two agencies c u rre n tly provide linkage services

fo r BET under T it le I I .

One program, implemented by the manpower sec­

tio n in the s ta te o ffic e o f one o f the major unions in the s ta te , is
directed toward pro vid ing inform ation on la b o r's ro le in CETA to prime
sponsors and la b o r unions in various communities.

The second linkage

co n tra ct has been made w ith a sm all, new agency th a t d e live rs a v a rie ty
o f inform ation and tra in in g services fo r s ta ffs o f Michigan prime spon­
sors.

These la t t e r contracts were o f p a r tic u la r in te re s t since they

were made because o f the com plexities o f the CETA programs.
Of the fo u r T it le IV youth co n tra cto rs, only one continues to
have a co n tra ct w ith BET—fo r employment services fo r adjudicated high
school drop-outs.

Two o f the other agencies provided services fo r

handicapped youth, w h ile a th ir d agency assisted Hispanic drop-outs in
fin d in g employment.

These programs were a ll located in c e rta in

133

designated communities—and were not a v a ila b le to youth sta te -w id e ,
since they were m ainly fo r demonstration o r experimental purposes.
The in te rvie w s w ith rep rese ntative s o f the ten con tractors in d i­
cate th a t norm ally most o f the agencies o f f e r a w ider range o f services
than ju s t those contracted f o r under the Governor's programs.
o f the agencies were exceptions, however.)

(Three

T he ir s p e c ia liz a tio n s and

c lie n t groups d i f f e r w idely as w e ll, w ith the r e s u lt th a t the agencies
themselves

are among the best experts on the c lie n ts ' needs, the ser­

v ic e s , and

the appropriate methods o f se rvice d e liv e ry .

The sizes o f

the agencies included 1n the sample range from having fiv e employees (a
prison p a ra -le g a l program) to over 200 (a m igrant workers' agency).
The age o f

the c o n tra c to r agencies varied from a 90 -year-old YMCA to a

new co n su ltin g

firm .

But most o f the agencies were esta blishe d since

1960, w ith government funds.
A ll o f the co n tra cto rs had a r e la t iv e ly low number o f contracts
(from one to f iv e ) , but some o f those from o th e r sources were very
large in amounts.

The s ta te CETA con tracts were u su a lly not the la rg ­

e s t o f t h e ir government co n tra cts.

Several o f the agencies also had a t

some time received CETA contracts from o th e r government u n its - - lo c a l
prime sponsors, d ir e c tly from the federal government— such th a t they
could compare the BET c o n tra c t procedures to o th e r CETA procedures.
Five o f the agencies re ly on government con tracts f o r a t le a s t 70 per­
cent o f th e ir op era ting co sts, w ith some o f these having no oth er
sources o f funds.
U nlike several DSS c o n tra c to rs , almost none o f the DOL contrac­
to rs seemed to be very dependent upon BET c o n tra c ts , since they usu ally
had a v a rie ty o f p u b lic and p riv a te sources o f funds.

In fa c t, two o f

134

the T it le IV youth contractors did not request renewals a fte r one year
o f a co n tra ct because o f various "b ureaucratic" requirements, the small
amounts o f the contracts and ra th e r poor re s u lts under the co n tra cts,
according to th e ir representatives.

In general, contractors understood

th a t th e ir BET contracts were fo r a three-year maximum pe rio d, under
BET's p o lic y .

(Only the union co n tra ct had been extended fo r a longer,

in d e fin ite time period.

Two o f the oth er cu rre n t con tractors also

expressed hope th a t th e irs might be continued a fte r three years, but
they were not counting on i t . )

What appears to be the case w ith the

DOL contracts is th a t they can be im portant fo r some agencies a t the
margins, since most agencies operate from hand to mouth, but contrac­
tors have not depended on them as th e ir major funding source.

There­

fo re , almost a ll o f the agencies could survive q u ite w ell w ith ou t
them.

5

In sum, the r e la tiv e ly small amounts o f the contracts and BET's

usual three-year li m it apparantly have helped to avoid the problems o f
dependence.
The only negative outcome o f th is lack o f dependence seemed to be
a less serious e f f o r t by some agencies a t meeting BET's requirements
and o b je c tiv e s —e sp e cia lly when they did not compare favorably w ith
other governments' methods.

One o f the c o n tra c to r interviewees said

th a t the BET co n tra ct was so small th a t i t was not worth th e ir w h ile to
make a concerted e f f o r t a t improving performance and "p u ttin g up" w ith
the hassles o f the BET.

Other contracts were more im portant to re ta in ,

and did not require compliance w ith as many d i f f i c u l t re g u la tio n s.

^Obviously, the agency th a t was mentioned in note #3 did not fare
so w ell w ith o u t the funds.

135

II.

Competition in State CETA Contracting
The emerging p ic tu re o f DOL co n tra ctin g already d iffe r s from that

o f DSS.

P riva te contractors are not as dependent upon BET funds;

there appears to be fewer automatic co n tra ct renewals; the goals o f
CETA programs were more orien te d toward e ffic ie n c y and e ffe ctive n e ss;
and the reasons fo r using outside providers seem to be rooted in CETA's
aim to use s ta te governments to promote innovation and coordination more
than on-going d ire c t services fo r c e rta in c lie n t groups.
a tte n tio n s h ifts to th is question:
and tra in in g "market"?

But now our

How com petitive is the employment

And do the procedures adopted by BET promote or

hinder competition?
A.

Competition 1n the Employment and Training Environment
The enployment and tra in in g f ie l d has been marked by only lim ite d

com petition--and fo r some o f the same reasons as were found in social
services:

the need fo r providers to d iffe r e n tia te th e ir services to

enter the market su cce ssfu lly, lo c a tio n a l r e s tr ic tio n s , and various
b a rrie rs to g e ttin g government funds.
Employment and tra in in g services are c le a rly services which,
p r io r to government a r tic u la tio n o f demand, suffered from under­
expression o f demand and lack o f adequate supply—even more than 1n the
area o f social services.

When the federal government decided th a t th is

basic need should be met by government a c tio n , there were very few
a v a ila b le providers.

The government generally had to depend upon pub­

l i c agencies to accomplish it s goals (e .g ., p u b lic schools, p u b lic
employment agencies).
Although the p u b lic sector has remained the c h ie f veh icle fo r
d e liv e rin g manpower services fo r the needy, some p riv a te agencies have

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been u tiliz e d .

During the S ix tie s , a number o f p riv a te , community-

based organizations (CBO's) created w ith federal grants developed
expertise in various employment and tra in in g services.

Even though

they were r e la tiv e ly small in number, these agencies have become impor­
ta n t because o f special considerations they receive over other agencies
under CETA re g u la tio n s— i . e . , requirements th a t they be allowed to par­
tic ip a te in the planning process, receive s o lic ita tio n s fo r co n tra cts,
and be awarded contracts where th e ir programs have demonstrated th e ir
e ffective ne ss.

Through t h e ir strong lobbying e ffo rts a t the national

le v e l, these organizations were able to gain enough p o lit ic a l support
to help ensure the continued flo w o f funds even though CETA has brought
almost a ll employment and tra in in g programs under the con trol o f p u b lic
o f f ic ia ls —and out o f the hands o f federal bureaucrats and n o n -p ro fit
corporations.
These regulations do not mean th a t CBO's and other p riv a te agen­
cies have re a d ily formed to compete w ith p u b lic agencies fo r sta te and
local con tracts.

New p riv a te agencies (o r e x is tin g social agencies

d e sirin g to expand th e ir services) have experienced some d i f f ic u lt y in
entering the market to compete d ir e c tly w ith p u b lic organizations fo r
government funds.

Some co n tra cto r Interviewees complained th a t they

o fte n were noc s e rio u s ly considered fo r local prime sponsor contracts
because o f the prime sponsors' long-standing lo y a ltie s to other related
p u b lic agencies in the community.

P riva te agencies included 1n th is

sample were able to form and continue w ith some success in large pa rt
because they were lo cal a f f ilia t e s o f national manpower networks ( e .g .,
in youth employment— 70,001 Ltd. and OIC); have been successful in get­
tin g grants from p riv a te employers and/or the federal government

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d ir e c tly (e .g ., the m igrant workers' o rg a n iz a tio n ); and/or have gotten
in to manpower programs as a by-product o f some other primary a c t iv ity
in which they developed program or c lie n t e xp e rtise not found in other
p riv a te o r p u b lic agencies ( e .g ., the labor union, re h a b ilita tio n agen­
c ie s , YWCA, prison para-legal program).

Apparently com petition is d is ­

couraged 1n th is f ie ld by the prime sponsors and the p u b lic agencies
th a t receive th e ir con tracts.
B.

The Reduction o f Competition Through a BET P olicy
The number o f p o te n tia l providers competing fo r CETA contracts

appears to be reduced fu rth e r by one c r it ic a l BET p o lic y — the s tip u la ­
tio n th a t a match fo r T it le IV youth contracts be made during the
second and th ir d years o f a con tract.

A match is not required by fed­

era l CETA re g u la tio n s , but was designed by BET to achieve c e rta in sta te
goals.
Almost a ll contracts under both s ta te t i t l e s have a three-year
l i m it .

(This fa c t in i t s e l f may discourage some providers from compet­

ing fo r c o n tra c ts .)

This BET p o lic y was designed in p a rt to fo s te r

model o r experimental programs which, i f successful, could be continued
through other funding sources.
step fu rth e r.

I t allows fo r

The p o lic y re q u irin g a match goes one
only one year o f being f u ll y funded by

the BET co n tra ct from T it le IV youth funds.

For the second co n tra ct

year, 30 percent o f the amount must be met by the p ro vid e r; in the
th ir d ye a r, 50 percent.

A fte r

three years, i t is expected th a t good

programs w ill have demonstrated th e ir e ffective ne ss and w i ll be able
to obtain a more permanent funding source to continue th e ir services.
While discouraging dependence on BET c o n tra cts, the increasing
match and the three-year li m i t also would seem to discourage some

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agencies from competing fo r and/or renewing co n tra cts.

P ublic agencies

can use th e ir own appropriations fo r the re q u is ite amount.

But ce rta in

p riv a te , n o n -p ro fit agencies w ith only government contracts would face
more d i f f i c u l t y than would p riv a te agencies w ith extra donated funds
from p riv a te sources.
The three years o f youth programs have seen a de cline in the num­
ber o f contracts w ith p riv a te agencies, because several agencies did not
reapply fo r contracts fo r the second and th ir d years.

In fa c t, none o f

the p riv a te contractors have continued fo r the three f u l l years as y e t.
One o f the reasons given fo r not asking fo r a renewal was the matching
requirement—some o f the agencies had d i f f i c u l t y fin d in g extra money,
w hile others had oth e r sources a v a ila b le th a t did not require a match
or complex reg ulatio ns.

Only two p riv a te contractors have requested

and received second-year co n tra cts.

An agency program d ire c to r said

th a t he believed the renewal o f his agency's co n tra c t was automatic
because he had the funds fo r the match, w h ile others did not.

Even

though the performance o f many o f the p u b lic and p riv a te youth contrac­
tors had not been s a tis fa c to ry to BET o f f ic ia ls , renewals were given to
a ll who requested them fo r FY81.

At th is tim e, BET had l i t t l e

choice

o f contractors so i t could not use the renewals as "rewards" f o r w e llrun, e ffe c tiv e programs.
BET's experience w ith the T it le IV match substantiates my claim
in the previous chapter th a t a donation requirement reduces competi­
tio n , e s p e c ia lly among p riv a te agencies.

DSS has had d i f f i c u l t y fin d ­

ing agencies th a t could provide a p a r tic u la r service and also make the
25 percent donation.

In BET, almost w ith o u t exception, the T it le I I

contractors have requested the maximum number o f co n tra ct years allowed

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by 8ET; T it le IV providers have been opting out o f t h e ir programs, and
have not usually continued them w ith other funds.

Thus, the matching

requirement not only reduces com petition and choice, but sometimes does
not allow promising programs to continue to the p o in t o f being success­
fu l and p ro vid ing the unemployed w ith jo b s— the very aim o f the sta te
grants.
C.

C ontracting Procedures
A ll other things being equal, we would expect th a t the T it le I I

funds would encourage more com petition and choice fo r BET than the
T it le IV youth con tracts—because o f the matching d iffe re n c e .

The pro­

cedures fo r the two CETA t i t l e s have n o t, however, been designed to be
equally com petitive.

The T it le I I procedures have usu ally produced

only lim ite d com petition, w h ile the T it le IV youth programs, at le a s t
fo r one year, created more com petition and choice through the use o f
the RFP process.
Many o f the procedures used by BET to purchase various services
are governed by CETA re g u la tio n s , which generally emphasize the need
fo r com petition, o b je c tiv ity , and fa irn e s s .6

Nonetheless, sta te gov­

ernments can use t h e ir own d is c re tio n in deciding which services to
purchase and in choosing s o lic it a t io n methods.

Michigan DOL has mainly

used two d iffe r e n t approaches to the two t i t l e s .
1.

Needs Assessments

The Bureau has had several ways o f determining which types o f
services should be provided by T it le I I and IV funds—CETA mandates,
6 Unlike DSS, BET has not needed C iv il Service permission to make
c o n tra c ts , because the federal grants pay f o r the e n tire co n tra ct
amounts under CETA. Nor has i t required the Attorney General's O ffice
to approve o f the forms and fin a l co n tra ct agreements.

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inform al and formal needs assessments, planning task fo rce s, and
requests fo r proposals.

Under CETA, the s ta te has s p e c ific responsibi­

l i t y fo r the employment and tra in in g needs o f in s titu tio n a liz e d in d iv i­
duals.

In a d d itio n , BET tr ie s to meet the unmet needs o f c e rta in

populations in the s ta te .

BET uses several advisory and inform ation

sources to determine i f in fa c t the prime sponsors are not meeting more
sp e cia lize d needs.

They Include:

the prime sponsors themselves; the

Michigan Employment and Training Council (METC)— a la rg e , CETA-mandated
advisory body

made up o f a v a rie ty o f in te re ste d experts and in d iv i­

duals, w ith it s own s t a f f ; the CETA management inform ation system,
which produces a great q u a n tity o f data, in c lu d in g the types o f s e r­
vices a va ila b le and enrollm ents fo r various populations throughout the
s ta te ; and the monthly reports o f the DOL a ffirm a tiv e actio n o f f ic e r ,
which are directed at determining how e q u ita b ly the various groups are
being served.

This in fo rm atio n 1s channelled to the planning and pro­

gram h a lf o f BET, which decides which populations need special a tte n ­
tio n and the general types o f programs th a t would f i t in to CETA
gu id eline s.

An annual CETA plan is then compiled, submitted to the

regional federal DOL o ffic e , and, i f approved, BET can proceed w ith
making the contracts to f u l f i l l th e ir plans.
In the recent past, BET has set up two planning task forces when
i t became apparent th a t o ld e r workers and handicapped in d iv id u a ls have
special needs th a t la rg e ly have gone unmet.

Each task force is an ad

hoc committee c o n sistin g o f representatives o f these special groups,
pro v id e rs, and prime sponsors.

In p a rt, t h e ir e ffo r ts were f i r s t

aimed a t helping the s ta te (as w ell as prime sponsors) to understand
the various needs o f these populations.

Although the cu rre n t fis c a l

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year does not include programs fo r them, the two committees each out­
lin e d the general programs required, and BET intends to fund a few
local demonstration p ro je cts fo r the next fis c a l year.

These and other

e ffo r ts at assessing needs and suggesting possible providers re ly both
on a strong research component ( s p e c ific a lly paid f o r by T it le I I , some
o f which are also contracted out w ith independent organizations) and
inputs from concerned groups.

This appears to promote a necessary

balance o f o b je c tiv ity and responsiveness in p ro vid ing employment and
tra in in g services.
The more recent T itle IV youth gra nt planning process la rg e ly
depended on the research re s u lts , which showed th a t ce rta in sub-groups
among unemployed youth needed a d d itio n a l employment assistance:

physi­

c a lly and m entally handicapped, ra c ia l m in o ritie s , heads o f households,
adjudicated youth, high-school drop-outs, central c it y and ru ra l re s i­
dents.

The RFP th a t was drawn up by the program s t a f f sp e c ifie d th a t

contracted p ro je cts should serve youth w ith some o f these ta rg e t char­
a c te r is tic s .

In a d d itio n , i t required th a t a ll the pro je cts should

include a t le a s t on-the -job tra in in g (OJT), since research re s u lts
convinced o f f ic ia ls th a t OJT is the best method o f ensuring th a t
enrol lees w i ll continue in unsubsidized employment.
Not a ll the BET contracts have used such system atic means fo r
determining needs, however.

In the past years, the ta rg e t populations

and methods o f service d e liv e ry have not been as w e ll-d e fin e d in ad­
vance o f the s o lic it a tio n stage fo r the T it le I I service con tracts.
Instead, program o f f ic ia ls have had general Ideas th a t more p ro je cts
fo r c e rta in groups (e .g .* women) were needed, but did not develop spe­
c i f i c programs o r ta rg e t sub-groups f o r con tracts.

The contracts were

142

developed then from the proposals th a t p o te n tia l contractors submitted—
e ith e r in response to an in v ita tio n o r through th e ir own in it ia t iv e .
2.

S o lic ita tio n Procedures

Unlike T it le XX and the Michigan DSS, the goals o f the s ta te CETA
t i t l e s and Michigan DOL fo r employment and tra in in g programs would seem
to require com petition in s o lic it a tio n prcoedures to a ttr a c t proposals
fo r innovative and model programs th a t would hold the gre ate st p o s s ib ili
tie s fo r success.

These sta te CETA funds are not supposed to be spent

only to provide ce rta in necessary services to c lie n t groups.

These

t it le s were also intended fo r model and demonstration p ro je c ts .

E ffec­

tiv e com petition would seem to be the avenue to g ivin g BET a v a rie ty o f
choices and achieving these goals.
BET has not, however, c o n s is te n tly promoted com petition through
it s s o lic ia tio n procedures.

Major diffe ren ces in methods have been

obvious when the youth contracts and the T it le I I contracts were com­
pared.

T it le IV contracts were marked by com petition throughout the

c o n tra ctin g process—a t le a s t fo r one year— but

only minimal competi­

tio n has characterized the T it le I I process.
While CETA regulations do not require i t , BET used the RFP
(Request fo r Proposal) process fo r the youth contracts in 1979, fo r the
f i r s t f u l l year o f T it le IV (FY80).

The Program Development D ivision

was responsible fo r w r itin g the RFP and n o tify in g agencies on th e ir
m ailing l i s t .

BET has compiled a long l i s t o f approximately 600 poten­

t ia l p u b lic and p riv a te providers, including past co n tra cto rs, a ll prime
sponsors, conmunity-based org an iza tion s, and any agency th a t has
expressed in te re s t in CETA c o n tra ct.

This s o lic it a tio n allowed fo r the

widest exposure and included p ra c tic a lly every possible c o n tra cto r.

143

The co n tra c t s p e c ific a tio n s were also very thorough and complete.
As mentioned above, the RFP s p e c ific a lly stated th a t OJT be p a rt o f the
services provided and th a t agencies design p ro je c ts aimed a t e n ro llin g
youths who met a t le a s t two o f the ta rg e t c h a ra c te ris tic s , in a d d itio n to
being under CETA's usual income lim it s .

Also Included in the RFP were

the standard requirements fo r equal o p p o rtu n ity , a ffirm a tiv e a c tio n ,
bookkeeping procedures, c lie n t e l i g i b i l i t y procedures.

Contracts were to

be made fo r a one year period o r le s s , w ith the s tip u la tio n th a t two
a d d itio n a l years would be a v a ila b le as w e ll, provided a match was made
and the f i r s t y e a r's performance was acceptable.

Performance goals were

also given ( e .g ., percentage o f p a rtic ip a n ts placed in unsubsidized
employment) and agencies were Informed in a general way th a t th e ir pro­
grams, i f funded, would be monitored and evaluated by BET fo r these and
o th e r m atters.

More im p o rta n tly , the package c le a rly s p e c ifie d the

c r it e r ia (and t h e ir r e la tiv e w eights) by which the proposals would be
judged and given awards.

I t s ta te d , f o r example, th a t e xtra "p o in ts "

would be given to p ro je c ts th a t proposed to e n ro ll youths who met more
than the minimum number o f ta rg e t c h a ra c te ris tic s .
This RFP process was a major undertaking by BET.

I t has not been

repeated f o r FY81 o r FY82, in p a rt because the f i r s t s o lic it a t io n had
been so thorough and BET has not changed it s goals f o r the youth g ra n t.
In a d d itio n , the process was very expensive, time-consuming, and com pli­
cated.

U n fo rtu n a te ly, BET o f f ic ia ls included in the sample were not

a lto g e th e r pleased w ith the re s u lts o f the process—both in terms o f the
proposals th a t were received and the performance o f the agencies th a t
were awarded co n tra cts.

144

For the two fo llo w in g years, BET b a s ic a lly continued the previous
ye a r's con tracts.

The contractors were in v ite d to submit proposals fo r

FY81 and then FY82, provided they had not mismanaged funds or been found
to be in "gross non-compliance" during the f i r s t year.

A ll o f the con­

tra c to rs who requested renewals fo r FY81 were given them, even though
th e ir performance had not met the expectations o f o f f ic ia ls and even the
terms o f the con tracts.

Some programs had la te s ta r ts , Inadequate

record-keeping systems, and/or d i f f i c u l t y meeting the co n tra c t terms.
Various reasons were given fo r the fa ilu re s besides the c o n tra cto rs'
adequacies, in clu d in g the econoipy, slow processing by BET, and u n re a lis ­
t ic expectations o f program o f f ic ia ls .
The T it le I I s o lic it a tio n process has not included using the RFP,
except fo r a few spe cia lize d research and linkage con tracts.

The usual

methods u t iliz e d by BET have been inform al contacts and le tte r s .

Any

time p riv a te sources may be used, w ider a d v e rtis in g is supposed to be
employed to maximize com petition, according to CETA re g u la tio n s.

Some

non-com petitive awards to p u b lic agencies are allowed, but they have not
been made o fte n , because, in the words o f one sup ervisor, " i t could be
so e a s ily abused.”

According to interview ees, i f BET has a s p e c ific

need, a small number o f p o te n tia l p u b lic and/or p riv a te providers is
n o tifie d by means o f a b r ie f general summary o f what is desired, and
what are the releva nt CETA requirements.

The requirements are not very

d iffe r e n t from those lis te d under the T it le IV programs, except the t a r ­
get groups and methods o f service are not as c le a rly stated.

Providers

propose th e ir own types o f programs, the number o f enrol le es, and the
to ta l cost.

These sumuaries also do not usu ally include the c r it e r ia

used in making awards.

The process works very much lik e the OSS

145

s o lic it a tio n s .

Instead o f achieving d ir e c t com petition through wide

a d v e rtis in g f o r c e rta in s p e c ific programs, BET receives several d i f f e r ­
ent types o f proposals fo r d iffe r e n t groups th a t cannot be e a s ily com­
pared.

The agencies then compete f o r a p a rt o f the a llo c a tio n fo r

d ir e c t se rvice s.
Apparently most o f the p riv a te agencies do not receive t h e ir con­
tra c ts as a re s u lt o f a s o lic it a t io n n o tice from BET; they con tact DOL
f i r s t about t h e ir proposed programs.

A ll fo u r o f the cu rre n t and former

d ir e c t service con tractors in T it le I I reported th a t t h e ir agencies
approached BET about funding, ra th e r than the reverse.

One respondent

said th a t she had never seen any advertisements about the T it le I I con­
tr a c ts , even though she has been very involved in the employment and
tra in in g p o lic y f ie l d in and out o f Michigan f o r many years.
3.

Proposals

A f u l l w ritte n proposal has not always been required fo r T it le I I
co n tra cts.

Instead, co n tra cto rs sometimes have submitted le tte r s o f

in te r e s t o r in te n t, w ith o u tlin e s o f t h e ir p ro je c ts —some o f which have
already been in operation w ith o th e r funding.

Even i f a proposal 1s

req u ire d , a d e ta ile d budget is not always included a t th is tim e.
For the youth c o n tra c ts , the proposal was c r it ic a l f o r the awards
f o r FY80.

I t was supposed to be very complete in terms o f i t s plan fo r

the ta rg e t groups, methods o f service d e liv e ry , and placement ra te s , but
the budget was not to be a fa c to r 1n the dec1sion-mak1ng process.
Generally the process f o r s o lic it in g T it le IV proposals was q u ite
com p etitive .

Of a l l the in v ita tio n s th a t were sent o u t, only 35 propo­

sals were received, o f which 14 agencies received c o n tra cts.

This

appears to provide more choice than was found in the DSS system.

The

146

only problem w ith the youth proposals was th a t most were judged as being
poorly w ritte n , poorly conceived, and unresponsive to the needs o f BET.
Just the same, a ll o f the funds were a llo ca te d .

An o f f ic ia l who was

responsible fo r the RFP and the proposal evaluations process declared
th a t i f she had had a choice, she would have only purchased services
from two o r three o f the 35 agencies.

Since the system o ffe rs no incen­

tiv e s to states o r o f f ic ia ls who return unused a llo c a tio n s , the con­
tra c ts were awarded to some p riv a te and p u b lic agencies th a t were
u n lik e ly to produce w e ll-ru n , e ffe c tiv e programs.

In th is case, the

com petition did not promote b e tte r q u a lity programs.

In p a rt, th is

re s u lt could be traced to the matching requirement th a t probably pre­
vented some agencies from competing, and the fa c t th a t the amounts o f
the contracts were f a ir l y sm all.
In the la s t series o f T it le I I proposal considerations, fo r FY81,
a ll the agencies th a t submitted proposals o r le tte rs o f In te n t received
contracts.

Several o f these were continuations o f previous p ro je c ts .

In other years, according to o f f ic ia ls , roughly h a lf o f the u n s o lic ite d
and s o lic ite d proposals have been selected fo r co n tra cts.

Nonetheless,

those agencies subm itting proposals fo r spe cia lize d programs and ta rg e t
groups have met l i t t l e

d ire c t com petition.

A ll o f the T it le I I service

contractors interview ed suggested th a t there were no oth er agencies in
Michigan th a t could provide th e ir kinds o f employment and tra in in g ser­
vices fo r t h e ir c lie n t groups.

I f BET receives more proposals than can

be funded, the Bureau must determine contracts mainly on the basis o f
which groups have the greatest need--not necessarily which co n tra cto r
has the best p ro je c t o r success ra te .

147

III.

Contract Decision Making
In th is sectio n, we w i ll once again examine i f decision makers

use co n tra ctin g out to promote greater e ffic ie n c y in the pro visio n of
p u b lic services—both 1n th e ir decisions to use outside contractors and
in t h e ir choices o f contractors to d e liv e r services.

In the DOL case,

a t le a s t the goals o f CETA are oriented toward improving e ffic ie n c y and
effectiveness through the sta te t i t l e s .

But the question is :

Is con­

tra c tin g perceived as a means o f improving e ffic ie n c y and effectiveness?
And have o f f ic ia ls used cost and performance c r it e r ia to make th e ir
choices among various proposals?
A.

Why Contract Out?
The underlying reason fo r con tractin g out fo r CETA services is

th a t DOL does not have the s t a f f and lo cal f a c il it ie s to carry out a ll
the mandated and optional programs in-house.

The in te n tio n o f the sta te

t i t l e s , in a d d itio n , was to encourage states to use the e x is tin g local
prime sponsors, school d is t r ic t s , community-based org an iza tion s, e tc .,
fo r in no vatio n, co o rd in a tio n , experim entation, and the targeted se r­
vices.

Consequently, r e la tiv e ly few a c t iv itie s are provided by DOL

i t s e l f —only some co o rd in a tio n , linka ge , and research services—and more
o f these are being contracted out as the s ta te government has required
personnel la y -o ffs in a ll departments and bureaus, even ones where most
employees are paid through federal funds.
Therefore, the fo llo w in g question took some respondents by sur­
p ris e :
Rank the fo llo w in g in order o f Importance {.from 1 to 7, w ith
1 being the most im portant) as to why outside agencies/firm s
are used to supply p u b lic services in your program area
instead o f s ta te p u b lic employees:

148

To c la r if y the q u estio n, I added the phrase, " f o r example, in an
expanded MESC" (.Michigan Employment S e curity Commissi on--a p a rt o f DOL,
w ith branch o ffic e s throughout the s ta te .^

The answers ranged across

the possible a lte rn a tiv e s , w ith some d iffe re n ce s o f opinion and d i f f i c u l tie s in answering.

0

I t was c le a r th a t some had never considered the

question before.
Among p u b lic o f f i c i a l s , the "g re a te r f l e x i b i l i t y " a lte rn a tiv e most
fre q u e n tly showed up in the top three (most im portant) responses.

"Bet­

te r services" also was chosen as r e la t iv e ly im p o rta n t, in the sense th a t
outside agencies have e xp e rtise in c lie n ts and services th a t is not
a v a ila b le w ith in the government.

While two in d iv id u a ls stated th a t

c o n tra c tin g was a way o f strengthening p riv a te agencies and firm s , others
disagreed and said th a t reason was not intended a t a l l .

Seen as having

somewhat less importance were the "low er cost" and " b e tte r o ve rsig h t"
options.

Respondents did not be lieve th a t p o lit ic a l pork b a rre lin g o r

the federal o r s ta te laws o r re g u la tio n s were g e n e ra lly very im portant.
Two comments given as o th e r key reasons were:

" i t makes no sense to

have a s ta te -w id e , s ta te -le v e l program fo r lo c a l problems" and "they
[outside agencies] happen to be a v a ila b le and can do i t w e ll."
Not s u r p ris in g ly , the p riv a te agency representatives most f r e ­
quently chose the "b e tte r services" a lte rn a tiv e , follow ed by "g re a te r
f l e x i b i l i t y in in it i a t i n g and te rm in a tin g programs" — in the words o f a
respondent who improved the schedule's wording.

They also believed th a t

^This example seemed necessary a f t e r the p re -te s t and the f i r s t
in te rvie w s in d ica te d th a t respondents needed an example to understand
the meaning o f the question.
®0ne o f f i c i a l did not answer th is q u estio n, w h ile two others gave
only one o r two o f the a lte rn a tiv e s on th is l i s t .

149

federal and s ta te mandates were q u ite im portant.

Of somewhat less

importance were lower co st, b e tte r o v e rs ig h t, and a way o f strengthening
p riv a te agencies and firm s.

P o litic a l pork b a rre lin g , w ith one excep­

tio n , was seen as unimportant in the decision to use outside su p p lie rs.
These and other answers in d ic a te th a t DOL has no complex set o f
c r it e r ia fo r deciding whether or not to co n tra ct out fo r p a rtic u la r ser­
vice s; there usu ally is l i t t l e

choice.

Because DOL and MESC o ffe r

lim ite d types o f services themselves, BET u su a lly turns to oth er pu blic
and p riv a te agencies fo r services they can perform.

The CETA s tru c tu re

i t s e l f is orie n te d towards d e c e n tra liz in g a d m in is tra tio n , d is c re tio n ,
and service d e liv e ry .
fo r model p ro je c ts .

Contracting out conforms w ell w ith BET's goals
In the words o f one interview ee, i t is a "way o f

in suring th a t programs w ill continue w ith local support and lo cal input."
I t would be q u ite In co n siste n t, as w ell as usu ally in e f f ic ie n t , to
b u ild up a s ta te -le v e l system fo r the services i t desires when other
lo ca l agencies e x is t which can f i l l

the need.

Thus, the primary reason fo r c o n tra c tin g out is not simply to cut
costs, as might be expected from the p u b lic choice lite r a tu r e on con­
tra c tin g out.

Rather, i t is to f i l l

the needs fo r employment and tr a in ­

ing services by using experienced lo ca l agencies, and seco nd arily, to
improve the e ffic ie n c y and e ffective ne ss o f the CETA programs.
B.

Choosing Contractors fo r Awards
Not only have the s o lic it a t io n procedures f o r the two t i t l e s d i f ­

fere d, but the two processes o f evaluating proposals have also been very
d is s im ila r.

The methods fo r judging the T it le I I proposals have fr e ­

quently been almost haphazard, w h ile the T it le IV process was f a i r and

150

systematic fo r the most p a rt.

Comnon to both t i t l e s , however, is a

general concern fo r the proposed program, the methods o f service d e li­
very, and needs o f the targeted c lie n ts .

Cost considerations have

hardly been seen as im portant a t a ll in making awards.
The T it le I I proposals, ofte n u n s o lic ite d except f o r renewals, are
almost always considered by releva nt program s t a f f members on th e ir
in d iv id u a l m erits in view o f the needs o f the ta rg e t group and the funds
a v a ila b le at the time.

Contracts are considered and w ritte n a ll year

around, such th a t a ll proposals are not compared to each oth e r a t the
same time in com petition fo r a given amount o f money.
o f f ic ia ls know the id e n titie s o f the providers.

Usually the

T heir recommendations

are then given to the bureau and department d ire c to rs f o r t h e ir s c ru tin y
and the fin a l decision.
A d iffe r e n t process fo r evaluating proposals was employed when the
RFP was used fo r youth con tracts.

( I t has also been used a couple times

fo r T it le I I when several research proposals have been submitted fo r a
sm aller number o f c o n tra c ts .)

A panel o f d is in te re s te d reviewers was

chosen—made up p rim a rily o f various s t a f f members from w ith in BET (not
those who have w ritte n the RFP or who negotiate and m onitor c o n tra c ts ),
prime sponsor rep rese ntative s, and selected members o f the METC.

This

panel examined and scored each proposal according to the RFP's speci­
fie d c r it e r ia .
close.

They discussed the top contenders when scores were

W ithout knowing who had submitted which proposals, the panel

recommended th a t the agencies receiving the top scores be awarded con­
tra c ts .

While these recommendations mainly determined the outcomes,

both the bureau d ire c to r and the department d ire c to r made the fin a l
s e le ctio n s.

151

Once the se le ctio n o f providers has been made—by e ith e r o f the
methods— the s p e c ia lis ts in con tract a d m in istra tio n are assigned the
contracts.

They are given the re s p o n s ib ility o f ne g o tia tin g and drawing

up the c o n tra cts, as w ell as providing technical assistance during the
p ro je c ts ' s ta rt-u p period.

Only here does the cost o f the programs

become a consideration—but th is is a fte r awards have been made.

The

adm inistrators examine the budget submitted by each p ro vid er and, i f
necessary, suggest ways to change the lin e -ite rn s and/or get the provider
in compliance w ith the many complex CETA re g u la tio n s.

In a d d itio n , they

may negotiate the number o f c lie n ts served (the un its o f service) and
the to ta l amount o f the c o n tra ct.

Generally the methods o f service

d e liv e ry are not discussed, but included as the proposal states them.
Several o f the youth contracts have been perform ance-oriented, in clu din g
not only the services to be d e live re d , but also the goals fo r the number
o f in d iv id u a ls to be placed in unsubsidized employment.
In the past, some agencies th a t have been selected fo r contracts
have not had them completed during the con tract w ritin g stage because o f
non-compliance w ith c e rta in CETA re g u la tio n s.

The program and planning

side o f the bureau has been p rim a rily concerned w ith the programmatic
elements o f proposals, w ith the re s u lt th a t contractors are o fte n not
aware o f the many re s tric tio n s and paperwork required u n til la te r .

Some

insurmountable technical problems have emerged only when the con tract
adm inistrators took over in the process.

When contracts cannot be w r it ­

ten, the funds are given to the next higher scorer in the T it le IV pro­
posal "c o n te s t," o r another T it le I I co n tra cto r must be found.
Interviewees were also questioned about t h e ir opinions o f the c r i ­
te r ia used in award decisions:

On what basis is i t decided th a t a

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c e rta in firm or agency w i l l receive a c o n tra c t in your program area?
Four o f the s ix BET employees answered th is question.
s p e c ia lis ts did not respond because they had l i t t l e
awards were made.)
o f f ic ia ls :

(Two co n tra ct

knowledge o f how

Two major reasons f o r BET's choices were given by

plan to f u l f i l l a l l c r it e r ia provided in s o lic it a t io n pack­

age and well-reasoned arguments why program elements w i ll accomplish the
desired goals, as given in the proposal.

Other reasons mentioned were

previous s a tis fa c to ry work in s ta te p ro je c ts o r services and previous
experience in th is general type o f se rvice .

Interviewees agreed th a t

lowest cost was hardly a fa c to r in decision making.

P u blic o f f ic ia ls

said th a t although the CETA re g u la tio n s say th a t m in o rity , female-owned
and small con tractors and CBOs be given a ll o p p o rtu n itie s to make propo­
s a ls , these background fa c to rs are only in fre q u e n tly involved in making
awards.
One o f the respondents who makes award recommendations to the
bureau d ir e c to r said th a t she wished th a t the only reasons f o r choices
were the f i r s t two lis te d above.

She asserted th a t p o lit ic a l fa cto rs

also were im portant once the fin a l decisions were in the hands o f the
bureau d ir e c to r and the department d ire c to r.
From t h e ir perspe ctive, the p ro vid e r respondents said th a t they
did not know f o r c e rta in what were the reasons f o r awarding c o n tra cts .
In th is respect, the providers were g e n e ra lly less informed than DSS
p ro v id e rs , who may have understood the system b e tte r because o f longer
re la tio n s h ip s w ith o f f ic ia ls .

(Many o f the DOL co n tra cto rs were also

very mistaken about the Id e n titie s o f those who selected c o n tra c to rs .)
T h e ir most frequent answers, in o rd e r, were:

having previous s a tis fa c ­

to ry work in s ta te p ro je c ts o r s e rv ic e s , an in no vative approach to

153

dealing w ith the perceived problem, lowest c o s t, and previous experience
in th is general type o f service o r population group.

The top two rea­

sons given by BET o f f ic ia ls were not seen as im portant as these, which
may in d ic a te th a t providers o fte n do not know what BET re a lly wants, and
th is may e xp la in why BET has o fte n been disappointed w ith the q u a lity of
proposals.

None o f the providers mentioned th a t p o lit ic a l in flu e n ce was

a fa c to r.

In fa c t , some o f the interview ees stated th a t compared to the

fa v o ritis m in the award process o f t h e ir lo ca l prime sponsors, the sta te
BET appeared to be remarkably fre e o f p o lit ic s .

The only com plaint in

th is regard was th a t p u b lic agencies appeared to receive more in v it a ­
tio n s fo r proposals and, th e re fo re , more co n tra c ts .
Because s ta te CETA funds have been r e la t iv e ly p le n tifu l and the
t i t l e s are geared toward producing e ffe c tiv e model programs, there
appears to have been l i t t l e

concern fo r co st.

The major reasons fo r

awards appear to be programmatic in nature— i . e . , on the basis o f the
proposed programs as they re la te d to the needs o f c e rta in unemployed
groups in the s ta te .

Previous experience o r re p u ta tio n may also have

some bearing in some cases, but th is d id not seem p a r tic u la r ly im portant
by i t s e l f , despite what providers thought.

N a tu ra lly agencies would be

b e tte r able to co n stru ct a fe a s ib le service plan i f they were fa m ilia r
w ith the ta rg e t p o p u la tio n 's needs and a b ilit ie s .

A cu rre n t p ro vid er

said th a t the youth grants program placed a "heavy w eight on in te n t and
design, not so much on success," e ith e r under previous funding o r dur­
ing the f i r s t year o f a BET c o n tra c t.
by o th e r o f f ic ia ls and p ro vid e rs.

This observation was confirmed

The submission o f a good proposal

seemed to be the c ru c ia l p a rt in g e ttin g e ith e r the T it le I I and IV

154

c o n tra c ts , but even some poorly w r itte n proposals have also re su lte d in
c o n tra c ts , since the funds were a v a ila b le and no o th e r co n tra cto rs were.
Though not guaranteed, renewals are u su a lly made .up. to the threeyear l i m i t , despite d i f f ic u lt ie s in operating programs and meeting
goals.

In the f i r s t year o f an experimental p ro je c t w ith a new funding

source, providers have encountered various s ta rt-u p problems th a t can be
overcome w ith a d d itio n a l tim e, experience, and tech nica l assistance from
BET.

Therefore, g iv in g renewals may o fte n help to accomplish BET's

goals o f helping to e s ta b lis h e ffe c tiv e employment and tra in in g pro­
grams, even though the f i r s t y e a r's costs may be high.
Judging from the evidence, a t le a s t one o f the key elements in
decision making assumed by c o n tra c tin g supporters is a b sen t--th e common
goal o f cost m in im iza tion .
performance instead.

O ffic ia ls have tr ie d to maximize service

In th e ir view, awarding contracts to providers

w ith good proposals f o r programs aimed a t the most needy is the method
o f achieving th is goal.
This means, however, th a t o fte n BET evaluates p o te n tia l contrac­
to rs on the basis o f lim ite d in fo rm a tio n — in fo rm a tio n compiled by p ro v i­
ders almost e x c lu s iv e ly about the programs' c lie n ts , elements, service
d e liv e ry , e tc .

In p a r tic u la r , three problems a ris e w ith th is approach

to judging programs' fu tu re success:

1) in fo rm a tio n about the l i k e l i ­

hood o f an agency being able to a tta in program goals ( i . e . , re p u ta tio n ,
past performance) 1s not o fte n used fo r making awards, as in the " b lin d '
youth contracts award process; 2) proposal evaluators o fte n do not have
independent in fo rm a tio n o r e x p e rtis e w ith which to judge the s p e c ia l­
ized agencies' proposals about c lie n ts and services ( e .g ., pa ra-legal
services fo r incarcerated women); and 3) there may be no necessary

155

connection between being able to "package" a c re d ib le program and being
able to implement the plans, since u su a lly these re q u ire d iffe r e n t
s k il ls and q u ite d iffe r e n t parts o f an o rg a n iza tio n are responsible fo r
these a c t iv it ie s .

As a r e s u lt, i t may be d i f f i c u l t to assess accurately

the a n tic ip a te d performance and consequences o f each a lte rn a tiv e in
terms o f the goal o f e ffe c tiv e n e s s .
BET's need to expend federal CETA funds also means th a t some
p la in ly less d e sira b le a lte rn a tiv e s have also been funded--a way o f actu­
a lly dim in ishing the p o s s ib ilitie s o f being e ffe c tiv e as w ell as produc­
ing a probable source o f waste and in e ffic ie n c y .

A program head said a

major problem in c o n tra c tin g was th a t BET "becomes more and more
pressured as time goes on, because money is ready to spend."

Conse­

q u e n tly , o f f ic ia ls give contracts to providers w ith "le s s than adequate
p la n s ."

No oth e r agencies are a v a ila b le , due to a lack o f com petition

in the environment, so w illin g agencies are given funds despite the
a n tic ip a te d problems.

This phenomenon is not due to c o n tra c tin g per se,

but to the d is in c e n tiv e s f o r having unexpended funds at the y e a r's end.
The problem is increased, however, when the c o n tra c tin g u n it has no
a lte rn a tiv e but to use con tractors to provide the desired se rvice s.

If

there was a choice to use e ith e r in-house s t a f f o r c o n tra c to rs , programs
probably could be designed and implemented to f u l f i l l more e x a c tly the
needs o f government.
C.

O b je c tiv ity and Fairness 1n C ontracting
The complex CETA reg ulatio ns Include several pro visions f o r pro­

moting fa irn e s s in c o n tra c tin g .

P o lit ic a l patronage and c o n f lic t o f

in te r e s t in awards, f o r example, are s t r i c t l y forbidden.

Although

c e rta in types o f co n tra cto rs are to be given "maximum reasonable

156

op p o rtu n ity" to compete and be given awards, generally se le ctio n o f con­
tra c to rs is supposed to be made on the basis o f m e rit a fte r a thorough
review.

In most respects, these regulations appear to be follow ed in

Michigan DOL.

Nonetheless, the personal re la tio n s h ip s between bureau­

crats and contractors and the ro le o f p o litic ia n s in sta te CETA con­
tra c ts must be examined to determine whether other influences a ffe c t
co n tra ctin g decisions.
1.

Relationships Between Bureaucrats and Contractors

BET does not hold the same p o te n tia l fo r fo s te rin g cozy o r cooptlv e re la tio n s h ip s as in DSS—fo r a basic s tru c tu ra l reason.

BET's

org an iza tion al s tru c tu re divides the work o f the bureau in to two major
areas--on one sid e , p o lic y , planning, and program development; on the
oth e r, on-going operations.

The con tractin g plans, programs, and awards

are the re s p o n s ib ility o f one set o f o f f ic ia ls .

Contract n e g o tia tio n s ,

m onitoring, and assistance are c a rrie d out by another se t— the co n tra ct
adm inistrators in the operations d iv is io n .
For our purposes, th is means th a t the bureaucrats w ith the most
frequent, on-going contracts w ith contractors are not the same in d iv i­
duals who make up the RFP's and decide awards fo r e ith e r o f the t i t l e s .
Personal re la tio n s h ip s are less lik e ly to be a fa c to r in choosing con­
tra c to rs and renewals.

C e rta in ly frien dsh ip s could develop between

co n tra ct ad m inistrators and contractors which would undermine the
o b je c tiv ity o f the m onitoring process and perhaps feed biased and inac­
curate in fo rm atio n in to the award process.

But the o p p o rtu n itie s fo r

th is are minimized by both the dominant ro le program o f f ic ia ls have
taken in the T it le I I decision making process and the o b je c tiv e nature
o f the T it le IV youth decision process.

The con tract a d m in is tra to rs ’

157

inform ation about contract implementation and compliance has had some­
what less influence on BET's plans, programs, and awards than they
would lik e .

( I f they were consulted, interviewees suggested th a t they

would reconvnend th a t several contractors would not receive renewals or
other o p p o rtu n itie s to compete fo r c o n tra c ts .)

In a d d itio n , because o f

the three-year li m it on funds, lo y a ltie s born out o f long-term re la tio n ­
ships are less lik e ly to m a te ria liz e .

Only a few p u b lic agencies and

the labor union have gone beyond the li m it , e ith e r w ith the same o r
d iffe r e n t programs.
Nonetheless, to fin d out about th e ir associations w ith others, I
asked respondents to ra te the frequency o f the fo llo w in g types o f re la ­
tions hi ps:
1.

close and personal

2.

warm and frie n d ly

3.

s t r i c t l y businesslike

4.

cool and d is ta n t

5.

h o s tile and an ta g o n istic

As w ith DSS, re la tio n s h ip s were described as ofte n warm and frie n d ly by
h a lf o f the BET o f f ic ia ls and s ix (60 percent) o f the contractors
(Tables 10 and 11).

Nonetheless, 50 percent o f the o f f ic ia ls said

th e ir re la tio n s h ip s were o fte n s t r i c t l y b u sin esslike.

Very few d i f f e r ­

ences in perceptions between bureaucrats and contractors are evident.
Again some respondents stated th a t th e ir re la tio n sh ip s were sometimes
cool and d is ta n t or even h o s tile and a n ta g o n is tic —w ith somewhat more
frequent responses o f th is kind by BET o f f ic ia ls .
The question about whether bureaucrats act as advocates fo r con­
tra c to rs was also asked o f both o f f ic ia ls and providers (Table 12).

It

Table 10:

S ta te B.E.T. O f f i c i a l s ' R e la tio n s h ip s W ith P rovid ers

Close and
personal

Warm and
frie n d ly

Always

1
(17%)

1
(17%)

Often

1
(17%)

3
(50%)

3
(50%)

Sometimes

2
(33%)

2
(33%)

2
(33%)

3
(50%)

1
(17%)

Never

2
(33%)

1
(17%)

3
(50%)

5
(80%)

6
(100%)

6
(100%)

6
(100%)

Frequency:

TOTALS

6
(100%)

6
(100%)

S t r ic t ly
businesslike

Cool and
d is ta n t

H o stile and
antagonistic

__

Table 11:

C o n tra c to rs ' R e la tio n sh ip s With B.E.T. C o n tra ctin g O f f ic ia ls

Frequency:

Close and
personal

Always

Warm and
frie n d ly

S t r ic t ly
businesslike

1
(10%)

1
(10%)

Cool and
d ista n t

H ostile and
antagonistic
__

Often

3
(30%)

6
(60%)

4
(40%)

_

Sometimes

3
(30%)

3
(30%)

4
(40%)

3
(30%)

1
(10%)

Never

4
(40%)

1
(10%)

7
(70%)

9
(90%)

10
(100%)

10
(100%)

10
(100%)

TOTALS

10
(100%)

«...

10
(100%)

160

Table 12:

Advocate Role o f B.E.T. Bureaucrats

Frequency:

State

Contractors

TOTALS

Always

1
(20%)

2
(20%)

3
(20%)

Often

2
(40%)

4
(40%)

6
(40%)

Sometimes

2
(40%)

1
(10%)

3
(20%)

3
(30%)

3
(20%)

10
(100%)

15
(100%)

Never

TOTALS

5*
(100%)

* One respondent did not answer th is question.

161

was apparent th a t some con tract ad m inistrators saw th e ir jobs in terms
o f a s s is tin g " th e ir " contractors.

Often th is required an advocacy ro le

—e .g ., cle a rin g payments fo r them, promoting th e ir programs w ith other
o f f ic ia ls .

Program heads also have acted as promoters o f contractors

w ith e ffe c tiv e programs in th e ir areas o f r e s p o n s ib ility .

Those who

work c lo s e ly w ith the contractors then were more lik e ly than other o f f i ­
c ia ls to give "always" and "o fte n " as th e ir responses.

This re s u lt was

s im ila r to the answers in DSS, where county coordinators reported more
freq ue ntly than sta te o f f ic ia ls th a t they act as advocates.
For the providers, the responses were more scattered across the
fo u r choices o f always (two, 20 p e rcen t), o fte n (4, 40 p e rce n t), some­
times (1 , 10 percent), and never (3, 30 percent).

T heir answers seemed

to depend in large p a rt upon the co n tra ct a d m in istra to r assigned to
them, since some seemed to take on the advocacy ro le more o fte n and were
generally more cooperative than others.

Unlike in DSS, where none of

the providers chose "never" fo r th is question, three o f the respondents
said o f f ic ia ls never acted as t h e ir advocates.
In general, most co n tra ct adm inistrators and program heads appear
to act as advocates w ith other o f f ic ia ls fo r t h e ir agencies—e sp e cia lly
when the programs are im portant ones and when they need assistance in
fin d in g th e ir way through BET's confusing p o lic ie s and bureaucracy.

As

a co n tra cto r s a id , o f f ic ia ls are "supportive" because they want the con­
tra c to rs ' programs to "do w ell so they look good to th e ir bosses."

Two

o f the con tractors fo r spe cia lize d p ro je cts fo r women also saw them­
selves as rece iving extra assistance because BET wanted to fund th e ir
unique programs and wanted them to succeed.

At times, however, o f f i ­

c ia ls were c r it ic a l o f requests or actions o f some con tractors.

And

162

they are lim ite d in what they can do fo r co n tra cto rs, since the impor­
ta n t decisions about p o lic ie s , awards, and renewals are made by a
v a rie ty o f in d iv id u a ls .
The only real evidence o f p re fe re n tia l treatment o r cooptation by
bureaucrats in re la tio n s w ith contractors was a general conment made by
a planning o f f i c i a l .

She said th a t "cronyism" between ce rta in prime

sponsors and the sta te 00L meant th a t a ll agencies are not given equal
treatm ent.

The more vocal and sometimes more c r it ic a l local agencies

tend to get more a tte n tio n and assistance.

From th e ir view point, some

o f the contractors also said they thought p u b lic agencies were preferred
in some T it le I I procedures and decisions.

From th is and oth er informa­

tio n , I concluded th a t c e rta in p u b lic agencies were not only given more
o p p o rtu n itie s to compete fo r co n tra cto rs, but they also on occasion were
chosen fo r contracts th a t, i f they had been p riv a te agencies, they would
not have received.

Some o f these decisions have been made w ith in the

program o ffic e s , w hile others have been made by the bureau and depart­
ment d ire c to rs .
2.

Role o f P o litic ia n s in BET Contracting

BET and p ro vid er respondents were also asked to evaluate the ro le
o f most p o litic ia n s in the co n tra ctin g process.

Generally BET o f f ic ia ls

saw the a c t iv it ie s o f p o litic ia n s in somewhat more negative lig h t than
did DSS s ta te and county o f f ic ia ls {Table 13).

One interviewee said

they were too in te r fe r in g , w h ile the re s t stated th a t they were only
involved 1n contracts t h e ir constituents wanted.

None said they were

h e lp fu l, not involved enough, o r hardly involved a t a l l .

The p ro vid ers'

experience w ith elected o f f ic ia ls was somewhat d iffe r e n t than th a t o f
bureaucrats, w ith two (20 percent) s ta tin g th a t p o litic ia n s were

Table 13:

Role o f P o litic ia n s in B.E.T. Contracting

Role o f P o litic ia n s :

State B.E.T.

Generally q u ite helpful
Not involved enough
Too in te rfe rin g in decisionmaking
Hardly involved, but th a t's
the way I p re fe r i t
Only involved in contracts
constituents want
TOTALS

* One respondent did not answer th is question.

—

Contractors

TOTALS

2
(20%)

2
(13*)

—

1
(7%)

1
(20%)
__

------

3
(30%)

3
(30%)

4
(80%)

5
(50%)

9
(60%)

5*
(100%)

10
(100%)

15
(100%)

164

g e ne rally h e lp fu l.

Three respondents (30 percent) thought they were

hardly involved a t a l l and fiv e (50 percent) said th a t they were only
involved in contracts t h e ir c o n stitu e n ts wanted.

As mentioned above,

some o f the providers said th a t from what they saw, BET was r e la tiv e ly
fre e o f the p o lit ic a l influences th a t were conrnon in the lo c a l prime
sponsors' decisions.
The o v e ra ll p ic tu re o f p o litic ia n s ' involvement in s ta te CETA con­
tra c ts 1s ra th e r s im ila r to th a t found in DSS' s o c ia l se rvice s, even
though p o lit ic a l pressure is more o fte n exerted by s ta te le g is la to rs
instead o f by lo c a l o f f ic ia ls .

Elected o f f ic ia ls are in te re s te d in hav­

ing funds channeled to t h e ir d is t r ic t s and sometimes to s p e c ific agen­
cies as w e ll.

Thus, they have become a c tiv e in a s s is tin g c o n s titu e n t

organizations in being considered f o r awards.

While they do not have

many contacts w ith o r in flu e n ce over bureaucrats in t h e ir recommenda­
tio n s f o r awards, on occasion they have been e ffe c tiv e in in flu e n c in g the
fin a l choices o f the bureau and department d ire c to rs .

As a re s u lt, BET

has had several sweetheart (o r "heaven above") con tracts over the past
y e a rs .
A c le a r case o f a sweetheart c o n tra ct was reported by two o f f i ­
c ia ls .

A C a th o lic agency has had contracts f o r years, both through

T it le I I and IV funds.

Not only have the co n tra c t amounts exceeded the

s p e c ifie d l i m i t on youth c o n tra c ts , b u t, according to a co n tra c t admin­
is t r a t o r , BET could have gotten another agency to provide the services
more e ffe c tiv e ly .

A program head m aintained, however, th a t usually

p o litic ia n s have not been very successful a t pushing poorly run programs.
Almost a ll o f the o f f ic ia ls expressed some resentment over the
changes th a t the appointed bureau and department heads have made.

A

165

p o lic y and planning supervisor stated th a t she tr ie s "to make p o lic y
p r io r it ie s th a t are good, but the decisions made a t higher le ve ls are
not con sisten t w ith these."

One o f the o f f ic ia ls explained th a t many

" p o litic ia n s may not have much inform ation and understanding" o f what
BET 1s attem pting to do w ith the CETA con tracts—w ith the im p lic a tio n
th a t i f they d id , they would not pressure BET to change th e ir p r io r itie s .
That judgment is probably too c h a rita b le .

Even those who know the goals

o f BET have not been averse to tampering w ith the experts' recommenda­
tio n s .

The department d ire c to r, P a tric k Babcock, had both a "hands-on"

s ty le where co n tra ctin g was concerned and some p o lit ic a l ambitions o f
his own, which in combination meant th a t some "capriciousness" in fund­
ing was almost in e v ita b le .

Some o f these decisions probably derived

from his use o f contracts to achieve his own goals w h ile others resu lted
from p o litic ia n s who understood Babcock's s ty le and his p o lit ic a l v u l­
n e r a b ility .

As w ith the DSS case, sweetheart contracts can come from

the decisions o f e ith e r elected o f f ic ia ls o r appointed department heads
—both o f whom tr y to augment th e ir p o lit ic a l support by th is means.
These fin d in g s in d ic a te th a t despite professional e xp ertise and a
model T it le IV con tractin g out process, p o litic s can s t i l l be a fa c to r
in awards decisions.

Consequently, the fin a l choices by BET have not

always been con sisten t w ith maximizing service performance and e ffe c ­
tiveness, much less e ffic ie n c y .
IV.
A.

The Watchdog Role o f BET
Review Procedures
Considering BET's goals fo r CETA co n tra cts, thorough and o b je ctiv e

reviews are c r it ic a l fo r two areas— co n tra ct compliance and program
e ffe c tiv e n e ss.

These reviews should also be u tiliz e d when contracts

166

are considered fo r renewals.

By these methods the government can be as­

sured th a t c lie n ts are rece iving the kinds and q u a lity o f services they
re q u ire .

And BET can gain useful knowledge about the cause and e ffe c t

re la tio n s h ip s th a t operate under various service conditions and programs.
Most o f the T it le I I and IV contracts are reviewed only in d ir e c tly
by the Bureau* however, through co n tra cto rs' s e lf-re p o rtin g o f expendi­
tures and progress in accordance w ith BET's guidelines and forms.

A ll

c o n tra c t m onitoring is performed by the co n tra ct a d m in istra to rs, but
they mainly check the p ro vid e rs' performance and expenditures forms fo r
simple compliance w ith the terms o f the con tract (e .g ., fo r c o rre ct
number o f enrol lees, fo r overspending and underspending), and f i l e them.
As w ith DSS co n tra cts, the most rigorous s c ru tin y is reserved fo r de ter­
mining p a rtic ip a n ts ' e l i g i b i l i t y .

A lo tte r y system lik e DSS' is used

fo r p u llin g c lie n ts ' f ile s to v e r ify inform ation.

Unlike the DSS

reviews, however, the m onitoring o f expenditures does not appear to be
p a r tic u la r ly thorough during the l i f e o f the co n tra ct.

Even when the

pro vid er is found to be in non-compliance, the co n tra ct may not be t e r ­
minated i f the pro vid er shows "good f a it h . "

Contract ad m in istrators

provide them w ith technical assistance to move the program or adminis­
tr a tio n in the agreed-upon d ire c tio n .
O n-site f ie ld v is it s were f i r s t employed fo r the e a rly p a rt o f
the c u rre n t fis c a l year FY8I, and then only In fre q u e n tly .

The personnel

are no longer a v a ila b le to make v is its because o f s t a f f cuts and tra ve l
curta ilm e nts.

(BET has had plenty o f federal funds to spend on con­

tra c ts and s t a f f s a la rie s , but i t has suffered along w ith oth er depart­
ments in the s ta te 's s t a f f reduction e f f o r t s . )

On rare occasions,

co n tra ct monitors have c a lle d on sub -contractors, but most o f the

167

sub-contracted services are in d ir e c tly reviewed through the co n tra cto rs'
reports.

T it le I I linkage contracts appear to receive even less

review, since they do not serve c lie n t populations d ir e c tly .
Some o f the providers also compile fin a l reports on th e ir pro­
je c ts , through th e ir own in it ia t i v e .

These range from very professional,

thorough, and o b je c tiv e analyses to b r ie f summaries o f the program,
completion ra te s , placements, e tc.

Sometimes contractors include p a r t i­

cip a n t evaluations and fo llo w -u p s; these are the only means BET has of
obtaining c lie n t view points, aside from a p a rtic ip a n ts ' grievance proce­
dure.

I t is unclear what, i f anything, BET does w ith these re p o rts.

C e rta in ly i t does not disseminate inform ation about the "model" o r
"demonstration" p ro je cts th a t have been successful in meeting employment
needs—y e t th a t would seem to be a natural f u lf illm e n t o f th e ir goals.
BET's program development d iv is io n has only in fre q u e n tly produced
in-depth evaluations and follow -ups i t s e l f to determine i f c e rta in pro­
grams are e ffe c tiv e , what changes are necessary, and 1f they should be
continued.

Several o f the pro vid e r respondents suggested th a t BET did

not seem to be p a r tic u la r ly in te re ste d in th e ir re s u lts —even when some
had not done very w ell in meeting th e ir o b je ctive s.

This fa ilu r e to do

adequate performance reviews is obviously in co n siste n t w ith BET's
avowed purpose to fund model programs.

How else is BET to know th a t i t

is using it s funds wisely?
The p o st-a u d it is by fa r the most thorough means o f v e rify in g
expenditures and co n tra ct compliance fo r the BET co n tra cts.

A ll con­

tra c ts o f $100,000 and over are ro u tin e ly audited by p riv a te firm s ,
w h ile each year 10 percent o f a l l oth e r contracts are randomly selected
fo r audits by the regional o ffic e o f the federal DOL.

Since very few

168

contracts are fo r over the $100,000 amount, most o f the con tracts actu­
a lly do not get a thorough review.

As in DSS, a u d its are performed some

time a fte r the end o f the co n tra ct ye a r, such th a t i f expenditure and
compliance m onitoring has not spotted any ir r e g u la r it ie s , the problems
can go undiscovered f o r almost two years.
Of the T it le I I and IV c o n tra c ts , approxim ately fiv e have been
term inated f o r non-compliance w ith the co n tra c t and/or CETA re g u la tio n s
in the la s t three years.

Several o th e r agencies have v o lu n ta r ily te rm i­

nated t h e ir contracts before the s p e c ifie d end o f the c o n tra c t ye a r, fo r
a v a rie ty o f re a so n s--in clu d in g la te s ta rt-u p s , s t a f f problems, e tc .
One a d d itio n a l c o n tra c t was revoked when BET learned th a t the agency
d ir e c to r was in j a i l .

Because o f these and o th e r experiences w ith c e r­

ta in p u b lic and p riv a te agencies, BET has decided th a t several agencies
w i l l not be considered fo r fu tu re co n tra c ts .
B.

Opinions About BET Review Procedures
Interviewees were also asked a question about t h e ir viewpoints o f

the m onitoring and e va lu a tio n o f co n tra cts:
In your area, do you believe th a t the m onitoring and
e va lu a tio n o f co n tra cto rs is :
1.
2.
3.
4.
5.
6.

too s t r i c t , w ith too much unnecessary and burdensome
paperwork involved
not adequate to oversee expenditures
not adequate to evaluate performance
not s t r i c t enough to oversee expenditures o r to
evaluate performance adequately
ju s t about r ig h t
some o th e r response?

BET o f f ic ia ls were very c r i t i c a l o f t h e ir own review methods, o r lack
o f them (Table 14).

Four o f the fiv e who answered the question gave

the fo u rth response— the procedures are not adequate to oversee expen­
d itu re s o r to evaluate performance.

Of the c o n tra c to rs , fo u r (40

Table 14:

M o n ito rin g and E valua tion o f B.E.T. C ontractors

Monitoring and evaluation is :
Too s t r ic t , w ith too much paperwork
Not adequate to oversee expenses

State

„

—

Not adequate to evaluate
performance
Not enough fo r expenditures or
performance

TOTALS

* One respondent did not answer th is question.
+ Error due to rounding.

1
(10*)

TOTALS
1
(7*)
—

—

*

»

2
(20%)

6
(40%)

4
(40%)

4
(27%)

1
(20%)

3
(30%)

4
(27%)

5*
(100%)

10
(100%)

15
(101%)+

4
(80%)

Just about rig h t
Some other response

Contractors

170

percent) o f the ten said th a t the procedures were ju s t about r ig h t , but
the oth e r c o n tra c to r respondents were more c r i t i c a l .

Two who chose

"some o th e r response" combined two o f the a lte r n a tiv e s --th e m onitoring
and eva lu atin g requires too much burdensome paperwork and is inadequate
to evaluate performance.

The respondent who gave the f i r s t choice,

answered in the same vein by saying th a t a c tu a lly the reviews are not
too s t r i c t — they ju s t req uire too much time-consuming paperwork.
Respondents were also asked to p in p o in t the major problems asso­
cia te d w ith the reviews.
on th is s u b je c t.

There was almost unanimity among BET o f f ic ia ls

A ll but one o f them answered th a t they had in s u f f i­

c ie n t tim e, s t a f f , and tra v e l funds necessary to do o n -s ite f ie ld moni­
to rin g .

Consequently, o f f ic ia ls have not been able to a s s is t contrac­

to rs as e ffe c tiv e ly as they m ight, nor can they determine what the
p ro v id e rs ' a d m in is tra tio n and program s t a f f are a c tu a lly doing.
fo llo w in g problems were also given by o f f ic ia ls :

The

"c o n tra c t work

statements are w ritte n so we cannot hold them to i t ; " some resistence by
con tractors to m onitoring and e v a lu a tio n , since they are somewhat pro­
te c tiv e o f t h e ir records; and i t is " d i f f i c u l t to develop d iffe r e n t
too ls and measures fo r e v a lu a tio n ," p a r tly because o f d iffe r e n t p r i o r i ­
tie s fo r the programs.
Two fa m ilia r themes ran through the responses o f the p ro vid e rs—
th a t the paperwork load was very heavy and th a t the performance reviews
were Inadequate.

A constant vexation were the various forms th a t were

required by CETA and BET.

For the same program, some co n tra cto rs must

f i l l out q u ite d iffe r e n t sets o f forms f o r each d iffe r e n t funding
source—even though the in fo rm atio n is u su a lly the same.

Some o f the

con tractors said th a t they have fa lle n behind schedule in subm itting

171

reports o r v e rify in g e l i g i b i l i t y because o f the u n re a lis tic expectations.
A p ro vid e r claimed th a t even w ith the m onitoring and the expenditure,
e l i g i b i l i t y , and progress re p o rts , a dishonest co n tra cto r could s t i l l
fin d methods o f defrauding the government su cce ssfu lly.
Several o f the co n tra cto r respondents complained about BET's narrow
view o f performance.

They noted th a t although BET o f f ic ia ls ta lk about

g e ttin g good re s u lts , they have focused most o f t h e ir m onitoring e ffo r ts
on forms, e l i g i b i l i t y , e t c . —not on performance outcomes, fo llo w -u p s, and
service q u a lity .

BET's sin g le measure o f success is whether o r not a

program p a rtic ip a n t has been placed in employment immediately a fte r
completion o f a program.

One o f the contractors found th is emphasis on

placement numbers to be q u ite inadequate fo r his program fo r adjudicated
m in o rity high school drop-outs.

Other long- and short-term p o s itiv e by­

products o f the program were also im portant fo r e n ro lle e s—e . g . , staying
out o f tro u b le , going back to school.

Another interview ee w ith a linkage

c o n tra c t stated th a t her agency has no external source o f evaluation fo r
essential feedback about t h e ir tra in in g programs.

She suggested that

"in te rn a l evaluations are always slanted" in th e ir own fa v o r, such th a t
the re s u lts would not always be r e lia b le and v a lid .
Although th e ir c ritic is m s were fewer in number and narrower in
scope, BET o f f ic ia ls and contractors seemed to have some o f the same
problems as DSS respondents did in the m onitoring and evaluation o f
th e ir prog rams—the paperwork; the inadequate evaluation measures and
to o ls ; and lack o f tim e, s t a f f , and funds.

Both departments emphasized

c lie n t e l i g i b i l i t y v e r ific a tio n , did less w ell on reviewing expendi­
tu re s , and fa ile d in evaluating program performance and e ffe ctive n e ss.
While everyone agreed th a t not enough m onitoring and evaluation was

172

being done, everyone also concurred th a t w ith the s ta te 's fis c a l squeeze
the s itu a tio n was u n lik e ly to change in the near fu tu re .
V.

B enefits o f Contracting Out
Now th a t the three conditions o f com petition, decisionmaking, and

reviews have been examined, we should also evaluate 1 f BET's programs
measure up to the expectations about co n tra ctin g out th a t have been
posited by the p u b lic choice approach--cost red uctio n, b e tte r services,
and a slowdown in government growth.

The OSS case showed th a t even

though a ll three conditions were incongruent w ith the con d itio n a l assump­
tio n s o f co n tra ctin g proponents, one o f the expectations probably was
re a lize d because o f another, compensating c o n d itio n —professionalism .
Thus, i t is possible th a t some o f the con tractin g be ne fits have been
achieved in BET's programs, despite the fa ilu r e to meet a ll three con­
tr a c tin g con dition s.
A.

The Costs o f Contracting Out
Assessing the comparative costs (and q u a lity ) o f in-house versus

p riv a te service p ro visio n 1n T it le I I and IV poses a problem fo r th is
study, since v ir t u a lly a ll d ire c t and linkage services are purchased by
BET.

Respondents have l i t t l e em pirical basis fo r comparing e ith e r the

cost o r the q u a lity o f services by these two methods.
Interviewees could, however, compare the re la tiv e costs and p e rfo r­
mance o f p riv a te and p u b lic con tractors.

A ll o f the BET o f f ic ia ls have

worked w ith both types o f providers under both t i t l e s .

The p riv a te

con tractors q u ite n a tu ra lly would tend to be biased in t h e ir a n a lysis,
judging from the DSS re s u lts , hut t h e ir opinions in themselves are o f
some in te re s t.

173

Generally the p u b lic choice lite r a t u r e has maintained th a t e ith e r
p u b lic o r p riv a te agents can be used to achieve t h e ir e ffic ie n c y goals,
but more rece ntly some w rite rs have argued th a t the p riv a te sector is
in h e re n tly sup erior to p u b lic p ro visio n .®

Therefore, i t is not Inappro­

p ria te to examine the viewpoints o f co n tra ctin g actors concerning the
d iffe re n ce s.
The same question th a t was used in the OSS study was also asked o f
DOL respondents, but the meaning fo r them was d iffe r e n t because o f the
d iffe r e n t context.

They did not focus on the e ffe c t o f co n tra ctin g out

in i t s e l f , but on the e ffe c ts o f the type o f service p ro vid e r.
In the contracts and services you work w ith , do you th in k
c o n tra ctin g w ith p riv a te agencies o r firm s costs less than,
about the same as, o r more than, government d e liv e ry o f
those services would?
The answers o f the sta te o f f ic ia ls and the contractors d iffe re d markedly
(Table 15).

While none o f the BET respondents said the costs o f p riv a te

agencies were less than government agencies, s ix (60 percent) o f the
pro vid er respondents thought they were.

Three interviewees o f each

group believed costs were equal (50 percent o f BET, 30 percent fo r pro­
v id e rs ); one from each group said costs were higher w ith p riv a te con­
tra c to rs (17 percnet, 10 pe rce n t); and two BET o f f ic ia ls said re la tiv e
costs depended on the s t a f f , the se rvice , and the agency's experience.
Respondents provided a v a rie ty o f reasons fo r th e ir answers.
Those who believed p riv a te costs are ge ne rally equal to o r g re ate r than
p u b lic p ro visio n made these comments:

Q

"p riv a te agencies underestimate

For one o f the “ best" examples, see Robert M. Spann, "P u blic
versus P riva te P rovision o f Governmental S e rvices," in Thomas E.
Borcherdfng, e d ., Budgets and Bureaucrats: The Sources o f Government
Growth (Durham, N.C.: Duke U n ive rsity Press, 1977), pp. 71-89.

174

Table 15:

The Cost o f B.E.T. Services By P riva te Contractors

Cost:

State

Less than government

Contractors

TOTALS

6
(60%)

6
(38%)

Equal to government

3
(50%)

3
(30%)

6
(38%)

More than government

1
(17%)

1
(10%)

2
(13%)

" I t depends"

2
(33%)

TOTALS

* E rro r due to rounding.

6
(100%)

2
(13%)
10
(100%)

16
(102%)*

175

how much i t c o sts;" a ll contracts are cost reimbursement contracts w ith
the same CETA g u id e lin e s; and there is "tremendous overhead" w ith some
p riv a te agencies.

On the oth er hand, providers who said the costs were

lower w ith p riv a te agencies gave many o f the same reasons as given by
the DSS respondents who compared p riv a te to in-house supply.

In th e ir

view, the government co n tra cto r agencies in c u r more expenses because o f
bureaucracy, red-tape, c iv i l service, and higher s a la rie s ; w h ile p riv a te
agencies are more fle x ib le and e f f ic ie n t , are forced to liv e w ith in
fin a n c ia l r e s tra in ts , have less overhead and lower s a la rie s , and are
motivated by " p r o f it . "
B.

The Q u a lity o f P riva te Service Contracting
The same type o f question was asked about the q u a lity o f p u b lic

versus p riv a te service p ro visio n :
For the contracts and services you work w ith , do you th in k
c o n tra ctin g w ith p riv a te agencies o r firm s re s u lts in poorer
s e rv ice , about the same q u a lity o f service, o r b e tte r ser­
vice fo r re c ip ie n ts than government service d e liv e ry would?
Again the s ta te o f f ic ia ls and the contractors disagreed in th e ir opin­
ions {Table 16).

None o f those from BET said th a t p riv a te agencies per­

formed b e tte r than p u b lic agencies.

Four o f f ic ia ls (67 percent) believed

th a t p riv a te services are equal to p u b lic ly -p ro v id e d ones.

One con tract

a d m in is tra to r concluded from her experience th a t p riv a te agencies pro­
vided poorer services than government agencies d id , w h ile another o f f i ­
c ia l said th a t the service q u a lity depended upon the agencies' and s t a f f
members' experience.
A p o lic y and planning o f f ic ia l conroented th a t each type o f agency
has c e rta in strengths and weaknesses fo r CETA co n tra ctin g purposes.
Because they have had more experience in government programs and d ire c t

176

Table 16:

The Q u a lity o f B.E.T. Services By P riva te Contractors

Q u a lity :

State

B e tte r than government

Contractors

TOTALS

7
(70%)

7
(44%)

Equal to government

4
{67")

1
(10%)

5
(31%)

Poorer than government

1
(17%)

1
(10%)

2
(13%)

"Depends"

1
(17%)

1
(10%)

2
(13%)

TOTALS

* E rro r due to rounding.

6
(101%)*

10
(100%)

16
(101%)*

177

s e rv ic e s , p u b lic agencies u su a lly are b e tte r able to run programs, han­
dle c lie n ts , and meet BET’ s s p e c ific needs.

G enerally n o n -p ro fit agen­

cies also have a good programmatic sense, but t h e ir a d m in is tra tiv e s k ills
are fre q u e n tly inadequate.

She a ttrib u te d th is f a llin g to the fa c t th a t

many o f these agencies " liv e hand-to-mouth because o f t h e ir grant depen­
dence."

On the o th e r hand, p riv a te , p ro p rie ta ry firm s have b e tte r

a d m in is tra tiv e s k i l l s , y e t they are not u su a lly very competent 1n pro­
v id in g the program and services to c lie n ts .

The advantage o f the p r i ­

vate over the p u b lic agencies is th a t the p riv a te providers are
"h u n g rie r, so they want to cooperate."
i t th is way:

Another co n tra ct sup ervisor put

"the y are more lik e ly to be responsive to c o rre c tiv e

a c tio n " because o f t h e ir g re a te r need fo r funds.
C ontractors answered th a t p riv a te agency service q u a lity was be t­
te r than government's, w ith seven g iv in g th is response (70 p e rcen t).
The o th e r three a lte rn a tiv e s were chosen by only one respondent fo r each.
Those who said the services were b e tte r in the p riv a te secto r gave these
reasons:

more f l e x i b i l i t y , less bureaucracy, more personal contact,

fewer re g u la tio n s , g re a te r e x p e rtis e , b e tte r s t a f f , less p o lit ic a l in te r ­
ference.

In a d d itio n , they claim ed, i f the agencies do not do a good

jo b , they w i l l not get funded.

That fa c t alone provides an in c e n tiv e

f o r good performance.
These responses and comments are c o n siste n t w ith the answers given
by DSS p ro vid e rs.

I t appears th a t many p riv a te agencies b e lie ve th a t

p u b lic agencies, whether under co n tra c t o r n o t, are in f e r io r in most
co st and performance respects to p riv a te agencies.

The c o n tra c to rs '

opinion th a t p riv a te agencies have more in ce n tive s to m aintain good se r­
vices seems to be substan tiated by the comments o f o f f ic ia ls .

But the

178

o ve ra ll performance would only be b e tte r i f a ll oth er fa cto rs c o n trib u t­
ing to q u a lity services were otherwise equal--and th a t may not be the
case fo r some agencies.
The question s t i l l remains, however:

Have the expectations o f cost

reduction and improved services been re a lize d by BET's heavy relia nce on
co n tra ctin g out?

Although there is no d ire c t evidence on th is m atter in

the in te rv ie w s, c e rta in fa cto rs can be considered to c la r if y th is issue.
Some large i n i t i a l costs o f b u ild in g an agency o r various programs
have been avoided by using e x is tin g spe cia lize d agencies.

C e rta in ly the

contracts help to cover some overhead and a d m in is tra tiv e costs these
agencies must in c u r, but i t is probably less than the costs o f s ta rtin g
from v ir t u a lly nothing.

On the oth e r hand, BET i t s e l f has sustained s ig ­

n ific a n t expenses d ir e c tly and e x c lu s iv e ly due to purchasing services
from a wide range o f d iffe r e n t s u p p lie rs .

The costs o f co n tra ct adminis­

tr a tio n appear high, as the DSS acfaiinistrators suggested.

Not only must

they negotiate and m onitor the c o n tra cts, but the co n tra ct adm inistrators
must also provide a great deal o f technical assistance to providers —
assistance which is p a r tic u la r ly necessary when new con tractors are used.
In a sense, then, BET absorbs program s ta rt-u p costs each time a new
agency is u t iliz e d , both in the "p ric e " o f the co n tra ct fo r the agency's
a d m in is tra tiv e needs and in the personnel costs fo r BET a d m in istra to rs.
The issue o f comparative service q u a lity is a d i f f i c u l t one.

It

is unclear whether p riv a te service q u a lity is in h e re n tly b e tte r than
p u b lic pro visio n because o f the s tru c tu re o f p u b lic and p riv a te agencies.
I f p riv a te services are usually b e tte r, then the p o s itiv e answers o f the
DSS o f f ic ia ls and providers can be explained in those terms—not ju s t

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because o f the c o n tra c t mechanism.

This would conform w ith

the answers

th a t DOL co n tra cto rs gave as w e ll.
What is in te re s tin g in the DOLcase, however, is th a t

the BET o f f i ­

c ia ls saw few d iffe re n ce s in se rvice q u a lity between the p u b lic
vate agancies.

and p r i ­

In a d d itio n , they were o fte n d is s a tis fie d w ith the

performance o f t h e ir c o n tra c to rs —both the p u b lic and p riv a te pro vid ers.
The youth contracts were p a r tic u la r ly d isa p p o in tin g .

The f i r s t y e a r’ s

placement rates were low and several o f the agencies had d i f f i c u l t y even
g e ttin g t h e ir programs in to o p era tion .

This re s u lt in d ica te s a problem

w ith purchasing human se rvice s—c o n tra c tin g u n its must depend upon oth er
agencies both to design th e ir own programs and then to implement them.
C ontractors' e ffo r ts may not coincide w ith the goals o f the o f f i c i a l s ;
y e t, in the BET case, these services were purchased anyway because o f no
o th e r a lte rn a tiv e s .

BET does not have it s own in-house s t a f f to provide

more d e s ira b le se rvice s.

Nor were there any o th e r p u b lic o r p riv a te

agencies to s o l i c i t since a ll o f them had already been in v ite d to submit
proposals.
lity .

Consequently, the services were not u n ifo rm ly o f good qua­

Reliance on ou tside agents means th a t the co n tra ctin g u n it can

lose co n tro l over the services themselves.

Therefore, they may not meet

the o b je c tiv e s s e t fo r them by government o f f ic ia ls .
C.

Slowdown o f Government Growth
Just as i t is d i f f i c u l t to evaluate the success o f the expecta­

tio n s o f lower cost and b e tte r se rv ic e s , 1t is also d i f f i c u l t to d e te r­
mine i f government growth has been slowed through DOL c o n tra c tin g .

Many

fa c to rs a ffe c t both personnel and budget growth, and, o b vio u sly, we have
no measures o f what would have occurred i f the services had not been
contracted o u t.

I t can be speculated, nonetheless, th a t growth may have

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been held in check by the use o f outside c o n tra c to rs .

The fa c t o f con­

tra c tin g and the usual thre e-yea r l i m i t on funding may have prevented
some in e ffe c tiv e programs from becoming in s titu t io n a l ized—as is wont to
happen in bureaucracies.
Government growth, however, should not be analyzed only from the
narrow view o f DOL's budget and personnel growth.

BET has made funds

a v a ila b le to o th e r s ta te and lo c a l p u b lic agencies th a t have found 1t
necessary to add s t a f f to accommodate the increased demand.

In a d d itio n ,

when the BET funds have no longer been a v a ila b le , lo c a l prime sponsors
o r c it y governments have o fte n c o n trib u te d the funds necessary to keep
p ro je c ts going.

A fte r three years o f se rvice to a community, there may

be s ig n ific a n t pressure to continue these p ro je c ts —even i f they are not
congruent w ith a lo ca l u n it 's p r io r it ie s .

Many lo ca l governments

throughout the U.S. have found i t d i f f i c u l t to withdraw t h e ir support
from programs th a t have been s ta rte d w ith federal and s ta te funds.
Conclusion
C ontracting in DOL has been marked by some procedures--not found
in DSS— th a t have enhanced c o m p e titio n , improved decisionmaking, and
prevented long-term re lia n ce on BET co n tra c ts .

In p a r tic u la r , BET has

used system atic needs assessment methods th a t depend upon in fo rm atio n
from a v a rie ty o f sources—not ju s t those w ith vested in te re s ts .

O f f i­

c ia ls have u t iliz e d these means to set p r io r it ie s and make co n tra cts.
The T it le I I c o n tra c t process also is a model o f wide s o lic it a t io n to
promote com p etitio n.
choose.

I t allowed BET more a lte rn a tiv e s from which to

When these proposals were considered, the process was f a i r and

o b je c tiv e , e s p e c ia lly since the c r it e r ia used fo r evaluations were
known in advance to those sub m itting proposals.

In a d d itio n , the

181

three-year li m it appears to have widened BET's choices by not allowing
i t s e l f to become lo cke d -in to c e rta in undesirable p ro je c ts .

Not only has

th is allowed BET more f l e x i b i l i t y , but i t has also helped to accomplish
th e ir goals o f promoting model pro je cts which, i f e ffe c tiv e , can in turn
gain lo cal co n tro l and support.
The DOL co n tra ctin g system has n o t, however, f u l f i l l e d a ll o f the
c o n d itio n a l requirements assumed by the p u b lic choice proponents o f con­
tr a c tin g .

F ir s t, the lim ite d com petition in the environment has meant

th a t a c tu a lly BET has had a lim ite d choice o f responsive and responsible
agencies.

T it le I I and IV funds have sometimes been unwisely used

because agencies have not been a v a ila b le to f u l f i l l BET's needs as they
see them.

The matching requirement fo r the T it le IV youth contracts

probably in h ib ite d com petition fo r c o n tra cts, even though BET s o lic ite d
w idely fo r proposals.

Second, the com petitive procedures in the T it le

IV program have not been used beyond the f i r s t year or fo r T it le I I con­
tra c ts .

Generally the procedures fo r the T it le I I programs have

reduced com petition and choice fo r BET.
T hird , decision making in BET has not always follow ed the model
process set up by o f f ic ia ls fo r the T it le IV contracts.

Apparently

there has been some preference in s o lic ita tio n s and awards fo r c e rta in
p u b lic agencies ( i . e . , prime sponsors, school d is t r ic t s ) .

Some awards

have also been m otivated, not by a desire fo r cost reduction or e ffe c ­
tiv e service performance, but by p o lit ic a l considerations.

This pheno­

menon v io la te s the com petitive process and BET's goal o f maximizing
e ffe ctive n e ss.
Fourth, the watchdog ro le o f BET over th e ir contracts has c le a rly
been in e ffe c tiv e .

The procedures emphasize e l i g i b i l i t y v e r ific a tio n and

182

not m onitoring and eva lu atin g performance and e ffe ctive n e ss in helping
the unemployed poor.

W ithout having accurate, complete, and o b je c tiv e

in fo rm atio n about services and t h e ir re s u lts , i t is indeed d i f f i c u l t to
make wise choices.
These con dition s have been analyzed to determine i f they measure
up to the assumptions o f the p u b lic choice approach.

In several

respects the three key con dition s appear to be absent o r only p a r t ia lly
f u l f i l l e d in these BET programs.

I t is uncertain i f the co n tra ctin g

mechanism has le d to the p o s itiv e b e n e fits expected by c o n tra c tin g propo­
nents.

Some o f the same service problems raised by c r it ic s o f bureaucra­

t i c supply— i . e . , overspending, waste, in e ffe c tiv e services— have been
present in the contracted se rvice s.

Although these d i f f ic u lt ie s proba­

b ly would have also m a te ria liz e d i f DOL had produced the contracted
services i t s e l f ( e .g ., through MESC), th is case in d ica te s th a t c o n tra c t­
ing out does not n e ce ssa rily avoid some o f the problems in he ren t in most
bureaucracies.

The services themselves may be provided in some non-

b u reaucratic s e ttin g s , but many o f the c r i t i c a l decisions are, nonethe­
le s s , made w ith in the context o f a large p u b lic bureaucracy.
The f a ilu r e o f the p u b lic choice model to provide a good f i t fo r
DOL c o n tra c tin g necessitates the eva lu a tio n o f the o th e r two perspec­
tiv e s to determine i f they are a p p lica b le .

F ir s t , the perspective o f

market im perfections provides a good explanation fo r some o f the r e a li­
tie s o f DOL c o n tra c tin g .

I t h ig h lig h ts the im portant ro le o f competi­

t io n — e s p e c ia lly the com petition among providers in the government
agency's environment.

M ainly because employment and tra in in g services

f o r the needy have p u b lic good c h a ra c te ris tic s , few p riv a te agencies
e x is t to provide these s e rv ic e s , and those th a t do have been created

183

w ith government assistance.

Most o f BET's contracts go to p u b lic agen­

cies th a t want to avoid d ire c t com petition w ith other pro vid ers.

There­

fo re , the supply o f p o te n tia l p u b lic and p riv a te con tractors is very
lim ite d .

BET's choice among providers is also lim ite d as a re s u lt.

Many o f those who proposed p ro je cts fo r BET did not even measure up to
the minimum standards set by o f f ic ia ls .

While the s p e c ific a tio n s may

have been ra th e r am bitious, th is s itu a tio n illu s t r a te s an im portant
p o in t.

In co n tra c tin g , government agencies are dependent upon a va ila b le

service supply when they cannot (o r w i ll not) provide the service them­
selves.

Competitive procedures, lik e those used in the youth program,

can enhance com petition and choice, but they seldom can create competi­
tio n where i t does not already e x is t.
The perspective o f market im perfection also emphasizes the s ig n i­
ficance o f inform ation in making choices among providers and in m onitor­
ing c o n tra c to rs ' performance.

Because o f the costs, decisionmakers must

s im p lify and reduce th e ir search fo r re le va n t, accurate, and complete
in fo rm atio n.

This is exa ctly what DOL has done.

Since the re q u is ite

resources are very lim ite d , BET has decided to focus it s m onitoring
e ffo r ts on v e rify in g c lie n t e l i g i b i l i t y .

O n-site m onitoring and program

evaluations have not been conducted by BET because they are not required
by CETA re g u la tio n s.

In these and oth er areas o f compliance, BET has

had to re ly on inform ation from the service " s e lle r s ," who have both the
Incentives and the o p p o rtu n itie s to put th e ir programs in the best pos­
s ib le lig h t .

Not only can they provide favorable inform ation fo r

reviews, but they also are the only sources o f inform ation fo r decisions
on awards.
m inim al.

In a ll o f th is , c lie n t feedback and follow -ups have been

184

Some aspects o f DOL co n tra ctin g can also be analyzed through the
cooptation perspective.

This perspective points out th a t co n tra ctin g

may o ffe r o p p o rtu n itie s fo r mutual advantage fo r bureaucrats, p o l i t i ­
cians, and co n tra cto rs.

In DOL, close re la tio n s h ip s between bureaucrats

and contractors did not seem to be convnon, but some preferences fo r
c e rta in p u b lic agencies was in evidence 1n s o lic ita tio n s and awards.
This phenomenon (and more extreme forms o f i t ) 1s predicted by the coop­
ta tio n perspective.

In p a r tic u la r , prime sponsors have become an in te ­

gral p a rt o f the DOL's employment and tra in in g system--such th a t they
have become key actors 1n BET's policy-making process in v o lv in g con­
tra c ts .

They have in sid e Inform a tion , special s k i l l s , and CETA regula­

tions which give them an advantage over p riv a te agencies.
In a d d itio n , some o f the awards in BET have been motivated by
p o lit ic a l gain.

Both le g is la to rs and appointed DOL o f f ic ia ls have used

th e ir po sitio ns on occasion to b u ild p o lit ic a l support.

Both the pre­

ference f o r c e rta in p u b lic agencies and the use o f co n tra ctin g f o r p o li­
t ic a l goals v io la te s the norms o f the com petitive process.

C ertain

agencies are disadvantaged as a consequence.

C lie n ts ' needs and view­

points are not used as the basis fo r awards.

And the agencies used may

not be able to provide the q u a lity o f services fo r re c ip ie n ts th a t they
deserve.
In sum, both o f these perspectives o ffe r explanations o f why con­
tra c tin g out 1n DOL has not met the id e a ls o f the p u b lic choice
approach.

They may not be able to explain a ll aspects o f the complex

process; y e t they co n trib u te to our understanding o f how market imper­
fe c tio n s and p o lit ic a l m otivations can produce less than ideal p o lic ie s ,
behavior, and re s u lts .

CHAPTER VI
CONCLUDING ANALYSIS OF CONDITIONS AND
EXPECTATIONS IN CONTRACTING OUT

This d is s e rta tio n has tr ie d to u n ite two types o f a n a lysis:

1)

the development o f the p o lit ic a l and economic perspectives th a t p e rta in
to the p u b lic choice p re s c rip tio n fo r co n tra ctin g o u t, and 2) an em p iri­
cal examination o f human service co n tra ctin g in various se ttin g s w ith in
two departments o f Michigan sta te government in lig h t o f the three d i f ­
fe re n t perspectives.

As a re s u lt, th is study o ffe rs a unique in q u iry

in to th is most tim ely sub je ct.

I t has taught us much about the actual

processes involved in con tractin g fo r services in Michigan under two
major federal acts.

I t suggests ways in which the p u b lic choice model

o f c o n tra ctin g is inadequate fo r understanding the r e a litie s o f DSS and
DOL c o n tra c tin g .

And the relevance o f the two a lte rn a tiv e social

science tr a d itio n s has been affirm ed in several im portant respects.
In th is chapter, I w i ll h ig h lig h t the major fin d in g s from the two
departments in terms o f the major con dition al assumptions o f the p u b lic
choice school as se t out in the second chapter.

From th is , we can begin

the task o f id e n tify in g s u ita b le conditions fo r successful co n tra ctin g
out.

I w i l l conclude w ith some unresolved issues th a t bear fu rth e r con­

s id e ra tio n and study.

185

186
I.

Comparison o f DSS and POL C o n tra c tin g

An obvious s ta rtin g p o in t fo r reviewing human service contracting
1s to compare the goals o f the co n tra ctin g advocates w ith those o f the
federal le g is la tio n a ffe c tin g social services and CETA programs.

The

social services grants were designed to increase the number o f c lie n ts
and the kinds o f social services a va ila b le to the needy.

In BET, the

CETA t i t l e s were aimed at coordinating CETA services and promoting model
employment and tra in in g programs.

In both cases, c u ttin g costs or

improving e ffic ie n c y were not major aims.

Thus, the co n tra ctin g systems

and decisions were not made to maximize the o b je ctives o f most co n tra c t­
ing supporters by com petitive means.
Is i t u n fa ir then to measure the procedures and outcomes according
to the y a rd s tic k o f com petition and reduced cost?

Not at a l l , since some

would believe th a t s ig n ific a n t savings would re s u lt simply from using
outside s u p p lie rs , fo r whatever reasons.

And the CETA t i t l e s at le a s t

were orien te d toward funding b e tte r, more e ffe c tiv e services which might
be determined best through com petitive means.

Even in DSS, the concern

fo r cost has become a fa c to r in recent years w ith budget c o n stra in ts.
A.

Competition
In th is study the lack o f meaningful com petition in the services

"market" was found to be a c r it ic a l fa c to r which led to problems in
meeting some o f the other con dition s.

Because o f the small pool o f

w illin g , responsible, and responsive agencies, too o fte n o f f ic ia ls were
"forced" to give contracts to the only a va ila b le providers—even though
they did not always f i t in w ith the departments' p r io r it ie s o r, as under
T it le IV, they were expected to encounter a d m in istra tive and service

187

d i f f ic u lt ie s .

Lack o f com petition in the environment tra n sla te d in to

lack o f choice fo r DSS and DOL.
Several a d d itio n a l fa cto rs a ris in g out o f government p o lic ie s and
procedures have fu rth e r lim ite d com petition and choice.

F ir s t , the

necessity o f using outside agencies fo r service d e liv e ry can reduce the
range o f p o te n tia l a lte rn a tiv e s .

Because o f it s s tru c tu re , BET has had

no choice but to u t iliz e co n tra cto rs, despite the u n sa tisfa cto ry plans
and subsequent service performance by some.

I t cannot design and imple­

ment it s own programs, but must a ct in a more passive ro le , depending on
oth er agencies fo r proposals and program implementation.

T h e o re tic a lly

at le a s t (and in fa c t, in some co u n tie s), DSS has the p o s s ib ility o f u t i ­
liz in g the county agency when there are no acceptable a lte rn a tiv e s .
This option may also enhance the "voice" mechanism, since the p o te n tia l
com petition from in-house supply should compel contractors to meet the
needs and performance standards o f the government.
Second, DSS' donation requirement and BET's increasing match fo r
T it le IV has obviously reduced the f ie ld o f competitors and gives cer­
ta in contractors d is tin c t advantages over others.

For T it le I I , the

proportion o f proposals to awards has usu ally been about two to one--the
same as fo r the T it le IV contracts fo r the f i r s t f u l l year—but the
T it le I I contracts have seldom been advertised.
are common.

U n so licite d proposals

Apparently prospective contractors are not deterred from

these T it le I I contracts since a match 1s not required at any time.
A t h ir d fa c to r involved in r e s tr ic tin g com petition is the loca­
tio n a l p ro b le m --1 .e ., when co n tra ctin g is decentralized under conditions
o f already lim ite d com petition in the environment, the government u n it
usually has even fewer sup plie rs a va ila b le .

In DSS, th is fa c t made

188

com petition impossible in medium- and sm aller-sized counties fo r ser­
vices in which the agencies were not m obile.

In c o n tra s t, DOL hashad

some more choice o f agencies from throughout

the s ta te , even though it s

e ffo r ts were o fte n targeted a t the major central
groups concentrated

c itie s and c lie n t

in c e rta in areas.

Fourth, the s o lic it a tio n procedures used by DSS and BET fo r T it le
I I have not allowed f o r the widest exposure o f the departments' con­
tr a c ts .

Certain o th e r, s h o rt-c u t methods have been easier and less

c o s tly fo r government o f f ic ia ls than the major RFP s o lic it a tio n fo r
T it le IV and the scattered cases o f RFPs in so cia l services.

But since

fewer agencies are lik e ly to compete fo r contracts under these circum­
stances, the government has fewer p ro je c ts , services, and suppliers to
consider.

This fa c t alone may also encourage providers th a t are n o ti­

fie d to be less concerned about t h e ir proposals, methods o f service
d e liv e ry , service q u a lity , and program costs.
In many ways, however, th is narrow search and lack o f com petition
is m utually b e n e fic ia l f o r most o f the key c o n tra ctin g a cto rs.

One o f

the primary concerns o f almost a ll o f f ic ia ls interviewed was to deter­
mine awards and process contracts in a tim ely manner w ith a minimum o f
confusion and controversy.

The co n tra ctin g process can proceed q u ic k ly

and smoothly under the fo llo w in g co n d itio n s:

when the co n tra ctin g u n it

does not have to reach an agreement on service p r io r it ie s and proposal
c r it e r ia ; when an RFP and complete m ailin g l i s t o f suppliers is deemed
unnecessary; when u n s o lic ite d proposals are already on f i l e ; when mainly
renewals are considered and given c o n tra cts; and when a thorough consi­
deration o f a lte rn a tiv e proposals and agencies is not needed.

Usually

there e x is t more d isin ce n tive s than incentives to promote com petitive

189

procedures.

When the fa c t o f d e clin in g resources o f personnel, time,

and money is added to these d is in c e n tiv e s , is 1t any su rp rise th a t com­
p e titio n among responsible and responsive providers is the exception,
ra th e r than the rule?
For th e ir p a rt, re g u la r contractors do not welcome com petition
e ith e r, since they seek a s ta b le , p re d icta b le source o f funds.

W riting

good, com petitive proposals is c o s tly fo r agencies, p a r tic u la r ly when a
con tract is not awarded fo r the e f f o r t .

I t is q u ite possible th a t some

providers would not wish to submit proposals fo r programs when the s o li­
c ita tio n was thorough and the com petition would lik e ly be s t i f f .

The

only actors who might personally b e n e fit from com petition are the agen­
cies th a t otherwise would not have an oppo rtunity to compete, and the
c lie n ts who might receive b e tte r q u a lity services as a re s u lt.

Usually,

however, these two groups have not been at a ll a ctive and organized
p a rtic ip a n ts in co n tra ct decisionmaking.
On occasion, boards o r supervisors more removed from the day-today operations have encouraged wider s o lic ita tio n s to expand th e ir
choices.

For the T it le IV contracts th is was viewed as necessary because

o f h ig h e r-le ve l p o lic y d e cisio n s--th e increasing match requirement, the
l i m it on the amounts o f the co n tra cts, and the s p e c ific a tio n o f the
method o f service d e liv e ry and ta rg e t groups.

For these reasons and

because a large number o f youth contracts were to be awarded a t one
time ( o r ig in a lly 16), o f f ic ia ls believed i t would be easier and more
productive to use the com petitive RFP process.

I t 1s s ig n ific a n t that

the com petitive procedures did not guarantee th a t BET obtained the pro­
posals and performance th a t was desired, due to the lim ite d number o f

190

p o te n tia l providers and the BET p o lic ie s th a t in e ffe c t discouraged some
from competing.
B.

Decision Making in Contracting Out
One o f the in trig u in g questions in th is type o f research is :

Why

have o f f ic ia ls chosen to use co n tra ctin g out instead o f tra d itio n a l
bureaucratic methods o f supply?
has two major components:
concerns.

For the DSS and BET cases, the answer

1) pragmatic considerations and 2) p o lic y

I t was c le a r from the interview s th a t decisionmakers did not

consult c o s t-b e n e fit studies o r p u b lic choice handbooks to determine the
advantages o f using outside agencies.

Rather, federal p o lic ie s encour­

aged i t and s ta te s itu a tio n s often have made co n tra ctin g necessary.
In DSS, in the la te S ix tie s and e a rly Seventies, various p o litic a l
pressures were exerted to use outside suppliers to capture the large
sums o f a v a ila b le federal matching funds in order to provide more ser­
vices to the needy.

Not only had HEW approved the use o f p riv a te p ro v i­

ders, but i t had also allowed lo cal donors (u s u a lly the contractors
themselves) to c o n trib u te the re q u is ite sta te match.

As a re s u lt o f

th is and th e ir experience in a wide v a rie ty o f spe cia lize d services,
outside suppliers became very a ttr a c tiv e as service d e liv e re rs .

To some

exte nt o f f ic ia ls apparently also saw the funds as an o p po rtunity to
encourage e x is tin g community agencies to focus on the needs o f the poor.
In DOL, co n tra ctin g out was u tiliz e d in p a rt because the s ta te level department did not have the necessary e xp ertise o r agencies fo r
the required and optional programs under the two t i t l e s .

C le a rly, con­

tra c tin g w ith established agencies gave BET greater f l e x i b i l i t y than
organizing a new agency o r expanding MESC would have.

Probably ju s t as

191

im p o rta n tly , purchasing services meshed w ith BET's d e c e n tra liz a tio n
p o lic y — i . e . , th a t community agencies should be given contracts th a t in
time could be funded through local support.

In CETA, states were encour­

aged to use p u b lic and p riv a te agencies to promote greater coordina tion ,
in no vatio n, and experim entation.
In the la s t few years, as sta te resources have become in cre a sin g ly
lim ite d and social needs have grown, co n tra ctin g out has proved to be an
even more desirable a lte rn a tiv e .

The federal funds have been a va ila b le

fo r services, but the sta te has imposed p e rio d ic h irin g freezes, cutbacks
fo r sta te tra v e l, and, most re c e n tly , personnel cuts which a ffe c t only
1n-house service supply.

For the most p a rt then, the e a rly and more

recent advantages o f using outside providers have arisen from the accom­
panying p o lic ie s and pressures encouraging con tractin g out—and not from
the Inherent cost and service q u a lity advantages o f outside supply.
The award processes o f the two departments stand in cle a r contrast
to one another, in p a rt because o f d iffe re n t h is to ric a l and programmatic
commitments.
in fre q u e n t.

In DSS, thorough and o b je ctive needs assessments have been
Most attempts a t assessing curre nt needs have been perfunc­

to ry and he avily dependent upon provider inputs.

The in te re s ts and

needs o f the in a r tic u la te , unorganized consumers and taxpayers have s e l­
dom been represented.

Even when a v a ila b le , needs inform ation only

In fre q u e n tly has served as the major determinant in s e ttin g social ser­
vice p r io r it ie s and awarding contracts a t s ta te and county le v e ls .

Pre­

vious coimrftments to services and providers have o fte n not allowed
o f f ic ia ls the f l e x i b i l i t y to change t h e ir p r io r it ie s , services, and
contractors w ith o u t p o lit ic a l repercussions.

DSS' e a rly p o lic y o f

granting contracts to almost any a va ila b le co n tra cto r w illin g to make

192

the donation set a pattern th a t has been d i f f i c u l t to break, even when
cutbacks and changes have been necessary.

Consequently, renewing con­

tra c ts repeatedly has been the standard p ra c tic e a t the sta te le vel and
in most counties.

When making new co n tra cts, decision makers have usu­

a lly pre ferred the experienced, reputable agencies th a t o ffe r necessary
services fo r DSS c lie n ts .
On the other hand, BET's awards have usually been based on a com­
b in a tio n o f the needs assessments and the submitted proposals.

The

assessment system appeared to be very thorough and so p h istica te d , and
aimed at in clu d in g both the r e la tiv e needs o f various ta rg e t populations
and the e x is tin g service supply through CETA programs.

{Of course,

assessing employment needs is a more manageable task than assessing the
wide range o f social needs th a t OSS tr ie s to meet.)

These analyses,

drawn from a v a rie ty o f sources, have been re g u la rly u t iliz e d in BET
planning.

For both t i t l e s , the agencies' proposals fo r meeting the

recognized needs o f c e rta in ta rg e t groups have usually been the basis
fo r the bureaucrats' recommendations fo r awards.
are ge ne rally made up to the three-year li m it .

I f requested, renewals
With only a few excep­

tio n s , BET has been able to avoid being lo cke d -in to ce rta in co n tra cts,
se rvice s, and providers because o f t h e ir stated three-year lim ita tio n on
funding.
Common to programs in both departments, however, is the presence
o f p o lit ic a l pressures which have sometimes determined the awards and
robbed the system o f o b je c tiv ity and fa irn e ss.

In DSS, p o litic ia n s ,

department heads, and the boards o f social services have usually acted
to prevent DSS o f f ic ia ls from reducing o r ending a p a rtic u la r c o n tra ct;
w h ile in BET, le g is la to rs and appointed o f f ic ia ls have promoted c e rta in

193

p u b lic o r p riv a te agencies fo r new awards.

E ith e r way, these p o litic a l

influences fru s tra te bureaucrats and act as a p o te n tia l th re a t to th e ir
recommendations.
The presence o f p o lit ic a l pressures, the lack o f adequate needs
assessments in OSS, and the tendency to continue contracts th a t should be
reduced or elim inated a ll are ways in which DSS and BET co n tra ctin g does
not measure up to the id e a l, ra tio n a l decision-making process th a t seems
to be required by the p u b lic choice

p re s c rip tio n o f co n tra ctin g out.

In a d d itio n , the re la tiv e costs o f competing proposals ( i f there
are any in d ir e c t com petition) are seldom considered in granting awards.
Service q u a lity and expected effectiveness can be im portant, but only i f
there are s im ila r agencies in d ire c t com petition—an in fre q u e n t occur­
rence 1n most DSS counties and under CETA's T it le I I .

What usually is

considered is whether the agency can meet c e rta in c lie n ts ' needs in an
adequate manner.

This is in d ic a tiv e o f s a tis fic in g behavior, not maxi­

mizing fo r the best q u a lity , most e ffe c tiv e services a t the le a s t cost
le v e l.

In th is respect as w e ll, DSS and BET co n tra ctin g behavior does

not meet the co n d itio n a l requirements o f co n tra ctin g proponents.
C.

The Watchdog Role
One o f the weakest parts o f the co n tra ctin g process appears to be

the reviews o f expenditures, performance, and effectiveness fo r both DSS
and BET programs.

For the most p a rt, the departments have not had ade­

quate resources to m onitor con tractors and conduct p e rio d ic evaluations
o f t h e ir programs.

Because o f federal requirements, o f f ic ia ls have

independently monitored e l i g i b i l i t y , but have depended upon contractors
themselves to supply inform ation on oth e r m atters.

Consumers o f the

194

services have had in fre q u e n t o p p o rtu n itie s to express th e ir needs,
suggestions, and complaints.
Moreover, DSS' and BET's watchdog roles have been rendered almost
in e ffe c tiv e by oth er fa c to rs :

1) the Attorney General has ruled th a t

contractors cannot be held responsible fo r fa ilu r e to meet performance
g o a ls ; 2 )

inform ation th a t the departments have obtained about compliance

and performance does not always determine whether or not a renewal w ill
be made, in view o f p o lit ic a l and service considerations; and 3) fr e ­
quently there are no other sources o f supply th a t could meet the depart­
ments' and/or c lie n ts ' needs.

Consequently, few mechanisms operate to

ensure th a t contractors are producing the kinds o f services and re s u lts
th a t are desired by o f f ic ia ls and needed by c lie n ts .
II.

Evaluation o f the Three Perspectives
Beyond these immediate substantive conclusions, th is study has

broader th e o re tic a l im p lica tio n s because o f what i t suggests about con­
tra c tin g in general.

The strength o f the th e o re tic a l, comparative case

study approach is th a t i t illu m in a te s not only the p a rtic u la r patterns
o f c o n tra c tin g in DSS and BET, but i t also sheds lig h t on the a p p lic a b i­
l i t y o f the p u b lic choice perspective, the common features and problems
o f human service c o n tra c tin g , and some o f the conditions under which
co n tra ctin g may not meet c e rta in e ffic ie n c y goals.

Throughout th is d is ­

s e rta tio n , I have tr ie d to stress th a t some undesirable behaviors and
outcomes are lik e ly to m a te ria liz e when c e rta in conditions e x is t—
whether in Michigan, human se rvice s, o r co n tra ctin g ge ne rally.
The major d i f f ic u lt y w ith the co n tra ctin g p re s c rip tio n is th a t too
o fte n i t is given as a panacea fo r the cu rre n t i l l s o f government w ith
little

e x p lic it reco gn itio n o f the re q u is ite conditions and the

195

r e a litie s o f implementation.

At le a s t three general d e fic ie n c ie s have

been evident in the p u b lic choice perspective o f co n tra c tin g .
F ir s t, despite I t s major c o n trib u tio n s to our understanding o f
p u b lic bureaucracy, the p u b lic choice school in it s advocacy o f co n tra ct­
ing has overlooked the m otiva tion al and org an iza tion al contexts o f the
con tractin g p a rtic ip a n ts .

Certain p u b lic choice scholars have shown th a t

bureaucrats are motivated by s e lf- in te r e s t which re s u lts in empireb u ild in g , budget maxim ization, and in e ffic ie n c y .

U n fo rtun ately, they

have not applied th is understanding to the bureaucratic and p o litic a l
behaviors th a t determine the design, decisions, and, e ve n tu a lly, the
outcomes o f co n tra ctin g systems.

The obvious questions are:

bureaucratic behaviors change w ith contracting?

Why should

What incentives are

there to achieve e ffic ie n c y goals?
Second, up u n til now the importance o f the co n tra ctin g organiza­
tio n a l s tru c tu re , process, and procedures has been ignored in public
a d m in is tra tio n .

Too re a d ily have some co n tra ctin g advocates assumed

th a t quasi-market mechanisms w i ll almost a u to m a tica lly work wonders in
providing services, w ith ou t e xp lo ring how and why co n tra ctin g is actu­
a lly u t iliz e d , what procedures are c r it ic a l in producing the expected
b e n e fits , and under which co n stra in ts and inducements the various actors
operate.

By in te rvie w in g some s ix ty p a rtic ip a n ts and observers o f BET

and DSScontractlng, I have been able not only to ob tain t h e ir opinions,
but also to gain in s ig h ts in to the common patterns o f con tractin g pro­
cesses.
T h ird , co n tra ctin g proponents have fa ile d to recognize the c r i t i ­
cal ro le th a t the service environment can play in c o n tra c tin g , both in
terms o f the pool o f p o te n tia l providers and the inputs and feedback o f

196

service consumers.

Not enough a tte n tio n has been paid to the e ffe c t

th a t government programs, re g u la tio n s , and funds have had on crea ting
co n tra c to rs, encouraging government dependency, and g iv in g c r it ic a l
advantages to c e rta in pro vid ers.

In oth er words, those who prescribe

co n tra ctin g out have examined the subject in a fa r too narrow and sim­
p l i s t i c way.

Too q u ic k ly they have adapted inappropriate economic models

fo r suggested use in complex and varying circumstances.

The r e a litie s o f

government mean th a t th is a lte rn a tiv e to tra d itio n a l methods o f supply is
not an easy, c le a r-c u t s o lu tio n to governments' knotty problems.
These c ritic is m s o f the p u b lic choice perspective on co n tra ctin g
are not meant to attack or re fu te p u b lic choice theory i t s e l f , however.
I have not contradicted those who claim th a t government is too big and
th a t bureaucracy is too often a clumsy vehicle fo r d e liv e rin g services.
Rather, the universal a p p lic a tio n o f the co n tra ctin g p re s c rip tio n is
being challenged.

I have not questioned some o f the fundamental causal

real tionships th a t have been asserted by th is perspective—fo r example,
th a t com petition is the most e ffe c tiv e way o f c u ttin g costs and improv­
ing services.

Nor have I raised e ith e r the le g itim a te question concern­

ing whether government should tr y to maximize e ffic ie n c y in human
s e rvice s, o r the re la te d issue o f whether slowing government growth
through p r iv it iz a t io n is a desirable end in i t s e l f .

These m atters,

however im portant, are beyond the scope o f th is work, but may prove to
be f r u i t f u l areas o f in q u iry fo r others to address.
Now th a t the p u b lic choice perspective has been shown to be
severely d e fic ie n t in d e scrib in g , exp la in ing and p re d ic tin g con tractin g
behavior, what o f the two a lte rn a tiv e perspectives o f market imperfec­
tio n s and cooptation?

Which o f these two models is correct?

In Chapters

197

4 and 5, i t has been shown th a t both perspectives have something to con­
tr ib u te to our understanding o f c o n tra c tin g out.
perspective is completely accurate.

By themselves, n e ith e r

Together, they suggest how economic

and p o lit ic a l fa c to rs can reduce co m p e titio n , se t aside the ra tio n a l
decision-making process, and prevent an e ffe c tiv e watchdog ro le fo r
government.
The perspective o f market im perfections is p a r tic u la r ly re le va n t
and a p p lic a b le to these cases o f human service c o n tra c tin g .

I t r ig h t ly

emphasizes the problems and causes o f inadequate com petition in the
environment and in procedures, as w ell as the s ig n ific a n c e o f inadequate
in fo rm a tio n in making awards and conducting reviews.

Basic economic

forces did shape many o f the decisions and behaviors o f c o n tra ctin g par­
tic ip a n ts in both DSS and DOL.

C ontracting out in these human services

has been marked by few com petitors, in s u f f ic ie n t resources f o r government
o f f ic ia ls and c o n tra c to rs , a lack o f com petitive procedures in most
cases, and dependence upon s e lle r s ' in fo rm a tio n and preferences.

The

research did n o t, however, discover signs o f attempts a t c o llu s io n ,
p ric e s e ttin g , o r market c o n tro l, even though the human services system
discourages d ir e c t com petition.
In the face o f these c o n d itio n s , o f f ic ia ls used sho rtcuts and
s a tis fic in g s tra te g ie s to make c o n tra c tin g p o lic y , procedures, and award
decisions.

A key fa c to r in decision making was a preference f o r pro fes­

sio n a lis m , as evidenced in choosing con tractors because o f t h e ir profes­
sional re p u ta tio n s and f o r t h e ir a b i l i t y to compile professional
proposals th a t met the needs o f the department.

In tu rn , professional

behavior by con tractors u su a lly meant th a t the q u a lity o f t h e ir work and
services was judged to be good, despite the v ir t u a l absence o f

198

government review and oth er mechanisms to constrain th e ir behavior.
(Of course, i t is somewhat questionable as to how Independently o f f i ­
c ia ls a rriv e d at these judgments.

The fa c t th a t these reputable agencies

are run by competent professionals w ith the c o rre c t education and a f f i l i ­
ations could mean th a t o f f ic ia ls concluded th a t the refore they must be
providing good q u a lity s e rv ic e s .)

Sometimes, however, i t can be sup­

posed th a t the common professional goals, methods, and biases served

as

a s u b s titu te fo r assessing the actual needs o f c lie n ts and the actual
outcomes o f outside s u p p lie rs ' services.
The cooptation perspective has predicted some o f the p o lit ic a l
influences th a t also a ffe c t co n tra ctin g decisionmaking.

Since they have

intense m aterial in te re s ts a t stake, providers have become more involved
than c lie n ts and taxpayers in the planning and co n tra ctin g process.

Not

only have th e ir views shaped decisions about service needs, but they
also have been successful in g e ttin g p o litic ia n s and appointed o f f ic ia ls
to operate on t h e ir behalf when a co n tra ct is a v a ila b le or a renewal is
threatened.

Therefore, not a ll contractors are treated a lik e .

Some,

such as the p u b lic agencies in BET, are given special advantages over
others, whether through th e ir p o lit ic a l tie s , federal re g u la tio n s , or
burea ucra tic-pro fe ssion al re la tio n s h ip s .

Although the ro le o f providers

has not taken the extreme and h ig h ly organized forms suggested by coopta t lo n is t s , y e t th is perspective heightens our awareness o f the possible
problems th a t can a ris e out o f co n tra ctin g out.
Where and when should co n tra ctin g be considered a via b le a lte rn a ­
tiv e to in-house supply?

I t appears th a t a v a rie ty o f s itu a tio n s o ffe r

some p o te n tia l fo r implementing con tractin g out:

where demonstration,

experimental programs, se rvice s, o r methods can be tr ie d w ith no

199

long-term conmitment to continuing the programs; when there is a genu­
in e , common need and desire to cut costs and s t i l l m aintain good q u a lity
services; where government does not have the re q u is ite experience,
equipment, o r e xp ertise to provide the se rvice s; when government needs
c e rta in services occasionally o r seasonally; where economies o f scale
can be re a liz e d ; where government o f f ic ia ls can set p r io r it ie s , service
le v e ls * and outcome goals, w ith the op p o rtu n ity to reward and punish i f
these are not met by co n tra cto rs; where there is adequate com petition in
the environment to ensure government choice; where com petitive proce­
dures can be adopted and enforced; where p o litic a lly -m o tiv a te d awards can
be minimized; where government agencies have the resources and desire to
implement e ffe c tiv e review methods.

Obviously, a ll these conditions are

not required to be present a t the same time fo r c o n tra ctin g to meet the
p u b lic choice goals o f c o n tra ctin g .

In some cases seemingly necessary

conditions o f co n tra ctin g can be absent i f oth e r conditions are used to
compensate fo r the void.
In s e ttin g up these s u ita b le conditions fo r c o n tra c tin g , I have
assumed the goals o f the co n tra ctin g advocates--least cost f o r the best
q u a lity services and a slowdown in government growth are the major aims
o f these conditions.

D iffe re n t observers o f co n tra ctin g may not agree

th a t these goals should be o f primary importance throughout government
services and programs.

Yet oth e r goals th a t government may wish to

maximize may also be met through c o n tra c tin g , perhaps w ith d iffe r e n t
con dition s.
This e f f o r t to id e n tify the necessary conditions f o r successful
c o n tra ctin g has only begun w ith th is lim ite d and flawed study.

Many

other services, le v e ls , and org an iza tion al environments should be

200

examined to v e r ify these e a rly conclusions and add to th is attem pt a t
studying the conditions o f c o n tra c tin g .

In a d d itio n , th is study has not

been able to examine adequately the various cost and se rvice outcomes o f
c o n tra c tin g w ith in DSS and DOL programs.

Measuring costs and b e n e fits

o f any programs is always d i f f i c u l t , but in c o n tra c tin g , the task can be
almost Impossible f o r c e rta in se rvice s.

Just the same, such attempts

could illu m in a te even more the re la tio n s h ip s between the con dition s and
the outcomes, which have only been estim ated in th is work.
For the most p a rt throughout th is study I have seen co n tra ctin g
through the eyes o f the government and, in d ir e c t ly , the consum er/citizens
government is supposed to represent.

There is , however, a growing

lite r a t u r e on the views o f the con tractors the m selve s--esp ecia lly the
n o n -p ro fit so cia l agencies.

This is an in te re s tin g and im portant area

o f study, f o r i t can help to understand how government c o n tra c tin g
impacts these agencies.

In th is way, scholars could begin to evaluate

the s ig n ific a n c e o f some o f the disadvantages th a t some have seen w ith
c o n tra c tin g , as given in the f i r s t chapter.
Honest and thorough attempts a t examining these d iff e r in g aspects
o f c o n tra c tin g can go fa r to increase our knowledge o f human behavior,
o rg a n iza tio n s, and the in te rfa c e between p u b lic and p riv a te secto rs.
Adding to our present Im perfect in fo rm a tio n can on ly help scholars and
p ra c titio n e rs to b e tte r understand the com plexities o f implementing
government programs and management devices.

Only by studying c o n tra c t­

ing can we le arn how to a lt e r con dition s to achieve it s p o s itiv e bene­
fits .

APPENDICES

APPENDIX A

APPENDIX A
SERVICE CONTRACT INTERVIEW SCHEDULE

In th is in te rv ie w , I am in te reste d 1n le arn ing more about service con­
tra c tin g 1n the s ta te o f Michigan 1n general, and 1n your area o f con­
tr a c tin g , in p a rtic u la r. Not only do I want to know more fa ctu a l
Inform ation about the process, but I would also lik e to hear your p o in t
o f view and opinions about your work. Therefore, many questions w ill
not have a s t r i c t l y r ig h t or wrong answer, since people see things d i f ­
fe re n tly . I assure you th a t the responses you give w i ll be kept c o n fi­
d e n tia l. Your answers to a ll questions w ill be used fo r s t a t is t ic a l
purposes only and w i ll not be examined on an In d ivid u a l basis, w ith
your name or p o s itio n id e n tifie d . In the in te re s t o f tim e, please try
to keep your answers sh o rt and to the p o in t.
A.

Background Questions
1.

To be completed by in te rv ie w e r:
a.

For bureaucrats—department o f employment:

1. Labor
2. Management and Budget
3. Social Services— state
4. Social Services—county
5. Transportation
Contractual program a f f ili t a t e d w ith :
2.

Job o f Respondent:
1.
2.
3.
4.
5.
6.
7.
8.

co n tra ct s p e c ia lis t
co n tra ct supervisor
program s p e c ia lis t
program supervisor
section c h ie f
program evaluator
co n tra cto r
other (s p e c ify )

a. What are the major tasks th a t you are responsible fo r in
your p o s itio n , as i t re la te s to co n tra ctin g fo r services?

201

202

b.

Who 1s your immediate supervisor?

c.

Number o f years in th is un it?

Personal background in fo rm atio n:
a.

Age o f respondent
1.
2.
3.
4.
5.

b.

21-30
31-40
41-50
51-60
61-70

Highest le ve l o f education completed:
1.
2.
3.
4.
5.
6.
7.

high school
some college
4-year college degree
Master's degree
some graduate school
Ph.D.
some other graduate degree (s p e c ify )

Major area o f study in college or graduate school:
1.
2.
3.
4.
5.
6.
7.

p u b lic a d m in istra tio n
social work
law
business
social sciences
humanities
other (sp e cify)

From which o f the fo llo w in g outside sources do you (o r your
u n it) purchase services by c o n tra c t: (may check more than one)
1. p riv a te , n o n -p ro fit agencies
2. p riv a te , p ro p rie ta ry (p ro fit-m a k in g )
panies
3. p u b lic agencies

agencies o r com­

What are the names o f some o f your la rg e s t c o n tra cto rs:

203

I f more than one type o f source is contracted w ith , are there
(JTfferences among them, a t le a s t as you work w ith them in your
jo b , because o f the type o f agency?
1.
• • ' i 2.
3.
4.

no diffe ren ces a t a ll
very few diffe ren ces
several d iffe re n ce s
many diffe ren ces

u I f some diffe ren ces e x is t, what are the major d iffe re n ce s you
have found?

B.

D e scrip tive Process Questions
5.

Which o f the fo llo w in g agencies or departments must approve a ll
contracts from your un it?
1.
2.
3.
4.
5.
6.
7.

Department o f Management and Budget
Attorney General's O ffic e
C1v1l Service Department
C iv il Rights Department
House and Senate Fiscal Agencies or A ppropriations
Commlttees
none o f the above
some oth e r agency/department (s p e c ify )

Which o f the fo llo w in g agencies or departments must approve some
o f the contracts from your un it?
1.
2.
3.
4.
5.
6.
7.
6.

Department o f Management and Budget
Attorney General's O ffic e
C iv il Service Department
C iv il Rights Department
House and Senate Fiscal Agencies or A ppropriations
Commlttees
none o f the above
some other agency/department (s p e c ify )

In your area, where do the guidelines and reg ulatio ns concerning
various parts o f the c o n tra ctin g process come from? Use the
fo llo w in g 11st where appropriate. (You may need to s e le c t more
than one source fo r some answers.)
1-State s ta tu te
2-State C o n s titu tio n
3-Federal laws or regulations
4-Department p o lic y
5-Program heads
6-C ontract or program s p e c ia lis ts
7-Some oth er source (s p e c ify )

204

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

whether a service w i ll be purchased by co n tra ct o r pro­
vided by department employees
co n tra ct a u th o rity
s o lic it a tio n procedures
bidding or n e g o tia tio n procedures
c r it e r ia fo r awarding contracts
se le ctio n o f 1nd1v1dual(s) who choose contractors
co n tra ct form
co n tra ct content
sub-contracting procedures
reasons fo r c o n tra ct term ination or revocation
types and nature o f review methods to be used during
co n tra ct l i f e
procedures fo r hearing protests and complaints from
contractors and would-be contractors

Which o f these twelve areas o f guidelines and regulations can be
most Influenced by you? ( e .g ., to change them)
7.

Approximately how many contracts have you personally worked on
1n the la s t calendar year (1979)?

8.

Approximately how many contracts were drawn up or processed in
the la s t calendar year in the program area o f _______________ ?

9.

How are p o te n tia l con tractors informed o f a p a rtic u la r p ro je c t
o r program th a t your department w ill purchase from a p riv a te
source? (may check more than one)
1.
2.
3.
i------- r4.
r
15.

newspapers
trade o f professional new sletter o r magazines
posted notices in s ta te o ffic e s
le t t e r
other means (s p e c ify )

_10. I f only some contractors are n o tifie d :
a.

How is i t decided which contractors w i ll be n o tifie d ?

b.

How many contractors are usually n o tifie d in your area?

11. Are s p e c ific s o lic it a tio n instruments required to purchase con­
tracted services in your area o f work?
ll.
2.
3.
a.

yes
no
sometimes

I f yes, which o f the fo llo w in g is (are) necessary?
check more than one)

(may

205

1.
2.
3.
4.
b.
^

I f sometimes, under what circumstances are they required?
I f a s o lic it a t io n instrum ent is sometimes necessary, which
o f the fo llo w in g 1s used?
1.
2.
3.
4.

— k:.

Request fo r Proposal (RFP)
Request fo r Quote (RFQ)
L e tte r o f in te n t
oth er s o lic it a t io n instrum ent (s p e c ify )

Request fo r Proposal (RFP)
Request f o r Quote (RFQ)
L e tte r o f in te n t
oth e r s o lic it a t io n instrum ent (s p e c ify )

I f a s o lic it a t io n instrum ent is used, who w rite s i t up?
Tplease name, where possible)
1.
2.
3.
4.
5.

co n tra c t s p e c ia lis t(s )
c o n tra c t supervisor
program s p e c ia lis t( s )
program supervisor
some oth e r person(s) (s p e c ify )

12. When s o lic it in g bids o r programs from outside sources, does your
o f f ic e e x p lic it ly s ta te th a t c e rta in requirements must be met by
the con tractor?
1.
2.
3.

yes
no
sometimes

I f yes, what kinds o f requirements are e x p lic it ly stated?
1.
2.
3.
4.
5.
6.
7.
8.
— ►b.

cost
equal o p p o rtu n ity employment
a ffirm a tiv e a ctio n program
length o f the c o n tra c t (tim e period)
s p e c ific a tio n s about q u a lity o r se rvice provided
s p e c ific a tio n s about number o f c l le n ts /re c ip ie n ts to be
served
o th e r performance s p e c ific a tio n s
oth er kinds o f requirements (s p e c ify )

I f sometimes, under what circumstances are requirements
stated?
* I f requirements are sometimes s ta te d , what kinds are they?
(see l i s t above in 12.a. #1-8)

206

13. When bids or proposals are in v ite d , are the c r it e r ia by which
proposals w ill be evaluated included in the package or notice?

C

1.
2.
3.

yes
no
sometimes

I f sometimes, under what circumstances are they included?

14. When a bid or proposal fo r a program 1s s o lld a te d , as contrac­
to r review methods and c r it e r ia included in the notice?
1.
2.

d

yes
no
sometimes

I f sometimes, under what circumstances are they included?

15. Is a budget included w ith the c o n tra c to r's proposal?
1.
2.
3.
4.

always
usually
sometimes
never

I f u su a lly or sometimes, under what circumstances would a budget
be submitted:
16. Must the c o n tra c to r's proposal, in clu d in g work plan and bid
prices o r proposal amounts, meet a ll requirements contained in
the o rig in a l s o lic it a tio n notice in V rd e r to be considered fo r
a contract?
1.
2.
3.

yes
no
sometimes

I f no o r sometimes, which requirements are u su a lly more f l e x i ­
b le , and why?
17. Who evaluates co n tra cto r proposals 1n your program are?
check more than one)
1.
2.
3.
4.

(may

department c o n tra c t a d m in istra to r (ce n tra l o ffic e )
co n tra ct o f f ic e r in program d iv is io n , se c tio n , or u n it
( c ir c le one)
a panel o f evaluators 1n program d iv is io n , se ctio n , or
u n it
some other group o r in d iv id u a l (sp e c ify )

207

I I f a panel is used, what are t h e ir usual p o s itio n s in the
department?
18. Do these In d iv id u a ls know which co n tra cto rs have subm itted which
proposals?
1. always
2. sometimes
3. never
19. In your area o f service c o n tra c tin g , how fre q u e n tly does your
u n it receive u n s o lic ite d proposals fo r programs o r pro je cts?
1.
2.
3.
4.

o fte n
sometimes
never
d o n 't know

20. As a re s u lt o f an u n s o lic ite d proposal, how fre q u e n tly does the
proposing source receive a c o n tra c t fo r the se rvice they wish
to perform?
1.
2.
3.
4.
5.

always
o fte n
sometimes
never
d o n 't know

21. In your program area, how fre q u e n tly are con tracts negotiated
between co n tra ctin g o f f ic ia ls and c o n tra c to rs , Instead o f
through the com p etitive bidding process?
1.
2.
3.
4.

always
u su a lly
sometimes
never

Why are they negotiated?
negotiable?

Which parts o f the c o n tra c t are most

22. What types o f con tracts are u su a lly awarded in your area, a t
le a s t where cost is concerned:
1.
2.
3.
4.

fix e d p rice c o n tra c t, 1n which some adjustment fo r
Increased costs may be provided fo r
fix e d -------------------------------p ric e c o n tra c t, where no adjustments are
r n _ firm
3
cost reimbursement c o n tra c t. In which c o n tra c to r Is reimbursed f o r on ly approved costs
cost reimbursement plus in c e n tiv e c o n tra c t, in which
c o n tra c to r receives a bonus i f under ta rg e t cost

208

5.
6.

cost plus a fix e d fee c o n tra c t, in which co n tra cto r
receives T osts plus a predetermined, fix e d fee
some oth e r kind o f co n tra ct (sp e c ify )

Does the co n tra cto r receive an advance fo r p a rt o f the
con tract price?
11.
_ 2.
3.
b.

yes
no
sometimes

I f yes o r sometimes, what is the usual amount?

23. I f more than one type o f co n tra ct isused, what is the second
most fre q u e n tly used type? (use l i s t above 1n 20. #1-6)
7.

no other type o f co n tra ct is used

24. In the purchased services you work w ith , who draws up the con­
tra c t?
1.
2.
3.
4.
5.

the Department o f Management and Budget
the department's cen tral co n tra ct o ffic e
the legal d iv is io n in th is department
someone in the program
area (name)
some other o ffic e o r person (s p e c ify )

25. Is com petitive bidding always, sometimes, o r never required in
your program area?
i

| 1.
2.
' 3.

^ a.

always
sometimes
never

I f sometimes, when is com petitive bidding required?

'—*■ b.I f com petitive bidding
Is used, is there a sp e c ifie d p o lic y
th a t requires award o f a co n tra ct to the lowest bidder,
provided minimum s p e c ific a tio n s are met?
1.
2.
26.

yes
no

In the contracted p ro je cts o r programs you are acquainted w ith
in your d iv is io n , how many d iffe r e n t co n tra c to rs ' bids o r pro­
posals are usu ally considered before an award i t made?

209

27. In your program area, is a w ritte n proposal o r an o ra l presen­
ta tio n required before the decision is made on who w i l l receive
a con tract? (may check more than one)
1. w ritte n proposal
2. ora l presentation
3. n e ith e r is re q u ire d , but one o f the two is sometimes
done
4. n e ith e r is re q u ire d , so n e ith e r are done
28. On what basis is i t decided th a t a c e rta in firm o r agency w i ll
receive a c o n tra c t 1n your program area? (choose 1st and 2nd
reasons)
1.
2.
3.
4.
5.
6.
7.
29.

lowest cost
previous s a tis fa c to ry work in s ta te p ro je c ts or s e r­
vices
adequate s t a f f and equipment to do the job
previous experience 1n th is general type o f service
plan to f u l f i l l a l l c r it e r i a provided in s o lic it a t io n
package.
well-reasoned arguments why program elements w i l l ac­
complish the desired g o als, as given 1n the proposal
some oth e r reason (s p e c ify )

When considering various bids o r proposals fo r a c o n tra c t, how
Im portant 1s i t th a t the c o n tra c to r be o f a ra c ia l m in o rity
group?
1.
2.
3.
4.
5.

very im portant
somewhat im portant
sometimes can be Im portant
not very im portant
not a t a ll im portant

Does your u n it keep track o f how many m in o rity co n tra cto rs are
awarded contracts?
1.
2.
30.

yes
no

Are sole source con tra cts used in your program area?

r - T Z Z I 1* yes
2. no
J
13. sometimes
* a*

+

b.

I f yes, why is 1t used?
use?

Are there any r e s tr ic tio n s on Its

I f sometimes, under what circumstances is i t used?

210

31.

In the contracts you work w ith , which o f the fo llo w in g
Items are always, sometimes, o r never Included 1n the
contracts?
1.
2.
3.
4.
5.

32.

lim ita tio n s on employee wage/salary increases
lim ita tio n s on co n tra cto r a d m in istra tive costs
minimum wages fo r employees
lim ita tio n s on employees' overtime and compensatory time
maximum wage/salary rates fo r major po sitio ns

«

C

'—

1
1
1
1

0

</>

4)

2
2
2
2

3
3
3
3

1 2

3

yes
no
sometimes

I f there are, what are they?

How are they determined?

In your area, do the contracts usually sta te the payments to
con tractors w i ll be in sp e cifie d lump-sum amounts, according to
p e r-u n it ra te s, o r to reimburse approved costs?
1.
2.
3.
4.
5.

34.

t.
>

In the cases o f f o r - p r o f it firm s , are there standard fee scales
o r lim ita tio n s on p r o f it margins?
1.
2.
3.

33.

>, £
S I

lump-sum amounts
p e r-u n it rates
reimburse approved costs
reimburse approved costs plus a s p e cifie d fee
some other form (sp e cify)

Do any o f the contractors awarded contracts in your area in
turn sub-contract fo r some or a ll o f the services?

rJ— I1yes
2. no
+ a.

I f yes, what types o f agencies o r firm s sub-contract?
choose more than one, but rank in terms o f frequency)
1.
2.
3.

b.

p riv a te , n o n -p ro fit agencies
p riv a te , p ro p rie ta ry ( fo r - p r o f1 t) firm s
pu blic agencies

What types o f firm s receive sub-contracts?
1.
2.
3.

p riv a te , n o n -p ro fit agencies
p riv a te , p ro p rie ta ry firm s
pu blic agencies

(may

211

^ c.

What ro le does your u n it have in sub-contracting?
check more than one)
1.
2.
3.
4.
5.
6.
7.
8.

35.

2.

yes

no

a-

I f yes, why were they revoked o r terminated?

b.

How many con tracts have been revoked or term inated w h ile
you have worked here?

c.

Approximately what percentage o f the to ta l number o f con­
tra c ts awarded in th is area is tha t?

Have any firm s o r agencies been suspended or debarred from
fu rth e r c o n tra ctin g w ith the state/county?
1.
2.

39.

orovldes gu id eline s fo r co n tra cto rs to fo llo w
sets s t r i c t rules governing sub -con tra cting
helps to s e le c t sub-contractors
examines contracts
reviews budgets fo r sub-contractors
checks to ensure th a t sub-contractors are in compliance
w ith EOE standards
no ro le a t a ll
some oth er ro le (s p e c ify )

During the time you have worked in th is u n it, have any con­
tra c ts been revoked o r term inated before the s p e c ifie d end o f
the contract?

H ~ ]l-

38.

(may

yes
no

a.

I f yes, how n.?ny?

b.

I f yes, why?

How fre q u e n tly are con tracts renewed from one year to the
next? ( I f p o ssib le , give the percentage o f a ll c o n tra c ts .)
1.
2.
3.
4.
5.

always
u su a lly
o fte n
sometimes
never

Why would a c o n tra c t not be awarded to a previous co n tractor?

212

40.

Is there a formal process fo r hearing co n tra cto r complaints in
your co n tra ct area?
rJ—

yes
no

+ a.

I f yes, where can a co n tra cto r go i f he/she has a complaint
about the ward o f a contract?

> b.

I f a co n tra cto r has a compliant aboutreg ulatio ns
ments fo r services, to whom canhe/she go?

+ c.

What a u th o rity does the o f f ic ia l have to changedecisions
about co n tra cts, re g u la tio n s , or payments?

d.

41.

11.
2.

or pay­

Approximately how many complaints have been reg istere d
concerning contracts in your area during the time you
have worked here?

What kinds o f review procedures are used in your program area
fo r contracted services? (may check more than one)

—
r . ''

1. p re -a u d it
2. continuous m onitoring o f expenditures
3. progress reports on performance or work accomplished
4.o n -s ite f ie ld m onitoring o f programs or
p ro je cts
5. in-depth evaluations
6. p o s t-a u d it o f expenditures
7. p o st-a u d it/re vie w o f performance
8. some oth er review procedure (s p e c ify )

a.

Which o f these review methods are required o f a ll con­
tra cts?

b.

Are any o f them used fo r sub-contracted services?

c.

If

an in-depth evaluation is done, who does it ?

1.
2.
3.
4.
5.
6.
7.
8.

the county department's evaluation u n it
the sta te department evaluation u n it
another county agency o r department
another s ta te agency o r department
an Independent evaluator
county evaluators in the u n it th a t grants contracts
s ta te evaluators in the u n it th a t grants contracts
some other source (s p e c ify )

d.

Why would an in-depth evaluation be done?

213

e.

I f a p o st-a u d it is done, who does it?
1.
2.
3.
4.
5.
6.

-*■ f .
g.
42.

another s ta te agency o r department
a sta te departmental u n it
a county departmental u n it
another county agency o r department
an independent accounting firm
some other a u d it source (sp e cify)

Why would a p o s t-a u d it be done?
What do you be lieve are the major problems in m onitoring
and evaluating co n tra cto r performance?

In your department, are there any advisory boards, commissions,
o r councils th a t have a ro le in the contracted services you
work w ith?
r4

1.
2.
?.

yes
no

What are th e ir names?

+ b.

Who are on these bodies?

> c.

How are they appointed?

+ d.

Why was th is advisory body formed?

^ e.

What is th e ir ro le

43.

in the contracted programs and projects?

What are the major groups o r associations th a t are a c tiv e in
your area o f contracting? (sp e cify w ith names)

44.

a.

Who do they represent?

b.

How many members is that?

c.

What is th e ir ro le in the co n tra ctin g process?

Are there any c lie n t, re c ip ie n t, or consumer groups th a t con­
ta c t you or others in your section about contracted programs
o r projects?
r4

1.
2.

+ a.

Please sp e cify w ith names o f organizations.

b.
^ c.

yes
no

Who do they represent?
What is the size o f th e ir membership?

214

45.

How are your contracts funded?
1.
2.
3.
4.
5.
6.

(may check more than one)

through federal grants
through donated funds from p riv a te sources
through donated funds from p u b lic sources
through the general d iv is io n 's appropriation from the
sta te le g is la tu re
through a s p e c ific ap pro priatio n from the le g is la tu re
fo r the contracted services alone
some other source (sp e c ify )

a. I f

through federal g ra n ts, sp e cify program and t i t l e .

b. I f

through p riv a te donated funds, spe cify the donors.

c. I f

through public donated funds, sp e cify the donors.

d.

Approximately how much money w i ll be SDent th is FY fo r
contracted services in your section o f ________________ ?
About what percent is th a t o f the s e c tio n 's e n tire budget
fo r FY80?

46.

Do you have the names o f organizations o r firm s th a t have
tr ie s to receive contracts in your area but have been unsuc­
cessful?
at
u
c
at
3

01
V

c
3

<o
-u

C.

Opinion Questions
In general, how much say or influence do
you th in k the people or agencies lis te d
below have over whether a co n tra ct is
made fo r a service w ith an outside
agency?
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

C iv il Service—contracts d iv is io n
The Attorney General's O ffic e
The C iv il Rights Departments
Department o f Management & Budget
Your department d ire c to r
Department deputy d ire c to r(s )
Bureau c h ie f
D ivisio n c h ie f
Section c h ie f
Program s p e c ia lis ts (s ta te )

<4-

c

•r0)
o

c

47.

at
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c
at C c
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at
3
c
0) <4- r— 43 O 4- o

0)

0)
3

C
e

•r-

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z

1
1
1
1
1
1
1
1
1
1

cr

4->

c
3

<4-

§

o

at

at

+J
ro
u
V

ss
f- T3
0)
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£

2
2
2
2
2
2
2
2
2
2

-f—

3
3
3
3
3
3
3
3
3
3

■a
■M
<a
at
s_
e:

4
4
4
4
4
4
4
4
4
4

<a

at

■o

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ia

at

t04
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at

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5
5
5
5
5
5
5
5
5
5

215

at

at
o

o
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11.
12.
13.
14.
15.
16.
48.

>

1

2

1

2

1

2

1

2

1

2

1

2

o
c
3
o
e
«

OJ
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at

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3
3
3
3
3
3

«9
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f_
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0)

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4
4
4
4
4
4

5
5
5
5
5
5

In general, how much say or in fluence do youth in k the people
or agencies lis te d below have over whoreceives a contract?
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.

49.

Contract s p e c ia lis ts (s ta te )
P rivate agencies
State le g is la tu re
County conmlssions
County co n tra ct supervisor
Y ourself

>>
1-

0)

<4C

c

C iv il Serv1ce--contracts d iv is io n
The Attorney General's O ffic e
The C iv il Rights Department
Department o f Management and Budget
Your department d ire c to r
Department deputy d ire c to r(s )
Bureau c h ie f
D ivisio n c h ie f
Section c h ie f
Program s p e c ia lis ts (s ta te )
Contract s p e c ia lis ts (s ta te )
P rivate organizations
State le g is la to rs
County commissioners
County co n tra ct supervisor
Yourself

1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2

3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3

4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4

In your area o f work, what have been the major problems w ith
co n tra ctin g w ith outside agencies o r firm s fo r services?

5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5

216

50.

In the contracts and services you work w ith , do you th in k con­
tra c tin g w ith p riv a te agencies o r firm s costs less than, about
the same as, o r more than, government d e liv e ry o f those
services would?
1.
2.
3.

less than government d e liv e ry
about the same as government d e liv e ry
more than government d e liv e ry

Why do you say that?
51.

For the con tracts and services you work w ith , do you th in k
c o n tra c tin g w ith p riv a te agencies o r firm s re s u lts in poorer
s e rv ic e , about the same q u a lity o f s e rv ic e , o r b e tte r service
fo r re c ip ie n ts than government service d e liv e ry would?
1.
2.
3.

poorer service
about the same q u a lity
b e tte r service

Why do you say that?
52.

In g e ne ral, fo r a wide v a rie ty o f s ta te s e rv ic e s , do you th in k
c o n tra c tin g w ith p riv a te agencies o r firm s re s u lts in poorer
s e rv ic e , about the same q u a lity o f s e rv ic e , o r b e tte r service
fo r re c ip ie n ts than government service d e liv e ry would?
1.
2.
3.
4.

53.

In ge ne ral, fo r a wide v a rie ty o f s ta te s e rv ic e , do you th in k
c o n tra c tin g w ith p riv a te agencies o r firm s costs less than,
about the same as, o r more than government d e liv e ry o f those
services?
1.
2.
3.
4.

54.

poorer service
about the same q u a lity o f service
b e tte r service
don’ t have any idea

less than government d e liv e ry
about the same as government d e liv e ry
more than government d e liv e ry
d o n 't have any idea

Rank the fo llo w in g in order o f importance (from 1 to 7 w ith 1
being the most im portant) as to why o u tsid e agencies/firm s are
used to supply p u b lic services in your program area instead
o f s ta te (o r county) p u b lic employees.

217

1.
2.
3.
4.
5.
6.
7.
8.

lower cost
b e tte r services
greater f l e x i b i l i t y in h irin g and f ir in g
b e tte r oversight over cost and performance
mandated by federal o r s ta te laws o r regulations
a way o f strengthening p riv a te agencies o r firm s
p o litic a l pork b a rre lin g
some other reason(s)

lA
55.

Use the fo llo w in g terms to describe your own
re la tio n s h ip s w ith contractors in your work:
1.
2.
3.
4.
5.

56.

close and personal
warm and fr ie n d ly
s t r i c t l y businesslike
cool and d is ta n t
h o s tile and a n ta g o n istic

<o
s

<
1
1
1
1
1

a

*•£
<
v
■M
*»
- so
o (/i
C

2
2
2
2
2

3=

3 4
3 4
3 4
3 4
3 4

Do you b e lie f th a t using p riv a te contractors to produce and
d e liv e r p u b lic services is somehow more democratic o r less
democratic than using pu blic employees:
1. more democratic
2. less democratic
3. doesn't have anything to do w ith democratic ideals

_
> Why?
57.

In your area, do you believe th a t the m onitoring and evalua­
tio n o f contractors is :
1.
2.
3.
4.
5.
6.

t.
O
>)
0)

too s t r i c t , w ith too much unnecessary and burdensome
paperwork involved
not adequate to overseeexpenditures
not adequate to evaluate performance
not s t r i c t enough to oversee expenditures o r to
evaluate performance adequately
ju s t about r ig h t
some other response?

218

58.

In your experience in c o n tra c tin g , how do you evaluate the
ro le o f most p o litic ia n s ( e .g ., s ta te le g is la to r s , county com­
m issioners, c it y councilmen) in the c o n tra c tin g process?
1.
2.
3.
4.
5.
6.

59.

How fre q u e n tly do you see y o u rs e lf a ctin g as an advocate fo r
se rvice providers in your work? ( e .g ., as w ith other s ta te
o f f ic ia ls )
1.
2.
3.
4.

60.

g e n e ra lly q u ite h e lp fu l
not involved enough in c o n tra c tin g
too in te r fe r in g in decision making
hardly involved in c o n tra c tin g a t a l l , but th a t's the
way I p re fe r i t
only involved in con tracts th a t t h e ir co n s titu e n ts
want, but otherw ise ha rdly involved a t a ll
some oth er response(s)

always
ofte n
sometimes
never

In your area o f c o n tra c tin g , i f two u n its disagree over proce­
dures, awards, e t c . , how are these c o n flic ts resolved?
In what matters are disagreements more lik e ly between u n its or
between various in d iv id u a ls involved in co n tra ctin g ?

61.

What are the major problems you see in the re la tio n s h ip
between the s ta te department and the county?

62.

What are the major problems or tensions in your own jo b , at
le a s t as i t re la te s to c o n tra c tin g fo r services?

APPENDIX B

APPENDIX B
SERVICE CONTRACT INTERVIEW SCHEDULE
SHORT FORM

In th is in te rv ie w , I am in te re ste d in learning more about service con­
tra c tin g in the s ta te o f Michigan in general, and in your area o f
c o n tra c tin g , in p a rtic u la r. Not only do I want to know factua l in fo r ­
mation about the process, but I would most o f a ll lik e to hear your
p o in t o f view and opinions about your work in co n tra c tin g . Therefore,
many questions do not have a s t r i c t l y r ig h t o r wrong answer, since
people see things d iffe r e n tly . I assure you th a t the responses you
give w i ll be kept c o n fid e n tia l. Your answers to a ll questions w ill be
used fo r s t a t is t ic a l purposes and w ill not be reported on an in d ivid u a l
basis, w ith your name or p o s itio n id e n tifie d . In the in te re s t o f time,
please tr y to keep your answers sho rt and to the p o in t.
A.

Background Questions
1.

For p u b lic employees--department o f employment:
1.
2.
3.
4.
5.

Labor
Management and Budget
Social Services—state
Social Services—county
Transportation

Contractual program a f f ilia t e d w ith :
2.

Job o f respondent:
1.
2.
3.
4.
5.
6.
7.
8.
a.

co n tra ct s p e c ia lis t
con tract supervisor
program s p e c ia lis t
program supervisor
county co n tra ct coordinator
program evaluator
con tractor
other (sp e cify)

What are the major tasks th a t you are responsible fo r in
your p o s itio n , as i t relates to co n tra ctin g fo r services?
219

220

3.

b.

Who is your immediate supervisor?

c.

Number o f years in th is unit?

Personal background inform ation:
a.

Age:
1.
2.
3.
4.
5.

b.

r
r

21-30
31-40
41-50
51-60
61-70

Highest le ve l o f education completed:
1.
2.
3.
4.
5.
6.
7.

high school
some college
4-year college degree
Master's degree
some graduate school
Ph.D.
some other graduate degree (sp e cify)

Major area o f study in college or graduate school:
1.
2.
3.
4.
5.
6.
7.
4.

p u b lic a d m in istra tio n
social work
law
business
social sciences
humanities
other (s p e c ify )

From which o f the fo llo w in g outside sources do you (o r your
u n it) purchase services by c o n tra ct: (may check more than one)
1.
2.
3.

p riv a te , n o n -p ro fit agencies
p riv a te , p ro p rie ta ry (p ro fit-m a k in g ) firm s
p u b lic agencies

a.

What are the names o f some o f the la rg e s t contractors th a t
you deal with?

b.

I f more than one type o f source Is contracted w ith , are
there diffe ren ces among them, a t le a s t as you work w ith
them in your jo b , because o f the type o f agency?
1.
2.
3.
4.

no d iffe re n ce s a t a ll
very few differences
several differences
many differences

221
I f some diffe ren ces e x is t, what are the major differences
you have found?
7.

28.

Approximately how many contracts have you personally worked
on in the la s t calendar year? (o r any other recent one-year
period)
On what basis is 1 t usu ally decided th a t a c e rta in firm or
agency w i ll receive a co n tra ct in your program area? (choose
1st, 2nd, and 3rd reasons)
1. lowest cost
2. previous s a tis fa c to ry work in sta te pro je cts o r
services
3. adequate s t a f f and equipment to do the job
4. previous experience in th is general type o f service
5. plan to f u l f i l l a ll c r it e r ia provided in s o lic it a tio n
package
6. well-reasoned arguments why program elements w i ll
accomplish the desired goals, as given in the proposal
7. some other reason (sp e cify)

41.

g.

What do you believe are the major problems in m onitoring
and evaluating co n tra cto r performance?

49.

In your area o f work, what have been the major problems in
co n tra ctin g w ith outside agencies o r firm s fo r services?

50.

In the contracts and services you work w ith , do you th in k con­
tra c tin g w ith p riv a te agencies o r firm s costs less than,
about the same as, o r morethan, government d e liv e ry o f those
services would?
1.
2.
3.

less than government d e liv e ry
about the same as government d e liv e ry
more than government d e live ry

Why do you say that?
51.

For the contracts and services you work w ith , do you th in k
co n tra ctin g w ith p riv a te agencies o r firm s re s u lts 1n poorer
se rvice , about the same q u a lity o f service, or b e tte r service
fo r re c ip ie n ts than government service d e liv e ry would?
1.
2.
3.

poorer service
about the same q u a lity
b e tte r service

Why do you say that?

222
52.

In general, fo r a wide v a re ity o f s ta te se rvice s, do you th in k
co n tra ctin g w ith p riv a te agencies o r firm s re s u lts in poorer
se rv ic e , about the same q u a lity o f se rvice , or b e tte r service
fo r re c ip ie n ts than government service d e liv e ry would?
1.
2.
3.
4.

53.

In general, fo r a wide v a rie ty o f s ta te se rvice s, do you th in k
co n tra ctin g w ith p riv a te agencies o r firm s costs less than,
about the same as, o r more than government d e liv e ry o f those
services?
1.
2.
3.
4.

56.

poorer service
about the same q u a lity
b e tte r service
d o n 't have any idea

less than
about the same as
more than
d o n 't have any idea

Do you believe th a t using p riv a te contractors to produce and
d e liv e r p u b lic services is somehow more democratic o r less
democratic than using public employees?
1.
2.
3.

more democratic
less democratic
doesn't have anything to do w ith democratic ideals

Why?
54.

Rank the fo llo w in g in order o f importance (from 1 to 7, w ith 1
being the most Im portant) as to why outside agencies/firm s are
used to supply p u b lic services in your program area instead o f
sta te (o r county) public employees?
1.
2.
3.
4.
5.
6.
7.
8.

lower cost
b e tte r services
greater f l e x i b i l i t y in h irin g and f ir in g
b e tte r oversight over cost and performance
mandated by federal or sta te laws o r regulations
a way o f strengthening p riv a te agencies o r firm s
p o lit ic a l pork b a rre lin g
some other reason(s)

223

l/t

55.

Use the fo llo w in g terms to describe your own
re la tio n s h ip s w ith contractors in your work:
1.
2.
3.
4.
5.

57.

2.
3.
4.
5.
6.

5.
6.

3
3
3
3
3

4
4
4
4
4

too s t r i c t , w ith too much unnecessary and burdenson
paperwood involved
not adequate to oversee expenditures
not adequate to evaluate performance
not s t r i c t enough to oversee expenditures o r to evalu­
ate performance adequately
ju s t about r ig h t
some other response?

generally q u ite h e lp fu l
not involved enough in con tractin g
too in te rfe rin g in decision making
hardly involved 1n co n tra ctin g a t a l l , but th a t's the
way I p re fe r i t
only involved 1n contracts th a t th e ir con stitue nts
want, but otherwise hardly involved at a ll
some other response(s)?

How fre q u e n tly do you see y o u rs e lf acting as an advocate fo r
service providers in your work? ( e .g ., as w ith other sta te
o f f ic ia ls )
1.
2.
3.
4.

60.

2
2
2
2
2

L.
0)
>
01
z

In your experience in c o n tra c tin g , how do you evaluate the ro le
o f most p o litic ia n s ( e .g ., sta te le g is la to rs , county commis­
sio n e rs, d t y councilmen) in the co n tra ctin g process?
1.
2.
3.
4.

59.

1
1
1
1
1

•r*
c +->
•M
H- o
O co

In your area, do you believe th a t the m onitoring and evaluation
o f contractors is :
1.

58.

close and personal
warm and frie n d ly
s t r i c t l y businesslike
cool and d is ta n t
h o s tile and an ta g o n istic

Irt
<0
*
<

always
often
sometimes
never

In your area o f c o n tra c tin g , i f two u n its disagree over proce­
dures, awards, e tc ., how are these c o n flic ts resolved?
In what matters are disagreements more lik e ly between u n its ,
In d iv id u a ls , o r le vels ( e .g ., county vs. s ta te ) involved in
contracting?

224

61.

What are the major problems you see in the re la tio n s h ip
between the s ta te department and the county?

62.

What are the major problems o r tensions in your own jo b , a t
le a s t as i t re la te s to c o n tra c tin g fo r services?

APPENDIX C

APPENDIX C
SERVICE CONTRACT INTERVIEW SCHEDULE
PROVIDER FORM

In th is In te rv ie w , I am In te re ste d 1n le a rn in g more about service con­
tra c tin g 1n the s ta te o f Michigan in general, and in your area o f con­
tr a c tin g , 1n p a r tic u la r . Not only do I want to know fa c tu a l inform ation
about the process, but I would most o f a l l lik e to hear your p o in t o f
view and opinions about c o n tra c tin g . Therefore, many questions do not
have a s t r i c t l y r ig h t o r wrong answer, since people see things d i f f e r ­
e n tly .
I assure you th a t the responses you give w i ll be kept confiden­
t i a l . Your answers to a ll questions w i l l be used fo r s t a t is t ic a l
purposes and w i l l not be reported on an in d iv id u a l b a sis, w ith your
name or p o s itio n id e n tifie d . In the In te re s t o f tim e, please tr y to
keep your answers s h o rt and to the p o in t.
A.

Background Questions
1.

Department o f co n tra c t and recomnendatlon:
1.
2.
3.
4.
5.

Labor
Management and Budget
Social Services— sta te
Social S ervlces—county
T ransportation

Contractual program:
3.

Personal background in fo rm a tio n :
a.

Age:
1.
2.
3.
4.
5.

21-30
31-40
41-50
51-60
61-70

225

226

b.

Highest level o f education completed:
1.
2.
3.
4.
5.
6.
7.

high school
some college
4-year college degree
Master's degree
some graduate school
Ph.D./D.P.A./M.D.
some other graduate degree (s p e c ify )

Major area o f study in college o r graduate school:
1. p u b lic a d m in istra tio n
2. social work
3. law
4. business
5. social sciences
6. humanities
7. oth er (sp e c ify )
4.

5.

What are the major tasks th a t you are responsible f o r , as i t
re la te s to service contracting?
a.

Number o f years in th is po sitio n?

b.

In th is agency/firm?

c.

Any previous p o sitio n s w ith pu blic agencies?

d.

When was th is agency/firm started?

e.

Is i t a f f ilia t e d w ith o r pa rt o f another organization?
( I f so, sp e cify)

f.

How many people are employed by your agency/firm?

(sp e cify)

From which o f the fo llo w in g does your agency have service con­
tra c ts a t the present time?
1.
2.
3.
4.
5.
6.

c it y government
county government ( i f more than one, s ta te to ta l
number)
s ta te government (sp e cify departments)
p riv a te , n o n -p ro fit agencies
p riv a te , pro fit-m a kin g firm s
some other u n it

a.

What percentage o f your revenues come from contracts w ith
c it y , county, o r sta te governments, approximately?

b.

How many contracts do you c u rre n tly have w ith sta te o r
county governments in the area o f ___________________ 1

227

B.

c.

Have you had a d d itio n a l c o n tra c t(s ) w ith any o f the above
u n its in the past, th a t has not been renewed fo r th is
year?

d.

How many separate contracts have been made w ith the state
and county governments in the la s t two years?

D e scrip tive Process Questions
9.

In the projects/program s fo r which your agency has attempted
to receive a c o n tra c t, how did you f i r s t learn o f the p o ss ib i­
l i t y o f the department le tt in g a contract?
1. newspaper no tice
2. trade or professional new sletter o r magazine
3. posted n o tice 1n a sta te o ffic e
4. le t t e r
5. other contractors o r service providers
6. telephone c a ll o r conversation w ith a state/cou nty
employee
7. other means (s p e c ify )

12.

When informed about the p a rtic u la rs o f a c o n tra c t, do you
receive Inform ation th a t c e rta in requirements must be met by
contractors?
1. yes
2. no
13. sometimes

a

J
a.

I f yes, o r sometimes, what kinds o f requirements are
e x p lic it ly stated?
1. cost
2. equal oppo rtunity employment
3. a ffirm a tiv e action program
4. length o f the co n tra ct
5. s p e c ific a tio n s about the q u a lity o f service
6. s p e c ific a tio n s about the number o f c lie n ts served
7. other performance s p e c ific a tio n s
8. bookkeeping requirements
9. oth er requirements (sp e c ify )

13.

When bids or proposals are In v ite d , are the c r it e r ia by which
proposals w i ll be evaluated Included 1n the package or notice?
1. yes
2. no
3. sometimes

228

14. When a b id o r proposal fo r a program is s o lic it e d , are con­
tra c to r review methods and c r it e r ia included in the notice?
1. yes
2. no
3. sometimes
15.

Does your agency/firm in clude a budget w ith the proposal?

p,

1. always
j 2. u su a lly
3. sometimes
4. never

+ I f u s u a lly o r sometimes, under what circumstances would a
budget not be submitted?
16.

Who w rite s up the proposal (o r le t t e r o f in te n t) f o r your
agency/firm?

17.

Do you know who evaluates c o n tra c to r proposal (o r le tte r s o f
in te n t) in your program area o f
?
1.
2.
3.
4.
5.
6.

18.

department co n tra ct a d m in is tra to r (c e n tra l o ffic e )
c o n tra c tin g o f f i c i a l in program
area
a panel o f evaluators in the sta te /co u n ty o ffic e
( c ir c le one)
county services o r con tracts co o rd in a to r
some other group o r in d iv id u a l (s p e c ify )
don1t know

Do these in d iv id u a ls know which co n tra cto rs have submitted
which proposals?
1.
2.
3.
4.

19.

always
sometimes
never
don’ t know

How fre q u e n tly has your agency/firm submitted u n s o lic ite d
proposals (o r le tt e r s o f In te n t) fo r programs w ith the sta te
o r county governments?

1

" | 1.
2.
- J 3.

o fte n
sometimes
never

+ How fre q u e n tly has your agency received a co n tra c t as a
re s u lt?
1.
2.
3.
4.

always
o fte n
sometimes
never

229

26.

In the contracted programs you are acquainted w ith , about how
many d iffe r e n t contractors are usually considered before a
co n tra ct is granted?

27.

In your co n tra cts, is a w ritte n proposal o r an o ra l presenta­
tio n required before the decision is made on who w i l l be
awarded a contract?
1.
2.
3.
4.

28.

On what basis 1s 1t decided th a t a c e rta in agency or firm
w i ll receive a co n tra ct in your program area (choose 1 st, 2nd,
and 3rd reasons)?
1.
2.
3.
4.
5.
6.
7.
8.
9.

29.

30.

w ritte n proposal
oral presentation
n e ith e r is required
n e ith e r is required, but one o f the two 1s sometimes
done

lowest cost
previous s a tis fa c to ry work in s ta te oro je cts or
services
adequate s t a f f and equipment to do the job
previous experience 1n th is general type o f service
plan to f u l f i l l a ll c r it e r ia in the s o lic ita tio n
package
well-reasoned arguments why program elements w ill
accomplish goals
an Innovative approach to dealing w ith the perceived
problem
p o litic a l influence
some oth er reason (s p e c ify )

How often in the la s t two years has your agency submitted a
proposal (o r le t t e r o f in te n t) fo r a program /project w ith the
sta te o r county government?
a.

How many o f these were in the program area o f____________?

b.

Of these, how many o f the proposals did not lead to an
award?

c.

Lf no co n tra ct was given, what do you believe were the
reasons?

d.

I f a proposal is not accepted fo r a c o n tra c t,
your agency/firm informed as to the reasons?

are you or

I f contracts are negotiated between your agency and the gov­
ernment u n it, which parts o f the co n tra ct are usually most
f le x ib le or negotiable?

33.

Oo the contracts usu ally sta te th a t payments w i ll be in :
1.
2.
3.
4.
a.

How fre q u e n tly does your agency receive an advance payment
fo r p a rt o f the contract?
1.
2.
3.
4.

35.

lump-sum amounts
p e r-u n it rates
to reimburse approved costs
some other form (sp e c ify )

always
often
sometimes
never

Has your agency received s ta te (o r county) sub-contracts in
recent years in the program area o f _____________________ ?
1.
2.

yes
no

+ Who was the o rig in a l co n tra ct from?
+ Who gave your agency/firm the sub-contract?
34.

Do you sub-contract fo r some or a ll o f the services fo r which
you receive contracts through the s ta te (o r county) govern­
ment?
r4

1.
2.

yes
no

> I f yes, who do your sub-contract with?
+ And fo r what services?
* How do you choose your sub-contractors?
39.

How freq ue ntly have your contracts been renewed from one year
to the next? (given percentage o f a l l con tracts)
1.
"|2.
3.
- ___ 4.
5.

always
usually
often
sometimes
never

Why have any contracts not been renewed?
40. Is there a formal process fo r hearing co n tra cto r complaints?

231

41.

a.

I f you have a com plaint, who do you usually go to?

b.

What kinds o f complaints o r protests have you put in
w r itin g over the past years?

c.

What action was taken as a re s u lt, i f any?

What kinds o f review procedures are used in your program area
fo r contracted services?
1.
2.
3.
4.
5.
6.
7.
8.

43.

p re -a u d it
continuous m onitoring o f expenditures
progress reports on preformance o r work accomplished
on-s1te f ie ld m onitoring o f programs or pro je cts
in-depth evaluations
p o st-a u d it o f expenditures
p o st-a u d it/re vie w o f performance
some other review procedure

e.

Has your program(s) ever been audited by the state?

g.

What do you believe are the major problems involved in the
m onitoring and evaluation o f performance?

What are the major groups o r associations th a t your agency/
firm is a member o f in your area o f work?
c.

What is th e ir ro le in the co n tra ctin g process, i f any?

44.

Are there any c lie n t, re c ip ie n t, o r consumer groups th a t
contact you about contracted programs/projects? ( i f so,
sp e cify)

45.

How are your contracts funded?
1.
2.
3.
4.
5.
6.
7.

(may check more than one)

through federal programs
through federal grants
through donated funds from p riv a te sources
through donated funds from pu blic sources
through an a p p ro p ria tio n from the sta te le g is la tu re
through county d is c re tio n a ry funds
some other source (sp e cify)

I f a donation 1s required, who donates the amount fo r your
service contract?
I f your agency donates the amount required, how does i t raise
the money?
Has your agency ever fa ile d to get a co n tra ct because 1t could
not get the required donation?

232

<
U
<J

0)
u

c

01

I— uC
r— 01
* 3
C.

Opinion Question
47.

In g e n e ra l» how much say o r in flu e n c e do you
th in k the people or agencies lis t e d below
have over whether a c o n tra c t is made fo r a
se rvice w ith an outside agency?
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.

48.

C iv il Service—con tracts d iv is io n
The A ttorney G eneral's O ffic e
The C iv il Rights Department
Department o f Management and Budget
Your department d ir e c to r
Department deputy d ire c to r(s )
Bureau c h ie f
D iv is io n c h ie f
Section c h ie f
Program s p e c ia lis ts (s ta te )
C ontract s p e c ia lis ts (s ta te )
P riva te agencies
S tate le g is la tu re
County commissions
County co n tra ct supervisor
Y o urself

0)
o

0)

i—

0)

+■*

3

+■>

c

«
<
3 <U I—
3u
r—
*+- U
c
-i-

c
ai

c

3
< *<—
*♦O **- O
T5
tf. <
0)
O O X5
E

(O
a t

C
£ >, ‘ai
»- -oO
zo >a> x;
1 2
3
1 2
3
1 2
3
1 2
3
1 2
3
1 2
3
1 2
3
1 2
3
1 2
3
1 2 3
1 2 3
1 2 3
1 2 3
1 2 3
1 2 3
1 2 3

»—

-W

<Q

<Q

a j

0 )

o>
« »,
a>1- a>
o :>
4 5
4 5
4 5
4 5
4 5
4 5
4 5
4 5
4 5
4 5
4 5
4 5
4 5
4 5
4 5
4 5

In general, how much say or in flu e n ce do you th in k the people
o r agencies lis te d below have over who receives a contract?
1.
■ 2.
' 3.
' 4.
' 5.
' 6.
‘ 7.
’ 8.
' 9.
10.
11.
12.
13.
14.
15.
16.

C iv il S ervice—co n tra cts d iv is io n
The A ttorney G eneral's O ffic e
The C iv il Rights Department
Department o f Management and Budget
Your department d ire c to r
Department deputy d lre c to r(s )
Bureau c h ie f
D iv is io n c h ie f
Section c h ie f
Program s p e c ia lis ts (s ta te )
C ontract s p e c ia lis ts (s ta te )
P riva te organizations
State le g is la to rs
County commissioners
County c o n tra c t supervisor
Y o u rse lf

1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2

3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3

4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4

5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5

233

50.

In the contracts and services you work w ith , do you th in k con­
tra c tin g w ith p riv a te agencies o r firm s costs less than, about
the same as, or more than, government d e liv e ry o f those ser­
vices would?
1. less than government d e liv e ry
2. about the same as government d e liv e ry
3. more than government d e liv e ry
Why do you say that?

51.

For the contracts and services you work w ith , do you th in k
con tractin g w ith p riv a te agencies o r firm s re s u lts in poorer
se rvice , about the same q u a lity o f se rv ic e , o r b e tte r service
fo r re c ip ie n ts than government service d e liv e ry would?
1. poorer service
2. about the same q u a lity
3. b e tte r service
Why do you say that?

52.

In general, fo r a wide v a rie ty o f sta te services, do you thin k
c o n tra ctin g w ith p riv a te agencies o r firm s re s u lts in poorer
se rvice , about the same q u a lity o f se rvice , or b e tte r service
fo r re c ip ie n ts than government service d e liv e ry would?
1.
2.
3.
4.

53.

In general, fo r a wide v a rie ty o f s ta te se rvice s, do you thin k
co n tra ctin g w ith p riv a te agencies o r firm s costs less than,
about the same as, o r more than government d e liv e ry o f those
services?
1.
2.
3.
4.

49.

poorer service
about the same q u a lity o f service
b e tte r service
d o n 't have any idea

less than government d e liv e ry
about the same as government d e liv e ry
more than government d e liv e ry
don’ t have any Idea

What have been the major problems w ith re ce ivin g contracts
from the state/county?
What have been the major advantages?
What would you lik e to see done d iffe r e n tly (o r b e tte r)?

234

54.

Please rank the fo llo w in g in order o f importance (from 1 to 7,
w ith 1 being the most im portant) as to why you be lieve outside
agencies/firm s are used to supply p u b lic services 1n your
program area instead c f sta te (o r county) p u b lic employees.
1.
2.
3.
4.
5.
6.
7.
8.

55.

Use the fo llo w in g terms to describe your own
re la tio n s h ip s w ith p u b lic o f f ic ia ls in your
area o f co n tra ctin g :
___
___
___
___

56.

lower cost
b e tte r services
greater f l e x i b i l i t y in h irin g and f ir in g
b e tte r oversight over cost and performance
mandated by federal o r s ta te laws o r regulations
a way o f strengthening p riv a te agencies or firm s
p o lit ic a l pork b a rre lin g
some other reason(s)

1.
2.
3.
4.
5.

in
>>
IQ
*
5
1
1
1
1
1

close and personal
warm and frie n d ly
s t r i c t l y businesslike
cool and d is ta n t
h o s tile and an tag on istic

in
U
c +*> u
<u
•M
>
<4a>
O 1/7 as
2 3 4
2 3 4
2 3 4
2 3 4
2 3 4

Do you believe th a t using p riv a te contractors to produce and
d e liv e r public services is somehow more democratic o r less
democratic than using p u b lic employees?
1. more democratic
r ___ 2. less democratic
3. doesn't have anything to do

w ith democratic

ideals

+ Why?
57.

In your area, do you believe th a t the m onitoring and evalua­
tio n o f contractors is :
1.
2.
3.
4.
5.
6.

too s t r i c t , w ith toomuch
paperwork
not adequate to oversee
not adequate to evaluate
not adequate to oversee
performance
ju s t about r ig h t
some other response?

unnecessary

andburdensome

expenditures
performance
expenditures or to evaluate

235

58.

In your experience in c o n tra c tin g , how do you evaluate the
ro le o f most p o litic ia n s (e .g ., sta te le g is la to rs , county
commissioners, c it y councilmen) in the co n tra ctin g process?
1.
2.
3.
4.
___5.
___6.

59.

generally q u ite h e lp fu l
not Involved enough in co n tra ctin g
too in te rfe r in g in decision making
hardly Involved fn co n tra ctin g a t a l l , but th a t's the
way I p re fe r i t
only involved in contracts th a t th e ir constituents
want, but otherwise hardly Involved at a ll
some other response?

How fre q u e n tly do you th in k th a t the service co n tra ct coo rdi­
n a to r ^ ) in the state/cou nty acts as an advocate fo r your
agency and oth e r service providers ( e .g ., as w ith other state
o f f ic ia ls ) ?
1.
2.
3.
4.

always
often
sometimes
never

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