Managing the government-nonprofit contracting relationship for social services in New York State

Many scholars and practitioners within the public administration, policy, and nonprofit communities have called for theories which better explain the nature of the government-nonprofit contracting relationship and the implications of contracting for public management. While the economic rewards for privatizing service delivery have been empirically shown in some areas, there has been insufficient theoretical and empirical research that addresses the benefits and limitations of privatizing social service delivery. With a lack of theory about nonprofits in the contracting arena and a lack of public management theory, multiple theories must be used to understand the nature of the complex contracting relationships which government enters into with nonprofit organizations and how these relationships are managed.This research examines the public management contract practices and the variation that exist in their application to nonprofit organizations engaged in the government-nonprofit contracting relationship for social services in New York State. Interviews were conducted with public managers in five New York State agencies and five New York State counties. Nonprofit executive directors whose organizations had contracts with at least one of the state agencies and one of the counties identified were also interviewed. The interview data was analyzed using Ethnograph v.5.0, a qualitative data analysis software. The research uses a theoretical framework primarily drawn from agency and stewardship theory and secondarily uses network theory to account for other influences that come to bear on managing the contract relationship.The findings suggest that a lack of competition, poorly defined outcomes that are not easily measured, and public management capacity shortages all contribute to managing contract relationships in a manner inconsistent with the tenets of agency or stewardship theory. This research finds that politicization has affected the contracting process and its participants. As a result, public managers rely on organizational reputation, relationships built on trust over time, and the threat of monitoring and sanctions to manage contracting relationships with nonprofits. Finally, the responsibilities of public managers are also affected by public capacity shortages and the influence that nonprofit organizations bring to the policy process.