Working paper 05/125 - Abstract

Delegation of Contracting in the Private Provision of Public Services (PDF, file 232 KB) (PDF, 231kB)

John Bennett and Elisabetta Iossa

 We use an incomplete-contract approach to compare contracting out by a public sector agency with the delegation of contracting out to a public-private partnership (PPP) that is a joint venture between private and sector agents. The PPP maximizes a linear combination of profit and social benefit. Such delegation may be desirable to curb innovations that reduce the cost of provision but also reduce social benefit. Delegation may be undesirable for innovations that increase social benefit but also raise costs. Our results are explained in terms of the shadow cost of public funds and the negotiating stance of the PPP.

Note: some of the documents on this page are in PDF format. In order to view a PDF you will need Adobe Acrobat Reader