The Transactional and the Relational Approach to Contracting Out for Public Services: How Do They Work?

This article aims to investigate how the role of the purchaser is exercised by local governments (LGs) when they contract out the delivery of public services. In particular, the article tries to identify which practices are applied when public services are contracting out. In achieving this it employs a framework developed by MacNeil for investigating how the role of "purchaser" is managed in contracting out for public service delivery. The study is based on the analysis of two services (waste management and home care services for the elderly) offered by three LGs in Italy. Transactional and relational contracting may be described as two poles of a continuum; accordingly, the crucial issue becomes identifying which is the right point (or the right mix) in a unique continuum for every outsourcing situation and is dependent on a balance of various factors, such as the type of service, the type of provider and contextual factors. The paper demonstrates with empirical evidence that the relational and transactional approaches are not substitutes for one another, but are both useful for contracting out. Finally further research is needed in order to investigate the effects on the quality of service due to different governance systems used for contracting out and the evolution of the life cycle of the contract in relation to the different application of the transactional and relational approaches.