The Transactional and the
Relational Approach to
Contracting Out for Public
Services: How Do They Work?
Alessandro Sancino*
Research Fellow, Catholic University of Piacenza, Italy
Mariafrancesca Sicilia
Assistant Professor, Bergamo University, Italy
* Corresponding Author, [email protected]
Journal of Finance and Management in Public Services. Volume 11 Number 1
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The Transactional and the Relational Approach to Contracting Out for Public Services
Alessandro Sancino & Mariafrancesca Sicilia
Abstract
but are both useful for contracting out.
Keywords: contracting out, public services, transactional contracting, relational contracting, local government.
The transactional and the relational approach to contracting out for public services: how
do they work?
Introduction
transactional and relational contracting.
Journal of Finance and Management in Public Services. Volume 11 Number 1
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The Transactional and the Relational Approach to Contracting Out for Public Services
Alessandro Sancino & Mariafrancesca Sicilia
Theoretical background
detriment of the principal.
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The Transactional and the Relational Approach to Contracting Out for Public Services
Alessandro Sancino & Mariafrancesca Sicilia
resolution of contract.
attributes during the life of the contract if necessary.
This approach does not resort to legal means in case of dispute because of their tendency to worsen
post failure.
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The Transactional and the Relational Approach to Contracting Out for Public Services
Alessandro Sancino & Mariafrancesca Sicilia
Methodology
approaches outlined in literature.
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The Transactional and the Relational Approach to Contracting Out for Public Services
Alessandro Sancino & Mariafrancesca Sicilia
Findings
Contracting out waste management services
1
“We don’t sanction our contractor because we don’t want to make the
“We try to communicate as often as possible, because we want to be sure that providers are
“Reputation
is important for contractors because public managers assess past performance in order to identify future
providers. Neighbouring municipalities invite us to pass judgment about our provider if they are bidding for
Journal of Finance and Management in Public Services. Volume 11 Number 1
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The Transactional and the Relational Approach to Contracting Out for Public Services
Alessandro Sancino & Mariafrancesca Sicilia
“Relationships with the current provider are more
Outsourcing of home care services for the elderly
out that the contract signed at the beginning of the relationship acts as a general guideline for indicating
“the charity that provides the services works well and
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The Transactional and the Relational Approach to Contracting Out for Public Services
Alessandro Sancino & Mariafrancesca Sicilia
amount of money to pay the contractor depends on this.
Discussion
to both the transactional and relational approaches.
relationship.
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The Transactional and the Relational Approach to Contracting Out for Public Services
Alessandro Sancino & Mariafrancesca Sicilia
Transactional
Approach
High
Medium
Relational
Approach
Low
High
Medium
S-Town
Waste
Management
S-Town
P-Town
P-Town
B-Town
S-Town
Home Care
Services
for Elderly
Low
P-Town
B-Town
B-Town
P-Town
S-Town
B-Town
Figure 1 - Outsourcing Waste Management- and Home Care Services for the Elderly
reputation on the other.
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The Transactional and the Relational Approach to Contracting Out for Public Services
Alessandro Sancino & Mariafrancesca Sicilia
Conclusions
possible scenario that could occur.
adaptation to the changing conditions.
to restore the balance of the control and power delegated to the contractor.
assumption that the agency theory is linked to transactional contracting and the stewardship theory is
linked to relational contracting.
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The Transactional and the Relational Approach to Contracting Out for Public Services
Alessandro Sancino & Mariafrancesca Sicilia
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The Transactional and the Relational Approach to Contracting Out for Public Services
Alessandro Sancino & Mariafrancesca Sicilia
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The Transactional and the Relational Approach to Contracting Out for Public Services
Alessandro Sancino & Mariafrancesca Sicilia
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