122 5: Th eories of Public Management
by delegating it to buyers. And contracting appears to decrease public manage-
ment responsibility for orderly and reliable institutions and increase the long-
range probability of instability. For management objectives, contracting does save
money, but not primarily because of improved management. Contractors save
money through greater fl exibility with workers, including lower pay, fewer bene-
fi ts, and more part-time work (Kettl 1993b).
Th ird, the social services have seen the most rapid growth in contracting, esti-
mated to have grown from 25 percent to over 50 percent in the 1980s (Chi, Dev-
lin, and Masterman 1989), and includes daycare centers, mental health services,
foster care, drug and alcohol rehabilitation, adoption services, elderly services, job
training, community development, Medicaid, and others. Contracting for social
services moved from the periphery to the center of the welfare state when states
were given greater latitude in service delivery and eligibility standards as part of
welfare reform (National Commission for Employment Policy 1988). Most social
services contracts are not put out for bid but are negotiated with one, usually
continuing, provider. Contractors seldom change because the market is limited.
Goals are hard to defi ne, making it diffi cult to measure outcomes or performance.
Rather than a market or a government monopoly, the contracting of social ser-
vices is best understood as a negotiated network. Th e management doctrines and
skills required to be eff ective in negotiated networks are treated in the next sec-
tion on governance.
Nonprofi t organizations are usually the contract agencies for social services.
Compared to government hierarchies, nonprofi ts employ fewer professionals,
recruit more volunteers, and hire more part-time and nonpermanent workers
at lower salaries and benefi ts (Smith and Lipsky 1993). Th e top professionals in
these nonprofi t organizations have considerably higher incomes, however, than
their counterparts in government hierarchies (Herzlinger and Krasker 1987).
Th ese professionals tend to fi nd nonprofi t settings particularly attractive because
opportunities for wider discretion and greater commitment are more plentiful
there than in government hierarchies (Majone 1984).
To counter the trend to deprofessionalize, governments have increasingly
required contractors to employ qualifi ed professionals, obtain the appropriate
licenses, and be able to withstand facilities inspections and audits (Smith and
Lipsky 1993). Still, most contracting social service agencies keep costs down by
deprofessionalizing. Steven Smith and Michael Lipsky claim that “the restrictions
on professional practice in all types of nonprofi t agencies receiving government
funds combined with low wages, job insecurity, and intractable social problems
have made nonprofi t agencies in general less attractive work environments for
human service workers. Loyalty to the agency fades when there is no advantage
to working in one place rather than another” (1993, 117). As a result, workers in
nonprofi t social service organizations have shown declining morale (Smith and
Lipsky 1993).