Contract type and the cost of provision: evidence from maintenance service contracts

Paul H. Jensen, Robin E. Stonecash

Research output: Contribution to journalArticlepeer-review

Abstract

More than half a billion dollars are spent each year on the maintenance of Australia's urban water and sewerage networks. Expenditure is governed through a mix of in-house and outsourced maintenance service contracts. We re-examine issues relating to the relationship between the cost of maintenance service provision and the type of contract used. We take advantage of the fact that water retailers in Melbourne use a mix of contract types – including fixed-price (FP) and cost-plus (C+) contracts – for the provision of water and sewerage network maintenance services. Our results suggest that the C+ contract results in substantial savings.
Original languageEnglish
Pages (from-to)279-296
Number of pages18
JournalFiscal Studies
Volume30
Issue number2
DOIs
Publication statusPublished - 2009

Keywords

  • contract efficiency
  • incentives
  • moral hazard
  • procurement
  • contracting out

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