Purchase-of-Service Contracting in Estonia

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Veiko Lember Kenneth A. Kriz

Abstract

We examine the use of purchase-of-service contracting in transition countries, focusing on a case study of Estonian social-welfare-services contracting at the local level. Given the nature of transition economies, we expect to find the use of relational contracting to offset problems of thin markets. We find this is the case; however, we also find that the relational contracting strategy is being pursued in the context of short-term contracting. We also find that Estonian local government officials most often view the primary benefit of contracting not in terms of enhancing efficiency or effectiveness, but rather in ensuring continuous service delivery. The combination of these two findings produces a risky situation for Estonia's citizens.

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Author Biographies

Veiko Lember, Department of Public Administration Tallinn University of Technology

VEIKO LEMBER, Ph.D., is a Research Fellow, Department of Public Administration, Tallinn University of Technology, Estonia. His main research interest is public-private partnerships with a particular emphasis on contracting-out public services and public procurement for innovation.

Kenneth A. Kriz

KENNETH A. KRIZ, Ph.D., is Associate Professor of Public Finance in the School of Public Administration, University of Nebraska, Omaha. His research interests lie in the area of public debt management and policy, transition public finance and infrastructure finance.