Abstract
The purpose was to examine the extent to which city governments in California use competition, incentive, and monitoring in the practice of contracting out in public services. This study also explores the relationship between contractual policy options (competition and incentive) and the performance of the contractor, and examines the relationship between monitoring and competition and incentives. The research assumes that a contracting government makes the effort to foster competition, provides more incentives to encourage contractors to meet its requirements in the contract, and those, in return, may force contractors to provide better service at less cost. Moreover, a contracting government devotes itself to obtaining information about contractors while overseeing their performance, and this, in return, may promote competition by providing necessary information to select potential contractors. It may also enforce more incentives based on this information. The data for this study were generated through a mailed questionnaire. The questionnaire was sent to 321 city managers in California, asking them to indicate their policy for contracting out and their estimates of the performance of the contractor. For this study, the researcher used descriptive analysis, t-test of difference for independent samples, the Mann Whitney U test, multiple regression analysis, and correlation analysis. The findings show that city governments make moderate use of competition and incentive policy options, and almost all city governments perform monitoring contracts. The findings also show that competition policies (competitive bidding, advertising, solicitation, criteria, and bidders) have positive effects on cost saving. Competition policies (competitive bidding, advertising, and bidders) also have positive effects on service quality. Incentive policies (termination, slow payment, and compliance) have positive effects on only service quality. However, renewal has negative effects on cost saving and service quality. Monitoring has a positive relationship with competition and incentives.