The impact of purchase of service contracting on voluntary, community-based, social services organizations

Purchase of service contracting (POSC) has been used extensively by govemments in Canada as an alternative service delivery approach to downsize goverrments and improve their cost-effectiveness.Based on a conceptual model constructed from a review of the literature, this thesis intended to understand the impact of contracting for social services on voluntary, community-based, social service organizations.A qualitative exploratory study was undertaken guided by three research questions: (1) What are the current practices in administrating POSC by voluntary community-based social services organizations?(2) How are the relationships of voluntary community- based organizatons with govemments affected by POSC according to the organizations' perceptions?(3) How does POSC affect voluntary, community-based, social services organizations?The sample consisted of eight voluntary, community-based organizations providing social services in Winnipeg.They were medium sized organizations with a mean annual operating revenue of 5624,927 (Median:9438,950, SD:$398,748).On average, government service contracting constituted 59.8% of the total operating revenue of the organizations in the sample (Median:58.0yo,SD:20.7yo).The methods for data collection were two in-depth, semi-structured, in-person interviews with the executive directors of the organizations and a review of relevant documents.Two types of purchase of service contracts-core funding contracts and project funding contracts emerged from the study.Contract award procedures, monitoring, reporting, and financial arrangements varied between these two types of contracts.The actual practice of POSC followed the competitive market model to a very limited extent.The levels of service standardization and govement control imposed by service contracting were limited for most of the investigated contracts, except for the contract for providing counselling services in a women's resource centre.Most executive directors reported an extreme power imbalance in their contracting relationship with government (9, 81 .8o/o of the contracts studied) and indicated that their contracting relationship with govemment was not a collaborative partnership.The findings indicate that POSC has not resulted in goal deflection or distortion.Most executive directors did not perceive that their organizations' autonomy was threatened by POSC, or that the accountability requirements involved had affected their ability to respond to client and community needs, except for the women's resource centre.The overall impacts of POSC on devlountarization of the voluntary organizations described in the literature were not supported by most of the cases studied.The positive impacts of POSC on voluntary organizations were recognized in terms of continuing stable core funding, expanding services, enhancing organizations' credibility, and improving networks with other organizations.This study provides empirical evidence regarding the practice of POSC, the contracting partnership and the impact of POSC on the voluntary social services organizations.A revised conceptual model was developed based on the research findings. Chapter One Rationale and SignificanceContracting-out social services has been used extensively by govemments in Canada as an altemative service delivery approach in an effort to downsize govemments and improve their cost-effectiveness (Shields &, Evans, 1998).The impact of contracting-out social selices on voluntary organizations has become an important research issue in the govemment-voluntary organizations relationship.This chapter includes five major sections.The first section is the statement of this research problem regarding the impact of "purchase of service contracting" on voluntary social services organizations.The rationale for this study is discussed in the second section.It outlines the importance of voluntary organtzations and the current restructuring of government- voluntary sector relationships in Canada.The third and fourth sections contain the discourse on the relevance of this study to theoretical development and the extension of empirical knowledge.Finally, the relevance of this study to the social work knowledge base regarding both practice and policy is discussed in the final section. Statement of research problemPurchase of seryice contracting (POSC) is the primary funding method whereby goveurent finances the voluntary sector to deliver social services in the United States (Kettner & Martin, 1994; Krarner, 1994; Salamon,2002).Since the 1990's, the procedure of POSC and its impact on both government and voluntary organizations have -i-attracted much attention.The central concern is the transformation of voluntary organizations from mission oriented, independent, and grassroots organizations into dependent, bureaucratic and institutionalized quasi-govemment agencies, through the mechanism of POSC.Wolch (1990) argued that voluntary organizations were becoming a "shadow state" because of the extensive privatization era of the 1980s.From her perspective, voluntary organizations were receiving government funds and subject to the goverrment's control by POSC, even though they were operating outside the political system.POSC has been recognized as an essential vehicle for social service privatization and devolution in welfare reform (Austin, 2003).There are many debates about the impact of POSC on both goverrment and voluntary organizations.Both disadvantages and advantages of using POSC have been discussed in the literature (Austin, 2003; Kramer, 1994; Salamon, 1995).Austin (2003) outlined the advantages of POSC for government agencies, including the ability to: (1) fulfill legislative mandates, (2) increase efficiency, (3) gain flexibility in service start-up and termination, and (4) extend service capacities and access to specialized service, which government agencies are not able to provide, through voluntary organizations (p.102).In the mean time, he also highlighted some of the disadvantages of POSC, including: (1) insufficient competition among voluntary service providers, (2) difficulty in measuring performance and accountability, and (3) increased transaction costs related to contract monitoring and infonnation systems (p.102).Do the advantages outweigh the disadvantages?There is limited empirical research that has been done in this area and the the results seem to be ambiguous because of limitations in the scope and the methods of research (Bachman, 1995;Kettner & Martin, 1994,1996;Kramer, 1994).POSC can also have some advantages for voluntary social service organizations.This funding mechanism has significantly increased the financial resources of voluntary organizatrons and diversified their services for the past decade (Austin, 2003; Kramer, 1994).However, the disadvantages of POSC for voluntary social services organizations have resulted in much comment in the literature.Based on his review of the literature, Kramer (1994) summarized that these impacts include (1) goal distortion, (2) loss of autonomy, (3) difficulties in accountability, and (4) devoluntarization (pp.a9-51).Notably, Kramer also emphasized that the extent, significance, and causes of these impacts are still unclear.The empirical research in this area is limited.There are many questions involved in the practice of POSC.For example, "Does the decision making of POSC really follow the competition principle?";"Are the accountability and monitoring procedures of social service contracting really implemented?","Is the measurement of outcome clearly defined and established in this procedure?";and "What is the nature of the contract renewal and termination process?"Govemments use different types of POSC to define their relationships with voluntary organizations and exercise different degrees of control over these contracted agencies.Certainly, the diversity of the contracting context and culture will have differential impacts on voluntary organizations.The impacts also might vary according to different seryice fields and different organizational characteristics of voluntary organizations.accounted for 10%o of all revenues reported by all voluntary organizations.These data from the NSNVO demonstrate that voluntary organizations have a substantial role in the Canadian economy (Statistics Canada, 2004,p. 1 0).In addition, voluntary organizations are the major vehicle for citizen engagement.According to the National Survey of Giving, Volunteering, and Participating (NSGVP), almost 22 million Canadians-9l% of the population aged 15 and older-made donations to charitable and non-profit organizations in 2000.The estimated financial support provided totalled more than $5 billion.Social services organizations were the third largest beneficiaries, receiving $503 million, or 70%o of the total amount of charitable donations.The NSGVP also indicated that every year Canadians donate an estimated 1.1 billion person-hours to voluntary activities-the equivalent of more than 549,000 full-time jobs.Among them, 20o/o of volunteer hours were directed to social selices voluntary organizations (Statistics Canada, 2001).In contrast, according to the NSNVO (Statistics Canada,2004) voluntary organizations reported a combined volunteer complement of over 19 million that contribute more than 2 billion hours of volunteer time, or the equivalent of more than 1 million full-time jobs, in 2003 (p.31).The number of volunteers reported by the voluntary organizations (NSNVO) exceeds the number of volunteers claimed by the population (NSCVP), because people may volunteer with more than one organization.The NSNVO also indicated that although social services organizations represented only 11.8% of organizations, they accounted for 18.8% of all volunteers and 20.5%o of total volunteer hours. 6-organizations investigated by the Child and Family Service Research Group (2003), from the Faculty of Social Work at the University of Manitoba, demonstrat

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