Privatization in Practice: Case Studies of Contracting for TANF Case Management. Collaboration Among Contractors


Contractors frequently collaborate through partnership and subcontracting arrangements. As a result, more than one type of organization provides TANF services in each of the study sites, including places where agencies hire a single, prime contractor (Table II.4). Both for-profits and nonprofits have a presence in all sites except Hennepin County, where the strength of the local nonprofit sector and the small size of contracts probably deter the entrance of for-profits. In those sites using both for-profit and nonprofit organizations, it is not uncommon for organizations to work together. Agencies may even provide explicit incentives for this  by, for example, including community collaborations among the evaluation criteria for proposals.

Cooperative arrangements in the Lower Rio Grande Valley and Wisconsin illustrate some of the ways contractors join forces. In its bid to operate one-stop centers in the Lower Rio Grande Valley, ACS partnered with the Texas Migrant Council, already a contractor for child care programs in the region. The two organizations created a joint venture known as the Valley Partnership, dividing responsibilities between them. Either ACS or Texas Migrant Council employees staff individual one-stop centers, but overall project management is shared. The organizations also split administrative responsibilities, with ACS acting as fiscal agent for the partnership and the Texas Migrant Council handling internal monitoring.

Among contractors providing TANF case management in Wisconsin, subcontracting is a common means of collaboration. All four W-2 providers in the county subcontract out significant components of their services  home visits and assessments, for example  sometimes to other W-2 contractors or even the county government. Throughout the state of Wisconsin, about 13 percent of W-2 contract expenditures went to subcontractors (Wisconsin Legislative Audit Bureau 2001).

Several factors motivate cooperative efforts among contractors. National for-profits view collaboration as a way to access the expertise of community organizations, especially their familiarity with local populations or programs. Such knowledge can help for-profits make their proposals more competitive and target services more effectively. Partnerships with nonprofits can also soften local opposition to service provision by for-profit organizations. Nonprofits that join with other organizations as partners or subcontractors may benefit from increased capacity, income, and risk protection. Smaller organizations, in particular, may not be willing to bid for contracts independently because they lack the resources to initiate programs and, if the contract is performance-based, to cushion themselves from possibly dramatic fluctuations in income. Organizations also pursue alliances in order to reduce competition for contracts, removing potential rivals from the field by offering them a role in (and revenues from) service delivery.

While the benefits of collaboration are apparent, such arrangements are not always successful. In several sites, contractors have abandoned subcontracting or partnership agreements. ACS in San Diego County, for instance, designed its service model to include 15 or more community-based organizations that would provide specialized assistance to a diverse welfare population. That model proved to be impractical, however, in part because the countys monitoring procedures required extensive collection and verification of information from every subcontractor. Similarly, in Wisconsin, the YWCA and two health care providers created a limited for-profit partnership in order to combine their services on behalf of welfare recipients. The for-profit partnership dissolved after a year of operation.

Collaboration between for-profit and nonprofit organizations creates special challenges for the parties involved. Differences in management approach can be significant and extend to practical matters, such as employee compensation. Within the Valley Partnership in Lower Rio Grande Valley, discrepancies in benefits for employees of ACS and Texas Migrant Council created dissatisfaction among staff. Establishing a single benefits package was difficult, since both organizations also have employees working outside the partnership, but managers have attempted to equalize perks for employees as much as possible.

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