Privatization in Practice: Case Studies of Contracting for TANF Case Management. Contract Duration

03/01/2003

Advantages and disadvantages exist for choosing short or longer contracts. Contracts covering longer periods reduce the potential frequency of contractor turnover and the disruption in service provision that may accompany it. Fewer and less frequent procurements can help conserve both agency and contractor staff time and other resources. Longer contracts also may give contractors more opportunity to establish a program model and improve service provision over time.

Contracts of shorter duration, on the other hand, increase incentives for contractors to launch and establish programs quickly. Shorter contracts may contribute to increased competition as well, by reducing the advantages of long-term incumbency. They also reduce risk by providing agencies more frequent opportunity to change performance targets or payments. Unsatisfactory providers can also be released more readily. Many contracts include provisions allowing the agency to terminate them before they expire, but doing so can be difficult.

In practice, the basic contracts in the study sites cover one or two years (Table IV.4). In most cases, however, the contracts include options for renewal without a new procurement if the public agency is satisfied with the providers performance. None of the study sites offer contracts whose total length, with renewals, exceeds four years. Some exceptions to these patterns occur under special circumstances. At least one site  Lower Rio Grande Valley  issued a contract for only eight months to cover the period shortened by the termination of a previous contract. In Hennepin Countys 2002 round of contract renewals, agency administrators renewed three contracts for only six months, rather than a full year, as part of a corrective action plan for providers that were not performing.

Table IV.4.
Contract Duration in Study Sites
Site Basic Contract Length Options for Renewal
Delaware 1 year 1 one-year renewal (both contracts)
Hennepin County 1 year 2 one-year renewals
Lower Rio Grande Valley 8 months 3 one-year renewals
Palm Beach County 1 year 2 one-year renewals (employment services contract)
None for eligibility determination contract
San Diego County 1 year 3 one-year renewals(a)
Wisconsin 2 years None
a San Diegos contracts have been extended for an additional year with a renewal option for up to 18 months.

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