The Use of Contracting in the Public Sector—Recent New Zealand Experience

This research note examines the expanding use of contracting within the public sector in New Zealand. The term ‘contracting’ is interpreted broadly to include both external contracting (ie outsourcing) as well as the use of more explicit or formal ‘contracts’ within and between public sector organisations. No attention is given here to the separate, albeit related, processes of corporatisation, commercialisation and full privatisation (ie asset sales and the termination of public funding as well as provision). The empirical data, although limited, suggest that the recent increase in contracting in New Zealand has brought significant gains in terms of fiscal savings, productive efficiency, consumer choice and managerial accountability. Recent trends, however, have also posed some important policy issues, among them the limits to contracting out and the potential dangers associated with ‘hollow’ government.