The politics of competitive sourcing: Cost savings, transaction costs, trade-offs and traditional public values

This dissertation examined the impact of costs savings on public-private competitions and the underlying forces driving competitive sourcing policy. This research is significant because it challenged the assumption of thirty percent savings when conducting a standard public-private competition. Also important is that this dissertation closely analyzed whether cost savings was the primary force driving competitive sourcing policy. The methodology used in this dissertation was a mixed model, which employed both quantitative analyses and qualitative interviewing. The quantitative model analyzed data on public-private competitions conducted on commercial activities in the Department of Defense from 1979--1994. This analysis also included transaction costs that accounted for contract support and government administration involved in the competitive sourcing process. The qualitative interviews asked two groups of federal government personnel questions regarding their agency experiences with competitive sourcing policy. The first group consisted of personnel directly involved in the implementation of competitive sourcing. The second group included Competitive Sourcing Officials (CSOs) or their designated agency representative(s). Additionally there was a historical content analysis that examined both the evolution of public values through government contracting and the development of competitive sourcing policy. The findings from this dissertation indicate three overarching themes. First, transaction costs matter and may dramatically impact the amount of cost savings produced through competitive sourcing. Second, the thirty percent cost savings figure reported in a number of studies could not be replicated, but it should be noted that savings did occur on a much smaller scale. Third, cost savings are not the only force driving competitive sourcing policy. Politics, public values and competing organizational goals have also played an active role in the development of competitive sourcing. A tangential theme of some importance was the representation of cost savings as a public value. Overall this research allows for a better understanding of the transaction costs, trade-offs and politics involved in the federal government's competitive sourcing policy.