Huysentruyt, Marieke
(2008)
Financial contracting with non-governmental organizations.
PhD thesis, London School of Economics and Political Science.
Abstract
This dissertation investigates how specific design choices or procedural rules that govern the contracting environment between government and non-governmental organizations affect organizational behaviour and contractual outcomes. Chapter 1 studies government procurement of a public good or service when only nonprofits compete. Theoretically, I find that the intensity of the ideological divide between government and nonprofits jointly impact the degree to which compromises are made in terms of both the public's and nonprofit's missions, as well as the ability on the part of government to reap double (cost-saving and strategic) financial gains. Chapter 2 analyses government procurement of specific development aid services via competitive scoring auctions, open to nonprofits and for-profits alike. Consistent with the theoretical predictions, I find robust empirical evidence that ex post renegotiation costs as well as initial price offers will tend to be higher when the agent is a for-profit compared to when the agent is a nonprofit; at the same time, the initial offers of for-profits will on average adhere better to the government's service delivery instructions compared to those of nonprofits. Furthermore, because nonprofits intrinsically value project outcomes, they will at times be able to offer government a better deal; at the same time, this distinct feature of nonprofits also gives them a competitive disadvantage when government holds strong views about how the services should be provided and finds it important that the agent does what it says. Finally, Chapter 3 shifts attention to the actual grant contracting procedures used by government (and other grant-making institutions) to finance nonprofits' initiatives to provide a public good or service. I focus on how asymmetric information impacts nonprofits' behaviour in markets for individual grant contracts. Theoretically, I make explicit the argument that hidden types may be associated with excessive grant requesting, and demonstrate how a collective contracting mechanism can essentially alleviate grant market failures due to adverse selection.
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