Understanding the Differences Between Vendor Types in Local Governance

Abstract

It is commonly posited that for-profit, nonprofit, and other government vendors have fundamental differences, which make one or the other the superior choice depending on the circumstances of service delivery. Past research, focusing on service and market characteristics, finds support for this proposition. In this article, we investigate not only the typical theoretical expectations regarding vendor traits, service characteristics, and market conditions associated with the sectors, but also the presumed trustworthiness and management practices that are argued to differentiate them in an effort to better understand the roles played by each in local government contracting. Our findings indicate that as expected, nonprofits are most commonly employed when dealing with hard to define, “soft” services with weak markets. However, contrary to expectations, nonprofits are not generally considered more trustworthy than for-profits and are not managed more “loosely” (i.e., more ambiguous contracts, more discretion exercised in sanctioning) than their for-profit peers. Rather, public vendors seem to be the most trusted and are managed less rigidly than contractors from the other sectors.