Human Services Contracting

A Public Solutions Handbook

Robert A. Shick, Lawrence Martin

• Publisher: Routledge
• Year: 2019
• Print ISBN:
  9781138498013
• eBook ISBN:
  9781351017213
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

In the last 35 years, governments around the globe have increasingly contracted with nonprofit and for-profit entities designed to provide a portion of the public sector's portfolio of goods and services. This trend can be traced to a variety of factors, including perceived or actual economic efficiencies in outsourcing goods and services, values concerning the role and size of government in society, and the financial and organizational constraints of many government entities. In the United States, child welfare services adopted a pro-contracting approach early, and a variety of other human services have followed suit, including mental health care, job training, homeless services and others. Although there is strong evidence to suggest that human service contracting is growing over time, scholarship continues to lag on topics related to human service contract management, policy implementation and innovation, performance-based contracting and evaluation.

This new volume in the Public Solutions Handbook series is the first volume-length treatment of human services contracting issues, integrating both policy and practice, and exploring a broad range of issues that includes the fields of history, growth, innovations, results and outcomes, best practices and the future of government human service contracting. Chapters in this book examine specific human service contracts, both in the U.S. and abroad, geared to practitioners in the public sector—from local government service contractors to municipal employees—as well as MPA students and those enrolled in courses on intergovernmental relations and nonprofit management.

Part 1

Foundation Chapters

1
A Brief History of Human Service Contracting

Robert A. Shick and Lawrence L. Martin

Introduction

This chapter briefly chronicles the history of human service contracting. The frame of reference used is that of the federally designated state human service agencies. These 50 state agencies originally administered the “social services titles” of the Social Security Act and today administer the federal Social Services Block Grant. Adopting this frame of reference makes it possible to place human service contracting in its historical context and to identify how it has changed and evolved over time. Any attempt to put dates on historical events must necessarily be somewhat arbitrary. The events and the timeframes discussed herein are not representative of all human service contracting at any point in time. The intent of this chapter is to identify the major themes that played out broadly on the national scene.

Human service contracting has been around for a long time. Its origins can be traced back to the Colonial era (Kamerman & Kahn, 1998). Paupers, both children and adults, were frequently “farmed out” by governments to local individuals who were paid an agreed upon sum of money for their care. If the pauper was able bodied, the agreement (the contract) frequently called for the pauper to be instructed in a useful trade (Kahn, 1978; Gibelman & Demone, 1989).

The modern era of human service contracting dates from the 1960s. Four periods can be identified: (1) the formative period from the mid-1960s to the end of the 1970s, (2) the maturation period comprising the decade of the 1980s; (3) the performance period from the 1990s to roughly 2005 and (4) the pay-for-results period that stretches from 2005 to the present day. In the sections that follow, the human service policy context of each period is discussed and how the policy context shaped human service contracting.

The Formative Period (1960s–1979)

Prior to the 1960s, two separate human service systems existed, one public and one private. Little interaction took place between the two systems. Governments raised revenue from taxes and other sources and directly provided human services to public clients. Private nonprofit organizations raised revenues from donations and other sources and provided human services to their private clients (Martin & Frahm, 2010). Federal policy initiatives beginning in the 1960s merged these two previously independent systems into one interdependent public/private human service system where government provided the funding and the private sector, primarily the nonprofit sector, provided the service. Much of the literature (e.g., Wedel, 1973, 1976; Kahn, 1978; Fisk, Kiesling, & Muller, 1978; Mueller, 1978; Kettner & Martin, 1983) during this formative period used the terms “purchase of service” and “purchase of service contracting” rather than human service contracting.

Policy Context

Several major federal policy changes during the 1960s contributed to uniting the public and private human service systems through the mechanism of contracting.

The Demonstration (Model Cities) Act of 1966, the Economic Opportunity Act of 1964, the Community Mental Health Centers Act of 1963 Act and the 1962 and 1967 amendments to the social service titles of the Social Security Act allowed state human service agencies for the first time to use federal funds when contracting with nonprofit organizations and for-profit businesses. Prior to these changes, state human service agencies could only use federal funds in contracts with other government agencies.

The amendments to the social services titles of the Social Security Act mandated that states provide child day and other supportive services to welfare recipients enrolled in the work incentive (WIN) program. States had the option of either directly providing these services or contracting for them. The amendments included provisions for “open-ended” federal appropriations. Consequently, the amount of federal funding available to states for human services was essentially unlimited! The amendments did contain cost-sharing requirements. State human service agencies were required to cover 25% of the cost of providing human services; the federal government would pay the remaining 75%. However, the amendments allowed state human service agencies to use “donated funds” to satisfy the 25% cost sharing requirements. The donated funds could come from other state agencies, local governments and in some instances private sources (e.g., the United Way).

The expansion of contracting options combined with “open-ended” federal funding and the ability to use donated funds to satisfy federal matching requirements enabled state human service agencies to significantly increase the types and amounts of human services they provided, frequently at no cost to themselves. The increasing importance that contracting played during this period was acknowledged by the convening of the first “National Institute on Purchase of Service Contracting” held in 1978 (Wedel, Katz, & Weick, 1978).

Contracting Context

In the 1960s, most state human service agencies, as well as their contractors, had little experience with contract service delivery (Demone & Gibelman, 1989). Consequently, financial accountability was the primary concern of state human service agencies (Elkin, 1985). Cost reimbursement contracting was the preferred method. State human service agencies and their contractors mutually agreed to detailed budgets. Only those expenditures in keeping with the mutually agreed upon budgets were allowable. State human service agencies conducted frequent audits of their contractors to ensure the proper use of federal funds.

Human service contract administration was in its infancy during this period. Contract service requirements were basic. Contract monitoring was sporadic at best (Gurin & Friedman, 1980; Kettner & Martin, 1985). Programmatic concerns (efficiency, quality, effectiveness, equity, etc.) were of secondary importance (Austin, 2002). The American Public Welfare Association (APWA) noted at the time that the focus on financial accountability resulted in a “relatively weaker focus on quality, adequacy and effects of services” (Slack, 1979, p. 30).

Summary

To summarize, during the formative period:

• Contracting resulted in two previously separate human service systems (one public, one private) being combined into one interdependent public/private human service system.
• Contracting and the use of donated funds enabled state human service agencies to increase the types and amounts of services provided.
• Contract administration was primarily concerned with financial accountability.
• Cost reimbursement was the preferred method of contracting.

The Maturation Period (1980–1990)

By the beginning of the 1980s, contracting was the major mode of human service delivery nationally (Benton, Field, & Millar, 1978). A consequence of creating one interdependent public/private human service system was that contractors had become dependent on government contracts to fund their basic operations and state human service agencies had become dependent on their contractors for the delivery of mandated human services.

The creation of an interdependent public/private human service delivery system left many policy and administrative questions unanswered. One of the more pressing unanswered questions involved the exact nature of the human service contracting relationship. Many state human service agencies saw their contractors as interchangeable vendors or suppliers (Hatry & Durman, 1985). Most contractors saw themselves as partners, preferably in long-term relationships with state human service agencies (Gibelman & Demone, 1983). The maturation period of human service contracting began a process of attempting to sort out these and other issues.

The sorting out process included dealing with the two dueling paradigms of human service contracting that had been around since the 1960s, the market model and the partnership model (Kettner & Martin, 1990). The market model posited that competition between contractors should be encouraged as a method of improving human services while driving down costs. The partnerships model posited that the strengths of government and the private sector should be combined in long term stable contracting relationships that lead to better human services (Hatry & Durman, 1985; Gibelman & Demone, 1983; Kettner & Martin,1989, 1990).

Policy Context

Much of the human service literature of the 1980s focused on “privatization.” This literature was primarily negative. Privatization, applied to human service contracting, was admonished for eroding the administrative state and for the de-institutionalization of social welfare among other concerns. A great deal of this criticism was unwarranted because contracting had become the major mode of human service delivery before privatization existed as a defined public policy (Martin, 2004). In other respects, some criticism was warranted owing to the fact contracting was initiated and expanded primarily for creative financing purposes and not as a method of improving the efficiency, quality and effectiveness of human services.

The original social service titles of the Social Security Act were replaced in the later part of the 1970s by the Title XX program. The Title XX program also brought an end to “open-ended” federal funding for human services. During the 1980s, the Title XX program was itself replaced by the Social Services Block Grant (SSBG). The SSBG became the major federal funding source for human services. As a block grant, the SSBG gave increased flexibility to state human service agencies, but also reduced overall federal funding (Carter, 1983).

Contracting Context

By the decade of the 1980s, state human service agencies had created major contracting human service programs. Now they had to manage them. Federal funding for human service program was no longer expanding. State human service agencies had to consider such programmatic issues as the efficiency and quality of their contracted services (Kettner & Martin, 1989). State human service agencies began developing standard operating procedures for contracting. The use of requests for proposals (RFPs) became the procurement tool of choice. Standardized contract formats and procedures became the norm (e.g., University of Texas, 1986; Kettner & Martin, 1987). Human service contracting began to function more like mainstream public procurement.

Efficiency Considerations

Efficiency considerations initially took the form of “unit-of-service” contracting. A unit of service is a measure of the amount of service or product provided by a human service program (Table 1.1).

Table 1.1
Units of Service

Counseling	One hour
Information and referral	One referral
Transportation	One trip
Home delivered meals	One meal
Job placement	One

Unit-of-service contracting enabled state human service agencies to “purchase” specific amounts of services at predetermined prices. State human service agencies expended considerable time and effort searching for the best units of service (Bowers & Bowers, 1976) and the best methodologies for computing unit-of-service costs (e.g., Elkin, 1985).

Quality Consideratio...

Table of contents

• Cover
• Half Title
• Series
• Title
• Copyright
• Contents
• List of Tables
• Series Editor’s Introduction, Marc Holzer
• Introduction
• Part 1 Foundation Chapters
• Part 2 Contracting for Specialized Human Services
• Part 3 Contracting for Human Services in Other Countries
• Part 4 The Future of Human Services Contracting
• About the Editors and Contributors
• Index