Question

Speculate on what technology might be able to do in 15 years to improve the contracting process.

Hypothesize whether contracting with the government will be easier or more difficult in the future. Provide a rationale for your answer.

Answer 1

Implementing technology and improving business processes go hand in hand. Applying new technology and keeping processes the same can hold us back from leveraging the full potential of technology products. Technology enables business process changes and improvements, provided that we know what the product is capable of.

According to recent research conducted by the International Association of Commercial Contract Managers (IACCM, "Corporate Benchmarking Survey, Summer 2004"), 87 percent of contracting professionals stated that the speed of decision making and execution in contracting are sources of organizational competitive advantage. While many practitioners are bullish on the prospect of value creation in contract management, the challenge of securing wider organizational buy-in around the merits of business process transformation still remains.

common practices in procurement, we assume that the principal can write

a contract that specifies two requirements: performance and time spent on the job. For

instance, if the principal wanted the agent to provide landscaping services, the contract

could specify performance requirements such as the frequency for trimming certain trees and

bushes, the amount of weeds allowed per square yard, and what composition of fertilizers were

to be used. Alternatively, the contract could specify that the agent spend forty hours a week

providing landscaping services as directed by the principal. While time and performance

requirements are contractible, however, we assume that labor intensity is not. This implies

that the agent will always have some discretion over how hard to work.

Local governments can provide services with their own employees or by contracting

with private or public sector providers. We develop a model of this “make-or-buy”

choice that highlights the trade-off between productive efficiency and the costs of con-

tract administration. We construct a dataset of service provision choices by U.S. cities

and identify a range of service and city characteristics as significant determinants of

contracting decisions. Our analysis suggests an important role for economic efficiency

concerns, as well as politics, in contracting for government services.