Assessing the impacts of transaction costs and rapid growth on local government service provision and delivery arrangement choices in North Dakota

Abstract

Local governments pressured by fiscal stress have long privatized public service provision to decrease costs or maintain service levels (Greene, 1999). While considerable research has considered contracting behaviors of 'mature,' urban and suburban communities for services which they already are, or are capable of, providing (e.g. Brown and Potoski, 2003), what happens in small communities faced with a rapid influx of population and resources? Do factors shaping contracting in larger, resource-constrained locations apply to expanding cities under conditions of opportunity? Are growing cities' service options limited by a lack of existing capacity, or expanded by additional resources to allow innovative delivery arrangements?Western North Dakota is currently experiencing an oil boom, doubling local populations in half a decade and dramatically impacting demand for public services. Using original data from over 100 North Dakota cities and counties in 2014, this paper models the impact of service and market-specific transaction costs, changes in resources and service demand, and other community factors on public officials' choices among delivery arrangement modes when contracting out for local services.