Incentives in Third-Party Governance: Management Challenges and Accountability Implications

Abstract

Contract incentives are designed to encourage contract performance and to provide public managers with a powerful tool to achieve contract accountability by motivating contractors with rewards or sanctions. Our knowledge of contract incentives has been primarily advanced as an element of contract design, yet as we move beyond contract specification and further into the contract lifecycle, we know little about why and how managers implement incentives. This study examines public managers’ use of contract incentives in practice. A typology of contract incentives is developed to capture a more accurate range of formal and informal incentives beyond what is currently understood. The study also assesses factors that influence managerial use of incentives. The findings shed light on the complexities of maintaining accountability in third-party governance structures and the management techniques aimed at improving the performance of public agencies.