Public procurement performance and the challenge of service complexity – the case of pre-hospital healthcare

Abstract

Purpose The purpose of this paper is to study the links between contextual changes, contract arrangements and resultant problems when changes in outsourcing regulatory requirements are applied to complex pre-hospital services previously characterized by relational contracting. Design/methodology/approach The study deployed a qualitative design based on interviews with key informants and extensive studies of documents. It is a longitudinal study of a procurement process taking place in a regional health authority covering the period 2006 to 2017. Findings A complex and longitudinal public procurement process where pre-hospital (ambulance) services are transformed from relational and outsourced governance to more formal arrangements based on legal and transactional controls, is described in detail. After several years, the process collapsed due to challenges following public scrutiny, legal actions and administrative staff resignations. The public body lacked procurement competencies and the learning process following the regulations was lengthy. In the end, the services were in-sourced. Research limitations/implications This study is based on one case and it should, therefore, not be generalized without limitations. Practical implications One practical implication of this study is that transactional contracts are not optimal when core and complex services are produced in inter-organizational settings. In public sector health-care contexts, the role of informal and social controls based on relational exchanges are particularly applicable. Social implications Acute health-care services essential to citizens’ security and health imply high asset specificity, frequency and uncertainty. Such transactions should according to theory be produced in-house because of high agency costs in the procurement process. Originality/value The paper contributes to the understanding of how the public procurement process can itself be complex, as managerial challenges and solutions vary along several dimensions and are contingent upon external factors. In particular, the study increases knowledge of why the design and implementation of outsourcing models may create problems that impede and obstruct control in a particular public sector context.