Third-Party Federalism: Using Local Governments (and Their Contractors) to Implement National Policy

Abstract

The federal government relies on states and localities to implement federal policy. The Department of Energy’s Energy Efficiency and Conservation Block Grant Program is one case in point. As a part of the American Recovery and Reinvestment Act (ARRA), over $3.2 billion was directed to local government energy efficiency and sustainability efforts. However, local governments have struggled to achieve timely implementation—one of the key goals of the program as specified by the federal government. We find that using contractors and the complications associated with using these third-party implementers influenced achievement of this federal goal. The insights for intergovernmental grant implementation derived from this analysis provide a foundation for integrating the fiscal federalism and contracting literatures into a broader theory of third-party federalism.