A CONTINGENCY APPROACH TO MANAGING OUTSOURCING RISK IN MUNICIPALITIES

We discuss outsourcing risk in relation to different governance models, and provide a framework for classifying the risk related to an outsourcing choice. We argue that different kinds of outsourcing have different degrees of risk, and that the governance model needed for successful outsourcing is contingent on the nature and amount of that risk. As result, municipalities need to use several different governance models, each attuned to the degree of risk of the service being outsourced. Moreover, a municipality’s managers must be especially careful not to outsource a service unless they have the capability to manage the requisite governance model.