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The Performance of Performance-based Contracting in Human Services: A Quasi-experiment

August 5, 2014 10:00 AM

Performance-based contracting (PBC) is an increasingly attractive practice to public human service agencies. By attaching contract compensation to a contractor's performance achievement, PBC encourages quality services, better outcomes, and less monitoring. However, current empirical evidence on PBC's effectiveness is limited and mixed. In The Performance of Performance-based Contracting in Human Services: A Quasi-experiment, author Jiahuan Lu from the University of Maryland, uses a case study of the Indiana vocational rehabilitation program to evaluate the effectiveness of PBC on individual employment outcomes. Lu employs a quasi-experimental design over a five year period and uses a Michigan program as a control.

After using propensity score matching and difference-in-differences regressions to control for the imbalances between the two states, Lu found that PBC is significantly effective in promoting better employment results and shorter time-to-employment. The author suggests introducing relational contracting as a supplement when using PBC in the purchase of human services.

Download the full paper from APPAM's Online Paper Collection.

 

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