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Contract Type and the Cost of Provision: Evidence from Maintenance Service Contracts *
Author(s) -
Jensen Paul H.,
Stonecash Robin E.
Publication year - 2009
Publication title -
fiscal studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.63
H-Index - 40
eISSN - 1475-5890
pISSN - 0143-5671
DOI - 10.1111/j.1475-5890.2009.00096.x
Subject(s) - sewerage , service (business) , contract management , finance , business , type of service , contracting out , economics , operations management , actuarial science , marketing , engineering , waste management
More than half a billion dollars are spent each year on the maintenance of Australia's urban water and sewerage networks. Expenditure is governed through a mix of in‐house and outsourced maintenance service contracts. We re‐examine issues relating to the relationship between the cost of maintenance service provision and the type of contract used. We take advantage of the fact that water retailers in Melbourne use a mix of contract types – including fixed‐price (FP) and cost‐plus (C+) contracts – for the provision of water and sewerage network maintenance services. Our results suggest that the C+ contract results in substantial savings.