On the Importance of Relationship-Building in Government Outsourcing: Evidence and Insights from the Transportation Industry

On the Importance of Relationship-Building in Government Outsourcing: Evidence and Insights from the Transportation Industry

This paper provides a comparative analysis of outsourcing practices in public and private sector organizations. Its purpose is two fold. First, it provides a descriptive account of the outsourcing process in several manufacturing firms that are comparable to state transportation agencies in terms of their size and scope of services delivered. To date, there have been only limited attempts to draw what lessons, if any that might be learned from the private sector's ongoing and generally successful outsourcing experience. And second, this paper provides unique insights into the perennial question of why public agencies have not embraced outsourcing to the same extent as their private sector counterparts. Using data gathered from a survey of 27 U.S. state departments of transportation, five large manufacturing firms, and three third-party transportation logistics providers, the results indicate that successful transportation outsourcing hinges upon the creation and maintenance of an ongoing relationship between firms and outsourcing providers. The paper then concludes with a discussion of how future research on public sector outsourcing practices ought to address the challenges associated with the political, legal, and institutional barriers that prevent this sort of relationship building in the public sector.