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Warner, M.E. and Amir Hefetz. 2010. "Service Characteristics and Contracting: The Importance of Citizen Interest and Competition," pp 19-27 in The Municipal Year Book 2010. Washington, DC: International City County Management Association.

Theory suggests that the decision to provide a service in house or via contracting will be determined primarily by service characteristics, e.g. specific physical infrastructure or technical expertise, and difficulty in contract specification and monitoring. However a 2007 national survey of US local government managers shows that citizen interest and the level of competition in the local market may be more important. Across 66 measured services, the average level of competition is less than two alternative providers. For rural areas there is only one alternative provider on average. Thus contracting out often results in substituting a private monopoly for a public monopoly. This helps explain why direct public delivery remains the primary service delivery mode.

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Subject: Privatization