Handbook of Research on Nonprofit Economics and Management
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Handbook of Research on Nonprofit Economics and Management

Edited by Bruce A. Seaman and Dennis R. Young

Nonprofit organizations are arguably the fastest growing and most dynamic part of modern market economies in democratic countries. This Handbook explores the frontiers of knowledge at the intersection of economics and the management of these entities. The authors review the role, structure and behavior of private, nonprofit organizations as economic units and their participation in markets and systems of public service delivery, assess the implications of this knowledge for the efficient management of nonprofit organizations and the formulation of effective public policy, and identify cutting edge questions for future research.
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Chapter 12: Contracting Out

Salvatore Alaimo


Salvatore Alaimo Introduction Contract management has gained attention and increased in activity in the US nonprofit sector over the past few decades. The devolution of the US government has resulted in an increase in contracting out services to nonprofit organizations, particularly in the area of social services. This activity, along with the challenges nonprofit organizations face in managing government contracts, has been widely studied and researched (Bernstein, 1991; Ferris, 1993; Gann, 2001; Kettner and Martin, 1996; Saidel, 1991; Salamon, 1987; Smith and Grønbjerg, 2006; Smith and Lipsky, 1993; Van Slyke and Roch, 2004; Young, 1999); see also Chapter 22 of this volume. Charitable nonprofit organizations that have IRS section 501(c)(3) tax status also contract out for services and collectively spend an estimated more than $100 billion annually; however this activity has not attracted the same attention from researchers and scholars.1 Scholars and practitioners suggest that nonprofits are increasingly hiring independent contractors or outsourcing functions as a means to improve the management of their organizations and remain competitive (Winkler, 2000; Ben-Ner, 2004). There is some evidence of the types of nonprofits contracting for services, the types of services, the costs for those services, the motivations behind contracting and what implications this activity has for nonprofit organizations. One example is technology’s influence on the health subsector, such as recent developments in electronic medical record (EMR) software that enables real-time entering of patient data and reduces the outsourcing of billing functions (Lowes, 2003). The Voluntary Hospitals of America 2007 survey...

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