Performance-based Contracting in Social Welfare Programs.

Summary
The Wisconsin Works (W-2) program changed the administrative structure for social welfare
services delivery from county government administration to one that also invites private sector
management of programs. Performance-based contracting was simultaneously introduced as a
mechanism to motivate and monitor the performance of public and private service providers.
We present a theoretical discussion of government contracting and the implications of alternative
contract structures for service provider behavior and performance. Using the W-2 program as a
case study, we analyze contract design and management across four contract periods (1997-
2005) as the state transitioned to a performance-based contract regime for social welfare services
delivery and evaluate service provider performance. We find that the state made rational
changes in the W-2 contract specifications and performance measures from one period to the
next that should have improved contract efficiency and effectiveness, and service providers
responded to these changes in allocating effort toward the achievement of priority performance
goals. At the same time, deficiencies in program administration and contract management
contributed to some contract failures and setbacks.

Note
Wisconsin county government administration - welfaresystem, USA.