Contracting out and quality of road maintenance service in Uganda using panel data

There is strong evidence that outsourcing can give rise to cost savings in public service delivery. Although this evidence is compelling and associative, it lacks dynamism and an outlook on developing countries. Moreover, there is still a need for an all-encompassing perspective, especially for public technical services like road maintenance. This paper examines the effect of contracting out on the quality of road maintenance services using panel data. Selection bias has been controlled by accounting for the year, region, and topography. The results reveal a negative effect of contracting out on the quality of road maintenance.

The findings are robust to alternative model specifications including imputation of missing values and transformations of some control variables; and corroborate prior related research in various fields such as education, prisons, and workers’ compensation claims. The negative effect could be attributed to the possibility that contracting out lowers the investment on road maintenance, which consequentially reduces the quality, as stakeholders are predisposed to cost savings. This could be true in Uganda’s case, as in most developing countries, where the bureaucracy and the legal institution are relatively weak. Besides, the poor contractual management practices and delays arising from weak legal enforcement may give rise to the negative effect of contracting out on road maintenance quality.