Agents or Stewards: Using Theory to Understand the Government-Nonprofit Social Service Contracting Relationship

Using agency and stewardship theories, this study examines how public administrators manage contracting relationships with nonprofit organizations. Interviews were conducted with public and nonprofit managers involved in social services contract relationships at the state and county level in New York State. The use of trust, reputation, and monitoring as well as other factors influence the manner in which contract relationships are managed. The findings suggest that the manner in which nonprofits are managed evolves over time from a principal-agent to a principal-steward relationship but with less variance than the theories would suggest. This results in part from the contextual conditions that include the type of service, lack of market competitiveness, and management capacity constraints. The intergovernmental environment in which social services are implemented and delivered presents complex challenges for public managers responsible for managing contract relationships. The findings from this study document those challenges and the corresponding management practices used with nonprofit contractors.