HOW LOCAL GOVERNMENTS STRUCTURE CONTRACTS WITH PRIVATE FIRMS: Economic Theory and Evidence on Solid Waste and Recycling Contracts.

Local governments often contract out many public services, including solid waste management. Although waste collection contracting is relatively straightforward, recycling is more complicated. Local governments have to figure out how to achieve multiple objectives: low-cost provision of service and a minimum level of service quality, along with attainment of recycling and waste-reduction goals. Who should own key assets, how fully to specify ex ante the service to be provided- including exactly what materials to collect what prices to charge households, and how to compensate contractors are but three of the difficult questions they must address. In this study, the author summarizes the economics literature on incomplete contracts to shed light on current waste management practices. She then shows results from an international City/County Management Association survey of over 1,000 U.S. communities and a detailed analysis of the structure of contracts in seven communities that have achieved high recycling rates. [ABSTRACT FROM AUTHOR]