The role of contract design in privatization of child welfare services: The Kansas experience

Abstract

In recent years, many states have privatized parts of their child welfare systems. This paper examines experience with privatization in Kansas, a pioneer of this approach, and discusses the lessons to be learned about the design of public-private contracts in human services. We describe the contracting approach initially taken and evaluate the incentives it created. Crucially, the state decided to contract separately for family preservation, foster care and adoption, and to hold each group strongly accountable for performance via fixed payments per case. These choices proved problematic given that the various contractors' performances are somewhat interdependent. While contractor performance with regards to specific measures of child well-being indicates some improvement in Child Welfare services, contractors have experienced significant financial hardships under the new system. Subsequent reforms have reduced contractors' exposure to financial risk via the payment rates, but retained the separate contracting approach. Future refinement of this system must protect the ability of contractors to provide quality services to children while ensuring their own financial viability in the long term. © 2004 Elsevier Ltd. All rights reserved.