Dees government punish nonprofits for high administrative costs in contracting decisions?
By: Zhao, Jianzhi and Lu, Jiahuan
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Material type: 
BookPublisher: American Review of Public Administration Description: 50(3), Apr, 2020: p.286-296.Subject(s): Government contracting, Government–Nonprofit relations, Administrative costs, Overhead costs
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American Review of Public AdministrationSummary: As government financing of nonprofit organizations to deliver services and implement policies has become a common practice in the public administration landscape, the question of what factors affect government’s source selection has emerged as a significant one. Within this strand of research, how nonprofits’ administrative costs affect their receipt of government contracts is still not fully understood. This article explores that relationship using a large panel data set of U.S.-based international development nonprofits from 1967 to 2014. Different model specifications consistently demonstrate an inverted U-shaped relationship between a nonprofit’s level of administrative costs and its amount of government contracts. In particular, as a nonprofit’s level of administrative costs increases, its amount of government contracts will initially increase, but after its level of administrative costs reaches approximately 16% to 18% of total expenses, further increases in the nonprofit’s level of administrative costs will reduce its amount of government contracts. These findings have implications for both public and nonprofit management.- Reproduced
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Articles
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Indian Institute of Public Administration | 50(3), Apr, 2020: p.286-296 | Available | AR123510 |
As government financing of nonprofit organizations to deliver services and implement policies has become a common practice in the public administration landscape, the question of what factors affect government’s source selection has emerged as a significant one. Within this strand of research, how nonprofits’ administrative costs affect their receipt of government contracts is still not fully understood. This article explores that relationship using a large panel data set of U.S.-based international development nonprofits from 1967 to 2014. Different model specifications consistently demonstrate an inverted U-shaped relationship between a nonprofit’s level of administrative costs and its amount of government contracts. In particular, as a nonprofit’s level of administrative costs increases, its amount of government contracts will initially increase, but after its level of administrative costs reaches approximately 16% to 18% of total expenses, further increases in the nonprofit’s level of administrative costs will reduce its amount of government contracts. These findings have implications for both public and nonprofit management.- Reproduced
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