Re-examining British welfare-to-work contracting using a transaction cost perspective

This article critically reflects on the administration of activation services in the UK. It describes the welfare-to-work quasi-market and focuses on the impact of 2008 commissioning reforms that advocated amalgamating small contracts into larger ‘lots’, creating a top tier of prime providers to manage subcontractors, and increasing outcome-based funding. Drawing on transaction cost theory and empirical case study research, it is demonstrated that these changes led to an increase in a range of activities and costs for competing service providers that undermine government rhetoric of choice and efficiency. This article adds to the existing literature on welfare-to-work contracting by demonstrating the difficulties some organisations face in the context of welfare markets and questioning public service out-sourcing processes. It concludes by reflecting on the implications for future market-based social policy reforms.