Contributions and limitations of relational governance towards the reliability of publicly procured air ambulance services

Abstract

The interconnectivity of critical services, resulting partly from the megatrends of globalization, liberalization, and deregulation, comes in many shapes and forms, one of them being the procurement arrangement. For publicly procured critical services, the transition between two contract periods can create organizational stresses that affect reliability. This paper, drawing on empirical materials from a case study of the two most recent air ambulance service procurements in Norway, assesses how governance solutions can counter such stresses and contribute to maintaining organizational reliability. Specifically, we analyse the contributions and limitations of relational governance, using relational exchange theory as a starting point. Although contractual governance is fundamental for procured services, contracts cannot account for all future contingencies in long-term, complex procurements. In addition, contractual governance can shift the actors’ focus to procedural and contractual matters rather than total outcomes. Relational governance counters this effect by encouraging a holistic approach in which both flexibility and joint problem solving are important. We find that, in air ambulance procurements, the procurer has applied relational governance, with positive effect on organizational reliability. However, we also find that relational governance implies a difficult balancing act between flexibility-enhancing and stability-preserving approaches. Furthermore, when conflicts between a procurer and supplier are profound, neither contractual nor relational governance can necessarily provide adequate solutions. We argue that an implication of imperfect governance solutions is that procurer organizations and public policy makers need to take into account that the procurement of critical services can involve periods of reduced reliability in service output.

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