The public sector hold-up problem

How structural asymmetries can undermine relationship-based service delivery

Datos Bibliográficos

ID17828602
AutoresDominique Malatesta (0000-0002-0486-7491, Indiana University Bloomington, autor de correspondencia), C Smith (0000-0003-2677-9991, University of Arizona), Craig R Smith (0009-0007-2578-2394, University of Arizona)
Año2026
Fecha de publicación2026-03-20
Peer ReviewedSí
Open AccessSí
TipoARTICLE
RevistaPerspectives on Public Management and Governance (JOURNAL)
Identificadores de la revistaISSN: 2398-4910 • E-ISSN: 2398-4929
EditorialOxford University Press (OUP) (PUBLISHER)
DOI10.1093/ppmgov/gvag003
OpenAlexW7154624047
IdiomaEN
Referencias citadas35

A recent wave of government contract cancellations under Termination for Convenience (TfC) clauses underscores the risks embedded in contemporary public contracting. These clauses, designed to preserve flexibility, have increasingly shifted from safeguards of last resort to instruments of routine discretion, exposing suppliers to sudden termination regardless of performance. We theorize this as the public sector hold-up problem, where relationship-specific investments that build collaborative capacity are vulnerable to unilateral state authority. Unlike private markets, where bilateral exposure and governance tools mitigate hold-ups, public contracting features structural asymmetries: (1) legal immunities insulating agencies, (2) political dynamics triggering unpredictable cancellations, and (3) constitutional constraints that preclude reciprocal safeguards. Extending hold-up theory into the public domain, this framework highlights how unchecked flexibility can undermine collaborative capacity essential for democratic governance

Corporate governance · Politics · Private sector · Public sector · Reciprocal · Service delivery framework · Military and Defense Studies · Public Procurement and Policy · Public-Private Partnership Projects