Contract budgeting attempts to reconfigure public budgeting as a system of purchase contracts between provider agencies and central government. It draws its inspiration from a simple model of contract in which the purchaser buys clearly specified outputs from a provider at a pre-agreed price. Contract budgeting thus represents a fusion of output-based budgeting schemas with the newer enthusiasm for placing the public sector on a ‘market’ footing. This paper reviews the problems which confront any form of output based budgeting, and then analyses the specific issues of contractualization. It concludes that contract budgeting does not well fit the realities of budgeting in a complex public sector.
