In a hollow state there are many degrees of separation between the source of taxpayer funds and the final distribution of taxpayer-funded products or services.
[3][4] The history of government contracting goes back thousands of years to when Mercenary bands were utilized by the ancient Greeks, Persians, and Romans.
The metaphor "Hollow State" is meant to be understood as a system consisting of units of government separated from their outputs but still linked by negotiation or contract.
However, if the nonprofit community-based organizations are too limited in capacity to carry out their grants or contracts, then a disconnect occurs in the hollow state.
[14] One of the primary reasons privatization occurs is because of the severe capacity that limitations force the government to contract for services it does not have the ability to provide.
Horizontal networks consist of 3 types, policy making, resource exchange, and project based, all of which are between governments and non-governmental organizations.
Many of these are the small grassroots or community-based nonprofits that meet important human service needs for a specific geographic area or population.
[17] Substituting from a stable, linear government for complex networks may raise questions of allocation deliberations being solely prompted by cost/ efficiency not taking into account taxpayers other values.
This can lead to experiencing disparities in fundraising, fiscal and human resource management practices, and even skills in building and maintaining partnerships and gaining political support.
The hollow state is exemplified by increased reliance on third-party producers, which may result in a lack of oversight expertise in government.
Managers at every level are forced to deal with an uncertain budget cycle, long waits for payment for services rendered, financial crises, billing problems, frequently changing and contradictory rules and much more.
This information disparity causes the principal to have unrealistic expectations and allows the agent to mislead the principle as to aspects such as cost, time, and human resources.
For example, contractors hired to patch roofs with blue tarp for FEMA after Katrina received payment of "between $149 and $175 per (10ftx10ft square)."