Contracting out of public services

The contracting out of public services to the private sector is used by a number of countries and particularly by the USA where it is the predominant method of privatization. It combines the private provision of public services with competition. Such competition can spur improved public provision of services. Where competition is active and where there is genuine competitive bidding for the franchises, it can lead to the provision of competitive services in terms of price and quality. For hard-pressed state or local authorities, faced with budgetary constraints, it can provide a useful additional source or an alternative to public provision. However, effective competition is essential in order to prevent collusive bidding or the emergence of dominant firms which may eventually shut out other competitors. There may be a need to monitor the quality of the services provided.