Public and private: The role of competition in municipal expenditures
Competitive bidding may affect spending for municipal services and cities. This study's major research questions are: whether competition in transit bus service and emergency medical service are associated with differences in operating costs and performance; whether the overall degree of competition that municipalities employ is associated with aggregate municipal expenditures; and whether differences in the type of evaluation, monitoring, bidding, re-bidding, negotiation, and specification of contracts affect the efficiency and effectiveness of transit bus and EMS service. While the findings were not uniform, the percentage of total bus service open to competition was strongly associated with lower vehicle operating costs per hour, perhaps the best single measure of efficiency. Competition was also associated with higher operating costs per passenger trip and mile. Lower bus operating costs were also associated with larger urban populations and larger urban areas in square mileage, but not larger transit service area square mileage or service area square mileage. These findings are consistent with the view that lower costs are associated with more potential service providers in an urban area that may provide direct or implied competition to the incumbent provider. In aggregate municipal spending, there was no evidence of an association between the percentage of total municipal spending open to competitive bidding and overall municipal pending levels per capita. Any savings from competitive contracting, if they existed, were not passed along to reduce municipalities' overall spending. Although the private sector provision of service showed a strong association with lower costs in some measures, other measures did not show significant cost advantages for private bus service providers over other types of service, including other government provision or mixed service provision by two types of providers concurrently. Further, competition appeared to play a largely independent role from private provision in service efficiency. This finding runs counter to the commonly-assumed connection between privatization and competition, raising issues that require further research.
|Year of publication:||
|Authors:||Ehrlich, David G|
Wayne State University
|Type of publication:||Other|
ETD Collection for Wayne State University
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