Chapter 3: Competitive Government: Injecting Competition into Service Delivery

Osborne and Gaebler believe competition is perhaps the most important element for improving both the quality and cost-effectiveness of government services. Introducing competition does not necessarily mean that a service will be turned over to the private sector; rather, the crucial function of competition is ending government monopolies. While we decry private monopolies, we have long permitted monopolistic structures in our government. When service providers are required to compete, they keep their costs down, respond quickly to changing demands, and strive to satisfy customers. Monopolies, on the other hand, stifle innovation, since an entrenched bureaucracy and the politically powerful often have control over them. Competition can actually boost morale among public sector workers, because they receive public recognition when they are successful.

Competition can come in various forms, including allowing public agencies to compete with private firms, having private firms compete with each other, even fostering competition among public agencies. Not only services provided to the public, but also internal services such as printing, accounting, purchasing, and repair services, can be made more efficient and responsive by introducing competition. Most often, competition comes in the form of contracting out for services in the private sector. There are pitfalls, however. Contracting can be difficult because it requires skill in writing and monitoring contracts. In many cases, the possibility exists that a contractor will eventually develop a monopoly; if this occurs and the public sector no longer has the capacity to perform the task, they are at the mercy of the private firm should it decide to raise its prices. Contracts can also be unfairly awarded to political patrons. Osborne and Gaebler believe that corruption can be avoided if four criteria are met:

1. if bidding is truly competitive;
2. if competition is based on hard information about cost and quality of performance;
3. if contractors are carefully monitored; and
4. if a relatively nonpolitical body is set up to perform these tasks.

Finally, the government must create the market rules that ensure equity and monitor service providers so that they remain accountable for their performance.