HR Green ASD for Local Governments Handbook - Executive Summary - Manual (Page 8)

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CHAPTER 3: MANAGED COMPETITION
Kimberly Nelson
Definition: Managed competition, also called public-private competition, attempts to inject competition into
the system in order to determine the most cost-efficient way to provide municipal services. Under managed
competition, a public-sector agency competes with private-sector firms to provide public-sector functions or
services under a controlled or managed process. This process clearly defines the steps to be taken by
government employees in preparing their own approach to performing an activity. The agency's proposal for
providing the service, which includes a bid proposal for cost-estimation purposes, is useful in competing
directly with private-sector bids. An internal department bids against external contractors and the service will
be provided by the entity that submits the best bid—whether internal or external.
Why consider managed competition?
• Enables a local government to determine whether services can be provided more efficiently with an
external contract.
• Allows a local government to determine whether costs of service provision can be reduced.
• May provide economic development benefits to the community if the contract is won by a private
contractor.
What we learned from focus group discussions:
• Economic Considerations
o
The initial implementation of managed competition can be costly. Internal departments must be
trained to bid and it is often necessary to modify the organizational structure.
o
Costs must be standardized between the public and private bids. The internal department is not
subject to the same taxes as the private organization, these estimates should be added to the
internal bid.
o
Even when services are retained in-house, the quality and efficiency of service provision can be
improved through managed competition.
• Political Considerations
o
Due to training and regulatory requirements, the timeline for a managed competition process is
longer than for traditional contracting out.
o
Generous communication and transparency throughout the process are often credited for
program success.
o
Managed competition does not always mean layoffs or employee/union dissension. Employees
can be empowered through the process.
Readiness checklist for managed competition:
 In order to successfully implement managed competition, both elected officials and management
must be supportive of the effort. Implementation of managed competition takes resources—
money, time, staff training, and expert advice. Without the support of leadership, it will not be
successful.
 Determine whether or not there is existing and sufficient competition in the private market for the
service(s) in question. Without adequate competition, it is unlikely that sufficient cost savings will
be realized.
 Develop an understanding of potential barriers to implementing managed competition. For
example, if unions are likely to oppose the initiative, communicate with union leadership and
employees early and often. Be willing and able to address the concerns of stakeholders.
 Determine what aspects of the process can be handled in-house and what aspects may require
outside assistance. Are the costs for outside assistance justified by potential savings from the
process? Can these costs be reduced in future managed competition efforts?