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Unlocking Efficiency: Contestability Impact on Savings in Public Services

Explore the effectiveness of contestability in various sectors like defence support, health services, and prison management across 12 countries over the past 30 years. Discover cost reduction opportunities, procurement strategies, and the impact on service quality. Learn from successful case studies and gain insights to improve public service efficiency.

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Unlocking Efficiency: Contestability Impact on Savings in Public Services

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  1. Does contestability work? Gary L. Sturgess 29 February 2008

  2. Competitive Edge: a study of studies • ~200 academic & governmental studies • 30 years (mostly past 2 decades) • 12 countries (mostly US & UK) • 5 sectors – defence support, health services, prison management, municipal services, refuse collection

  3. Competitive Edge: What’s new? • We’ve drawn from a wider range of studies • We’ve looked at competition vs monopoly • . . . and evidence of a contestability effect • We’ve drawn conclusions about a range of savings • And sought information as to the source of benefits

  4. Competitive Edge: Savings? • Defence support – 20-30% + • Health services – 20% + • Prisons – 5-15% (US), 20-30% (UK) • Municipal services – 5-25% (higher in US) • Refuse collection – 20%

  5. Competitive Edge: Methodology • Data quality & comparability • Do the studies control for quality? • Are procurement & monitoring costs taken into account? • Do savings persist?

  6. Contracting for complexity:cost & service outcomes The UK prisons market: • Cost reductions of 15-20% from competing prison management • Further cost reductions of almost 40% from PFI competitions • Private prisons are still 30-40% less costly • Costs at HMP Blakenhurst increased when competition stopped • Service levels are comparable, and in some ways better in the contract prisons

  7. Contracting for complexity:on-time & on-budget The UK prisons market: • PFI – on-time & on-budget • Traditional – 13% late & 18% over-budget Australian PPPs: • PFI – 3% early & 1% over-budget • Traditional – 23.5% late & 15% over-budget

  8. Contracting for complexity:construction times The UK prisons market: • Construction times fell by 40-45% Australian PPP tollroads: • Construction times fell from the first project (M4) and continued to fall

  9. What accounts for success? • Strong procurement & contract management skills • Building competitive markets

  10. What accounts for success?- lessons from the UK prisons market • Introduction of a performance management regime • Qualitative & quantitative measures • Introduction of higher standards • Innovation in design, construction & management • Careful selection of partners • Building a deeper market

  11. What accounts for success?- lessons from the UK prisons market • A single buyer • Market leverage • Development of expertise • Repeat business • Deeper investment by companies • Avoidance of short-term gaming • Total service contracting?

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