Health
The academic literature across the health sector is vast, with commensurate differences between the subjects under investigation. There is a wealth of literature on the relationship between competition and quality, as well as theoretical and empirical analysis of choice, equity and responsiveness. With regard to the financial consequences of contestability, there is a growing literature around hospital ownership and management, as well as comparative efficiency of payment systems.
Against such a backdrop, this section aspires to a modest aim, namely the measurement of efficiency effects following the introduction of competition into support services. This literature mainly covers the United Kingdom, where tendering was, at least in theory, compulsory after September 1983, when the departments of health in England, Scotland and Wales published guidance asking health authorities to test cost-effectiveness by subjecting the award of contracts for provision to competitive tender. District Health Authorities (DHAs) were instructed that, unless there were exceptional circumstances, all competitive tendering programmes were to be completed by September 1986.
Elsewhere the use of tendering has been more ad hoc, and rarely compulsory. While the majority of published cost-benefit analyses on contestability in health support services has come from the UK, there have also been interesting studies elsewhere, notably Denmark and Australia.
Contracting for Health Services in a Public Health System: the New Zealand Experience
Toni Ashton, Jacqueline Cumming and Janet McLean, 2005
Health Policy, 2004, Vol. 69, Issue 1.
Competition and Costs: Evidence from Competitive Tendering in the Scottish National Health Service Robin Milne and Robert Wright, 2004 Scottish Journal of Political Economy, Vol. 51(1), February 2004, pp. 1-23. This paper estimates the impact of competitive tendering on cleaning costs in Scottish National Health Service hospitals between 1986/7 and 1991/2. These support the contention that CT led to a cost-reduction for support services, but for a much lower order than that previously identified - around 4-6%. The authors conceded that some of the difference with other studies may be due to differences with the subject - but also that their approach ironed out a number of methodological problems elsewhere. Significantly, this report confirmed findings elsewhere that it was the presence of competition, rather than any intrinsically superior efficiency in the private sector, which drove costs down. UK
Competitive Tendering in the Scottish National Health Service: Was It Compulsory, and Did It Make a Difference? (PDF) Robin Milne and Robert Wright, 2000 Scottish Affairs, Vol. 31, Spring 2000, pp. 133-152. This paper explores whether CCT was compulsory in the Scottish NHS, given the slow take-up rate following the 1983 DHSS advice. It also estimates cost savings as a consequence of competitive tendering where it took place. UK
Contracting Out Building Cleaning Services at the National Hospital of Denmark
Jensen, Wayne , 1997
Organisation for Economic Co-operation and Development (OECD)
Competitive Tendering in UK Health and Local Authorities: What Happens to the Quality of Services?
McMaster, Robert , 1995
Scottish Journal of Political Economy, 42(4), pp.409-427
This is a survey of 21 health and local authorities, principally in relation to cleaning, catering and maintenance, with particular reference to quality.
Contractors' Experience of Compulsory Competitive Tendering: A Case Study of Contract Cleaners in the NHS Robin Milne, 1993 Public Administration, Vol. 71 (Autumn 1993), pp. 301-321. This paper attempts to redress a perceived imbalance in the CCT literature. While there is an extensive literature on the experience of government in implementing CCT (costs and outcomes, quality, and so on), little had been written on the supply side of the market. The author therefore reports on the extent of competition and experience of outcomes for contractors in the market for NHS domestic cleaning contracts. UK
Competitive Tendering for Domestic Services: A Comparative Study of Three Hospitals in New South Wales
Hall, Christine with Domberger, Simon , 1995
Domberger, Simon & Hall, Christine (eds), Australian Government Publishing Service, pp.99-136. First published as 'Competitive Tendering for Domestic Services: A Comparative Study of Three Hospitals in NSW', Graduate School of Business, University of Sydney, 1992.
This study examines three case studies of cleaning services in New South Wales hospitals following the introduction of competitive tendering pilot projects in 1989-1990. The tendering process, winning bid and contract outcome are examined in each case. In Hospital A, the in-house team won the bid and provided an improved service 20.8% cheaper than previously. In Hospital B, an outside firm won but also provided an improved service at significantly lower cost - 29.7% in this case. In Hospital C, however, the results were not so impressive - an outside contractor won with the lowest bid, promising big cost-savings, but the quality of service deteriorated to such an extent that the contract was terminated. More broadly, in the period 1989-1992 saw a 13.2% reduction in expenditure on hotel services in NSW.
Compulsory Competitive Tendering in the NHS: A New Look at Some Old Estimates
McGee, Magnus & Milne, Robin , 1992
Fiscal Studies, 13(3), pp.96-111
This paper followed in the footsteps of Domberger et al (1987) to estimate the effect of CCT on service expenditure in support services. It used a similar statistical approach for domestic and catering services to measure expenditure reductions, and then asked whether these reductions might be offset by the costs of CCT implementation. CCT was found to reduce costs in both domestic and catering, by 17% and 5% respectively. However, the small sample meant that there was a big margin of error in these estimates so neither is statistically significant. The difference between these reductions is also not found to be significant, though the respective magnitudes (domestic expenditure reductions greater than catering) reiterate findings elsewhere. See NAO (1987) and Domberger et al. (1987).
The NHS Privatisation Experience: Competitive Tendering for NHS Services Joint NHS Privatisation Research Unit, 1990 Written by a 'research unit' representing five major trade unions, this is a polemical review of the third-party costs imposed by competitive tendering - the cost of arranging and evaluating bids; of monitoring services, of redundancy and reduced pay; of increased staff turnover. Allegations of explicit racism and sexism in private contractors' methods are also made. There are valid points to be made with regard to both the costs of tendering and the social costs of workforce reductions but there is no serious attempt to address either these complex issues or counter arguments. UK
The Facts on the NHS Privatisation Experience: A response to The NHS Privatisation Experience by the Joint NHS Privatisation Research Unit Contract Cleaning and Maintenance Association, 1990 This document from a trade association was published in direct response to Joint NHS Privatisation Research Unit (1990). They report that the methodology and presentation of JPRU was disingenuous and misleading. After early problems, tendering had delivered substantial savings for the NHS and would continue to do so in the future with government backing. However, this response does not fully engage with all of the points raised in the original document, in some cases for understandable reasons and in others because the authors here too were employed by vested interests. UK
Too High a Price to Pay? A Study of Competitive Tendering for Domestic Services in the NHS
Bach, Stephen , 1989
Warwick Papers in Industrial Relations, No.25, Industrial Relations Research Unit, University of Warwick
This paper is a detailed case study of the impact of competitive tendering for domestic services in one English health authority. It reports that following tender standards dropped dramatically with an associated increase in risks and costs for patients. The service was then returned in-house, but not without lasting damage to the moral and strucutre of staff.
The Competitive Advantage: Report of the CBI Public Expenditure Task Force
Confederation of British Industry (CBI), 1988
This report examines a decade of competition in the provision of UK public services, claiming to draw on the experience of that time to lay out future strategy in government. It looks across central and local government with a focus on health sector. It found that competition had brought, and would continue to bring, major advantages and opportunities for consumers, taxpayers, businesses and public sector managers through financial savings. Cost reductions have varied in the health sector, with 23% in cleaning the highest available.
The Impact of Competitive Tendering on the Costs of Hospital Domestic Services Simon Domberger, Shirley Meadowcroft and David Thompson, 1987 Fiscal Studies, Vol.8, No.4, 1987, pp. 39-54. This statistical analysis of CCT in hospital domestic services measures the relationship between cost of service provision and whether or not the service had been subject to competitive tender. Cost savings of around 20% were likely in tendering out domestic services in hospitals, though there had been various teething problems. UK
Competitive Tendering for Support Services in the National Health Service
National Audit Office, 1987
The Stationery Office
Competitive Tendering in the NHS: An Economic Analysis of the Early Implementation of HC(83)18
Milne, Robin G. , 1987
Royal Institute of Public Administration, Vol. 65, pp.145-160
This paper makes an in-depth analysis of six contracts put out to tender in the early days of CCT in the NHS. It finds that significant cost savings are achieved - but often at the expense of wages, with staff resignations and redundancies common.
Can In-house Caterers Cope? Health and Social Service Journal, 1983 This article from a public sector journal blends statistics and interviews with stakeholders to argue that an increasing number of catering contracts are being awarded in-house due to increased NHS efficiency in the face of private competition. In the period 1974-83 catering expenditure fell from 7.3% of NHS expenditure to 5.6%, while the cost of in house provision of patient meals fell 7% in real terms. Public sector managers claim that productivity has increased because "We see [privatisation] as a challenge". UK