To put public services out for tender is often based on a political and ideological stand point with back-drop in New Institutional Economics like transaction cost theory (Williamson, 1975, 1979) and agency theory (Jensen & Meckling, 1976), permeating economic thinking at the rise of NPM (Ferlie et al, 1996). From a bargaining logic, competitive tendering will make production of services in public sector more efficient. An attractive idea in times when demand for public services is increasing at the same time as access to resources is scarce. Yet, the effects tendering has on the quality of service provision is inconclusive (Hefetz & Warner, 2004; Padovani & Young, 2008).
This study aims at investigating if and how Swedish local governments can increase quality in public services through the use of tendering can find more sustainable ways of providing public services. The study is based on an in-depth case study of how learning from public tendering is enacted, followed by a survey investigating prevalence. The case is elderly care in a municipality. The survey was conducted in the same sector and was sent out to all municipalities in Sweden.
The case study shows how the organization gradually has developed the elderly care through how they managed the tendering process and increased quality in services provided at the same time as they kept their budget. The survey shows that even though 30 % of local governments put elderly care out for tender, few efforts are made to change processes within the own organization or to be an active counterpart to the private providers. The conclusions drawn are that tendering is a reform with potential to create more sustainable service provision, but requires conscious and persistent adaptation of the organizational processes and routines within the public organization.
References
Ferlie, E., Ashburner, L., Fitzgerald, L. and Pettigrew, A. (1996), The New Public Management in Action. Oxford University Press.
Hefetz, A. and Warner, M. (2004), Privatization and its reverse: explaining the dynamics of the government contracting process, Journal of Public Administration Research and theory, Vol. 14, No. 2, pp. 171-190.
Jensen, M.C. and Meckling, W.H. (1976), Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3, 4, pp. 305-360.
Padovani, E. and Young, D. W. (2008), Toward a framework for managing high-risk government outsourcing: Field research in three Italian municipalities, Journal of public procurement, Vol. 8, No. 2, pp. 215-247.
Williamson, O.E., (1975), Markets and Hierarchies: Analysis and Antitrust Implications, New York, Free Press.
Williamson, O.E., (1979), Transaction Cost Economics: The Governance of Contractual Relations, Journal of Law and Economics.
