Market-type Mechanisms, Market Testing and Market Making: A Longitudinal Study of Contractor Interest in Tendering

Market testing is evaluated in the context of market-type mechanisms, for the efficiency gains it achieves. It has been part of public policy in the UK since 1979, and mandatory for defined support services, first in central government departments, then in the National Health Service and finally in local government. The policy is evaluated for its impact for three typical services, in terms of the government's ability to secure contractor interest in tendering. Success has been mixed, and government efforts to stimulate contractor interest have had a marginal impact. Substantial cost savings can be made from market testing, but management should be left to choose which support services are subject to the discipline of the market.