COMPETITIVE TENDERING IN UK HEALTH and LOCAL AUTHORITIES: WHAT HAPPENS TO THE QUALITY OF SERVICES?

This paper analyzes the effects on the quality of U.K. health and local authority services arising from the substitution of contract governance for direct provision. Empirical studies of contract provision tend to be confined to estimating cost savings. The paper assumes that transaction benefits as well production and transaction costs are pertinent to governance choice. Quality is assumed to be a benefit generated by health and local authorities. An ordered-probit model is presented and predicts that service quality is sensitive to governance adjustments; implying that the case for contracting services is not as clear cut as its advocates suggest.