Competition and Costs: Evidence from Competitive Tendering in the Scottish National Health Service

This paper estimates the impact of competitive tendering on cleaning costs in Scottish National Health Service hospitals. Unlike previous studies, which have relied on cross‐sectional data, a five‐year balanced panel of 176 hospitals is used to estimate a series of fixed effects regression models. These panel estimates suggest that previous studies have likely over‐estimated the cost‐savings associated with competitive tendering. The findings also suggest that the lower costs associated with competitive tendering have more to do with auction theory than with any intrinsic efficiency of the private sector.