Solid‐waste contracting‐out, competition, and bidding practices among Canadian local governments

Canadian local governments continue to rely on private contractors to produce services for their residents. A key expectation for those who contract out services is that unit costs will be lower than the costs incurred if public crews and equipment produced the same service. A principal reason for expecting lower costs is the assumption that private contractors are exposed to competition that induces companies to operate with mixes of capital, labour and technologies that are more efficient. This article compares public and contracted private production of residential solid‐waste collection in 327 local governments across Canada. Three complementary hypotheses that are grounded in the theory and research on local public economies are tested. The findings generally support contracting‐out as a way to reduce unit costs, although substantial public‐private differences occur only in communities less than 10,000 population. Further, where communities have divided up their residential solid‐waste collection between public and private producers, overall costs are lower than national averages, and contracted companies are substantially less costly than their public counterparts in the same local governments. Finally, in communities that have contracted out this service, the competitiveness of the bidding practices affects unit costs. Local governments that bid the service competitively enjoy a cost saving compared to those that renew their contract with the existing company.