Thursday, 3 November 2011

Managed Competition

Necessity is the mother of all invention and that doesn't just go for inventing things you can touch. It applies to all ideas.

Human beings are resourceful creatures who spawned from primordial ooze and morphed to omnivores with warm blooded adaptable bodies; stood up on only two paws and used an opposable thumb to strike flint to make fire; and then finally built industries and cities that crumble under their own over-consuming cyclical debaucherous weight.

Each time we boom, we bust.

Each time we build, we crumble.

Each time we make, we break.

Each time we prosper, we fail.

What makes us the dominant species for the foreseeable future is that each time we learn. We keep learning. Although our primal drives satisfy our lizard brains, we keep alive the great ape in us. That part that says "make this system better".

The city of Chicago renews it's garbage collection contracts about every decade, along with other city wide contracts that are held jointly by the public and the private sectors.

Each time the contract goes up for grabs and during the lifetime of this committment (which spans multiple mayoral terms) the private sector is judged against and compared to the public sector to see who does the job at a better price and simply who does the job better.

Often once a big contract is won, prices go up or quality goes down. After all, government pockets are bottomless, right?

In this system, the private sector always has competition and not just from the rest of the private sector. The huge in this case is the public sector and that keeps the competition alive. There is a maintained basic level of quality and an understood and accepted cost.

When these contracts have gone up for grabs in the city of Chicago between 1979 and 1994, The Economist states that "the private sector won 34 contracts while the public sector won 22."

What a simple and effective way to privatise yet keep quality and price in check. It even fairly applies those same constraints that private companies must operate under to fat cat public servants.

There is probably a lack of perfection in this way too but I like the transparency and constant reappraisal. The fact that providers of a service can thrive if they should or fail if they should seems right. The fact that privatisation makes sense in some decades and not in others might be reason enough to try this shared responsibility via managed competition.

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