Business issues

Competition

A range of diverse providers delivers better value and more innovation. As the public sector continues to cut spending in response to the demands of meeting the fiscal deficit, public services need to be challenged to increase savings while also improving services. Making the most of the expertise of new independent providers is essential

Overview

Different providers competing to deliver a better service can be a catalyst for improvement, and there is a clear case for using competition to improve the delivery of public services and save taxpayers money.

There is much more that independent sector providers could do to help public services save money and maintain and improve service quality. But this can only happen if they are given the opportunity to compete to run services and demonstrate value.

Public services operate in a different fashion to private sector business, and have to take account of broader policy objectives such as the need to provide fair and free access to services. Opening up services to ideas from other providers can nevertheless play an important role in challenging existing ways of operating and encouraging new organisations to enter public service markets and bring innovation to the way different services are run.

Fair competition between providers has three important impacts:

Improved performance - existing providers have to continuously improve how they operate and be more responsive to the needs of the public they serve. Where there is an alternative option available, poor provision is less easy to justify.

Inspiring service transformation - competition is a catalyst for new ideas on how existing services could operate. The commissioning process allows government to focus on the outcomes it wants to achieve - it is then left to providers to decide how best they can deliver those outcomes at the right price.

Costs are reduced and value raised - providers have a clear incentive to deliver services in a more efficient way. A failure to do so may result in them losing a contracts to competitors who are more efficient. In social housing management, opening this market up to competition has led to savings of up to 45%.