The San Diego City School district wanted to save money on busing. It decided to expand the expensive operation and eliminate the efficient, private providers all in the name of lower costs. The Importance of Competition None of the cost efficiencies of private or public providers will last in the absence of competition. Private enterprises often provides lower-cost services because competition forces them to keep close watch on their expenditures. Likewise, competition from private providers forces public providers to control their costs.
Competitive markets can lead to efficient operations in both the public and private sector.
Some governments have unfairly tilted the playing field against the private sector by exempting in-house units from the requirement of submitting sealed, blind bids. Several cities have made it a practice of allowing in-house units to put together their bids after being shown the best bids from the private sector. In addition to corrupting the competition process, such an approach is likely to significantly reduce future cost savings from competition. The reason is that if private firms feel as though they re being used by politicians only to obtain concessions from in-house units, they soon will decide it s not worth the trouble and expense of putting together serious contract bids. The result will be less competition.