The justification must include evidence that the services under consideration for contacting can be performed more economically or efficiently by contract rather than by current or newly hired state employees. The risk and uncertainty associated with contracting out for a service rather than providing it in-house, demand that there be a substantial cost advantage. Some jurisdictions recognize this and have established various cost-savings thresholds. The District of Columbia requires a cost savings of 5 percent over the duration of a contract. The Federal Government requires a cost savings of 10 percent over the duration of the contract.
Competition is a two-way street.
If services are put up to bid, the workers who do the job should have the same opportunity as contractors to design the work, generate savings and present their case. To level the playing field, employees and unions need access to all necessary information and technical assistance and work time to develop a competitive alternative. The state of Massachusetts permits labor unions to bid on contracts and provides resources to assist in bid preparation. The District of Columbia includes in all solicitations for contracted services the procedure for District employees to exercise their right to bid on a contract. Often contracts last many years, or are automatically renewed when they expire, creating a private-sector monopoly on a public service.