Procurement Perspectives: Outsourcing may be contingent on market conditions

A key concern when outsourcing is used is whether market conditions permit a municipality to secure an adequate number of bids to form a suitable range of competitive suppliers.

By outsourcing, this important public policy concern is frustrating. Even if there is no true monopoly, if there are only a few suppliers who are able to bid for the work, there is a significant risk that a non-competitive price will be obtained. Three problems are likely to be encountered in such cases. First, there is the problem in properly administering the means test to ensure the subsidy is provided only to those people that qualify.

Third, contracts for this form of service provision will often provide for fee increases based on some arbitrary formula with little regard to the suppliers actual cost experience.

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