Public and private competition

2.16 Because public solid waste systems in developing countries are commonly plagued by excessive staff, obsolescent equipment, cumbersome procurement procedures for spare parts, inflexible work schedules, limitations on management changes, inadequate supervision, and strong worker unions, it is difficult for the public service to implement the changes necessary to match the efficiency of the private sector. Nevertheless, it has been shown that when the public service agency is a) placed in competition with private contractors, and b) is allowed to make the necessary adjustments to become competitive, the public agency has been able to attain costs comparable to those of the contractor (20).

2.17 For this reason, the ideal arrangement may be a mix of public and private service-for example, contracting for the collection of solid waste from some zones of the city, while retaining public service to the remaining zones. This is the way that Bangkok has approached private contract service of solid waste collection in some districts. In this way, Bogota has also recently contracted for solid waste collection in two zones covering 40 percent of its service area. The competition between the private and public systems has led this city to streamline its roles by 30 percent, largely through the attrition of unproductive office employees. It is also the basis for continued negotiations with the government labor union over work schedules, overtime pay, and worker performance requirements for collection workers (11).

2.18 When a mixed public and private system was implemented in 1970 in Minneapolis, Minnesota (United States), the city's costs were higher than those of private contractors. After five years, however, the city's costs dropped toward the level of the private contractors', whereas the quality of service provided by the private contractors raised toward the standard set by the city crews (20). With a mix of public and private service, the natural tendency is to make both types of providers more accountable. As a result, the public organization is motivated to become more efficient, and the contractors recognize that the city cannot be held hostage to cartels, monopolies, or collusion.

2.19 The city of Phoenix, Arizona (United States), maintains a balance of public and private solid waste collection service, which it believes is the foundation of preserving cost effectiveness. The city is divided into zones for solid waste collection. The city's department of public works (DPW) always keeps jurisdiction over two of the zones to maintain its ability to provide service in case of private sector failure. The remaining zones are tendered for contracts of seven-year duration. At the time of tendering, the DPW competes on a level basis with private companies. Using cost accounting data available on current DPW operations and any changes it proposes in technical systems, the city auditor independently and confidentially prepares the bid. Not until the bids are opened does the DPW know the bid price that the city auditor has submitted. The contract award goes to the lowest bidder. To date, the city has successfully been awarded about half of the contracts. As of 1988, Phoenix estimated that cost savings amounted to about $US 11 million in one decade of competitive bidding. In addition, in the same time frame, cost avoidance (from lower costs of contracts won back by city employees) amounted to another $US 9 million (26).

2.20 In Great Britain, a number of local governments allowed the public sector service to challenge the private sector in bid competitions. In those cities where the public sector won the competition, as compared with public monopoly, the city saved about 17 percent in service cost (20).

2.21 South Korea has a successful blend of public and private sector activity for hazardous waste disposal. A public corporation established under the ministry of the environment built and operated two state-of-the-art hazardous waste treatment and disposal facilities. Using the knowledge and practical experience gained from this activity, the Ministry has been able to license and monitor the development of at least six privately owned and operated hazardous waste treatment and disposal facilities (11).