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29 February 2008

Does contestability work?. Gary L. Sturgess. 29 February 2008. Competitive Edge: a study of studies. ~ 200 academic & governmental studies 30 years (mostly past 2 decades) 12 countries (mostly US & UK)

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29 February 2008

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  1. Does contestability work? Gary L. Sturgess 29 February 2008

  2. Competitive Edge: a study of studies • ~200 academic & governmental studies • 30 years (mostly past 2 decades) • 12 countries (mostly US & UK) • 5 sectors – defence support, health services, prison management, municipal services, refuse collection

  3. Competitive Edge: What’s new? • We’ve drawn from a wider range of studies • We’ve looked at competition vs monopoly • . . . and evidence of a contestability effect • We’ve drawn conclusions about a range of savings • And sought information as to the source of benefits

  4. Competitive Edge: Savings? • Defence support – 20-30% + • Health services – 20% + • Prisons – 5-15% (US), 20-30% (UK) • Municipal services – 5-25% (higher in US) • Refuse collection – 20%

  5. Competitive Edge: Methodology • Data quality & comparability • Do the studies control for quality? • Are procurement & monitoring costs taken into account? • Do savings persist?

  6. Contracting for complexity:cost & service outcomes The UK prisons market: • Cost reductions of 15-20% from competing prison management • Further cost reductions of almost 40% from PFI competitions • Private prisons are still 30-40% less costly • Costs at HMP Blakenhurst increased when competition stopped • Service levels are comparable, and in some ways better in the contract prisons

  7. Contracting for complexity:on-time & on-budget The UK prisons market: • PFI – on-time & on-budget • Traditional – 13% late & 18% over-budget Australian PPPs: • PFI – 3% early & 1% over-budget • Traditional – 23.5% late & 15% over-budget

  8. Contracting for complexity:construction times The UK prisons market: • Construction times fell by 40-45% Australian PPP tollroads: • Construction times fell from the first project (M4) and continued to fall

  9. What accounts for success? • Strong procurement & contract management skills • Building competitive markets

  10. What accounts for success?- lessons from the UK prisons market • Introduction of a performance management regime • Qualitative & quantitative measures • Introduction of higher standards • Innovation in design, construction & management • Careful selection of partners • Building a deeper market

  11. What accounts for success?- lessons from the UK prisons market • A single buyer • Market leverage • Development of expertise • Repeat business • Deeper investment by companies • Avoidance of short-term gaming • Total service contracting?

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