Commissioning and competition in the public sector

Start date: September 2010
Next milestone: March 2011

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Summary of work

The OFT undertook a study into the role of competition in the commissioning of public services. This formed part of a broader programme of work by the OFT looking at competition in public service markets and built on previous studies in the area such as Choice and competition in public service markets (pdf 658 kb), Competition in mixed markets (pdf 560kb) and Assessing the impact of public sector procurement on competition (pdf 1.1 mb).

The study's objective was to provide constructive and practical insights to commissioners and procurers of public services in local, central and devolved government on how to leverage competition to create dynamic, open and contestable public services markets in which commissioners, procurers and suppliers alike face appropriate, aligned incentives to achieve enduring value for money.

Drawing on case study research (carried out on behalf of the OFT by PwC) and engagement with a range of public and private sector parties involved in public services delivery, we have identified four competition themes and worked up more detailed, constructive guidance in order that commissioners and procurers are better equipped to leverage competition to create open and contestable public services markets that incentivise suppliers to increase efficiency, improve quality of service provision and innovate.

These four themes are: tackling barriers to entry, tackling barriers to exit, achieving genuine choice, and aligning incentives.

• Reducing barriers to entry through ensuring procurement policies and processes do not discriminate against certain types of suppliers, particularly smaller suppliers, and encourage the widest possible participation.
• Reducing barriers to exit by ensuring requirements to maintain continuity of service do not automatically favour the largest supplier or the public sector, and that the Government can effectively and quickly switch from a poorly performing supplier to a more efficient one. 
• Promoting genuine choice by giving end users of public services the right tools to make well-informed decisions that drive competitive outcomes.
• Ensuring the right incentives to drive commissioners, procurers and suppliers to strive for long-term value for money and not just focus on the short-term.

By taking account of these factors, commissioners and procurers will be better equipped to balance some of the complex trade-offs they face - such as the choice between local versus centralised procurement or between large and small contracts.

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Next steps

This study forms part of the OFT's wider work in public markets. Building on the OFT's track record of delivering market-based solutions that benefit users and its previous experience of examining the role of Government in markets, the OFT is currently working with, and guiding policy making by, Government departments undertaking reviews of, and reform initiatives related to, commissioning and procurement.

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Related documents

• Press release OFT to examine competition in public services procurement (10 December 2010)
• Commissioning and competition in the public sector report (pdf 860kb)
• Understanding commissioning behaviours: commissioning and competition in the public sector, PwC (pdf 1.9Mb)
• Press release Buyers of public services could reap greater benefits from competition (15 March 2011)
• Assessing the impact of public sector procurement on competition - summary (September 2004) (pdf 420kb)

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Contacts

Team leader: Haris Irshad (020 7211 8389 / haris.irshad@oft.gsi.gov.uk)

Project director: Veronica Mansilla (020 7211 8330 / veronica.manislla@oft.gsi.gov.uk)

Senior responsible officer: Sonya Branch (020 7211 8707 / sonya.branch@oft.gsi.gov.uk)

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Media enquiries

Any media enquiries should be directed to a member of our Press Office

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