Over the past twenty years, governments all over the world have transferred the responsibility for providing services out of their hands and into the private sector. One of the pioneers in this movement has been the city of Phoenix, Arizona. However, instead of dismantling the public agency providing the service and hiring a private contractor, the city allows the public agency to bid for the contract as well. Phoenix estimates the competitive process has saved it over $30 million since 1979.
This report looks at Phoenix' public/private competition process, specifically as it pertains to solid waste collection services. Phoenix' program for contracting out for solid waste collection is examined for government failure and competitive neutrality between public agencies and private firms. It finds that there is room for significant improvement. Application of competitive contracting has been sporadic and mainly confined to a few areas. In the area of solid waste collection, an informal rule keeping service provision to 50 percent of the city prevents the city from getting the full benefits of competition. In addition, various stipulated inefficiencies in contracts with private providers raise costs.