How does competitive tendering and contracting affect satisfaction with municipal health and care services?
| Author | Marthe Liss Holum |
| DOI | 10.1177/0020852316630391 |
| Date | 01 September 2018 |
| Published date | 01 September 2018 |
| Subject Matter | Articles |
International Review of
Administrative Sciences
2018, Vol. 84(3) 520–538
!The Author(s) 2016
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DOI: 10.1177/0020852316630391
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International
Review of
Administrative
Sciences
Article
How does competitive tendering
and contracting affect satisfaction
with municipal health and
care services?
Marthe Liss Holum
Trondheim Business School, Norway
Abstract
In this article, an investigation is made into the relationship between competitive ten-
dering and contracting and satisfaction with health and care services in Norwegian
municipalities. There is an ongoing public debate concerning privatization and contract-
ing as a way of providing municipal services. Several studies suggest improved product-
ivity, as well as service quality, as a result. Based on public choice and property rights
theories, public organizations are argued to be inefficient. Thus far, we have little know-
ledge about the effects of competitive tendering and contracting on citizens’ evaluations
of the services exposed to competitive tendering and contracting. To explore this, data
from the Norwegian Citizen Study, covering over 35,000 individuals, are employed. The
findings show that citizens and users are more satisfied with health and care services
that are subject to competitive tendering and contracting compared to those provided
solely by the public sector.
Points for practitioners
The findings of this article encourage the competitive tendering and contracting of
health and care services. A positive relationship is found between competitive tendering
and contracting and satisfaction with these services. Findings provide support for
arguments made in Scandinavian evaluations; the introduction of competition and
contracting is argued to increase municipal focus on service quality and increase ser-
vice-oriented care, and is suggested as representing an improvement in attention to the
‘secondary needs’ of residents. This is especially important for public managers in social-
democratic countries where the use of competitive tendering and contracting is still a
controversial topic.
Corresponding author:
Marthe Liss Holum, Trondheim Business School, Norwegian University of Science and Technology,
Klæbuveien 72, Trondheim 7030, Norway.
Email: marthe.l.holum@ntnu.no
Keywords
competitive tendering, contracting, health and care services, public administration,
satisfaction
Introduction
Competitive tendering and contracting (CTC) is a common form of privatization
(Rehfuss, 1991), and has become one of the most important strategies in improving
efficiency in the public sector. Contracting services with private organizations has
increased significantly in most Western countries since the 1980s. In Norway, a
social-democratic country, contracting elderly care with private suppliers is still
regarded as controversial, and critics are quick to blame profit-maximizing
owners of private care homes where cases of poor care services are exposed (e.g.
Voldnes, 2015). ‘Privatization’, in its narrow sense, is practically non-existent in
Norway, and the term usually refers to government outsourcing with private sup-
pliers. This involves contracts of three to five years’ duration (Bogen, 2002; Eika
˚s,
2001). CTC has received considerable scholarly attention in recent years. However,
research hitherto has focused on the determinants of the ‘make-or-buy decision’
and the economic effects. There is a lack of studies evaluating the non-economic
effects of contracting (Park, 2004), but a few studies have addressed effects on
internally measured quality (e.g. Bel and Warner, 2008; Levin and Tadelis, 2010;
Stolt et al., 2011). We have only limited knowledge concerning how these ways of
reforming the public sector affect the external evaluation of those services exposed
to competition and contracting.
The advocates of CTC mainly base their arguments on public choice
theory (Niskanen, 1974, 2012; Tullock, 1965). From a public choice per-
spective, the use of competitive forces is necessary to constrain bureaucrats’
behaiour. This will direct public sector activity towards the public interest.
Among the sceptics, a common concern is what has been labelled the
‘quality-shading hypothesis’ (Domberger and Jensen, 1997). This entails that pri-
vatization, or CTC, leads to an exaggerated focus on costs – at the expense of
service quality.
The goal of this study is to explore the relationship between CTC and satisfac-
tion with municipal health and care services. To do this, multilevel analysis com-
bining individual- and municipal-level data is employed. The Norwegian Citizen
Study covers more than 35,000 respondents over two rounds (2009 and 2013). The
Study of Municipal Organization conducted in 2008 and 2012 is well suited to be
combined with these data, investigating, among other aspects, municipalities’ deci-
sions on employing CTC within health and care services. Findings indicate that
citizens of municipalities employing CTC have a higher level of satisfaction with
these services, the effect being strongest for the institutionalized services. The find-
ings support the argument that CTC entails increased municipal focus on service
quality and more service-oriented care.
Holum 521
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