Govt Intervention - Promoting Competition and Contestability:Competitive Tendering and Promotion of Small Businesses

Question 1

What is competitive tendering and give examples

Answer 1

When a project is put out to tender so that private sector firms can bid for the right to provide the service

Examples:
Laundry Services in hospitals
School Meal Services
Building and maintaining of roads

Question 2

Arguments for and against competitive tendering

Answer 2

For:
-Increased competition leads to lower prices for govt
-encourages greater efficiency
-promotes transparency in the procurement process
-Leads to a better value for taxpayers’ money

Against:
-poorer service quality due to profit motive
-Loss of accountability for private firms
-Job insecurity
-Lack of public control
-Costly and time-consuming

Question 3

What are ways the govt can promote small businesses

Answer 3

-Giving training
-Providing grants
-Tax incentives
-Subsidies

Question 4

Benefit of promotion of small businesses

Answer 4

-Increase innovation
-increase efficiency
-incumbent firms are less likely to be x-inefficient