Contracting out public services: An evaluation of the public consequences of opening up routine road maintenance to competition

This report evaluates the public consequences of opening up routine road maintenance in Sweden to competition. The theoretical foundation for competition as a method of improving efficiency in public services is analysed. The scientific framework of this study is the theory of program evaluation in political science combined with evaluation methods developed in the field of regional development planning. General influences and the spirit of the times when this decision was made are described. A retrospective view of the national road administration describes earlier organisation for road maintenance in Sweden. Public consequences are investigated using official statistics, interviews and inquiries. The evaluation concentrates on the political economy of contracting, on innovation and learning processes and on the transport policy goals in Sweden. Previous research has shown that contracting costs has decreased by approximately 25 percent, and the ordering costs are estimated to up to 5 percent of the expenditures for routine road maintenance. However, it is unclear whether the reduced expenditure is explained by budget steering or by competition exposure. Competition in routine road maintenance in Sweden is weak, and the Swedish National Road Administration's result unit for Construction and Maintenance is still the largest contractor in this business. The private entrepreneurs, to a large extent, use subcontractors and are not developing new mechanical innovations on their own. Technological development has changed its form through organizational change. The fact that distances from the production line to the development of innovations have increased does not only negatively affect creativity, but also reduces the prospects for learning within the organization. Competition has not affected the direction of innovations. An absolute majority of the mechanical innovations developed both before and after the reform are primarily generated to benefit cost effectiveness. The reform does not provide for the transportation policy goal of high quality transportation, since contracting seems to signify observance of the regulations much better than the former system of in-house production, and the regulated standard is lower than the custom standard before the reform. The reform has created poorer accessibility in sparsely populated areas than the actual pre-reform standard, which is likely to have a negative affect on regional development since it increases time distances. The environment was affected negatively by the reform in the short run, but the long-term environmental effects are likely to be positive since contract steering facilitates meeting environmental requirements. The study suggests measures to improve performance of contracting of routine road maintenance in relation to certain public objectives and concludes with a proposal for scientifically-based evaluation processes as a part of the quality assessment of public spending in the infrastructure field.