Competition in Local Services: Solid Waste Management

Abstract:     
This document (of 196 pages) comprises the proceedings of an OECD roundtable on promoting competition in local services with a special focus on competition in handling solid waste.

Many natural monopolies are not under the authority of central or federal government, but are the responsibility of local or municipal governments. Do local governments have incentives to ensure competition and efficiency in the provision of services under their authority? The answer may depend on central-local government relations and factors such as the size of transfers of funds from central to local government.

In most cities, one such natural monopoly is the collection of solid waste from households and small business. How should the collection of solid waste be organised? Because the level of sunk investment in providing these services is limited, they can be purchased through competition for-the-market in the form of competitive tendering. Experience in many cities shows that competitive tendering can yield greater efficeincy and lower prices than either self-provision or regulated monopoly. However, competitive tendering is far from straightforward. Close attention must be paid to promoting competition in the bidding process, to the prevention of hold-up problems and to maintaining the incentives for investment, quality and efficient adjustment of prices over the life of the contract.

How might competition in the bidding process be enhanced? What is the proper role of competition law enforcement? What is the best way to ensure that quality is maintained over the life of the contract?

This document consists of a background paper by the Secretariat, country submissions from 9 OECD countries and a summary of the oral discussion.

Number of Pages in PDF File: 196

Keywords: Local government services, municipal services, solid waste management, competitive tendering, hold-up, procurement, collusive bidding, competition for-the-market

JEL Classification: H70, L40, L98

working papers series