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Public and Private Production in a Mixed Delivery System: Regulation, Competition and Costs

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  • Germà Bel
  • Jordi Rosell

Abstract

Academics and policy makers are increasingly shifting the debate concerning the best form of public service provision beyond the traditional dilemma between pure public and pure private delivery modes, because, among other reasons, there is a growing body of evidence that casts doubt on the existence of systematic cost savings from privatization, while any competition seems to be eroded over time. In this paper we compare the relative merits of public and private delivery within a mixed delivery system. We study the role played by ownership, transaction costs, and competition on local public service delivery within the same jurisdiction. Using a stochastic cost frontier, we analyze the public-private urban bus system in the Barcelona Metropolitan Area. Our results suggest that private firms tendering the service have higher delivery costs than those incurred by the public firm, especially when transaction costs are taken into account. Tenders, therefore, do not help to reduce delivery costs. Our results suggest that under a mixed delivery scheme, which permits the co-existence of public and private production, the metropolitan government and the regulator can use private delivery to contain costs in the public firm and, at the same time, benefit from the greater flexibility of private firms for dealing with events not provided for under contract.
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Suggested Citation

  • Germà Bel & Jordi Rosell, 2016. "Public and Private Production in a Mixed Delivery System: Regulation, Competition and Costs," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 35(3), pages 533-558, June.
    • Handle: RePEc:wly:jpamgt:v:35:y:2016:i:3:p:533-558
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    File URL: http://hdl.handle.net/10.1002/pam.21906
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    Cited by:

    1. Matthias Aistleitner & Christian Grimm & Jakob Kapeller, 2018. "Auftragsvergabe, Leistungsqualitaet und Kostenintensitaet im Schienenpersonenverkehr. Eine internationale Perspektive," ICAE Working Papers 86, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    2. Allen, Jaime & Muñoz, Juan Carlos & Rosell, Jordi, 2019. "Effect of a major network reform on bus transit satisfaction," Transportation Research Part A: Policy and Practice, Elsevier, vol. 124(C), pages 310-333.
    3. Avenali, Alessandro & Catalano, Giuseppe & D'Alfonso, Tiziana & Matteucci, Giorgio, 2020. "The allocation of national public resources in the Italian local public bus transport sector," Research in Transportation Economics, Elsevier, vol. 81(C).
    4. Jerch, Rhiannon & Kahn, Matthew E. & Li, Shanjun, 2017. "The efficiency of local government: The role of privatization and public sector unions," Journal of Public Economics, Elsevier, vol. 154(C), pages 95-121.
    5. Albalate, Daniel & Rosell, Jordi, 2019. "On the efficiency of toll motorway companies in Spain," Research in Transportation Economics, Elsevier, vol. 76(C).
    6. Beáta Mikušová Meričková & Juraj Nemec & Nikoleta Jakuš Muthová, 2024. "Contract management of municipal public services: the Slovak experience," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-9, December.
    7. Jason Coupet, 2025. "To make or buy commercialization: A synthetic control approach," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 44(1), pages 183-207, January.
    8. Xinshuo Hou & Weiling Li & Dongyang Li & Jianghuan Peng, 2025. "Public–private partnerships and carbon reduction targets: evidence from PPP investments in energy and environmental protection in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(3), pages 6567-6597, March.
    9. José M. Alonso & Rhys Andrews, 2025. "Does not‐for‐profit corporatization of local public services improve performance?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 44(2), pages 612-631, March.
    10. Rosell, Jordi, 2017. "Urban bus contractual regimes in small- and medium-sized municipalities: Competitive tendering or negotiation?," Transport Policy, Elsevier, vol. 60(C), pages 54-62.
    11. Campos-Alba, Cristina M. & Prior, Diego & Pérez-López, Gemma & Zafra-Gómez, Jose L., 2020. "Long-term cost efficiency of alternative management forms for urban public transport from the public sector perspective," Transport Policy, Elsevier, vol. 88(C), pages 16-23.
    12. Germà Bel & Marianna Sebo, 2020. "Introducing and enhancing competition to improve solid waste management in Barcelona," IREA Working Papers 202004, University of Barcelona, Research Institute of Applied Economics, revised Apr 2020.
    13. Daniel Albalate & Jordi Rosell, 2016. "Persistent and transient efficiency on the stochastic production and cost frontiers – an application to the motorway sector," Working Papers XREAP2016-04, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2016.
    14. Nicole B. Baker & Christian Haddad, 2024. "Private ownership and management control decisions in infrastructure from the perspective of Transaction Cost Theory: Evidence from emerging economies," Economics and Politics, Wiley Blackwell, vol. 36(2), pages 764-791, July.
    15. Erik Hembre & Stephanie Moulton & Matthew Record, 2021. "Low‐Income Homeownership and the Role of State Subsidies: A Comparative Analysis of Mortgage Outcomes," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 40(1), pages 78-106, January.
    16. Rivas, Marcela González & Schroering, Caitlin, 2021. "Pittsburgh's translocal social movement: A case of the new public water," Utilities Policy, Elsevier, vol. 71(C).

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