Public Procurement at the Local Level in Austria: The Economic Consequences of Compulsory Competitive Tendering for Public Services

Abstract

This paper looks at possible problems concerning the economic effects of the introduction of an compulsory competitive tendering for general economic interest services at the local level. It examines the framework in Austria and some fundamental problems of competitive tendering. An obligation binding local authorities to put general economic interest services up for competitive tender, as currently intended by the European Commission (i.e. service concessions), would have considerable medium‐ and long‐term effects on both the process of municipal service provision and the economic position of municipal (public) enterprises. The paper concludes that, from an economic point of view, procurement through competitive tendering does not appear to be effective or tenable for all general economic interest services in (all) different areas. The introduction of compulsory competitive tendering for service concessions in all areas of public services is therefore something best forgotten.