By Steve Kelman

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Swedes debate procurement, competition and public services

man graphs performance

As many Americans are aware, Sweden has an extensive welfare state, with child-care centers, home health care for the elderly and nursing homes paid for with public funds. As fewer Americans are aware, in the past 20 years, Sweden has moved dramatically -- often more so than the United States -- toward allowing private producers, including for-profit firms, to compete with local government for such services.

In the early 1990s, Sweden introduced the world's most comprehensive school voucher system for elementary and secondary education. Swedish parents are given a voucher that can be used at any school, public or private (including religious schools). For-profit schools are not only allowed, they dominate the non-government sector.

Similarly, for social services such as child care or nursing homes, many local governments have allowed private firms (and some non-profits) to compete with government, either through contracting or vouchers.

During the month I have been in Sweden, the status and fate of both vouchers and contracting for these services has been a major topic of public debate.

I have been reading the large number of Swedish studies on quality differences between private and government sectors in areas such as schools, nursing homes and employment services (which in Sweden have traditionally been a government monopoly). There also are extensive studies of price differences between contracted and voucher services in the private sector.

I think the overall message of these studies is that the differences are modest, favoring neither government nor the private sector, though a fair summary of the studies would note that the differences that exist mostly show slightly higher quality -- and more frequently somewhat lower cost -- for private compared with government provision.

There is a general agreement that markets cannot work without a good procurement system in the case of contracting and a good set of rules for vouchers.

Last year, there was a big government report on procurement reform titled "In Search of a Good Deal." I read the report in order to participate in a panel discussion with the report committee's chairman, and I was amazed at the similarities of the problems the Swedish and American procurement systems face. There was significant concern about insufficient contract management, without which, the report argues, private providers can't be expected to do a good job. There was concern about inadequate specs in contracts, particularly lack of performance specs. There was concern about training for the procurement workforce. And there was even concern about excessive bid protests, a disease Europe seems to have caught from the U.S.

There has been major media coverage in Sweden of scandals involving for-profit schools, following a similar rash of stories more than a year ago about a for-profit nursing home in Stockholm.

The largest television network, in its weekly investigative journalism show, sent reporters with hidden cameras and tape recorders (this is apparently allowed on Swedish television) to pose as parents seeking to get their children into for-profit schools or seeking a job there. The basic message of these hidden camera exposes was that some for-profit schools were letting kids in based on whether they were likely to be "easy" students to deal with, as opposed to kids who had poor grades in their current school, had ADHD or came from immigrant families.

This is in violation of Swedish law, which says that except for students in the school's neighborhood or those with siblings already in the school, students in schools with more demand than supply can be admitted based only on how long they have been on a waiting list. The for-profit schools stood accused of trying to increase their earnings by giving their schools lower-cost children and making the schools more attractive to potential students.

It is interesting to see contracting and other public management issues have so high a profile in political debate and to see Sweden grappling with some of the same problems that we are.

Posted on Nov 01, 2013 at 10:24 AM


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