As governments at all levels increasingly use the private sector to perform public services, questions of competitive fairness arise, a recent study from the Reason Public Policy Institute points out. The bidding process, in particular, must assure that private companies are not placed at a disadvantage in relation to in-house government entities if taxpayers are to realize the savings and service improvement that competitive bidding offers.

William D. Eggers, the study's author, says lawsuits from private bidders are occurring with increasing frequency. Therefore guidelines must be adopted to level the playing field when governments let contracts for municipal services.

Problems of competitive fairness arise when public units fail to include all their costs in their bids, when a performance guarantee is required of private bidders but not of public ones, when a risk assumed by the private sector is not valued, and from the fact that private bidders must pay taxes and comply with regulations from which public providers are exempt.

• Teams of municipal employees don't have to earn a profit and their cost of capital is cheaper.

• Furthermore, they don't have to bear the costs associated with the financial, liability and compliance risks that are typically borne by the private operator.

• And sometimes public entities competing for contracts are permitted to view the bids of their private competitors before submitting their own bid.