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Competitive bidding (also called competitive contracting or competitive tendering) is a process in which bids, contracts or tenders, to provide public services are solicited, evaluated and awarded by public sector employers.  The lowest bidder is often awarded the contract, but other factors may determine the winning bid.
The bids are from private companies, which are increasingly large transnational corporations.  The “mom and pop” contractors are quickly disappearing, in large part because the contracts are larger and longer term.  Bigger contracts are more attractive to large corporations and make the bidding process more costly for small contractors.

In-house staff, including unionized employees, are increasingly being asked to enter into competitive bidding by submitting bids for service provision.  When this happens, unions are placed under pressure to reduce the cost of service by showing “flexibility” around work routines and job descriptions and making concessions on shift schedules, hours of work, overtime pay, use of part-time workers, benefits, wages and staff complement.
Many governments and employers claim that competitive bidding will deliver cheaper, more cost-efficient service.  Competition between private contractors and the public sector employees keeps downward pressure on public service costs, especially wages and benefits these kinds of measures are attractive to many public sector decision makers, at a time when public service delivery is suffering from downloading and funding cuts,
Contractors usually reduce the wage bill by cutting the number of employees through attrition and layoffs.  These kinds of measures are attractive to many public sector decision-makers.
Right-wing, neo-liberal governments are also ideologically committed to having private companies deliver as many services as possible.  They also want to use contracting out as a way of weakening the union.