: According to Donahue's survey of garbage collection cost studies, researchers have found that "contractors are cheapest, followed by public agencies, then open competition." What factors best explain this result?
The best explanation provided by Donahue for the finding that contractors are cheapest was that, while public agencies may be characterized by factors that cause them to be higher cost service deliverers, they also possess the knowledge of garbage collection requirements and workings of the industry, together with the necessary negotiating skills, that enable them to obtain service contracts that are lower cost than those that could be obtained by the typical individual, household, or business firm negotiating for such services.
Another factor that is likely involved is the collective character of negotiations conducted by representatives of public agencies. The reasoning behind this contention is the same that underlies collective bargaining by labor unions. Skilled negotiators representing a large groups of individuals obtain results superior to those that would likely be obtained by each individual member of a labor union action on her or his own.
Donahue provides a number of reasons why garbage collection services provided by a public agency may be more expensive than those provided by contractors. Among the more significant of these reasons is that public agencies pay higher wages than do contractors, particularly over the long term. The implication of this contention is that employees on the public payroll will tend to remain in their jobs, and, as they build seniority with a public organization, their wages will rise. Conversely, the low pay offered by contractors will discourage all but cretins from remaining on the job for an extended period. Implicit in such an argument is an assumption that public agencies should be more efficient in the actual operation of garbage collection, because their empl...