It is a common finding that competitive tendering improves inefficiency and produces cost savings for the government. Reports of cost savings have however been followed by raising concerns of side effects and unforeseen consequences of the changes made. This paper sets out to discuss whether the admittedly positive effects of competitive tendering on subsidy savings have been outweighed by rising costs from a socioeconomic point of view due to: rising administrative costs, such as transfer of resources from the private operator to the authorities and deteriorating labor standards, such as falling wage and pensions levels, heavier work load and rising sickness rates for workers. The restructuring of the network from district to urban areas, may lower mobility for non-urban community members. This study evaluates the use of competitive tendering of local bus services in Norwayduring the last decade, investigating the sources of the ten percent costsavings reported in previous studies. Competitive tendering is associated with transfer of responsibilities from operators to authorities. This ismainly attributable to the fact that the introduction of competitive tendering is associated with a move from net contracts to gross contracts. In a net contract regime, planning expertise is typically located at the operators, whereas in the gross cost, competitive tendering regime this function is transferred to the local authority. The paper shows that transfer ofresources represents only a marginal cost increase for the procuring body, since competitive tendered contracts are considerably less demanding to administer during the contract period than annually negotiated net cost contracts. There is no evidence in our data that driver salaries deterioratewith the introduction of competitive tendering. Developments of wage levels and labour standards are ultimately linked to national variations in labour market regimes and bargaining systems. Hence in Norway, competitive tendering in the bus sector is introduced within a labour market regime generally considered to be a highly centralized and well regulated one, hampering the use of local wage levels as a competitive factor. There is nevertheless some evidence to indicate increased workload for the drivers, whichperhaps may lead to rising levels of sick leave and disablement in the long run. The evidence to support this is however sparse and remains to be seen in a long-term view. What we do find is a tendency that competitive tendering is associated with service improvements in central areas, and thatthe opposite applies in sparsely populated areas. Some of the cost savings on the regional level may thus be attributed to the restructuring of theroute network, from highly subsidised services in rural areas to serviceswith lower subsidy shares in the city centres. Recommendations are given for future competitive tendering processes so as to safeguard real economic gains. For the covering abstract see ITRD E145999
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