Role of Private Sector in Health Care - Contracting

The government can transfer some of its work to the private sector by contracting. If the cost of resultant services (including the government’s cost in administering and monitoring the contract) are lower than the cost of services extended by the government directly, then contracting can be a viable option. Some funds will then become available for other uses.

Contracting can also free up scarce skilled government personnel who can devote their time to other managerial tasks which only the government can do. Such arrangements will also produce additional benefits beyond the considerations of cost and savings. It would promote the establishment of an environment in which there is a separate private market for health care infrastructure including manufacturers and distributors. By having contract clauses that ensure efficient delivery, contracting can influence healthy private market practices and prices.