Compulsory Competitive tendering or CCT is when public sector organizations let private firms to offer a tender for public sector services like rail, sanitation, safety etc. This rationale is to decrease costs, improve quality and efficiency using Compulsory Competitive tendering.
The private firms applying for CCT will compete with the internal provisions of the organization and try to provide better services at lower costs through a tender. Public firms would be able to save money and get better facilities. There would be greater competition for work. Employees would be working on a contractual basis and this would drive down the costs for paying the employees for the public sector organization, the organization will also not be directly responsible for the welfare and benefits of the employee and can save on their wage bills. Compulsory Competitive tendering was introduced by the UK conservative government in 1980 and had made it compulsory for public sectors to allow private firms to compete for services. In 1997 the labour government removed CCT, but even after that it is still widely practiced by many organizations in UK.
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Compulsory competitive tendering has helped to decrease costs, improve efficiency and quality of services in public sectors. It has pushed a lot of jobs from the public sector to the private sector. The employees hired are under contract and not permanent employees of the organization. Due to these changes there have been pay cuts and condition of employees have also deteriorated. Public sector organizations have been able to save money and have been able to decrease their permanent workforce also it has resulted in increased competition by opening up tenders for outside market. Compulsory Competitive tendering is only specific to UK and in 1997 the UK government removed the compulsion.
Advantages of Compulsory Competitive tendering are as follows:
1. Costs are driven down with an increase in quality and efficiency.
2. Organization has to hire less permanent employees because of CCT outsourcing
3. Wage bills and bills on benefits of employees decreases
Certain disadvantages are:
1. Employees have to accept inferior work conditions
2. Jobs are pushed out from public sector to private sector
Example of Compulsory competitive tendering or CCT is If Indian Railways has to hire a private firm for cleaning of the coaches of the train because of an amendment made in the law, so it has to compulsorily open up a tendering process for the same. This process is known as compulsory competitive tendering, so that private firms compete for such services with the organization’s department. This can lead to savings for the public sector organization and also lead to better facilities as there will be greater competition.
Hence, this concludes the definition of Compulsory Competitive Tendering (CCT) along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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