The goal of the City’s managed competition program is to provide the best service at the lowest cost. Private sector interest in competition must be maintained by ensuring a level playing field from the initial bidding process throughout the term of the contract.

When a KBU of the City wins a bid competition, the City assumes two roles. In one role, the City acts as a purchaser of services. In this context, the parties enter into a contractual-type relationship where the KBU agrees to perform and the City agrees to pay for performance. With respect to performance standards, this relationship warrants the same terms that would apply if the City were dealing with a private business. However, the fact that the KBU and the City are the same legal entity requires the addition of certain clauses, including notice of default. It also requires the deletion of certain clauses, such as provisions for performance bonds, insurance, injunctive relief, jurisdiction, and venue.

In its second role, the City manages the KBU as a division of the City and bears responsibility for payment of the KBU’s costs. This relationship is analogous to that of a corporate division and corporate headquarters. Decisions regarding corrective action when a KBU overruns its sealed bid amount fall within the bounds of business judgment rather than contract law. However, it is important that all parties understand the factors that impact these decisions, as well as the potential alternative courses of action.

In either role, the decision-driving factor is the long-term best interests of the taxpayers.