Privatised public services have become a fact of daily life, in these times of budget constraints and concerns about government efficiency. There is much debate, however, as to what government activities should be entrusted to the private sector. Politicians are unsure whether public goods can be provided at quality and price levels acceptable to the general public. Moreover, there is a need to study the governance structures and legal framework of privatised government activities that range from public-private partnerships to private companies supplying services under a private-law contract. It is against this background that we present a series of articles, marking a starting point in an as yet open debate where aspects of public, competition and contract laws overlap.

Despite the fact that ours are market societies, the common good – bonum commune – plays a surprisingly important role, not only in the Member States of the European Union but also in Community law. As stated in the Communication from the Commission of 20 September 2000, services of public interest are a key element in the European model of society. The new Article 16 in the EC treaty now confirms their place among the shared values of the Union and their role in promoting social and territorial cohesion. It stipulates that the Community and the Member States ... shall take care that such services operate on the basis of principles and conditions which enable them [the services] to fulfil their missions. On the other hand, as the Community is committed to the principle of free and fair competition (Art. 3g/4 EC), there is bound to be at least a certain tension between this principle and the concepts of common good or public subsistence. Economists point out that the “enemies of an open society” follow “their own interests under the cover of the common good”. Bonum commune – this “sounds like something that has been given a-priori precedence, something that calls for republican civic virtue and that would seem to place obligations above individual rights”. But the European Commission sees no contradictions here. An earlier Communication stated that “far from being incompatible, services of general economic interest, internal market and Community competition policy were complementary in the pursuit of the fundamental objectives of the Treaty. Their interplay must benefit individual citizens and society as a whole.” It is therefore consistent for Article 16 EC to state that Articles 73, 86 and 87 EC (transport / application of competition rules to public undertakings / regulations governing state aid) continue to apply fully and without prejudice.

This paper evaluates the current attempt to develop local ‘compacts’ between local government and the voluntary and community sector, as an example of a relational contracting approach to structuring the evolving relationships between these sectors. It is structured in four parts. The first part charts briefly local government – voluntary sector (LG – VS) relationships in England over the period 1979-2000. It draws examples in particular from experience in the field of area regeneration. The second part introduces the concept of the Voluntary Sector Compact (VSC), and argues that it is central to the approach of the current Labour government to these relationships. It differentiates this approach from that of the previous government, denoted here as the service agency model, and situates it within the meta-paradigm of community governance. The third part explores the implementation of the Compact in England at both the national and local level. The final part draws out key lessons from this for the future of LG – VS relationships in England, situating these within an emerging model of LG – VS relationships.

Economists are showing an increasing interest in alternative organizational arrangements for delivering public interest services. More specifically, the involvement of private operators has been called into question in light of market failures. Following the UK privatization program in the 1980s, one might look there for a model for transferring ownership of infrastructure utilities from the public to the private sector. Such transfer of ownership is based on the idea that market forces and private ownership can lead to better performance, for instance by insulating management from political interference (see Boyco-Shleifer 1995 for a specific model and Vickers-Yarrow 1991 and Vining-Boardman 1992 for a more general discussion on this issue). This increased control is believed to favour reduction of costs (and prices if competition exists), and improvement in quality and innovation. Solutions other than full privatization are also proposed, such as delegation contracts.

As in other European Union countries, Spanish local governments, by law and according to their population size, provide a number of basic services, which include the local police service, fire-fighting, refuse collection, street cleaning, land use control, urban transportation, social services, leisure and cultural activities, public works and town planning, slaughterhouses, central markets, housing, etc. Only the larger Spanish municipalities participate in the delivery of services such as education or health, which are under regional government responsibility. The vast majority of Spanish municipalities are very small. Recently, some Autonomous Communities have been establishing supra-municipal or district authorities (Comarcas), grouping several municipalities in order to manage the delivery of common local services. Public-private partnership initiatives were introduced into Spain by the Municipal Services Act of 1955, which allows the provision of local services by private operators. This act was updated by the Public Contracting Act of 1995, which was recently amended to bring it into line with EU legislation. Spanish local governments have traditionally provided services using almost all PPP methods, such as local government corporations, concessions or franchises, lease of assets with or without additional investment, public-private ventures, associations with other local governments, public entities and non-profit organisations. The results of our work on local service provision, set out in this paper, show a higher degree of PPP initiatives in medium-sized Spanish cities than in the rest. We find no statistical differences in the levels of efficiency observed in public and private urban transport operators. Finally, we observe both a need to update car park concessions in Spanish local administrations, incorporating mechanisms to increase efficiency, and an absence of homogeneity in these concessions because there is no unit that advises public authorities.

The privatization of the rail network, which started in 1996, is the main motivation for this analysis of the recent performance of and prospects for the sector. The paper starts with a brief description of the evolution of the Brazilian transport sector and its relationship with the country's economic development. The second section presents an overview of the size and relative importance of the transport sector by mode, and the characteristics of intermodal competition. The operational and cost structure of the rail sector is then analyzed in detail and compared to its tariffs. The limited cash flow generation of the rail concessionaires is set against the investment needs of the sector for service expansion. The conclusions drawn from the financial performance analysis prompt a discussion of the prospects for the Brazilian rail sector.