When the government creates a monopoly saying it's in the best interest of the people and hires one contractor to control all their work in one particular area, say, water and wastewater operations...

When the government creates a monopoly saying it's in the best interest of the people and hires one contractor to control all their work in one particular area, say, water and wastewater operations and maintenance, isn't that unfair to all the other companies that offer the same service. One company went out of business in 2013 because they lost their shirts, trying to compete. When the small companies can't get work because the bigger companies, created by the government and putting them out of business, how is that in the best interest of the people?

Asked on by susanmc

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

What you are describing here is not technically an instance of the government creating a monopoly.  The government is not saying that only one company may provide this sort of services in a given area (the way that it does with, for example, cable companies).  Instead, it is simply buying goods and services from one firm on the basis of competitive bids.

If I understand this scenario properly, the government is buying all of its wastewater services from one company.  This would have been done on the basis of competitive bidding.  All companies interested in the contract would have bid and the government would have hired the company that submitted the lowest bid. 

We can say that this is good for the people because it is an example of the government using tax money efficiently.  If the government hired a firm that did not submit the lowest bid, it would be spending more taxpayer money than it had to.  We would not like that.  In addition, if it hired many companies, it would cost more in administrative costs than it would cost if the government only had to deal with one company.

In this case, the government is simply spending its money as efficiently as possible.  The government should not waste money propping up firms that do not submit the lowest bids.

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